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Dunkin donuts target market and demographic segmentation

23/11/2021 Client: muhammad11 Deadline: 2 Day

Marketing: An Introduction

Thirteenth Edition

Chapter 6

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

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.

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.

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.

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.

First Stop: Dunkin’ Donuts Targeting the Average Joe

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

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.

Learning Objective 6-1

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

Figure 6.1 - Designing a Customer Value-Driven Market Strategy

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.

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

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.

Learning Objective 6-2

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

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

This table outlines variables that might be used in segmenting consumer markets. Each of these variables are discussed in the forthcoming slides.

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

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.

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

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.

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.

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.

Psychographic Segmentation (2 of 2)

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

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.

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.

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.

Behavioral Segmentation (2 of 3)

Schwinn makes bikes for every benefit segment.

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.

Behavioral Segmentation (3 of 3)

User status: Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users.

Usage rate: Markets can be segmented into light, medium, and heavy product users.

Loyalty status: Consumers can be loyal to brands, stores, and companies.

User status segments markets into 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. Included in the potential users group are consumers facing life-stage changes who can be turned into heavy users.

Usage rate segments markets into 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.

A market can also be segmented by loyalty status. Consumers can be loyal to brands, stores, and companies. Highly loyal customers promote the brand through personal word of mouth and social media. In contrast, by studying its less-loyal buyers, a company can detect which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses and take actions to correct them.

Multiple Segmentation Bases

Segmentation bases help companies to

Identify smaller, better-defined target groups

Identify and understand key customer segments

Reach customers more efficiently by tailoring market offerings and messages to customers’ specific needs

Segmentation systems help marketers segment people and locations into marketable groups of like-minded consumers.

Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, better-defined target groups.

One of the leading consumer segmentation systems is Experian’s Mosaic USA system. It classifies U.S. households into one of 71 lifestyle segments and 19 levels of affluence, based on specific consumer demographics, interests, behaviors, and passions. For example, the Birkenstocks and Beemers group is located in the Middle Class Melting Pot level of affluence and consists of 40- to 65-year-olds who have achieved financial security and left the urban rat race for rustic and artsy communities located near small cities.

Such segmentation helps companies identify and better understand key customer segments, reach them more efficiently, and tailor market offerings and messages to their specific needs.

Segmenting Business Markets

Consumer and business markets use many of the same variables for segmentation.

Variables used by business marketers for segmentation include

Operating characteristics

Purchasing approaches

Situational factors

Personal characteristics

Consumer and business marketers use many of the same variables to segment their markets. Business buyers can be segmented geographically, demographically (industry, company size), or by benefits sought, user status, usage rate, and loyalty status. Yet, business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.

Segmenting International Markets

Variables include

Geographic location

Economic factors

Political and legal factors

Cultural factors

Intermarket (cross-market) segmentation: Grouping consumers with similar needs and buying behaviors irrespective of their location

Companies can segment international markets using one or a combination of several variables.

Geographic segmentation assumes that nations close to one another will have many common traits and behaviors. For example, some U.S. marketers lump all Central and South American countries together.

World markets can also be segmented based on economic factors. Countries might be grouped by population income levels or by their overall level of economic development. For example, many companies are now targeting the BRIC countries – Brazil, Russia, India, and China – which are fast-growing developing economies with rapidly increasing buying power.

Countries can also be segmented by political and legal factors such as the type and stability of government, receptivity to foreign firms, monetary regulations, and amount of bureaucracy.

Cultural factors can also be used by grouping markets according to common languages, religions, values and attitudes, customs, and behavioral patterns.

Using intermarket segmentation (also called cross-market segmentation), marketers form segments of consumers who have similar needs and buying behaviors even though they are located in different countries.

Requirements for Effective Segmentation

Measurable

Accessible

Substantial

Differentiable

Actionable

To be useful, the size, purchasing power, and profiles of market segments should be measurable. The market segments must be accessible – effectively reached and served. The market segments should be substantial – large or profitable enough to serve. They should be differentiable, which means they are conceptually distinguishable and respond differently to different marketing mix elements and programs. Finally, the segments should be actionable, which means that effective programs can be designed for attracting and serving the segments.

Learning Objective 6-2 Summary

Consumer market segmentation

Geographic, demographic, psychographic, and behavioral

Business market segmentation

Demographics, operating characteristics, purchasing approaches, situational factors, and personal characteristics

Requirements for effective segmentation

Measurable, accessible, substantial, differentiable, and actionable

There is no single way to segment a market. Therefore, the marketer tries different variables to see which give the best segmentation opportunities. For consumer marketing, the major segmentation variables are geographic, demographic, psychographic, and behavioral. In geographic segmentation, the market is divided into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. In demographic segmentation, the market is divided into groups based on demographic variables, including age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. In psychographic segmentation, the market is divided into different groups based on social class, lifestyle, or personality characteristics. In behavioral segmentation, the market is divided into groups based on consumers’ knowledge, attitudes, uses, or responses concerning a product.

Business marketers use many of the same variables to segment their markets. But business markets also can be segmented by business demographics (industry, company size), operating characteristics, purchasing approaches, situational factors, and personal characteristics. The effectiveness of the segmentation analysis depends on finding segments that are measurable, accessible, substantial, differentiable, and actionable.

Learning Objective 6-3

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

Market Targeting (1 of 2)

Evaluating the various segments based on

Segment size and growth

Segment structural attractiveness

Company objectives and resources

Selecting target market segments

Target market: Set of buyers sharing common needs or characteristics that the company decides to serve

Market segmentation reveals the firm’s market segment opportunities. The firm has to evaluate the various segments and decide how many and which segments it can serve best. In evaluating different market segments, a firm must look at three factors.

First, a company wants to select segments that have the right size and growth characteristics. Second, the company needs to examine major structural factors that affect long-run segment attractiveness like strong and aggressive competitors or if it is easy for new entrants to come into the segment. The existence of actual or potential substitute products, the relative power of buyers, and powerful suppliers also affects segment attractiveness. Finally, the company must consider its own objectives and resources. Some 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.

After evaluating different segments, the company must decide which and how many segments it will target. A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Market targeting can be carried out at several different levels.

Figure 6.2 - Market-Targeting Strategies

This figure shows that companies can target very broadly, very narrowly, or somewhere in between. Undifferentiated (or mass marketing) refers to a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. Differentiated (or segmented marketing) refers to a market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. Concentrated (or niche marketing) refers to a market-coverage strategy in which a firm goes after a large share of one or a few smaller segments or niches. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Rather than seeing a customer in every individual, micromarketers see the individual in every customer.

Micromarketing includes local marketing and individual marketing. Local marketing involves tailoring brands and marketing to the needs and wants of local customer segments like cities, neighborhoods, and even specific stores. Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers.

Mass customization is the process by which firms interact one to one with masses of customers to design products, services, and marketing programs tailor-made to individual needs.

Market Targeting (2 of 2)

The PUMA Factory sneaker customization Web site

An example of individual marketing is the PUMA factory sneaker customization Web site which lets customers tailor their PUMA shoes to taste. “You know what works—what styles, what textures, what colors. Customize your sneakers whatever way you want.”

Choosing a Targeting Strategy

Factors to consider

Company resources

Product variability

Product’s life-cycle stage

Market variability

Competitors’ marketing strategies

Companies need to consider many factors when choosing a market-targeting strategy. Which strategy is best depends on the company’s resources. When the firm’s resources are limited, concentrated marketing makes the most sense. The best strategy also depends on the degree of product variability. The product’s life-cycle stage also must be considered. When a firm introduces a new product, it may be practical to launch one version only, and undifferentiated marketing or concentrated marketing may make the most sense. In the mature stage of the product life cycle, however, differentiated marketing can be useful.

Another factor is market variability. If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate. Finally, competitors’ marketing strategies are important. When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal.

Socially Responsible Target Marketing

Controversy and concern of target marketing

Vulnerable or disadvantaged consumers are targeted with controversial or potentially harmful products.

Socially responsible target marketing should be done to serve both the interests of the company and the interests of those targeted.

Target marketing sometimes generates controversy and concern. The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.

In target marketing, the issue is not really who is targeted but rather how and for what. Controversies arise when marketers attempt to profit at the expense of targeted segments—when they unfairly target vulnerable segments or target them with questionable products or tactics. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.

Learning Objective 6-3 Summary

Four market-targeting strategies

Undifferentiated (or mass), differentiated, concentrated (or niche), and micromarketing

Micromarketing includes local and individual marketing.

To target the best market segments, the company first evaluates each segment’s size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four market-targeting strategies—ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated (or mass) marketing. This involves mass producing, mass distributing, and mass promoting the same product in about the same way to all consumers. Or the seller can adopt differentiated marketing—developing different market offers for several segments. Concentrated marketing (or niche marketing) involves focusing on one or a few market segments only. Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product life-cycle stage, market variability, and competitive marketing strategies.

Learning Objective 6-4

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

Differentiation and Positioning (1 of 2)

Firms must decide which segments to target and on the value proposition.

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

Beyond deciding which segments of the market it will target, the company must decide on a value proposition—how it will create differentiated value for targeted segments and what positions it wants to occupy in those segments. A product position is the way a product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products.

Differentiation and Positioning (2 of 2)

IKEA does more than just sell affordable home furnishings; it’s the “Life improvement store.”

Figure 6.3 - Positioning Map: Large Luxury SUVs

Marketers prepare perceptual positioning maps that show consumer perceptions of their brands versus those of competing products on important buying dimensions to plan their differentiation and positioning strategies.

This figure shows a positioning map for the U.S. large luxury SUV market. The position of each circle on the map indicates the brand’s perceived positioning on two dimensions: price and orientation (luxury versus performance). The size of each circle indicates the brand’s relative market share.

Choosing a Differentiation and Positioning Strategy

The differentiation and positioning task consists of three steps, which include identifying a set of differentiating competitive advantages on which to build a position, choosing the right competitive advantages, and selecting an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market.

The following slides discuss each of these steps in greater detail.

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