Choosing a differentiation and positioning strategy

Marketing: An Introduction

Thirteenth Edition

Chapter 6

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

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Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

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Learning Objectives (1 of 4)

6-1. Define the major steps in designing a customer value-driven marketing strategy: market segmentation, targeting, differentiation, and positioning

6-2. List and discuss the major bases for segmenting consumer and business markets.

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This chapter defines the major steps in designing a customer value-driven marketing strategy which are market segmentation, targeting, differentiation, and positioning. It also lists and discusses the major bases for segmenting consumer and business markets.

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Learning Objectives (2 of 4)

6-3. Explain how companies identify attractive market segments and choose a market-targeting strategy.

6-4. Discuss how companies differentiate and position their products for maximum competitive advantage.

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This chapter also explains how companies identify attractive market segments and choose a market-targeting strategy. Finally, the chapter discusses how companies differentiate and position their products for maximum competitive advantage.

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First Stop: Dunkin’ Donuts Targeting the Average Joe

Dunkin’ Donuts targets everyday Joes who just don’t get what Starbucks is all about.

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Dunkin’ Donuts targets the “Dunkin’ tribe”—not the Starbucks coffee snob but the average Joe. Dunkin’ isn’t like Starbucks; it doesn’t want to be.

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Learning Objective 6-1

Define the major steps in designing a customer value-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

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Figure 6.1 - Designing a Customer Value-Driven Market Strategy

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This figure shows the four major steps in designing a customer-driven marketing strategy.

In the first two steps, the company selects the customers that it will serve. Market segmentation involves dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.

In the final two steps, the company decides on a value proposition. Differentiation involves actually differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place, relative to competing products in the minds of target consumers.

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Learning Objective 6-1 Summary

Customer value-driven marketing strategy

Identifying which customers to serve

Determining a value proposition

Market segmentation and market targeting

Differentiating the market offering

Positioning in the minds of target customers

Right relationships with the right customers

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A customer value-driven marketing strategy begins with selecting which customers to serve and determining a value proposition that best serves the targeted customers. It consists of four steps. Market segmentation is the act of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes. Once the groups have been identified, market targeting evaluates each market segment’s attractiveness and selects one or more segments to serve. Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of positioning the market offering in the minds of target customers. A customer value-driven marketing strategy seeks to build the right relationships with the right customers.

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Learning Objective 6-2

List and discuss the major bases for segmenting consumer and business markets.

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Table 6.1 - Major Segmentation Variables for Consumer Markets

Segmentation Variable Examples
Geographic Nations, regions, states, counties, cities, neighbourhoods, population density (urban, suburban, rural), climate
Demographic Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation
Psychographic Social class, lifestyle, personality
Behavioral Occasions, benefits, user status, usage rate, loyalty status
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This table outlines variables that might be used in segmenting consumer markets. Each of these variables are discussed in the forthcoming slides.

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Geographic and Demographic Segmentation

Geographic segmentation: Dividing a market into different geographical units

Such as nations, states, regions, counties, cities, or neighborhoods

Demographic segmentation: Dividing a market into segments based on variables

Such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation

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Geographic segmentation calls for dividing the market into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. For example, many large retailers—from Target and Walmart to Kohl’s and Staples—are now opening smaller format stores designed to fit the needs of densely packed urban neighborhoods not suited to their typical large suburban superstores.

Demographic segmentation divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Demographic factors are the most popular bases for segmenting customer groups. These factors are discussed in detail in the following slide.

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Demographic Segmentation

Age and life-cycle segmentation

Dividing a market into different age and life-cycle groups Gender segmentation

Dividing a market into different segments based on gender Income segmentation

Dividing a market into different income segments

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Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups. For example, Kraft’s Oscar Mayer brand markets Lunchables, convenient prepackaged lunches for children. To extend the substantial success of Lunchables, however, Oscar Mayer later introduced Lunchables Uploaded for teenagers and an adult version, P3 (Portable Protein Pack).

Gender segmentation divides a market into different segments based on gender, and has long been used in marketing clothing, cosmetics, toiletries, toys, and magazines For example, the men’s personal care industry has exploded, and many cosmetics brands that previously catered mostly to women, now successfully market men’s lines.

Income segmentation involves dividing a market into different income segments. For example, many retailers—such as the Dollar General, Family Dollar, and Dollar Tree store

chains—successfully target low- and middle-income groups. The core market for such stores is represented by families with incomes under $30,000. With their low-income strategies, dollar stores are now the fastest-growing retailers in the nation.

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Psychographic Segmentation (1 of 2)

Marketers segment their markets using variables such as

Social class

Lifestyle

Personality characteristics

The products people buy reflect their lifestyles.

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

.

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Psychographic Segmentation (2 of 2)

VF Corporation offers a closet full of more than 30 premium lifestyle brands.

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For example, VF Corporation offers a closet full of more than 30 premium lifestyle brands, each of which “taps into consumer aspirations to fashion, status, and well-being” in a well-defined segment.

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Behavioral Segmentation (1 of 3)

Occasion segmentation: Segments divided according to occasions, when the buyers

Get the idea to buy

Make their purchase

Use the purchased item

Benefit segmentation: Segments divided according to the different benefits that consumers seek from the product.

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Many marketers believe that behavior variables are the best starting point for building market segments.

Occasion segmentation divides the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item. This segmentation can help firms build up product usage. Companies try to boost consumption by promoting usage during nontraditional occasions. For example, most consumers drink orange juice in the morning, but orange growers have promoted drinking orange juice as a cool, healthful refresher at other times of the day.

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Behavioral Segmentation (2 of 3)

Schwinn makes bikes for every benefit segment.

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Benefit segmentation divides the market into segments according to the different benefits that consumers seek from the product. For example, to meet varying benefit preferences, Schwinn makes affordable, quality bikes in seven major benefit groups: cruisers, hybrid, bike path, mountain, road, urban, and kids.

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Behavioral Segmentation (3 of 3)