4/5/2023

Customer Value-Driven Marketing Strategy:

Creating Value for Target Customers

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.

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Marketing Vignette: Henkel’s Persil in the Gulf Region (GCC)

Henkel has segmented its market carefully and concentrated on

serving men and women’s needs separately. By focusing on
generating insights to understand market trends and customers’
special needs in different regions, Henkel found huge success
with its brands in the Middle East.
Persil White for White Thobes Persil Abaya Shampoo
(Oud/Agarwood) (Musk and Flower)

The Marketing Process

Value Provision,
Needs,
Offerings & Brands
Wants & Segmentation, Capture Value
Supply chain &
Demands; Targeting & Value & from
Marketing channels
Competition; Positioning Satisfaction customers in
Media, Impression &
Marketing return
Engagement
Environment

Design a
customer
Understand driven Capture value
Construct an
marketplace marketing Build long from customers
integrated marketing
and customers’ strategy term to create profits
programs that deliver
needs profitable and
superior value
& wants relationship & customer
customer equity
delight

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Customer-Driven Marketing Strategy

Companies today recognize that they cannot appeal to all buyers in the marketplace—or at least not to all
buyers in the same way.

They must design customer-driven marketing strategies that build the right relationships with the right
customers.

Thus, most companies have moved away from mass marketing and toward target marketing: identifying market
segments, selecting one or more of them, and developing products and marketing programs tailored to each.

Market Segmentation
Market segmentation requires dividing a market into
smaller segments with distinct needs, characteristics, or
behaviors that might require separate marketing
strategies or mixes.

Segmenting Segmenting Segmenting Requirements

consumer business international for effective
markets markets markets segmentation

Buyers in any market differ in their wants, resources, locations, buying attitudes, and buying practices. Through
market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached
more efficiently and effectively with products and services that match their unique needs.

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Market Segmentation – Consumer Market

• Geographical units • Variables such as age,
such as nations, life-cycle stage,
regions, states, gender, income,
counties, cities, or occupation, education,
even neighborhoods religion, ethnicity, and
(ie,zip/poscode generation
markets)

Geographic Demographic
segmentation segmentation

• Different segments • Segments based on

based on social class, consumer knowledge,
lifestyle, or personality attitudes, uses of a
characteristics product, or responses
to a product.

Psychographic Behavioral
segmentation segmentation

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Demographic Segmentation

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Psychographic segmentation divides US buyers into eight primary

groups based on social class, lifestyle, or personality traits
VALS – Values and Lifestyles

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Behavioural Segmentation

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Market Segmentation
Behavioural Segmentation
Occasions

• When consumers get the idea to buy, actually make their purchase, or use the purchased item
• help firms build up product usage.

Benefits sought

• Refers to finding the major benefits people look for in a product class, the kinds of people who look for each benefit, and the major
brands that deliver each benefit

User status

• Nonusers, ex-users, potential users, first-time users, and regular users of a product. Marketers want to reinforce and retain regular
users, attract targeted nonusers, and reinvigorate relationships with ex-users.

Usage rate

• Light, medium, and heavy product users.

• Heavy users are often a small percentage of the market but account for a high percentage of total consumption

Loyalty status

• Some consumers are completely loyal—they buy one brand all the time and can’t wait to tell others about it.
• Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes
buying others.
• Still other buyers show no loyalty to any brand—they either want something different each time they buy, or they buy whatever’s on
sale.
• A company can learn a lot by analyzing loyalty patterns in its market, starting with its own loyal customers.

Benefit segmentation: “There’s a Fitbit for Everyone.

Fitbit makes health and fitness tracking devices aimed at buyers in

three major benefit segments: Everyday Fitness, Active Fitness, and
Performance Fitness

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Behavioral Segmentation Breakdown

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Market Segmentation
Segmenting Consumer Markets

Multiple segmentation is used to identify smaller, better-defined target groups.

Experian’s Mosaic U S A system classifies U.S. households into one of 71 lifestyle segments
and 19 levels of affluence.

Using Acxiom’s Personicx segmentation system, marketers paint a surprisingly

precise picture of who you are and what you buy. Personicx clusters carry such
colorful names as “Skyboxes and Suburbans,” “Shooting Stars,” “Hard Chargers,”
“Soccer and SUVs,” “Raisin’ Grandkids,” “Truckin’ and Stylin’,” “Pennywise
Mortgagees,” and “Cartoons and Carpools.”

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Market Segmentation
Business Markets

Consumer and business marketers use many of

the same variables to segment their markets.

Additional • Customer operating characteristics

• Purchasing approaches
variables • Situational factors
•
include: Personal characteristics

Market Segmentation
Business Markets

Major Segmentation Variables for Business Markets

Demographic
1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?

Operating Variables
4. Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with a highly centralized or decentralized
purchasing organization?
8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?
9. Nature of existing relationship: Should we serve companies with which we have strong relationships or simply go
after the most desirable companies?
10. General purchasing policies: Should we serve companies that prefer leasing? Service contract? Systems
purchases? Sealed bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

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Market Segmentation
Business Markets

Situational Factors
12. Urgency: Should we serve companies that need quick and sudden delivery or service?
13. Specific application: Should we focus on a certain application of our product rather than
all applications?
14. Size or order: Should we focus on large or small orders?

Personal Characteristics
15. Buyer-seller similarity: Should we serve companies whose people and values are similar
to ours?
16. Attitude toward risk: Should we serve risk-taking or risk-avoiding customers?
17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

Market Segmentation
Segmenting International Markets

Geographic Economic Political and Cultural factors

location factors legal factors • grouping markets
•Geographic •grouping countries by • segmenting by the according to
segmentation assumes population income levels type and stability of common languages,
that nations close to one or by their overall level of the government, religions, values
another will have many economic development. government and attitudes,
common traits and A country’s economic receptivity to foreign
behaviors, however structure shapes its customs, and
there are many population’s product and firms, monetary behavioral patterns
exceptions service needs and, regulations, and the
therefore, the marketing amount of
opportunities it offers bureaucracy

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Market Segmentation
Segmenting International Markets

New communications technologies, such as satellite TV and

the internet, connect consumers around the world, marketers
can define and reach segments of like-minded consumers no
matter where in the world they are using intermarket
segmentation (also called cross-market segmentation.)

Intermarket segmentation involves forming segments of

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

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Market Segmentation
Requirements for Effective Segmentation
• To be useful, market segments must be:

Measurable Accessible Substantial

• The size, purchasing power, • The market segments can be • The segments are large and
and profiles of the segments effectively reached and served profitable enough to serve. A
can be measured segment should be the largest
possible homogeneous group
worth going after with a tailored
marketing program

Differentiable Actionable
• The segments are conceptually • Effective programs can be
distinguishable and respond formulated for attracting and
differently to different marketing mix serving the segments
elements and programs. If married
and single women respond similarly
to a sale on perfume, they do not
constitute separate segments.

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Market Targeting
Evaluating Market Segments

Segment size and growth

• The largest, fastest-growing segments are not always the most attractive ones for
every company.
• Smaller companies may target segments that are smaller and less attractive, in an
absolute sense, but that are potentially more profitable for them

Segment structural attractiveness

• Affect long-run segment attractiveness include strong and aggressive competitors,

new entrants, substitute products, power of buyers relative to sellers, and powerful
suppliers who can control prices, quality, or quantity of ordered goods and services

Company objectives and resources

• Attractive segments can be dismissed quickly because they do not mesh with the
company’s long-run objectives.
• Or the company may lack the skills and resources needed to succeed in an attractive
segment.
• A company should only enter segments in which it can create superior customer
value and gain advantages over its competitors

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Market Targeting
Market-Targeting Strategies

A target market is a set of buyers who share common

needs or characteristics that the company decides to serve

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Selecting the Market Segments

• Possible Levels of Segmentation

Selecting Target Market Segments

Undifferentiated Strategy

Company Mix Market

Differentiated Strategy

Marketing Mix 1 Segment 1

Marketing Mix 2 Segment 2

Marketing Mix 3 Segment 3

Concentrated Strategy Segment 1

Company Marketing Mix Segment 2

Segment 3

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Market Targeting
Selecting Target Market Segments

Undifferentiated marketing targets the whole market with

one offer.
• Mass marketing
• Focuses on common needs rather than what’s different

Most modern marketers have strong doubts about this strategy.

Difficulties arise in developing a product or brand that will satisfy all
consumers.

Moreover, mass marketers often have trouble competing with

more-focused firms that do a better job of satisfying the needs of
specific segments and niches

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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

Differentiated marketing: With more

than 30 differentiated hotel brands,
Marriott International dominates the
hotel industry, capturing a much
larger share of the travel and
hospitality market than it could with
any single brand alone.

Ritz-Carlton, St. Regis, and W Hotels serve the luxury segment. The Marriott, Sheraton, and Westin brands serve more mainstream but still
upscale travelers. Courtyard by Marriott focuses on more affordable rooms for business travelers, and Residence Inn by Marriott targets
extended-stay business and leisure travelers. Aloft offers “an affordable alternative for the tech-savvy and confidently social—travelers who love
open spaces, open thinking, and open expression.” The Marriott Vacation Club gives travelers a timeshare option.
In all, the Marriott portfolio of brands offers something for every travel segment.

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Market Targeting
Selecting Target Market Segments

Concentrated marketing targets a large share of a

smaller market.

• Limited company resources

• Knowledge of the market
• More effective and efficient

Concentrated marketing: Fila owes its resurgence not only to the

retro wave but the brand’s ability to create a narrative about its
products.

Read: https://www.cnbc.com/2019/06/19/how-a-90s-nostalgia-
trend-powered-the-comeback-of-champion-and-fila.html

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 involves tailoring brands and promotion to the needs and
wants of local customer segments.
• Cities
• Neighborhoods
• Stores

• Individual marketing

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Market Targeting
Selecting Target Market Segments

Individual marketing involves tailoring products and marketing programs to

the needs and preferences of individual customers.
• Individual marketing: The Rolls-Royce Bespoke design team works closely
with individual customers to help them create their own unique Rolls-Royces

Also known as:

• One-to-one marketing
• Mass customization

Big brands now offer for tailor-made cars

Market Targeting
Selecting Target Market Segments

Choosing a targeting strategy depends on

Company resources

• When the firm’s resources are limited, concentrated marketing makes the most sense

Product variability

• Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel

Product life-cycle stage

• When a firm introduces a new product, it may be practical to launch one version only, as undifferentiated
marketing or concentrated marketing may make the most sense
• In the mature stage of the product life cycle, however, differentiated marketing often makes more sense.

Market variability

• Undifferentiated marketing is appropriate where there is little market variability – most buyers have the same
tastes, buy the same amounts, and react the same way to marketing efforts

Competitor’s marketing strategies

• When competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or
concentrated marketing, focusing on the needs of buyers in specific segments

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Differentiation and Positioning

Product position is the way the product is
defined by consumers on important attributes.

Positioning maps show consumer perceptions of

marketer’s brands versus competing products on
important buying dimensions.

Positioning map: Large luxury S UVs

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

Communicating and delivering the chosen position to the market

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Competitive advantage is an advantage over

competitors gained by offering consumers
greater value, either through lower prices or by
providing more benefits that justify higher prices.

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Identifying a set of possible competitive

advantages to differentiate along the lines of:

• Product
• Services
• Channels
• People
• Image

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy
A competitive advantage should be:

• The difference • Competitors do not • The difference is • The difference is

delivers a highly offer the difference, superior to other communicable and
valued benefit to or the company can ways that customers visible to buyers
target buyers offer it in a more might obtain the
distinctive way. same benefit

Important Distinctive Superior Communicable

• Competitors cannot • Buyers can afford to • The company can

easily copy the pay for the introduce the
difference difference difference profitably

Preemptive Affordable Profitable

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Value proposition is the full mix of benefits upon which a brand is positioned.

Possible Value Propositions

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Winning Value Propositions

Value proposition Description

More for more • Provides the most upscale
product or service

More for the same • High quality at lower prices

More for less • Best winning proposition
The same for less • Gives a good deal
Less for much less • Meeting consumers’ lower
performance or quality
requirements at a lower price

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Positioning statement summarizes company or brand
positioning using this form: To (target segment and need)
our (brand) is (concept) that (point of difference/benefit)
support points (reason to believe)

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Developing a Positioning Statement

Positioning statement: Summarises company or brand positioning

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Apple’s Positioning Statement

Differentiation and Positioning

Communicating and Delivering the Chosen Position

Choosing the Maintaining the

Establishing a
positioning is often position requires
position or changing
easier than consistent
one usually takes a
implementing the performance and
long time.
position. communication.

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Rebranding vs Repositioning

REBRANDING REPOSITIONING

While rebranding deals with outward factors like the overall brand
image, repositioning deals with what's on the inside.

A brand can be repositioned without changing its identity.

Repositioning focuses on the customer perception of the brand relative to
the major competitors.

CQC7025 - AAMA

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Rebranding
• From ‘healthy food’ to more affordable and accessible image. Read:
Behind dahmakan’s Drastic Decision To Drop The Healthy Food Image &
Revamp As Pop Meals (Vulcan Post, 2021)

• The redesigned logo reflects a new era for Burger King and its
commitment to fresher, cleaner ingredients is best represented by
looking back to simpler, less processed times. Read: Burger King Rolls Out
Its First Rebrand In More Than 20 Years (Forbes, 2021)

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Repositioning
• Spotify was already a well-positioned brand in the market, but a crisis like the COVID-
19 pandemic can reshape business models and consumer needs.

• The music streaming platform already seemed to have built the perfect brand to thrive
during the pandemic because it is digital and remote, which provides struggling people
with a much-needed escape from daily life.

• However, the pandemic caused many advertisers to cut budgets. As a result,

Spotify’s business model–which relies heavily on revenue from advertisements–faltered.

• To successfully reposition the brand, they increased their focus on original content
like podcasts and put enormous effort into curating playlists from internal
experts, external experts and celebrities. This strategy (re)positioned the company
not only as a music provider, but also a tastemaker and content creator.

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