Customer-Driven Marketing Strategy: Creating Value for Target Customers 7 Principles of Marketing

Learning Objectives After studying this chapter, you should be able to: 1. Define the three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive consumer and business markets 4. Discuss how companies position their products for maximum competitive advantage in the marketplace 7-2

Chapter Concepts: 1. Market Segmentation 2. Marketing Target 3. Differentiation and Positioning 4. Positioning for Competitive Advantage 7-3

Market Segmentation 1. Discuss the need to understand competitors as well as customers through competitor analysis 2. Explain the fundamentals of competitive marketing strategies based on creating value for customers 3. Demonstrate the need for balancing customer and competitor orientations in becoming a truly market-centered organization 5-4

Market Segmentation Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs 7-5

Market Segmentation Segmenting consumer markets Segmenting business markets Segmenting international markets Requirements for effective segmentation 7-6

Market Segmentation Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral 7-7

Market Segmentation Segmenting Consumer Markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities 7-8

Market Segmentation Segmenting Consumer Markets Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality 7-9

Market Segmentation Segmenting Consumer Markets Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables 7-10

Market Segmentation Segmenting Consumer Markets Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation divides the market based on sex (male or female) 7-11

Market Segmentation Income segmentation divides the market into affluent or low-income consumers 7-12 Segmenting Consumer Markets

Market Segmentation Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits 7-13 Segmenting Consumer Markets

Market Segmentation Segmenting Consumer Markets Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product Occasion Benefits sought User status Usage rate Loyalty status 7-14

Market Segmentation Segmenting Consumer Markets Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit 7-15

Market Segmentation Segmenting Consumer Markets User status divides buyers into ex-users, potential users, first-time users, and regular users of a product Usage rate divides buyers into light, medium, and heavy product users Loyalty status divides buyers into groups according to their degree of loyalty 7-16

Market Segmentation Loyalty status divides buyers into groups according to their degree of loyalty 7-17 Segmenting Consumer Markets

Market Segmentation Using Multiple Segmentation Bases Multiple segmentation is used to identify smaller, better-defined target groups Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns 7-18

Market Segmentation Using Multiple Segmentation Bases PRIZM NE classifies every American household into 66 unique segments organized into 14 different social groups. These groups segment people and locations into marketable groups of like- minded consumers that exhibit unique characteristics and buying behavior based on a host of demographic factors. 7-19

Market Segmentation Age Educational level Income Occupation Family composition 7-20 Ethnicity Housing Behavioral and lifestyle factors Purchases Free-time activities Media preferences Using Multiple Segmentation Bases Prizm classifications include

Market Segmentation Segmenting Business Markets In addition to the same segmentation variables as consumers, business can also be segmented by: Customer-operating characteristics Purchasing approaches Situational factors Personal characteristics 7-21

Market Segmentation Segmenting Business Markets Segmenting international markets Geographic location Economic factors Political and legal factors Cultural factors 7-22

Market Segmentation Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries 7-23 Segmenting Business Markets

Market Segmentation Requirements for Effective Segmentation To be useful, a market segment must be: Measurable Accessible Substantial Differentiable Actionable 7-24

Market Segmentation Requirements for Effective Segmentation Measurable examples include the size, purchasing power, and profiles of the segments Accessible refers to the fact that the market can be effectively reached and served 7-25

Market Segmentation Requirements for Effective Segmentation Substantial refers to the fact that the markets are large and profitable enough to serve Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs 7-26

Market Segmentation Requirements for Effective Segmentation Actionable refers to the fact that effective programs can be designed for attracting and serving the segments 7-27

Market Targeting Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources 7-28

Market Targeting Evaluating Market Segments Segment size and growth Smaller versus larger segments Growth potential 7-29

Market Targeting Evaluating Market Segments Segment structural attractiveness Competition Substitute products Power of buyers Power of suppliers 7-30

Market Targeting Evaluating Market Segments Company objectives and resources Competitive advantage Availability of resources Consistent with company objectives 7-31

Market Targeting Selecting Target Market Segments Undifferentiated marketing Differentiated marketing Concentrated marketing Micromarketing 7-32

Market Targeting Target Marketing Strategies Undifferentiated marketing targets the whole market with one offer Mass marketing Focuses on common needs rather than whats different 7-33

Market Targeting Selecting Target Market Segments Differentiated marketing targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing 7-34

Market Targeting Selecting Target Market Segments Concentrated marketing targets a small share of a large market Limited company resources Knowledge of the market More effective and efficient 7-35

Market Targeting Selecting Target Market Segments Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing 7-36

Market Targeting Selecting Target Market Segments Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores 7-37

Market Targeting Selecting Target Market Segments Local Marketing Benefits: Increased marketing effectiveness in competitive markets More customer-specific offerings 7-38

Market Targeting Selecting Target Market Segments Local marketing Challenges: Increased manufacturing and marketing costs Less economy of scale Logistics Dilution of company image 7-39

Marketing Targeting Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers Also known as: One-to-one marketing Mass customization Markets-of-one marketing 7-40 Selecting Target Market Segments

Market Targeting Selecting Target Market Segments Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs. Has made relationships with customers important in the new economy. Provides a way to distinguish the company against competitors 7-41

Market Targeting Choosing a Targeting Strategy Depends on: Company resources Product variability Product life-cycle stage Market variability Competitors marketing strategies 7-42

Market Targeting Socially Responsible Target Marketing Benefits customers with specific needs Concern for vulnerable segments Children Alcohol Cigarettes 7-43

Differentiation and Positioning Product position is the way the product is defined by consumers on important attributesthe place the product occupies in consumers minds relative to competing products Perceptions Impressions Feelings 7-44

Differentiation and Positioning Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions Price and orientation 7-45

Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy 7-46

Differentiation and Positioning Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Service differentiation Channels People Image 7-47

Differentiation and Positioning Identifying Possible Value Differences and Competitive Advantage Competitive Advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices 7-48

Differentiation and Positioning Choosing the Right Competitive Advantages A difference is worth establishing to the extent that it satisfies the following criteria: Important Distinctive Superior Communicable Preemptive Affordable 7-49

Differentiation and Positioning Selecting an Overall Strategy Value proposition is the full mix of benefits upon which a brand is positioned More for more More for the same Same for less Less for much less More for less 7-50

Positioning for Competitive Advantage Developing a Positioning Statement Positioning statement states the products membership in a category and then shows its point-of-difference from other members of the category. 7-51