Principles of Marketing Eighteenth Edition
Chapter 7
Customer Value-Driven Marketing Strategy:
Creating Value for Target Customers
Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
Learning Objectives
7-1 Define the major steps in designing a customer-driven marketing
strategy: market segmentation, targeting, differentiation, and
positioning.
7-2 List and discuss the major bases for segmenting consumer and
business markets.
7-3 Explain how companies identify attractive market segments and choose
a market-targeting strategy.
7-4 Discuss how companies differentiate and position their products for
maximum competitive advantage.
Customer-Driven Marketing Strategy
Market Segmentation
Market requires dividing a market into smaller
Segmentation segments with distinct needs, characteristics,
or behaviors that might require separate
marketing strategies or mixes.
Market Segmentation
Segmenting consumer markets
Segmenting business markets
Segmenting international markets
Requirements for effective segmentation
Market Segmentation I Consumer Markets
Geographic Demographic
segmentation segmentation
Psychographic Behavioral
segmentation segmentation
Market Segmentation I Consumer Markets
Geographic calls for dividing the market into different
Segmentation geographical units such as:
World region City
Country Neighborhood
Country region Climate
Province Population density
Market Segmentation I Consumer Markets
Demographic divides the market into segments based on
Segmentation variables such as age, life-cycle stage,
gender, income, occupation, education,
religion, ethnicity, and generation.
• Most popular basis for segmentation
• Easiest to measure
• Demographics are closely related
to needs, wants and usage rates
Market Segmentation I Consumer Markets
Age and life-cycle divides a market into different
stage Segmentation age and life-cycle groups.
Gender divides a market into
Segmentation different segments
based on gender.
Income divides a market into
Segmentation different income
segments.
Market Segmentation I Consumer Markets
What type of
demographic
segmentation
is reflected in this
Kmart Discount
Stores ad?
Market Segmentation I Consumer Markets
Psychographic divides a market into different segments
Segmentation based on social class, lifestyle, or personality
characteristics.
VS
Market Segmentation I Consumer Markets
Behavioral divides a market into segments based on consumer
knowledge, attitudes, uses of a product, or responses
Segmentation
to a product.
• Occasions
• Benefits sought
• User status (non, ex, potential, first-
time or regular users)
• Usage rate
• Loyalty status (light, medium or heavy
users)
Market Segmentation I Consumer Markets
Multiple is used to identify smaller, better-defined
Segmentation target groups.
Market Segmentation I Business Markets
Consumer and business marketers use many of the same
variables to segment their markets.
Additional variables include:
• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
Market Segmentation I International Markets
Geographic Economic
location factors
Political and Cultural
legal factors factors
Market Segmentation I International Markets
Intermarket involves forming segments of consumers who have
similar needs and buying behaviors even though they
Segmentation
are located in different countries. (also called cross-
market segmentation)
Global Middle-Class Global Middle & Upper Class,
Teenagers & Young Adults
Requirements for Effective Segmentation
Measurable Accessible Substantial
Differentiable Actionable
Customer-Driven Marketing Strategy
Market Targeting I Evaluating Market Segments
Segment size and growth
Segment structural attractiveness
• Level of competition
• Available substitute products
• Power of buyers
• Power of supplier
Company objectives and resources
Market Targeting
By going after segments instead of the whole
market, companies have a much better chance to
deliver value to consumers - and to receive
maximum rewards for paying close attention to
customer needs
is a set of buyers who share
Target Market common needs or
characteristics that the
company decides to serve (a
“rifle” approach)
Market Targeting
Figure 7.2 Market-Targeting Strategies.
Market Targeting I Selecting Target Market Segments
Undifferentiated targets the whole market with one offer.
marketing • Mass marketing
• Focuses on common needs rather than what’s
different
This strategy makes it difficult to compete with more-focused companies
that do a better job of satisfying the needs of specific segments and
niches.
Market Targeting I Selecting Target Market Segments
Differentiated targets several different market segments and designs
marketing separate offers for each. (Segmented Marketing)
• Goal is to achieve higher sales and
stronger position
• More expensive than undifferentiated
marketing
Market Targeting I Selecting Target Market Segments
Concentrated targets a large share of one or a few smaller
(niche) marketing segments or niches
• Lets smaller companies focus limited
resources
• Achieve a strong position & reputation in the
segment because of greater knowledge of
segment’s needs
• Achieve operating economies from
specialization
• However, higher risk is involved – you have
“all your eggs in one basket”
Market Targeting I Selecting Target Market Segments
connect the world's
Bringing the world closer professionals to make them more
together productive and successful
Market Targeting I Selecting Target Market Segments
is the practice of tailoring products and marketing
Micromarketing
programs to suit the tastes of locations and specific
individuals
• Local marketing and Individual
marketing
• Drawbacks: Higher costs & no
economies of scale
• Benefits: Very close attention to
individual customer needs
Market Targeting I Selecting Target Market Segments
involves tailoring brands and promotion to the needs
Local marketing
and wants of local customer segments.
• Cities
• Neighborhoods
• Stores
tailoring promotion
tailoring brands
Market Targeting I Selecting Target Market Segments
Individual involves tailoring products and marketing programs to
marketing the needs and preferences of individual customers.
Also known as:
• One-to-one marketing
• Mass customization
The Rolls-Royce Bespoke design team works closely with
individual customers to help them create their own unique
Rolls-Royces.
Market Targeting I Selecting Target Market Segments
Choosing a targeting strategy depends on
Company resources
Product variability
Product life-cycle stage
Market variability
Competitor’s marketing strategies
Market Targeting I Socially Responsible Target Marketing
Targeting benefits customers with specific needs
but there is concern for vulnerable segments
• Children: Alcohol, Cigarettes & Internet
abuses
• Minorities & the poor
• The issue is not who is targeted but rather
how and for what (Colgate targeting kids for
toothbrushes is OK)
Customer-Driven Marketing Strategy
Differentiation and Positioning
Value Proposition How a company will create differentiated value for
targeted segments and what positions it wants to
occupy in those segments.
Product positioning is the way the product is defined by consumers on
important attributes - the place the product occupies in
consumers’ minds relative to competing products (clear,
distinctive & desirable)
Differentiation and Positioning
Positioned on Positioned on
Positioned on
luxury performance safety
Positioning: Sonos does more than just sell
speakers; it unleashes “All the music on earth,
in every room of your house, wirelessly.”
Differentiation and Positioning
Perceptual show consumer perceptions of marketer’s brands
Positioning maps versus competing products on important buying
dimensions.
Luxury Sport
Utility Vehicles
Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Step 1 Identifying a set of possible competitive advantages to build
a position
Step 2 Choosing the right competitive advantages
Step 3 Selecting an overall positioning strategy
Step 4 Communicating and delivering the chosen position to the
market
Differentiation and Positioning
Step 1 Identifying a set of possible competitive advantages to
build a position
Competitive is an advantage over competitors gained by offering
advantage consumers greater value, either through lower prices
or by providing more benefits that justify higher
Product differentiation prices.
Service differentiation
Channel differentiation
People differentiation
Image differentiation
Differentiation and Positioning
Panasonic’s
Toughbook Laptop is
positioned as the
durable & reliable
laptop that works even
in the toughest
environments
Differentiation and Positioning
Samsung smart phone differentiates Carrefour differentiates and positions
and positions its smart phone on its its supermarket on Price
camera and quality of photos (Product)
Differentiation and Positioning
Step 2 Choosing a Differentiation and Positioning Strategy
A competitive Important Distinctive Superior
advantage should be:
Communicable Preemptive Affordable
Profitable
Differentiation and Positioning
Step 3 Selecting an overall positioning strategy
Value Proposition
is the full mix of benefits upon which
a brand is positioned.
It is the answer to the customer’s
question “Why should I buy your
brand?”
Differentiation and Positioning
Which overall positioning strategy is
being used here?
Differentiation and Positioning
Positioning summarizes company or brand positioning using this
statement form: To (target segment and need) our (brand) is
(concept) that (point of difference)
Positioning Statement Example for Evernote:
To busy multitaskers who need help remembering things, Evernote is a 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.
Positioning Statement Example for Amazon:
To consumers who want to purchase a wide range of products online with quick
delivery, Amazon is an online retailer that provides a one-stop online shopping
site.
Differentiation and Positioning
Step 4 Communicating and Delivering the Chosen Position
The entire marketing mix must support the chosen positioning strategy. May
require changes to the product, pricing, distribution or promotion
Establishing a position or changing one usually takes a long time
Maintaining a position requires consistent performance and communication
