Chapter 

8: Customer-Driven Marketing
Strategy: Creating Value for Target
Customers
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OBJECTIVE 1 – OUTLINE - MARKET SEGMENTATION,

TARGETING, DIFFERENTIATION, AND POSITIONING
 Because buyers are too numerous and companies vary widely in abilities, a
company must identify the parts of the market to serve.
 Target Marketing – Identify market segments, select one or more of them, and
develop products and marketing programs tailored to each.

Four Steps to Designing a Customer-Driven Marketing Strategy

Market Segmentation – Dividing a market into smaller segments of buyers with distinct
needs, characteristics, or behaviour that may require separate marketing strategies or
mixes.

Market Targeting (Targeting) – Process of evaluating each market segment’s

attractiveness and selecting one or more segments to enter.

Differentiation – Differentiating the firm’s market offering to create superior customer

value.

Positioning – Arranging for a market offering to occupy a clear, distinctive, and

desirable place relative to competing products in the minds of target customers.

OBJECTIVE 2 – MARKET SEGMENTATION

 Buyers vary in wants, resources, locations, buying attitudes, and buying
practices.
 Companies segment large markets into smaller segments.
Segmenting Consumer Markets

Geographic Segmentation – Divide a market into different geographical units, such as

nations, regions, provinces, countries, cities, or even neighbourhoods.

Demographic Segmentation – Divide a market into segments based on variables such

as age, gender, family size and life cycle, income, occupation, education, religion, race,
generation, and nationality.

 Age and Life-Cycle Segmentation – Offer different products or use different

approaches for different age and life cycle groups.

o Guard against stereotypes.

 Gender Segmentation – Divide a market into different segments based on

gender.

o Neglected segments can offer new opportunities.

 Income Segmentation – Divide a market into different income segments.

o Target luxury markets or discount and lower income markets.

o Economic Trends come into play for all markets.

Psychographic Segmentation – Divide a market into different segments based on

social class, lifestyle, or personality characteristics.

 Lifestyles – Segment markets based on the way customers live their lives, such
as environmental conscious decisions.
 Personality – segment markets based on the aspects of customer personality.

Behavioural Segmentation – Dividing a market into segments based on consumer

knowledge, attitudes, uses, or responses to a product.

 Occasions – Segment markets based on occasions when buyers get the idea to
buy, actually make the purchase, or use the purchased item.
 Benefits Sought – Segment markets based on different benefits consumers
seek from the product.
  User Status – Segment markets based on how much the consumer has used
the product. (i.e. nonusers, ex-users, potential users, first time users, regular users)
 Usage Rate – Segment based on how often consumers use the product.
 Loyalty Status – Segment markets based on consumer loyalt .

Using Multiple Segmentation Bases

Marketers typically use multiple segmentation bases to identify smaller, better-defined

target groups.

Example - Wealthy retired adults with several segments based on current income and
lifestyles.

 Helps to identify and better understand key customer segments, target them
more efficiently, and tailor market offerings and messages to their specific needs.

Segmenting Business Markets

Additional Variables

 Operating Characteristics
 Purchasing Approaches
 Situational Factors
 Personal Characteristics

 Some companies establish systems for dealing with larger groups of customers
and continually dividing them.
 Buying Behaviour and Benefits provide the best basis for segmenting business
markets.

Segmenting International Markets

 Different countries vary greatly in economic, cultural, and political makeup.

 Firms group world markets into segments with distinct buying needs and
behaviours.

o Geographic Location – Group countries by regions with common traits/behaviour.

 o Economic Factors – Group countries by population income level or by overall
level of economic development.
o Political and Legal Factors – Group markets by type and stability of government,
receptivity to foreign firms, etc.
o Cultural Factors – Group markets according to common languages, religions,
values and attitudes, customs, etc.

Intermarket Segmentation (Cross-Market Segmentation) – Forming segments of

consumers who have similar needs and buying behaviour even though they are located
in different countries.

Requirements for Effective Segmentation

 Measurable - Size, purchasing power, and profiles of segments can be

measured.
 Accessible – Segments can be effectively reached and served.
 Substantial – Segments are large or profitable enough to serve.
 Differentiable – Segments are conceptually distinguishable and respond
differently to different marketing mix elements and programs.
 Actionable – Effective programs can be developed for attracting/serving
segments.

OBJECTIVE 3 – MARKET TARGETING

Evaluating Market Segments

  Firm must analyze -

o Segment size and growth

o Structural attractiveness
o Company objectives and resources.

Selecting Target Market Segments

Target Market – A set of buyers who share common needs or characteristics that the
company decides to serve.

 It can be carried out broadly, narrowly, or somewhere in between.

Undifferentiated Marketing (Mass Marketing) – Market coverage strategy where a

firm ignores segment differences and targets the whole market with one offer.

 Focuses on common needs rather than differences.

 Appeals to the largest number of buyers.
 Difficult to develop.

Differentiated Marketing (Segmented Marketing) - Market coverage strategy where a

firm decides to target several market segments and designs separate offers for each.

 Creates more total sales due to stronger position in each segment.

 Increases costs of doing business due to extra research, forecasting, analysis,
etc.

Concentrated Marketing (Niche Marketing) – Market coverage strategy in which a

firm goes after a large share of one or a few smaller segments or niches.

 Strong market position due to greater knowledge of consumer needs and special
reputation.
 Effective and efficient due to intuitive adjustments and specific consumer base.
 Small and attracts few competitors.

Micromarketing – Tailoring products and marketing programs to the needs and wants
of specific individuals and local customer segments.

 Local Marketing – Tailoring brands and promotions to the needs and wants of
local customer segments – cities, neighbourhoods, or stores.
 o More effective marketing to demographic/lifestyle.
o May drive up manufacturing and marketing cost by reducing economies of scale
and complicating logistics.

 Individual Marketing – Tailoring products and marketing programs to the needs

and preferences of individual customers.

o Mass Customization – Firms interact one-to-one with customers to design

products and services tailor-made to individual needs.

Choosing a Target Strategy

The best strategy is dependent on company resources and product variability.

Example - Concentrated marketing is the best for limited resources and undifferentiated
marketing is best for uniform products.

 Product Life-cycle – Analyze how long the product will last.

 Market Variability – Analyze the variability in buying behaviours, personality, etc
across all customers in the market.
 Competitor’s Marketing Strategies – Gain advantages by focusing on needs
that are not met by competitors.

Socially Responsible Target Marketing

 Issues surround targeting vulnerable or disadvantaged consumers with

controversial or potentially harmful products.
 Problems with marketing of adult products spilling over to children’s segments.
 Growth of the internet and carefully targeted direct media raises questions about
targeting abuse.

OBJECTIVE 4 – DIFFERENTIATION AND POSITIONING

Value Proposition – Company decides on how it will create differentiated value for
targeted segments and what positions it wants to occupy in those segments.

Product’s Position – The way the product is defined by consumers on important

attributes – the place the product occupies in consumers’ minds relative to competing
products.
  Consumers are overloaded with info, so they organize products, services, and
companies into categories with “positions” in their minds.
 Marketers plan positions that give products the best advantage.

Positioning Maps

Perpetual Positioning Maps – Show consumer perceptions of their brands versus

competing products.

Choosing a Differentiation and Positioning Strategy

 Brand Positioning must serve the needs/preferences of well-defined target

markets.
 Differentiation and Positioning involves 3 steps: Identifying differentiating
advantages, choosing them, and selecting a positioning strategy.

Identifying Possible Value Differences and Competitive Advantages

Competitive Advantage – An advantage over competitors gained by offering greater

customer value, either by having lower prices or providing more benefits that justify
higher prices.

 Must be built on fulfillable promises – Offer customer value by embracing a

slogan to deliver the promised value.
 Marketers must think through the entire experience of a customer to locate
points of differentiation.
  Product Differentiation – Features, performance, or style and design.
 Services Differentiation – Speedy, convenient, or careful delivery.
 Channel Differentiation – Designing channel coverage, expertise, and
performance.
 People Differentiation – Hiring and training better people.
 Image Differentiation – Convey a product’s distinctive benefits and positioning.

Choosing the Right Competitive Advantages

Choose the potential differentiations to build a positioning strategy.

How Many Differences?

 Unique selling proposition (USP) – Brand picks an attribute and touts itself as
“number one.”
 More than one differentiator – Useful for if two or more firms are claiming to be
the best.

Which Differences to Promote?

 Important – Difference delivers high value.

 Distinctive – Competitors don’t own the difference, or the company does it more
distinctively.
 Superior – Difference is superior to other ways of getting the benefit.
 Communicable – Difference is easy for buyers to understand and see.
 Affordable – Buyers can afford to pay for the difference.
 Pofitable – Company introduces the difference profitably.

o Choosing competitive advantage advantages to position the product relies on

picking the most appropriate differentiators.

Selecting an Overall Positioning Strategy

 Value Proposition – Full positioning of a brand – the full mix of benefits on

which it is positioned.
 o There are winning value propositions, losing value propositions, and a marginal
proposition.

 More For More – Provide the most upscale product or service and charge a
higher price to cover the highest costs.

o Can be vulnerable to imitators, and at risk during economic downturns.

 More for the Same – Offer comparable quality at a lower cost.

o Useful for attacking more-for-more.

 The Same for Less – Offers discount products or services based on superior
purchasing power and lower cost operations.

o Useful for luring away customers from the market leader.

 Less for Much Less – Offers products that offer less and therefore cost less.

o Involves meeting consumer’s lower performance/quality requirements at a much

lower cost.

 More for Less – The winning value proposition – a lofty and difficult goal of
offering the best products/services for the lowest price.

o Difficult to sustain due to rising costs and competition from focused competitors.

Developing a Positioning Statement

Positioning Statement – Statement that summarizes company or brand positioning.

  To (target segment and need) our (brand) is (concept) that (point of difference).

Example - Evernote: “To busy multitaskers who need help remembering things,
Evernote is digital content management application that makes it easy to capture and
remember moments and ideas from your everyday life using your computer, phone,
tablet, and the Web.”

Communicating and Delivering the Chosen Position

 Positioning requires concrete delivery – working out the tactical details of

strategy.

Example - More-for-more position requires high-quality products at a high price,

distributed through high-quality dealers and advertised in high-quality media.

 Implementation is more difficult than establishing when it comes to a positioning.

 Positions require close monitoring and adapting to match changes in needs and
strategies.