W

Chapter Five

College STP
• Business and
Economics
Department
• Management It is no longer enough to satisfy customers. You must delight them. Kotler
• MBA Program
Chapter objectives
• Define the major steps in designing a customer-driven marketing strategy

(STP)

• The major bases for segmenting consumer and business markets

• Know how companies identify attractive market segments and how they choose a

target marketing strategy.

• Comprehend how companies position their products for maximum competitive

advantage
Introduction: customer-driven marketing strategy

• Companies cant serve all buyers/consumers due to:

• Buyers are too numerous

• Widely scattered

• Varied in their wants and buying practice

• Limited company’s ability to serve

As a result companies must design customer- centerity marketing

strategies that build the right relationship with the right customer
 Steps in target marketing

1. Market
2. Market 3. Market
Targeting Positioning
Segmentation

S T P
Con’t…
• Target Marketing: is the process of market segmentation, targeting and positioning.
1. Market segmentation
• dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who
might require separate products or marketing mixes
• Levels of Market Segmentation

» Mass Marketing

» Segment Marketing local marketing

» Niche Marketing
» Micro marketing

individual marketing
Segmenting consumer market

• No single best way to segment a market.

• Segmentation variables:

• Geographic,

• Demographic,

• Psychographic, and

• Behavioural variables.
 Common ways of segmenting buyers
Geographic Demographic Psychographic Behavioural

• Region • Age/generation • Activities • Benefits sought from the product

(continent, • Income • Interests • How often the product is used
country, state, • Gender • Opinions (usage rate)
neighbourhood) • Family life cycle • Values • Usage situation (daily use, holiday
• Size of city or • Ethnicity • Attitudes use, etc.)
town • Family size • Lifestyles • Buyer’s status and loyalty to
• Occupation product (nonuser, potential user,
• Population • Education first-time users, regular user)
• Nationality
• density • Religion
• Social class
• Climate
 Geographic Segmentation

• Dividing the market into different geographical units

such as nations, states, regions, countries, cities, or

neighborhoods.

• Where are our customers located, and how can we reach

them? What products do they buy based on their

locations?
Demographic Segmentation

• How do the ages, races, and ethnic backgrounds of our

customers affect what they buy?
 Most popular bases for segmenting customer groups.

• Dividing the market into groups based on demographic

variables such as age, gender, family size, family life
cycle, income, occupation, education, religion, race,
and nationality.
 Psychographic Segmentation

• What do our customers think about and value? How do they live their lives?
• Segmenting people based on social classes, lifestyles, psychographic
characteristics (i.e. AIO)
Behavioral Segmentation

• What benefits do customers want, and how do they use our product?
• Divides buyers Based on consumer knowledge, attitude, use, or response to a
product.
• Occasion: birthdays, anniversaries, valentine day, wedding ceremonies
• Benefit sought- medicinal toothpastes, economics segments
• User status: nonusers, ex-users, potential users, first-time users, and regular users
• Usage Rate. light, medium, and heavy product users.
• Loyalty: hard core loyalty, split loyalty, switchers
Segmenting business market

There are fewer behavioural and needs-based segments in B2B markets than in B2C

markets for some reasons:

• customer operating characteristics i.e. corporations, p/ships, sole proprietorship
• purchasing approaches
• situational factors
• personal characteristics
Procedures in market segmentation

There are different stages/procedures in market segmentation

• Survey stage
• Analysis stage

• Profile stage
Requirements for Effective Segmentation
Measurable
• Size, purchasing power, profiles
of segments can be measured.
Accessible
• Segments must be effectively
reached and served.

Substantial
• Segments must be large or
profitable enough to serve.

Differential
• Segments must respond
differently to different marketing
mix elements & actions.

Actionable
• Must be able to attract and serve
the segments.
Market Targeting

• Answers which segment customer will the company serve?

• The process of evaluating each market segment’s attractiveness and
selecting one or more segment to enter.
• A target market is a set of buyers sharing common needs or characteristics
that the company decides to serve.
• No single, best choice strategy suits all firms
 Evaluating Market Segments Market Targeting

• In evaluating different market segments, a firm must look at three factors

Company’s Objectives
Attractiveness of the Market  Level of competition
And Resources  Substitute products
 Power of buyers
 Powerful suppliers

•Size
•Growth
•Profitability
•Scale Economies
Segment size and growth •Competition
•Risks
•Synergy
Target marketing strategies

high segmenta
tMicromarketing
ion (local or
individual) marketing

Concentrated (Niche)
marketing

Differentiated (segment)
marketing
No segm
entatio
n Undifferentiated (mass)
marketing
Undifferentiated marketing
 one product, one marketing mixes

• Ignore market segments

• Target the whole market with one offer

• focuses on what is common in the needs of consumers rather than on what is different.

• Focus on media coverage i.e. TV, Radio

Differentiated market

 also known as selective specialization

different segments, different marketing mixes
• Firms produce numerous product with different mixes
• Products are designed to satisfy the smaller segments
• Increase sales volume
• Incurs higher product cost, inventory cost and marketing cost
Concentrated Marketing
• Popular term for concentring marketing is Niche marketing

• A strategy, instead of going after a small share of a large market, a firm goes
after a large share of one or a few smaller segments or niches.

• Specific product is focusing (single-segment)

• Choose small segment provided it’s a profitable segment

• Most suitable for smaller firm, which have lesser resources

• Involves higher-than-normal risk

Micromarketing

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of

specific individuals and locations.

 Narrowest targeting approach

 More effective for small firms to sustain, to build and grow their own brand

• Local Marketing: involves tailoring brands and promotions to the needs and wants of local

customer groups—cities, neighbourhoods, and even specific stores.

• Individual Marketing: In the extreme, micromarketing becomes individual marketing—

tailoring products and marketing programs to the needs and preferences of individual customers.
Target marketing

• Choosing a Target-Marketing Strategy Requires Consideration

 Company resources
 The degree of product variability
 Product’s life-cycle stage
 Market variability
 Competitors’ marketing strategies
Positioning
• 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. Kotler

• Positioning is the act of designing the product and service offering of a company in the
minds of the customers.

• Marketers must:

• Plan positions to give their products the greatest advantage in selected target markets,

• Design marketing mixes to create these planned positions.

Market Positioning

• “Positioning” according to Ries and Trout

• Positioning starts with a product. A Piece of merchandise, a service, a

company, an institution, or even a person... But positioning is not what
you do to a product. Positioning is what you do to the mind of the
prospect. That is, you position the product in the mind of the prospect.

Here!
Choosing a Differentiation and Positioning Strategy

• The differentiation and positioning task consists of three steps:

i. Identifying possible competitive advantages

ii. Choosing the right competitive advantages, and

iii. Selecting an overall positioning strategy.

Identifying possible competitive advantages

Product : features, performance , style, design

Service: speedy, convenient, careful delivery

People: hiring and training employees than competitors do

Channel: coverage, performance, expertise

Image: goodwill, e.g. Nike’s swoosh, apple’s bite mark

 Selecting the Right Competitive Advantages
Impo
Criteria for Meaningful Differences rtant

Distin
Pr o ctive
fitab
le Criteria
for
Determining
Which
rda
Affo Differences Superior
ble to
Promote
Pre ble
mp e u n ica
e tiv Comm
 Selecting an Overall Positioning Strategy
Price
These are winning
More The same Less value propositions
More for More for More for
More gives the company competitive advantage
more the same less

The same
Benefits

The same for less Value Propositions: the full

mix of benefits on which a brand
Less for is differentiated & positioned.
Less
much less

These are loosing Margin proposition

value propositions
The End!