Armstrong9e 06


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Armstrong9e 06

  1. 1. Chapter 1 Chapter 6 Customer-Driven Marketing Strategy: Creating Value for Target Customers
  2. 2. <ul><li>Define the major steps in designing a customer-driver marketing strategy: market segmentation, targeting, differentiation, and positioning. </li></ul><ul><li>List and discuss the major bases for segmenting consumer and business markets. </li></ul><ul><li>Explain how companies identify attractive market segments and choose a market-targeting strategy. </li></ul><ul><li>Discuss how companies differentiate and position their products for maximum competitive advantage in the marketplace. </li></ul>Rest Stop: Previewing the Concepts
  3. 3. <ul><li>Dunkin’ Donuts </li></ul><ul><li>Background: S hifted focus from donuts to coffee in mid 90s; coffee accounts for 64% of sales. </li></ul><ul><li>Customers: Blue- and white-collar workers from of all race, age, and income groups. Want to be part of a crowd. </li></ul><ul><li>Positioning: Low-brow, “everyman” appeal; simple fare for working class. </li></ul><ul><li>Starbucks? Dunkin’ Donuts customers disliked Starbucks’ atmosphere, the way laptops used tabletops, the couch seating, coffee lingo, and high prices. </li></ul><ul><li>Future plans: Move upscale while keeping existing customers, expanding menu into pizza and smoothies. </li></ul>Case Study <ul><li>Starbucks </li></ul><ul><li>Background: 5,400 coffee shops with 10,000 more planned by 2020. </li></ul><ul><li>Customers: Higher income professionals. Desire to standout as individuals. </li></ul><ul><li>Positioning: High-brow “third place” outside of home and office, featuring art, eclectic music, wireless Internet, and couches. </li></ul><ul><li>Dunkin’ Donuts? Starbucks customers “couldn’t bear that they weren’t special anymore.” </li></ul>Dunkin’ Donuts vs. Starbucks - Segmentation
  4. 4. Designing a Customer-Driven Marketing Strategy <ul><li>Designing a true customer-driven marketing strategy involves: </li></ul><ul><ul><li>Segmentation </li></ul></ul><ul><ul><li>Targeting </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><ul><li>Positioning </li></ul></ul>
  5. 5. Market Segmentation <ul><li>Segmentation: </li></ul><ul><ul><li>Dividing a market into smaller groups with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. </li></ul></ul><ul><li>Key variables: </li></ul><ul><ul><li>Geographic </li></ul></ul><ul><ul><li>Demographic </li></ul></ul><ul><ul><li>Psychographic </li></ul></ul><ul><ul><li>Behavioral </li></ul></ul><ul><li>No single way to segment is best. Often combine more than one variable to better define segments. </li></ul>
  6. 6. Market Segmentation <ul><li>Geographic: </li></ul><ul><ul><li>World region or country </li></ul></ul><ul><ul><li>Region of country </li></ul></ul><ul><ul><li>City or metro size </li></ul></ul><ul><ul><li>Density </li></ul></ul><ul><ul><li>Climate </li></ul></ul>
  7. 7. Market Segmentation <ul><li>Demographic: </li></ul><ul><ul><li>Age, gender, family size, family life cycle, income, occupation, education, race, religion, generation, nationality. </li></ul></ul><ul><ul><li>The most popular bases for segmenting customer groups. </li></ul></ul><ul><ul><li>Easier to measure than most other types of variables. </li></ul></ul>
  8. 8. Market Segmentation <ul><li>Age and life-cycle stage addresses the fact that consumer needs and wants change with age: </li></ul><ul><ul><li>P&G has different toothpastes for different age groups. </li></ul></ul><ul><li>Avoid stereotypes in promotions. </li></ul><ul><li>Promote positive messages. </li></ul>
  9. 9. Market Segmentation <ul><li>Gender: </li></ul><ul><ul><li>Neglected gender segments can offer new opportunities (e.g., Nivea for men). </li></ul></ul><ul><li>Income: </li></ul><ul><ul><li>Identifies and targets the affluent for luxury goods. </li></ul></ul><ul><ul><li>People with low annual incomes can be a lucrative market. </li></ul></ul><ul><ul><li>Some manufacturers have different grades of products for different markets. </li></ul></ul>
  10. 10. Market Segmentation <ul><li>Psychographic segmentation: </li></ul><ul><ul><li>Dividing a market into different groups based on social class, lifestyle, or personality characteristics. </li></ul></ul><ul><li>Behavioral segmentation: </li></ul><ul><ul><li>Dividing buyers into groups based on consumer knowledge, attitudes, uses, or responses to a product. </li></ul></ul>
  11. 11. Market Segmentation <ul><li>Behavioral segmentation: </li></ul><ul><ul><li>Occasion segmentation: </li></ul></ul><ul><ul><ul><li>Special promotions and labels for holidays. </li></ul></ul></ul><ul><ul><ul><ul><li>(E.g., Hershey Kisses) </li></ul></ul></ul></ul><ul><ul><ul><li>Special products for special occasions. </li></ul></ul></ul><ul><ul><ul><ul><li>(E.g., Kodak disposable cameras) </li></ul></ul></ul></ul><ul><ul><li>Benefits sought: </li></ul></ul><ul><ul><ul><li>Different segments desire different benefits from products. </li></ul></ul></ul><ul><ul><ul><ul><li>(E.g., P&G’s multiple brands of laundry detergents to satisfy different needs in the product category). </li></ul></ul></ul></ul>
  12. 12. <ul><li>Behavioral segmentation: </li></ul><ul><ul><li>User status: </li></ul></ul><ul><ul><ul><li>Nonusers, ex-users, potential users, first-time users, regular users </li></ul></ul></ul><ul><ul><li>Usage rate: </li></ul></ul><ul><ul><ul><li>Light, medium, heavy </li></ul></ul></ul><ul><ul><li>Loyalty status: </li></ul></ul><ul><ul><ul><li>Brands, stores, companies </li></ul></ul></ul>Market Segmentation
  13. 13. Market Segmentation <ul><li>Best to use multiple segmentation bases in order to identify smaller, better-defined target groups. </li></ul><ul><ul><li>Start with a single base and then expand to other bases. </li></ul></ul><ul><ul><li>Multivariable segmentation systems such as PRIZM NE are becoming more common. </li></ul></ul>
  14. 14. Market Segmentation <ul><li>PRIZM NE: </li></ul><ul><ul><li>Multivariable segmentation systems developed by Claritas, Inc. </li></ul></ul><ul><ul><li>Potential Rating Index for Zip Markets (PRIZM NE). </li></ul></ul><ul><ul><li>Based on U.S. census data. </li></ul></ul><ul><ul><li>Classifies U.S. households and organizes them into 66 clusters or segments within 14 different social groups. </li></ul></ul>
  15. 15. Segmenting Business Markets <ul><li>Consumer and business markets use many of the same variables for segmentation. </li></ul><ul><li>Business marketers can also use: </li></ul><ul><ul><li>Operating characteristics </li></ul></ul><ul><ul><li>Purchasing approaches </li></ul></ul><ul><ul><li>Situational factors </li></ul></ul><ul><ul><li>Personal characteristics </li></ul></ul>
  16. 16. Segmenting International Markets <ul><li>Factors used: </li></ul><ul><ul><li>Geographic location </li></ul></ul><ul><ul><li>Economic factors </li></ul></ul><ul><ul><li>Political and legal factors </li></ul></ul><ul><ul><li>Cultural factors </li></ul></ul><ul><li>Intermarket segmentation: </li></ul><ul><ul><li>Forming segments of consumers who have similar needs and buying behavior even though they are located in different countries. </li></ul></ul>
  17. 17. Requirements for Effective Segmentation <ul><li>To be useful, market segments must be: </li></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Accessible </li></ul></ul><ul><ul><li>Substantial </li></ul></ul><ul><ul><li>Differentiable </li></ul></ul><ul><ul><li>Actionable </li></ul></ul>
  18. 18. Evaluating Market Segments <ul><li>Segment size and growth: </li></ul><ul><ul><li>Analyze current segment sales, growth rates, and expected profitability. </li></ul></ul><ul><li>Segment structural attractiveness: </li></ul><ul><ul><li>Consider competition, existence of substitute products, and the power of buyers and suppliers. </li></ul></ul><ul><li>Company objectives and resources: </li></ul><ul><ul><li>Examine company skills and resources needed to succeed in that segment. </li></ul></ul><ul><ul><li>Offer superior value and gain advantages over competitors. </li></ul></ul>
  19. 19. Market Targeting <ul><li>Market targeting involves: </li></ul><ul><ul><li>Evaluating marketing segments. </li></ul></ul><ul><ul><ul><li>Segment size, segment structural attractiveness, and company objectives and resources are considered. </li></ul></ul></ul><ul><ul><li>Selecting target market segments. </li></ul></ul><ul><ul><ul><li>Alternatives range from undifferentiated marketing to micromarketing. </li></ul></ul></ul><ul><ul><li>Being socially responsible. </li></ul></ul>
  20. 20. Selecting Target Market Segments <ul><li>Targeting strategies include: </li></ul><ul><ul><li>Undifferentiated (mass) marketing: </li></ul></ul><ul><ul><ul><li>Ignores segmentation opportunities </li></ul></ul></ul><ul><ul><li>Differentiated (segmented) marketing: </li></ul></ul><ul><ul><ul><li>Targets several segments and designs separate offers for each </li></ul></ul></ul><ul><ul><li>Concentrated (niche) marketing: </li></ul></ul><ul><ul><ul><li>Targets one or a couple small segments </li></ul></ul></ul><ul><ul><li>Micromarketing (local or individual marketing) </li></ul></ul>
  21. 21. Micromarketing <ul><li>Tailoring products and marketing programs to suit the tastes of specific individuals and locations. </li></ul><ul><ul><li>Local marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores. </li></ul></ul><ul><ul><li>Individual marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. </li></ul></ul>
  22. 22. Choosing a Targeting Strategy <ul><li>Factors to consider: </li></ul><ul><ul><li>Company resources </li></ul></ul><ul><ul><li>Product variability </li></ul></ul><ul><ul><li>Product’s life-cycle stage </li></ul></ul><ul><ul><li>Market variability </li></ul></ul><ul><ul><li>Competitors’ marketing strategies </li></ul></ul>
  23. 23. <ul><li>Smart targeting helps both companies and consumers. </li></ul><ul><li>Marketing sometimes generates controversy and concern when targeting: </li></ul><ul><ul><li>Vulnerable, minority or disadvantaged populations </li></ul></ul><ul><ul><li>Children and teens </li></ul></ul><ul><li>Controversy arises when an attempt is made to profit at the expense of segments. </li></ul>Socially Responsible Targeting
  24. 24. Differentiation and Positioning <ul><li>A product’s position is: </li></ul><ul><ul><li>The way the product is defined by consumers on important attributes — the place the product occupies in consumers’ minds relative to competing products. </li></ul></ul><ul><ul><li>Perceptual positioning maps can help define a brand’s position relative to competitors. </li></ul></ul>
  25. 25. <ul><li>Choosing a differentiation and positioning strategy involves: </li></ul><ul><ul><li>Identifying a set of possible value differences and competitive advantages on which to build a position. </li></ul></ul><ul><ul><li>Choosing the right competitive advantages. </li></ul></ul><ul><ul><li>Selecting an overall positioning strategy. </li></ul></ul>Differentiation and Positioning
  26. 26. Differentiation and Positioning <ul><li>Identifying possible value differences and competitive advantages: </li></ul><ul><ul><li>Key to winning target customers is to understand their needs better than competitors do and to deliver more value. </li></ul></ul><ul><li>Competitive advantage: </li></ul><ul><ul><li>Extent to which a company can position itself as providing superior value. </li></ul></ul><ul><ul><ul><li>Achieved via differentiation. </li></ul></ul></ul>
  27. 27. Differentiation and Positioning <ul><li>Differentiation </li></ul><ul><ul><li>Actually differentiating the marketing offering to create superior customer value. </li></ul></ul><ul><li>Types of differentiation: </li></ul><ul><ul><li>Product differentiation </li></ul></ul><ul><ul><li>Services differentiation </li></ul></ul><ul><ul><li>Channels differentiation </li></ul></ul><ul><ul><li>People differentiation </li></ul></ul><ul><ul><li>Image differentiation </li></ul></ul>
  28. 28. Differentiation and Positioning <ul><li>Choosing the right competitive advantage requires selecting how many and which differences to promote. </li></ul><ul><li>Differences that could be promoted are: </li></ul><ul><ul><li>Important </li></ul></ul><ul><ul><li>Distinctive </li></ul></ul><ul><ul><li>Superior </li></ul></ul><ul><ul><li>Communicable </li></ul></ul><ul><ul><li>Preemptive </li></ul></ul><ul><ul><li>Affordable </li></ul></ul><ul><ul><li>Profitable </li></ul></ul>
  29. 29. <ul><li>Overall or full positioning of the brand is called the brand’s value proposition. </li></ul><ul><li>Potential value propositions include: </li></ul><ul><ul><li>More for more: More benefits for higher price. </li></ul></ul><ul><ul><li>More for same: More benefits for the same price. </li></ul></ul><ul><ul><li>More for less: More benefits for a lower price. </li></ul></ul><ul><ul><li>Same for less: Same benefits for a lower price. </li></ul></ul><ul><ul><li>Less for much less: Fewer benefits for much lower price. </li></ul></ul>Differentiation and Positioning
  30. 30. <ul><li>Developing a positioning statement: </li></ul><ul><ul><li>Format: “To (target segment and need) our (brand) is (a concept) that (point of difference).” </li></ul></ul><ul><ul><li>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.” </li></ul></ul>Differentiation and Positioning
  31. 31. <ul><li>Company must take strong steps to deliver and communicate the desired position to target consumers. </li></ul><ul><ul><li>The marketing mix efforts must support the positioning strategy. </li></ul></ul><ul><li>Firm must also monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies. </li></ul>Communicating and Delivering the Chosen Position
  32. 32. <ul><li>Define the major steps in designing a customer-driver marketing strategy: market segmentation, targeting, differentiation, and positioning. </li></ul><ul><li>List and discuss the major bases for segmenting consumer and business markets. </li></ul><ul><li>Explain how companies identify attractive market segments and choose a market-targeting strategy. </li></ul><ul><li>Discuss how companies differentiate and position their products for maximum competitive advantage in the marketplace. </li></ul>Rest Stop: Reviewing the Concepts
  33. 33. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall