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

Positioning

Refers to how a product is defined by consumers on important attributes - the place it occupies in their minds relative to competing products ALSO refers to efforts by the company to shape and alter how its target market thinks about the brand

STDP Process

Select customers to serve: -Segmentation -Targeting Decide on a value proposition: -Differentiation -Positioning

Psychographic Segmentation

Social class, lifestyle, interests, and personality adventurous vs. conservative active vs. sedentary Cruise lines using it: -Royal Caribbean: "The Nation of Why Not" -Regent Seven Seas Cruise Lines: "Luxury Goes Exploring" -Carnival: "The Fun Ships" Campbell's Soup using it: -Passionate kitchen master -Constrained wishful eaters -Familiar taste pleasers -Uninvolved quick-fixers -Disciplined health-manager

Differentiated (Segmented) Marketing

Target multiple segments with diverse offerings Example: P&G offers multiple detergent brands (Tide, Cheer, Era, Gain, Dreft) Advantages: The same company can capture various types of customers, potentially charging more for a differentiated product Disadvantages: Costs more to offer additional products/services, and to market them

Market Segmentation

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. Based on the idea that different groups of people have different needs and wants, and will respond differently to different marketing mixes. Creates value for customers: -Better meet the diverse needs of customers by aligning marketing mix with consumer needs Creates value for companies: -Efficiently allocate resources -Increase the potential for profit by avoiding head-on competition *Market segments can be defined using multiple variables

Positioning Statement

To (Target Statement and Need) our (Brand) is (Concept) that (Point of Difference) --> To urban-dwelling consumers who want regular access to a car without the cost and hassle of owning one, membership in Zipcar ensures access to automobiles at convenient pick-up and drop-off locations throughout the city for a reasonable hourly rate. (Brand) is the brand of (Category) for (Target) that (Point of Difference) because (Reason to Believe) --> Zipcar is the form of transportation for urban-dwelling consumers that provides the benefits of owning a car without the cost and hassle, because of our convenient pick up and drop off locations and reasonable hourly rate.

Evaluating Market Segments Objective

Understand some of the ways companies should evaluate market segments before deciding which segment to target

Demographic Segmentation

Value is created by having insight into genuinely differing needs/wants Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Most popular bases for segmenting customer groups because consumer needs, wants, and usage rates often vary closely with demographic variables. A segment's demographic characteristics tell the size of the target market and how to reach it efficiently. Keep in mind bad gender segmentation

Differentiation and Promotion

Which differences to promote? 1. Important: Customers care about it 2. Distinctive & Superior: Different from and better than competitors 3. Communicable: Easily communicable and/or visible to buyers 4. Pre-emptive: Competitors can't easily copy 5. Affordable: Customer can afford to pay for the difference 6. Profitable: Company can differentiate in this way profitably

Understanding Segmentation Objectives

1. Be able to explain how segmentation adds value for both consumers and companies 2. Understand the variables that are most commonly used to segment consumer markets, and be able to use those when thinking about a new business or product

Effective Segmentation Requirements

1. Operational (Measurable + Accessible) - Can you figure out how many people are in it & could you differentially access them with your marketing mix? - Measurable: The size, purchasing power, and profiles of the segments can be measured - Accessible: The market segments can be effectively reached and served 2. Substantial: The market segments are large or profitable enough to serve. Should be the highest possible homogeneous group worth pursuing with a tailored marketing program - Large and/or profitable enough to be worth serving 3. Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. - Do customer needs differ between segments? - Would segments respond differently to any of the four P's? 4. Actionable: Effective programs can be designed for attracting and serving the segments. - Does your company have the resources and ability necessary to target and differentiate for that group?

Points of Differentiation

1. Product (product and service) 2. Price 3. Placement (includes channels) 4. Promotion (includes images)

Targeting Strategy

1. Undifferentiated (Mass) Marketing - most broad 2. Differentiated (Segmented) Marketing - more broad 3. Concentrated (Niche) Marketing - more narrow 4. Micromarketing (local or individual marketing) - most narrow **Many companies start out as niche marketers and expand to differentiated marketing

Usage (Behavioral)

1. User Status: non-users, potential users, first-time users, regular users ex: "potential users" at William-Sonoma: anyone getting married (registries) 2. Usage Rate: light, medium, and heavy product users -heavy users are often a small percentage of the market but account for a high % of total consumption ex: Burger King "Super Fans": 18% of customers account for 50% of visits 3. Loyalty Status: segment based on degree of loyalty to brands, stores, or companies

Positioning Maps

A graphical representation of a) the company b) its competitors c) with respect to dimensions/features consumers care about

Behavioral Segmentation

Based on consumer knowledge, attitudes, uses, or responses to a product Occasions, Benefits Sought, Usage

Targeting Objective

Be able to articulate the advantages and disadvantages of the four main approaches to targeting

Differentiation

Changing some aspect of the marketing mix to create superior customer value In context of STDP, differentiation is designed to add value to the specific segments that you are targeting Companies should differentiate in ways that give them a competitive advantage, or that capitalize on existing competitive advantages

Targeting

Choosing which market segments to serve Factors to consider: - Segment size and growth - Competitors - Existing competitive advantages - Ease of entry into the target market (for both self and competitors) - Fit with overall company position in the market - Company resources

Geographic Segmentation

Customers have different needs/wants/demands based on where they live City vs. Country North vs. South US vs. China

Occasion Segmentation (Behavioral)

Divides the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item Orange juice a "morning kick-start" or "post-workout replenishment" -Each occasion implies a different set of competitors

Benefits Segmentation (Behavioral)

Divides the market into segments according to the different benefits that consumers seek from the product. Benefits sought/way the product is used Bicycles can be used for commuting, working out, road racing, recreation

Concentrated (Niche) Marketing

Dominate one segment Ex: Big & Tall shops, Trader Joe's vs. Winn-Dixie/Wal-Mart Advantages: Bigger piece of the pie (generally less competition) Disadvantages: smaller pie!

Intermarket or Cross-Market Segmentation

Forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries.

Segmenting Business Markets

Geographic Demographic (industry, company size) Behavioral (benefits sought, user status, usage rate, loyalty status) Operating characteristics, purchasing approaches, situational factors, and personal characteristics

Common Market Segmentation Variables

Geographic: -Nations, regions, states, counties, cities, neighborhoods, 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

Value Proposition

How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments

Undifferentiated (Mass) Marketing

Ignores any segment differentiation Less common because difficulties arise in developing a product or brand that will satisfy all consumers. Ex: Some large retailers like Best Buy and Target Advantages: Appeals to largest number of buyers Disadvantages: In trying to please everybody, they might please nobody

LO 2: List and discuss the major bases for segmenting consumer and business markets

Key terms: -Geographic segmentation -Demographic segmentation -Age and life-cycle segmentation -Gender segmentation -Income segmentation

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

Key terms: -Market segmentation -Market targeting -Differentiation -Positioning -Psychographic segmentation -Behavioral segmentation -Occasion segmentation -Benefit segmentation -Intermarket (cross-market) segmentation -Concentrated (niche) marketing -Micromarketing -Local marketing -Individual marketing

LO 4: Discuss how companies differentiate and position their products for maximum competitive advantage

Key terms: -Product position -Competitive advantage -Value proposition -Positioning statement

LO 3: Explain how companies identify attractive market segments and choose a market-targeting strategy

Key terms: -Target market -Undifferentiated (mass) marketing -Differentiated (segmented) marketing

Micromarketing

Local marketing: Tailoring products and marketing to local customer groups --> ex: CVS stores in NYC look different than CVS stores in the suburbs of NYC Individual (one-to-one) marketing: Mass customization --> Amazon does this in customizing its site for each user --> NikeID sneakers Advantages: Better meet customer needs Disadvantages: More expensive to customize, riskier (smaller pool of customers), perhaps harder to maintain consistent brand identity