CUSTOMER-DRIVEN MARKETING STRATEGY, CREATINGVALUE FOR TARGET CUSTOMERS
TOPICS TO BE COVERED• Define targetmarket, segmentation• Differentiation, positioning• Segmentingconsumer markets,business markets• Inter-marketsegmentation• Evaluating marketsegments, selecting
• Target marketing includes three activities:market segmentation, market targeting, andmarket positioning.We can target markets at four levels:• segments• Niches• local areas and• IndividualsMarket segments are large, identifiablegroups within a market.Globalization and the Internet have madeniche marketing more feasible to many.
Levels of Market Segmentation• In mass marketing: the seller engages in themass production, mass distribution, and masspromotion of one product for all buyers.• Segment Marketing: A market segmentconsists of a group of customers who share asimilar set of needs and wants.• Niche Marketing:• A niche is a more narrowly defined customer group seeking a distinctive mixof benefits.• Marketers usually identify niches by dividing a segment into sub-segments.• Niche marketers presumably understand their customers’ needs so well thatthe customers willingly pay a premium.• Globalization has facilitated niche marketing.
• Local Marketing: Target marketing is leadingto marketing programs tailored to the needsand wants of local customer groups. Localmarketing reflects a growing trend calledgrassroots marketing• Individual Marketing: The ultimate level ofsegmentation leads to “segments of one”,“customized marketing”, or “one-to-onemarketing”.Customerization combines operationally driven masscustomization with customized marketing in a way that empowersconsumers to design the product and service offering of theirchoice.
The HimalayaDrug Companyserves a growingniche market byfocusing onayurvedicmedicines andhealthsupplements
customization is certainly not for every companybecause it may be very difficult to implement for complexproducts, can also raise the cost of goods.• Mostly applicable in personal care products,paints co.s, subway, dominos, McDonalds,recent launch of Starbucks in India
Bases for segmenting consumermarketTwo broad groups of variables are used tosegment consumer markets.A) Descriptive characteristics:geographic, demographics, and psycho-graphic.B) Behavioral considerations: such as consumerresponses to benefits, use occasions, or brands
• Geographic Segmentation: Geographic segmentation calls for dividing the market intodifferent geographical units.• More and more, regional marketing means marketing right down to a specific zip code.• calls for dividing the market into different geographical units such asnations, regions, states, counties, cities, or even neighborhoods.• Demographic Segmentation: divides the market into groups based onvariables such as age, gender, family size, family lifecycle, income, occupation, education, religion, race, generation, andnationality.factors that are the most popular bases for segmenting customer groups.• Age and Life-Cycle Stage is offering different products or using differentmarketing approaches for different age and life-cycle groups.• Gender segmentation has long been used inclothing, cosmetics, toiletries, and magazines.• Income segmentation has long been used by the marketers of productsand services such as automobiles, clothing, cosmetics, financialservices, and travel.
• Psychographic Segmentation: dividesbuyers into different groups based on socialclass, lifestyle, or personality characteristics.• Marketers use personality variables tosegment markets.Titan(executive); Fastrack (youth);Sonata( affordable prices) positioning andrepositioning, Halal and Jhatka meat in SouthAsian food chains for Muslim consumer, Feminatarget “women of substance”
The VALS("Values, Attitudes andLifestyles“)Segmentation System
Consulting Business Intelligence’s1) The major tendencies of the four groups with highresources are:• Innovators• Thinkers• Achievers• Experiencers2) The major tendencies of the four groups with lowerresources are:• Believers• Strivers• Makers• Survivors
• Behavioral Segmentation: divides buyers intogroups based on theirknowledge, attitudes, uses, or responses to aproduct.• Occasion segmentation is grouping buyers according tooccasions when they get the idea to buy, actually make theirpurchase, or use the purchased item.• Benefit segmentation is grouping buyers according to thedifferent benefits that they seek from the product.• User Status is segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of aproduct.• Usage Rate is grouping markets into light, medium, and heavyproduct users.
BASIS FOR SEGMENTINGBUSINESS MARKETS• Consumer and business marketers use many of thesame vari-ables to segment their markets.• Business marketers also use some additionalvariables, such as customer operatingcharacteristics, purchasing approaches, situationalfactors, and personal characteristics.• Many marketers believe that buying behavior andbenefits provide the best basis for segmentingbusiness markets.
Segmenting InternationalMarkets• Inter-market segmentation is segmenting of consumers who have similarneeds and buying behavior even though they are located in differentcountries. Geographic factors: Nations close to one another will have many commontraits and behaviors. Economic factors: Countries may be grouped by population income levelsor by their overall level of economic development. Political and legal factors:Type and stability of government, receptivity toforeign firms, monetary regulations, and the amount of bureaucracy. Cultural factors: Grouping markets according to commonlanguages, religions, values and attitudes, customs, and behavioral patterns.
• Market segments must rate favorable on fivekey criteria:– Measurable: The size, purchasing power, and profiles of the segmentscan be measured.– Substantial: The market segments are large or profitable enough toserve.– Accessible: The market segments can be effectively reached andserved.– Differentiable: The segments are conceptually distinguishable andrespond differently to different marketing mix elements and programs.– Actionable: Effective programs can be designed for attracting andserving the segments.EVALUATING AND SELECTINGMARKET SEGMENTS
Evaluating Market Segments• In evaluating different market segments, a firm must look at three factors: Segment size and growth, Segment structu-ral attractiveness, and Company objectives and resources.• The largest, fastest-growing segments are not always the most attractiveones for every company.• The company also needs to examine major structural factors that affectlong-run segment attractiveness.• A segment is less attractive if it already contains many strong andaggressive competitors.• The existence of many actual or potential substitute products may limitprices and the profits.• The relative power of buyers also affects segment attractiveness.
Selecting Target Market Segments• A target market consists of a set of buyers who sharecommon needs or characteristics that the companydecides to serve.1. Single segment: FMCG products only on low income groupsegment2. Selective segment3. Product segment: Such as Volvo which targets only safetyconscious people.4. Market specialization: Such as Mahindra and Mahindrawhich targets mainly the government sector.5. Full market coverage: undifferentiated(firm ignores segmentdifference) & differentiated (serves the whole market with itsdifferent designs)
Case study of Target marketing – Titan watches• Segment selection – Titan mainly targets multiple segments based on theirincome, social standing as well as behavioural attributes. Thus it targetscustomers who have low incomes along with customers with high income.• Marketing mix – Titan does not offer the same product to differentcustomers. In fact it has a new product for each segment thereby micromanaging its target marketing efforts. Thus a Sonata will be offered to thelow income group whereas a Tommy Hilfiger will be offered to the highpurchasing power individual• Positioning – Each product of Titan is positioned separately. Furthermorewhen you walk into the retail store of Titan (World of titan) you will find thatthere are separate sections for each class of customers depending on theirincome groups.• Customer life cycle marketing – Another example of target marketingis having every product in the kitty for each level of a customers life cycle.Thus by having brands like Fast track, raga and others, Titan ensures that ithas a product whether its customer is a college going individual, a workingwomen or a high income professional.
DIFFERENTIATION ANDPOSITIONING• Value proposition: How a company will create differentiatedvalue for targeted segments and what positions it wants tooccupy in those segments.• A product’s position is the way the product is defined byconsumers on important attributes.• Choosing a Differentiation and Positioning StrategyThe differentiation and positioning task consists of three steps:1. Identifying a set of differentiating competitive advantages uponwhich to build a position,2. Choosing the right competitive advantages, and3. Selecting an overall positioning strategy
example• An expensive TV, what comes first to your mindprobably will be A Sony or A Samsung TV whereas ifa cheaper or VFM TV (value for money TV) you mightthink of an Onida or a Videocon. That’s positioning.Why is it that you have called out these respectivenames only? That is because how the brands arepositioned in your mind in terms of awareness.• Positioning is the final part of the SEGMENT –TARGET – POSTION or STP process
(a) Prospectively profitable: the segment’s characteristics (e.g. pricelevels, growth rate) and competitive environment (e.g. number ofcompetitors, basis of competition) are conducive to a growing pool of profits.(b) Homogeneous within the segment, i.e. members are relatively similar withrespect to attitudes, buying criteria, media habits, etc.(c) Heterogeneous across segments, i.e. members in different segments havefundamental differences and act accordingly.(d) Accessible: members can be reached effectively with communications, andshop in outlets through which products can be efficiently distributed.(e) Winnable: the company’s distinctive strengths match the segment’srequirements and provide an advantage versus competition, so the companycan reasonably expect an acceptable share of the industry profits.The most attractive positioning that can be targetedin general is:
• Perceptual Mapping: it is basically a technique to representwhat people think about products or services, people or ideas.• Positioning a product to specific segments:• Communication Process: Communication helps the marketerto builds up image of the product. Image build up is influencedmore by the effectiveness of the communication than by thecommunication budget• Positioning Map: show consumer perceptions of their brandsversus competing products on important buying dimensions.Marketers decide upon a competitive position, which enablesthem to distinguish their own products from the offerings of theircompetition.Positioning techniques
Identifying Possible Value Differencesand Competitive Advantages• To the extent that a company can differentiateand position itself as providing superiorcustomer value, it gains competitiveadvantage.• It can differentiate along the lines ofproduct, services, channels, people, or image.