Principles of Marketing

Eighteenth Edition, Global Edition

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

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Customer-Driven Marketing Strategy

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Market Segmentation (1 of 14)
Market segmentation requires dividing
a market into smaller segments with
distinct needs, characteristics, or
behaviors that might require separate
marketing strategies or mixes.

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Market Segmentation (2 of 14)
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective segmentation

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Market Segmentation (3 of 14)
Segmenting Consumer Markets
• Geographic segmentation
• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation

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Market Segmentation (4 of 14)
Segmenting Consumer Markets
Geographic segmentation divides the market into different
geographical units such as nations, regions, states,
counties, cities, or even neighborhoods.

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Market Segmentation (5 of 14)
Segmenting Consumer Markets
Demographic segmentation divides the market into
segments based on variables such as age, life-cycle stage,
gender, income, occupation, education, religion, ethnicity,
and generation.

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Market Segmentation (6 of 14)
Segmenting Consumer Markets
Age and life-cycle stage segmentation divides a market
into different age and life-cycle groups.
Gender segmentation divides a market into different
segments based on gender.
Income segmentation divides a market into different
income segments.

Social CRM Helps businesses exploit Social media to

understand leads and their life cycle stages..

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Market Segmentation (7 of 14)
Segmenting Consumer Markets
Psychographic segmentation divides a market into different segments
based on social class, lifestyle, or personality characteristics.
Lifestyle segmentation

Tracking mobile users’ app usage data to get better insights on

Psychographic level
JTBD mentality applied to Custom Audience& Look-alike
advertising model
i.e. Maçkolik, Prayer Time App, Newspaper Consumption Habits

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Market Segmentation (8 of 14)
Segmenting Consumer Markets
Behavioral segmentation divides a market into segments
based on consumer knowledge, attitudes, uses of a product,
or responses to a product.

Behavioral Email Marketing

Programmatic Marketing

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Market Segmentation (9 of 14)
Segmenting Consumer Benefit segmentation: Schwinn
Markets makes bikes for every benefit
Behavioral Segmentation segment. For example, its e-
• Occasions bikes “help make the morning
• Benefits sought commute or ride around town a
little bit easier.”
• User status
• Usage rate
• Loyalty status

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Market Segmentation (10 of 14)
Segmenting Consumer Markets
Multiple segmentation is used to identify smaller, better-defined target groups.
Experian’s Mosaic USA 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 (11 of 14)
Segmenting 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

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Market Segmentation (12 of 14)
Segmenting International Markets
• Geographic location
• Economic factors
• Political and legal factors
• Cultural factors

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Market Segmentation (13 of 14)
Segmenting International Markets

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 (14 of 14)
Requirements for Effective Segmentation
• Measurable: The size, purchasing power, and profiles of the segments
can be measured.
• Accessible: The market segments can be effectively reached and
served.
• Substantial: The market segments are large or profitable enough to
serve.
• Differentiable: The segments are conceptually distinguishable and
respond differently to different marketing mix elements and programs.

• Actionable: Effective programs can be designed for attracting and

serving the segments.

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Market Targeting (1 of 10)
Evaluating Market Segments

• Segment size and growth

• Segment structural attractiveness
• Company objectives and resources

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Market Targeting (2 of 10)
Selecting Target Market Segments
A target market is a set of buyers who share common
needs or characteristics that the company decides to serve.

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Market Targeting (3 of 10)
Figure 7.2 Market-Targeting Strategies

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Market Targeting (4 of 10)
Selecting Target Market Segments
Undifferentiated marketing targets the whole market with
one offer.
• Mass marketing
• Focuses on common needs rather than what’s different

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Market Targeting (5 of 10)
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.

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Market Targeting (6 of 10)
Selecting Target Markets Concentrated marketing: Fila owes
its resurgence not only to the retro
Concentrated marketing targets a wave but the brand’s ability to
large share of a smaller market. create a narrative about its
• Limited company resources products.
• Knowledge of the market
• More effective and efficient

• Small businesses, in particular,

are realizing riches from serving
small niches
• Today, the low cost of setting up
shop on the internet makes it
even more profitable to serve

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Market Targeting (7 of 10)
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

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Market Targeting (8 of 10)
Selecting Target Market Segments
Local marketing involves tailoring brands and promotion to
the needs and wants of local customer segments.
• Cities
• Neighborhoods
• Stores

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Market Targeting (9 of 10)
Selecting Target Markets Individual marketing: The
Individual marketing Rolls-Royce Bespoke design
involves tailoring products team works closely with
and marketing programs to individual customers to help
the needs and preferences of them create their own unique
individual customers. Rolls-Royces.
Also known as:
• One-to-one marketing
• Mass customization

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Market Targeting (10 of 10)
Selecting Target Market Segments
Choosing a targeting strategy depends on
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies

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Differentiation and Positioning (1 of 9)
Product position is the way the product is defined by
consumers on important attributes.
Positioning: Sonos does more than just sell speakers; it
unleashes “All the music on earth, in every room of your
house, wirelessly.”

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Differentiation and Positioning (3 of 9)
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 (4 of 9)
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 (5 of 9)
Choosing a Differentiation Services differentiation:
and Positioning Strategy Quicken Loans’ Rocket
Identifying a set of possible Mortgage doesn’t just offer
competitive advantages to mortgage loans; its online-
differentiate along the lines of: only interface lets users get a
loan decision in only minutes.
• Product
• Services
• Channels
• People
• Image

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Differentiation and Positioning (6 of 9)
Choosing a Differentiation and Positioning Strategy
A competitive advantage should be:
• Important
• Distinctive
• Superior
• Communicable
• Preemptive
• Affordable
• Profitable

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Differentiation and Positioning (7 of 9)
Choosing a Differentiation and Positioning Strategy
Value proposition is the full mix of benefits upon which a
brand is positioned.
Figure 7.4 Possible Value Propositions

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Value Proposition
• Value proposition is the answer to the customer’s
question “Why should I buy your brand?”
• BMW’s “ultimate driving machine” value
proposition hinges on performance but also
includes luxury and styling, all for a price that is
higher than average but seems fair for this mix of
benefits

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Differentiation and Positioning (8 of 9)
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)
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Brand Superiority
• The brand’s superiority is made on its points
of difference.
• For example, the U.S. Postal Service ships
packages just like UPS and FedEx, but it
differentiates its priority mail from
competitors with convenient, low-price, flat-
rate shipping boxes and envelopes. “If it fits,
it ships,” promises USPS.

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 Differentiation and Positioning (9 of 9)
Communicating and Delivering the Chosen Position
Choosing the positioning is often easier than implementing the position.
Establishing a position or changing one usually takes a long time.
Maintaining the position requires consistent performance and
communication.

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What’s Strategy All About ?
• Strategy, in essence, is about making deliberate choices about
– Where to compete and where not to compete
§ Products
§ Customers
§ Geography

• Profitability Comes from

– Industry Effect %20
– Positioning Effect %40
– Corporate Effect %20

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Netflix Example
What is innovation and how is it done?

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https://modelthinkers.com/mental-model/ten-types-of-innovation

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https://www.ideatovalue.com/inno/nickskillicorn/2019/07/ten-types-of-innovation-30-new-case-
studies-for-2019/

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