principles of marketing chapter 6: creating value for target customers

Principles of Marketing

Chapter 6:Creating Value for Target Customers

Designing a Customer-Driven Marketing Strategy

• Designing a true customer-driven marketing strategy involves:

Segmentation

Targeting

Differentiation

Positioning

Dr. James Carver – Auburn University

Market Segmentation

• Segmentation: The process of dividing a market into distinct

groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs.

Key variables:• Geographic• Demographic• Psychographic• Behavioral


Market Segmentation (cont.)

• Geographic:NationsRegion of countryStatesCountiesCitiesNeighborhoods



• Demographic:Age, gender, family size, family life cycle, income,

occupation, education, race, religion, generation, nationality.

The most popular bases for segmenting customer groups as needs, wants, and usage often vary by demographics.

Easier to measure than most other types of variables.



• Age and life-cycle stageAddresses the fact that consumer needs and wants

change with age.

Avoid stereotypes in promotions based on age.• e.g., Boomers don’t act like those of previous

generations

Promote positive messages & avoid “talking down” when marketing to mature consumers.



• Gender:Neglected gender segments can offer new

opportunities (Harley Davidson & women).

• Income: Identifies and targets the affluent for luxury goods.People with low annual incomes can be a lucrative

market (Walmart vs. Target)Troubled economy makes marketing to all income

groups a challenge.



• Psychographic segmentation:Dividing a market into different groups based on

social class, lifestyle, or personality characteristics.

• Behavioral segmentation:Dividing buyers into groups based on consumer

knowledge, attitudes, uses, or responses to a product.


Behavioral Segmentation

• Behavioral segmentation:Occasion segmentation:

• Special promotions and labels for holidays.• Special products for special occasions.

Benefits sought:• Different segments desire different benefits from

products.

User status: • Nonusers, ex-users, potential users, first-time users,

regular users.



• Use of multiple segmentation bases provides:Ability to identify smaller, better-defined target

groups.

• Start with a single base and then expand to other bases.

• Multivariable segmentation systems such as PRIZM NE are becoming more common.


PRIZM NE

• PRIZM NE:Multivariable segmentation systems developed by

Claritas, Inc.Potential Rating Index for Markets (PRIZM NE)

Based on U.S. census data.Classifies U.S. households into 66 clusters or

segments within 14 different social groups.

http://www.srds.com/frontMatter/ips/lifestyle/reports/prizm.html





Requirements for Effective Segmentation

• To be useful, market segments must be:

Measurable

Accessible

Substantial

Differentiable

Actionable


Market Targeting

• Market targeting involves:

1. Evaluating marketing segments.

2. Selecting target market segments.

3. Being socially responsible.


Selecting Target Market Segments

• Targeting strategies include:Undifferentiated (mass) marketing:

• Ignores segmentation opportunities.

Differentiated (segmented) marketing:• Target several segments & make separate offers to each

Concentrated (niche) marketing:• Targets one or a couple small segments.

Micromarketing (local or individual marketing)


Micromarketing

• Tailoring products and marketing programs to suit the tastes of specific individuals and locations.

Local marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores.

Individual marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.


Socially Responsible Targeting

• Smart targeting helps both companies and consumers.

Marketing sometimes generates controversy and concern when targeting:

• Vulnerable, minority or disadvantaged populations• Children and teens

Controversy arises when an attempt is made to profit at the expense of segments.


Differentiation and Positioning

• A product’s 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

Perceptual positioning maps can help define a brand’s position relative to competitors.



• Choosing a differentiation and positioning strategy involves:

1. Identifying a set of differentiating competitive advantages on which to build a position.

2. Choosing the right competitive advantages.

3. Selecting an overall positioning strategy.



• Competitive advantage:An advantage over competitors gained by offering

greater customer value, either through lower prices or by providing more benefits that justify higher prices.



• Identifying possible value differences and competitive advantages:

Key to winning target customers is to understand their needs better than competitors do and to deliver more value.

Finding points of differentiation requires examining the entire customer experience



• Types of differentiation:

Product differentiation

Services differentiation

Channels differentiation

People differentiation

Image differentiation



• Choosing the right competitive advantage requires selecting how many and which differences to promote.

Unique selling proposition is often preferred.

Promoting multiple differences is possible.



• Worthwhile differences that could be promoted are:

• Important• Distinctive• Superior• Communicable• Preemptive• Affordable• Profitable



• Overall or full positioning of the brand is called the brand’s value proposition.Potential value propositions include:

• More for more: More benefits for higher price.• More for same: More benefits for the same price.• More for less: More benefits for a lower price.• Same for less: Same benefits for a lower price.• Less for much less: Fewer benefits for much lower

price.


Developing a Positioning Statement

• Format:“To (target segment and need) our (brand) is (a

concept) that (point of difference).”

• Example:“To busy mobile professionals who need to always

be in the loop, BlackBerry is a wireless connectivity solution that gives you an easier, more reliable way to stay connected to data, people, and resources while on the go.”


Communicating and Deliveringthe Chosen Position

• Company must take strong steps to deliver and communicate the desired position to target consumers.

The marketing mix efforts must deliver the positioning strategy.

Firm must also monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.


principles of marketing chapter 6: creating value for target customers

Documents

occasion segmentation

psychographic segmentation

different groups

income groups

different needs

segmenting customer

potential users

special products