Customer-Driven Marketing
Strategy

Objectives
• Define the four major steps in designing a
customer-driven market strategy: market
segmentation, market targeting, differentiation,
and positioning
• List and discuss the major bases for segmentation
• Explain how companies identify attractive market
segmentation and choose a market targeting
strategy.
• Discuss how companies position their products
for maximum competitive advantage in the
marketplace

Topic Outline
• Market Segmentation
• Market Targeting
• Differentiation and Positioning

Marketing Strategy
• Once the best opportunity to satisfy unfulfilled
customer needs is identified, a strategic plan
for pursuing the opportunity can be developed.
• Marketing strategy involves:
– Segmentation
– Targeting (target market selection)
– differentiation
– Positioning the product within the target market

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

Market Segmentation
• The process of dividing a market into distinct
groups of buyers on the basis of needs,
characteristics, or behavior
• Segmentation allows the company to better
satisfy the needs of its customers

Market Segmentation
When segmentation is done right, you get
the highest return for your marketing
expenditure

Market Segmentation
Segmenting Consumer Markets
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation

Geographic segmentation
• Marketing mixes are customized
geographically
• Geographic Segmentation Variables
– World Region or Country
– State
– City
– City or Metro Size
– Density
– Climate

Demographic segmentation
• Demographic segmentation divides the
market into groups based on variables such as
age, gender, family size, income, occupation,
education, religion, race, generation, and
nationality

Demographic segmentation
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)
Income segmentation divides the market into
affluent or low-income consumers

Psychographic segmentation
• Psychographic segmentation divides buyers
into different groups based on social class,
lifestyle, or personality traits.
• People in the same demographic group
can have very different psychographic
characteristics

Psychographic segmentation
• Lifestyle
– Different people have different lifestyle
patterns and our behaviour may change as
we pass through different stages of life.

Swatch targets
those with an
active lifestyle

Behavioral segmentation
• Behavioral segmentation divides buyers into groups
based on their knowledge, attitudes, uses, or
responses to a product
• Behavioral Segmentation Variables
– Occasions
– Benefits
– User Status
– Usages Rate
– Loyalty Status
– Attitude Toward the Product

Behavioral segmentation
• Dividing a market into groups based on
consumer knowledge, attitude, use , or response
to a product
• Behavioral Segmentation Variables
– Occasions
– Benefits
– User Status
– Usages Rate
– Loyalty Status
– Attitude Toward the Product

Fig: Applying benefit segmentation to office Furniture
Ad at left targets businesspeople who are interested in comfort, while the one at
the right targets businesspeople who are attracted to symbol of success

Segmenting Business Markets

Segmenting Business Markets
• Demographic segmentation
– Industry, company size, location
• Operating variables
– Technology, usage status, customer capabilities
• Purchasing approaches
• Situational factors
– Urgency, specific application, size of order
• Personal characteristics
– Buyer-seller similarity, attitudes toward risk, loyalty

Segmenting International
Markets
• Geographic segmentation
– Location or region
• Economic factors
– Population income or level of economic development
• Political and legal factors
– Type / stability of government, monetary regulations,
amount of bureaucracy, etc.
• Cultural factors
– Language, religion, values, attitudes, customs,
behavioral patterns

Segmentation Criteria
• Criteria that assist us within segmentation
– Is the segment viable? Can we make a profit
from it?
– Is the segment accessible? How easy is it for
us get into the segment
– Is the segment measurable? Can we obtain
realistic data to consider its potential

Requirements for Effective
Segmentation
• Differentiable (Distinct)
– is each segment clearly different from other segments?
• Accessible
– can buyers be reached through appropriate
promotional programmes and distribution channels?
• Measurable
– is the segment easy to identify and measure?
• Substantial
– is the segment sufficiently large to provide a stream of
constant future revenues and profits?
• Actionable
– Effective programs can be designed for attracting and serving
the segment.

Targeting
(Target Market Selection)

Target Market Selection
• Market:
– People or institutions with sufficient
purchasing power, authority, and willingness
to buy
• Target market:
– Specific segment of consumers most likely to
purchase a particular product
• Set of buyers sharing common needs or
characteristics that the company decide to
serve

Target Marketing
• Contrasts with mass marketing
– Offer single product to the entire market.
• Evaluating each market segment’s
attractiveness and selecting one or more
segment to enter.

Target Marketing
• Evaluating Market Segments
– Segment size and growth
– Segment structural attractiveness
• Level of competition
• Substitute products
• Power of buyers
• Powerful suppliers
– Company objectives and resources

Targeting (Target Market Selection)
Suitability of Market Segments to the Company
• Evaluation according to how segment fit the
company objectives, resources, and
capabilities.
– Whether the company can offer superior value to
the customer in the segment
– The impact of serving the segment on the firm’s
image
– Access to distribution channels required to serve
the segment

Target Marketing Strategies

Target Marketing Strategies
Undifferentiated marketing targets the whole
market with one offer
– Mass marketing (homogeneous demand)
– Focuses on common needs rather than what’s
different
– Before choosing this strategy should ensure the
availability of resources for mass production,
mass distribute, and mass advertise.

Target Marketing Strategies
Differentiated marketing targets several
different market segments and designs
separate offers for each
• Also called selective specialization
• Goal is to achieve higher sales and stronger
position
• More expensive than undifferentiated
marketing

Target Marketing Strategies
Concentrated marketing targets a narrow,
specific consumer segment through one,
specialized marketing plan catering to the needs
of that segment.
• Also called niche marketing
• Limited company resources
• One or limited market segment is served
• Knowledge of the market
• More effective and efficient

Concentrated marketing cont…
• Via concentrated marketing, a firm can
succeed by appealing to one segment with
a tailored marketing plan
• Try to avoid “majority fallacy”
– Enter to a smaller, but untapped segment

Majority Fallacy

Target Marketing Strategies
Micromarketing is the practice of tailoring
products and marketing programs to suit the
tastes of specific individuals and locations
• Local marketing
• Individual marketing

Target Marketing Strategies
Micromarketing cont…
Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups
• Cities
• Neighborhoods
• Stores

Target Marketing Strategies
Micromarketing cont…
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

Target Marketing Strategies
• Selecting and Executing a Strategy
– No single, best choice strategy suits all firms
– Depends on:
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies

Socially Responsible Target Marketing
• Benefits customers with specific needs
• Concern for vulnerable segments
• Children
– Alcohol
– Cigarettes
– Internet abuses

Contrasting Target Market Approaches

Differentiation and
Positioning

Company should target on value
proposition- how it will create differentiated
value for targeted segments and what
positions it wants to occupy in those
segment

Positioning
The act of designing the company’s offering
and image so that they occupy a meaningful
and distinct competitive position in the target
customers’ minds.

Positioning
Product position is the way the product is defined by
consumers on important attributes—the place the
product occupies in consumers’ minds relative to
competing products
– Perceptions
– Impressions
– Feelings

Positioning
• Two fundamental elements:
– Physical attributes - the functionality and capability that a brand
offers.
– Communication - the way in which a brand is communicated and
how consumers perceive the brand relative to other competing
brands in the market place.

Positioning
• How customers view the firm and its
product
– Mercedes, position is luxury
– Landrover, position is very very reliable
– Porsche and BMW-Performance
– Volvo- Safety
– Walmart, position is lowest price, quality not
so bad

Porsche is
positioned on
the basis of
performance
and freedom.

Positioning
Used a s a communication tool to reach
target customers in a crowded
marketplace.

Positioning
(Getting Into the Mind of the Customer)
• Easiest way of getting into someone’s
mind is to be first.
– Easy to remember who is first.
• Cut through the noise level of other
products
• Customers rank brands in their minds.
• Difficult to replace the market leader in the
mind of the customer.

Positioning Maps
Marketer prepare perceptual maps for planning
differentiation and positioning strategies.

Differentiation and Positioning
Positioning maps
show consumer
perceptions of
their brands
versus competing
products on
important buying
dimensions

Example of a Perceptual Map

Differentiation and Positioning
Strategy
• Three steps:
– Identifying a set of possible competitive
advantages
– Choosing the right competitive advantages
– Selecting an overall positioning strategy

Choosing a Positioning Strategy
Identifying possible competitive advantages
• Many potential sources of differentiation exist:
– Products
• Consistency, durability, reliability, reparability
– Services
• Speed, convenience, careful delivery
– Channels
– People
• Hiring, training better people than competition
– Image
• Convey benefits and positioning

Porsche is
positioned on
the basis of
performance
and freedom.

Choosing a Positioning Strategy
Choosing the Right Competitive Advantages
• Choosing the right competitive advantage
– How many differences to promote?
• Unique selling proposition
– Ex: Wal-Mart promotes low price
• More than one differentiator
– Which differences to promote?

Choosing a Positioning Strategy
Which difference to promote
• Important
• Superior
• Preemptive
• Distinctive
• Communicable
• Affordable
• Profitable

Selecting an Overall Positioning
Strategy
• Full positioning of a brand is called the
brand’s value proposition
– Full mix of benefits upon which it is positioned
• Gives answer to the customer’s question
“why should I buy your brand?’
– Ex: Volvo's proposition hinges on safety but
also includes reliability, styling.

Selecting an Overall Positioning
Strategy
Fig: Possible value propositions
Value proposition
is the full mix of
benefits upon
which a brand is
positioned

More for More
• This positioning strategy involves
providing the most upscale product or
service and charging a higher price.
Ex: Ritz-Carlton Hotels, Mont Blanc,
Mercedes automobile.

More for the Same/Less
• Companies can targeted competitor more-
for-more strategy with more for the same
or more for less.
Ex: Toyota introduced its Lexus line with a
“more for the same” value proposition
versus Mercedes, and BMW.

Same for Less
• Powerful value proposition.
Ex: Dell offers equivalent quality computers
at a lower “price for performance”
Wal-Mart use this strategy.
AMD makes less expensive versions of
Intel’s microprocessor chips.

Changing your position
• Changing your position, to get better
reaction, might mean
1. Changing the Product (one of the 4 P’s)
2. Changing the Price
3. Adding a new product line
4. Change the advertising (Promotion)
eg. Women in truck commercials
eg. 7UP - the Un-cola

Repositioning Strategies
The following four ways outline how to approach
repositioning a product, depending on the individual
situation facing a brand. In some cases, a brand might
need to be adapted before relaunch.
1. Change the tangible attributes and then communicate the new
proposition to the same market.
2. Change the way a product is communicated to the original market.
3. Change the target market and deliver the same product.
4. Change both the product (attributes) and the target market.

Developing a Positioning
Statement
• A statement that summarizes company or
brand positioning- it takes this form: To
(Target segment and need) our (brand) is
(concept) that (point of difference).
• Ex: To busy, mobile professionals who need to always
be in the loop, BlackBerry is a wireless connectivity
solution that allows you to stay connected to data,
people, and resources while on the go, easily and
reliably.