The document discusses Best Buy's shift to a customer-centric marketing strategy six years ago. It segmented customers into "angels" and "demons" based on profitability. It sought to attract angels by catering merchandise and service to different angel segments. It discouraged demons by removing promotions targeted to them. This strategy has doubled Best Buy's sales and profits and increased customer satisfaction over its main competitor.

1. Chapter 7- slide 1
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Chapter Seven
Customer-Driven Marketing
Strategy
Creating Value for Target
Customers

2. Chapter 7- slide 2
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Customer-Driven Marketing Strategy:
Creating Value for Target Customers
• Customer-Driven Marketing
Strategy
• Market Segmentation
• Market Targeting
• Differentiation and Positioning
Topic Outline

3. Chapter 7- slide 3
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Best Buy: Embracing the
Angles and Ditching the
Demons
• Six years ago, to better differentiate itself in a crowded,
fiercely competitive marketplace, Best Buy needed to
segment its market, narrow its targeting, and sharpen its
positioning. So, Best Buy embarked on a “customer
centric” segmentation strategy by which it set out to
identify its best customers and win their loyalty by serving
them better. It also identified less attractive customers and
began to send them packing. Through research, Best Buy
learned that it had two basic types of customers: angels
and demons. Whereas angel customers are profitable,
demon customers may actually cost a company more to
serve than it makes from them. Best Buy further segmented
the angels into different groups, from “Barrys” (high-
income men) to “Jills” (suburban moms) to “Buzzes” (male
technology enthusiasts).

4. Chapter 7- slide 4
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• To attract the angels, the retailer began stocking more
merchandise and offering better service to them. It organized
customer-centric stores around the demographics of a given
geographic area, catering to specific types of angles. To
discourage the demons, Best Buy removed them from its
marketing lists, reduced the promotions and other sales tactics
that tended to attract them, and installed a 15 percent restocking
fee. How is Best Buy’s customer-centricity strategy working?
Very well. Since rolling out the new strategy six years ago, Best
Buy’s overall sales (and profits) have more than doubled. And
because Best Buy shoppers are having their specific needs met,
customer satisfaction far outpaces that of closest competitor
Walmart.

5. Chapter 7- slide 5
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Designing a Customer-Driven
Marketing Strategy
Select customers to
serve
Segmentation
Divide the total
market into smaller
segments.
Targeting
Select the segment
or segments to enter.
Decide on a value
proposition
Differentiation
Differentiate the market
offering to create
superior customer value.
Positioning
Position the market
offering in minds of
target customers.
Create value
for targeted
customers

6. Chapter 7- slide 6
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Market segmentation is 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
Market Segmentation

7. Chapter 7- slide 7
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• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective
segmentation
Market Segmentation

8. Chapter 7- slide 8
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Market Segmentation
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
Segmenting Consumer Markets

9. Chapter 7- slide 9
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Market Segmentation
Geographic segmentation divides the
market into different geographical units
such as nations, regions, states,
counties, or cities
Segmenting Consumer Markets

10. Chapter 7- slide 10
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11. Chapter 7- slide 11
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Market Segmentation
Demographic segmentation divides the
market into groups based on variables
such as age, gender, family size, family
life cycle, income, occupation,
education, religion, race, generation,
and nationality
Segmenting Consumer Markets

12. Chapter 7- slide 12
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13. Chapter 7- slide 13
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Market Segmentation
Age and life-cycle stage segmentation
is the process of offering different
products or using different marketing
approaches for different age and life-
cycle groups
Gender segmentation divides the market
based on sex (male or female)

14. Chapter 7- slide 14
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15. Chapter 7- slide 15
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16. Chapter 7- slide 16
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Judge Yourself

17. Chapter 7- slide 17
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And what about this?

18. Chapter 7- slide 18
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Market Segmentation
Income segmentation divides the market
into affluent or low-income consumers
Psychographic segmentation divides
buyers into different groups based on
social class, lifestyle, or personality
traits
Segmenting Consumer Markets

19. Chapter 7- slide 19
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20. Chapter 7- slide 20
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21. Chapter 7- slide 21
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Market Segmentation
Behavioral segmentation divides buyers
into groups based on their knowledge,
attitudes, uses, or responses to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
Segmenting Consumer Markets

22. Chapter 7- slide 22
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23. Chapter 7- slide 23
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24. Chapter 7- slide 24
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Market Segmentation
Multiple segmentation is used to identify
smaller, better-defined target groups
Geodemographic segmentation is an
example of multivariable segmentation
that divides groups into consumer
lifestyle patterns
Using Multiple Segmentation Bases

25. Chapter 7- slide 25
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Market Segmentation
• PRIZM NE classifies every American
household into 66 unique segments
organized into 14 different social groups
• These groups segment people and
locations into marketable groups of like-
minded consumers that exhibit unique
characteristics and buying behavior
based on a host of demographic factors
Using Multiple Segmentation Bases

26. Chapter 7- slide 26
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Market Segmentation
Geographic
location
Economic
factors
Political-
legal factors
Cultural
factors
Segmenting International markets

27. Chapter 7- slide 27
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Market Segmentation
Intermarket segmentation divides
consumers into groups with similar
needs and buying behaviors even
though they are located in different
countries
Segmenting Business Markets

28. Chapter 7- slide 28
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Segmentation International Markets
• Intermarket segmentation
 Forming segments of consumers who have similar
needs and buying behavior even though they are
located in different countries.
• Coca-Cola: World’s teen
• IKEA: global middle class
• Lexus: global elite

29. Chapter 7- slide 29
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Market Segmentation
To be useful, market segments must be:
Requirements for Effective
Segmentation
Measurable Accessible Substantial
Differentiable Actionable

30. Chapter 7- slide 30
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Market Targeting
• Target market consists of a set of
buyers who share common needs or
characteristics that the company
decides to serve
Selecting Target Market Segments

31. Chapter 7- slide 31
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Market Targeting
• Segment size and growth
• Segment structural attractiveness
• Company objectives and
resources
Evaluating Market Segments
.

32. Chapter 7- slide 32
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33. Chapter 7- slide 33
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Market Targeting
Undifferentiated marketing targets the
whole market with one offer
–Mass marketing
–Focuses on common needs rather
than what’s different
Target Marketing Strategies

34. Chapter 7- slide 34
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Market Targeting
Differentiated marketing targets several
different market segments and designs
separate offers for each
• Goal is to achieve higher sales and
stronger position
• More expensive than undifferentiated
marketing
Target Marketing Strategies

35. Chapter 7- slide 35
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supplies premium denim and accessories sold
in boutiques and high-end department stores

36. Chapter 7- slide 36
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produce the highest-quality athletic wear
and do it for every Major League Baseball club,
the National Basketball Association,
most major colleges and universities,
and sports fans everywhere

37. Chapter 7- slide 37
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Market Targeting
• Concentrated (Niche) marketing targets
a small share of a large market
• Limited company resources
• Knowledge of the market
• More effective and efficient
Target Market Strategies

38. Chapter 7- slide 38
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• Whole Foods Market offers organic,
natural, and gourmet foods where Wal-
Marts can’t serve well.

39. Chapter 7- slide 39
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Marketing Targeting
Micromarketing is the practice of
tailoring products and marketing
programs to suit the tastes of specific
individuals and locations
• Local marketing
• Individual marketing
Target Market Strategies

40. Chapter 7- slide 40
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Market Targeting
Local marketing involves tailoring brands
and promotion to the needs and wants
of local customer groups
• Cities
• Neighborhoods
• Stores
Target Market Strategies

41. Chapter 7- slide 41
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Market Targeting
Individual marketing involves tailoring
products and marketing programs to the
needs and preferences of individual
customers
• Also known as:
– One-to-one marketing
– Mass customization
– Markets-of-one marketing
Target Market Strategies

42. Chapter 7- slide 42
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Market Targeting
Depends on:
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies
Choosing a Targeting Strategy

43. Chapter 7- slide 43
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Market Targeting
• Benefits customers with specific needs
• Concern for vulnerable segments
• Children
– Alcohol
– Cigarettes
– Internet abuses
Socially Responsible Target Marketing

44. Chapter 7- slide 44
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Product 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
– Perceptions
– Impressions
– Feelings
Differentiation and Positioning

45. Chapter 7- slide 45
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• Positioning maps show consumer
perceptions of their brands versus
competing products on important buying
dimensions
Differentiation and Positioning

46. Chapter 7- slide 46
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Differentiation and Positioning
• Identifying a set of possible competitive
advantages to build a position
• Choosing the right competitive
advantages
• Selecting an overall positioning strategy
• Developing a positioning statement
Choosing a Differentiation and
Positioning Strategy

47. Chapter 7- slide 47
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Differentiation and Positioning
Competitive advantage is an advantage
over competitors gained by offering
consumers greater value, either through
lower prices or by providing more
benefits that justify higher prices
Identifying Possible Value Differences
and Competitive Advantages

48. Chapter 7- slide 48
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Differentiation and Positioning
Identifying a set of possible competitive advantages to
build a position by providing superior value from:
Choosing a Differentiation and
Positioning Strategy
Product differentiation
Services differentiation
Channel differentiation
People differentiation
Image differentiation

49. Chapter 7- slide 49
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Differentiation and Positioning
Difference to promote should be:
Choosing the Right Competitive
Advantage
Important Distinctive Superior
Communicable Preemptive Affordable
Profitable

50. Chapter 7- slide 50
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Differentiation and Positioning
• Value proposition is the full mix of
benefits upon which a brand is
positioned
Selecting an Overall Positioning Strategy

51. Chapter 7- slide 51
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Differentiation and Positioning
• To (target segment and need) our
(brand) is (concept) that (point of
difference)
Developing a Positioning Statement

52. Chapter 7- slide 52
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• Choosing the positioning is often easier
than implementing the position.
Communication and Delivering the
Chosen Position