CH6 350

Major Steps in Designing a Customer Value–Driven Marketing Strategy

1. Market segmentation: Dividing markets into meaningful customer groups.

2. Targeting: Choosing which customer groups to serve.

3. Differentiation: Creating market offerings that best serve targeted customers.

4. Positioning: Positioning the offerings in the minds of consumers.

Marketing boils down to two questions (Concept)

1. Which customers will we serve?

2. How will we serve them?

The goal is to create more value for the customers we serve than competitors do.

Differentiation

Designing the market offering to create superior customer value that is distinct from that offered by competitors

Positioning

Creating a clear, distinctive, and desirable place for a marketing offer relative to competing products in the minds of target consumers"

• Positioning is often framed as the battle for the mind of the consumer

Meta's Core Segmentation Principle

Recognizing that “no one social media platform can be all things to all people”, Meta built a portfolio of brands, each targeting the diverse needs of different social media segments.

• Facebook: Social networking site for connecting and sharing with family and friends online.

• Instagram: Acquired in 2012 for 19 billion. Provided immediate access to new customer segments, boasting more than 450 million registered international users, most of whom were not on Facebook.

• Messenger: Originally Facebook Chat, now a standalone app, letting its overlapping but separate segment of users interact without logging on to Facebook.

  • FUTURE:

  • The company’s restructuring as Meta Platforms signals its intent to develop and dominate the “metaverse”—a network of 3D virtual reality worlds.

  • Paid $2 billion for Oculus VR, a maker of virtual reality (VR) headsets.

Zuckerberg's Vision

...to create a set of products that help you share any kind of content you want with any audience you want.”

Demographic Segmentation (Popularity)

Demographic factors are the most popular bases for segmentation because consumer needs, wants, and usage rates often vary strongly with demographic variables. They are also easier to measure.

Local Marketing

Companies are increasingly localizing their products, services, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and localities.

• ex) Target operates more than 170 locally focused small-format stores in crowded city centers or college campuses, offering a carefully tailored assortment.

Kroger’s Hyperlocal Functionality

Kroger's app uses digital/mobile technologies to provide aisle locations for items in the local store and in-store offers based on preferences.

Its partnership with Google Maps shares a pickup customer’s ETA  with the store so orders are ready for handover.

Crest Toothpaste Age Segmentation Example

• Crest 3D White Brilliance targets older adults.

• Crest Kids Advanced Color Changing Fluoride Toothpaste targets young children with a paste that changes color from blue to pink when kids brush for two minutes, helping “kids brush up to 2X longer”.

Gender segmentation (Concept & Fidelity Example)

Has long been used (clothing, cosmetics).

• Fidelity Investments targets women investors who control 2/3 of consumer spending and hold 40% of global wealth.

• Fidelity uses tailored websites and the “Women Talk Money” community to address the unique factors that impact women’s financial goals.

Gender-Neutral Marketing Trend (Case Detail)

Brands are introducing gender-neutral products that look beyond gender.

• Target eliminated its “pink” and “blue” aisles in 2015.

• The LEGO Group announced it will work harder to remove gender stereotypes from its products and marketing.

Hungry-Man Frozen Dinners (Income Segmentation Case)

• Targets low-income, value-seeking consumers with high calories and protein at a low price (e.g., $4.99 at Target).

• Taglines include “Meals of epic proportions for epic appetites.”

  • The price is right, and the protein keeps the stomach feeling full.

Psychographic Segmentation

"divides buyers into different segments based on lifestyle or personality characteristics."

• People in the same demographic group can have very different psychographic characteristics.

Loews Hotel “SmartJourney” Strategy

Uses personality variables to segment markets into “personas” (e.g., “weekend explorer couples,” “luxury jetsetters”).

• The hotel creates personalized offers and messages (a “SmartJourney”) for each segment, leading to a 40% improvement in customer email engagement rates.

Behavioral Segmentation

"divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product."

• Many marketers believe behavior variables are the best starting point for building market segments.

Occasion segmentation

Grouping buyers according to occasions when they get the idea to buy, actually make their purchases, or use the purchased items.

ex) Alka-Seltzer marketed its product as a morning-after-partying remedy following holidays like Cinco de Mayo, using “Alka-Seltzer Mocktails”.

Benefit Segmentation

requires finding the major benefits people look for in a product class,

• the kinds of people who look for each benefit

• and the major brands that deliver each benefit

Schwinn Bikes (Benefit Segmentation Case)

• Schwinn makes bikes for every benefit segment, from cruisers (for relaxed rides with vintage charm) to high-end Fastback Carbon racers (for “advanced to expert riders who want to go farther and faster”).

User Status Segmentation

Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users.

• ex: P&G promotes Pampers Swaddlers as the diaper most U.S. hospitals provide for newborns to capture the potential user segment (new parents).

Usage Rate Segmentation

Segments include light, medium, and heavy product users.

• Heavy users are often a small % of the market but account for a high % of total consumption.

• Bojangles (Targeting Heavy Users Case)

  The fast-food chain targets everything it does toward its core of regulars, which it calls Bo Fanatics or Bo’lievers. The brand sponsored the “Sponsor Me, Bojangles” sweepstakes to find its most dedicated, obsessed fans. Slogan: “It’s Bo Time!”.

Lululemon Ambassador Program (Loyalty)

Relies on a network of more than 1,300 customer-ambassadors to champion the brand.

• Ambassadors embody three pillars of “sweatlife”.

  • They keep the company grounded, track reputation, teach classes, and collaborate on initiatives from product design to store layouts.

BTS (Loyalty and Engagement Case Study)

The success of the K-pop band is built on its huge, deeply devoted, and very active fan base known as ARMY (Adorable Representative M.C. for Youth).

• BTS’s emotional authenticity and focus on social issues (mental health, LGBTQ+ concerns) resonated with fans.

• Fan Engagement Strategy: Rely heavily on social media, posting constant flows of “daily life” content (not just music).

  • Customer-Initiated Loyalty (ARMY)

    • ARMY fans have organized to run their own unofficial accounts and fan sites (e.g., @BangtanTrends, translation accounts).

    • Many fans have activated old phones or borrowed phones to optimize streaming capacity to keep the band atop music charts.

Multivariable Segmentation Systems

Marketers often use multiple segmentation bases in combination to identify smaller, better-defined target groups.

• Acxiom’s Personicx Lifestage system classify U.S. households into 70 distinct clusters within 21 life stage groups.

  • Example Cluster: “Cartoons and Carpools” (solidly middle-income, married, mid-30s couples with children of all ages).

AI and Segmentation (Technological Advancement)

AI applications can efficiently churn through reams of data to create new, targetable segments and can generate much more fine-grained segments, often even “segments of one.”.

Keurig Commercial Segmentation Example

Keurig targets various commercial segments (large and small offices, restaurant and food service, hotel and hospitality establishments).

• Its Keurig Commercial group offers “full property solutions” to hotel clients spanning guest rooms, lobbies, and meeting rooms.

Caterpillar’s Multistage Segmentation Process

1. Segment by industry (mining, energy, construction).

2. Segment by geographic location.

3. Segment by size (small, medium, large).

4. Segment by behavioral/need-based classification: “Do it myself” (DIM), “Do it with me” (DIWM), and “Do it for me” (DIFM) customers.

• Caterpillar is interested in selling high-margin products to all DIM customers. It may decide not to do business with the small and medium-sized DIFM customers seeking turnkey solutions, as the time/effort/costs would not likely be worth the financial returns.

Requirements for Effective Segmentation (5 Criteria)

1. Measurable: Size, purchasing power, and profiles can be measured.

2. Accessible: Can be effectively reached and served.

3. Substantial: Large or profitable enough to serve.

4. Differentiable: Conceptually distinguishable and respond differently to marketing efforts.

5. Actionable: Effective programs can be designed to attract and serve the segments.

Targeting Broadly vs. Narrowly

Targeting b r o a d l y: Undifferentiated (mass) marketing.

• a firm ignores market segment differences and targets the whole market with 1 offering.

  • Focuses on what is common in the needs of consumers. Modern marketers have strong doubts about this strategy.

Targeting narrowly: Micromarketing (local or individual marketing).

In between: Differentiated (segmented) marketing or Concentrated (niche) marketing.

• DIFFERENTIATED: a firm targets several market segments and designs separate offerings for each

  • Goal: Increase profits by tailoring product variations to needs.

  • Risk: Increases the costs (R&D, advertising, channel management) and can confuse customers or cannibalize other brand

    • InterContinental Hotels Group (IHG): Operates more than 6,000 hotels under 19 brands grouped into four collections (luxury and lifestyle, premium, essentials, and suite).

    • Example: Hotel Indigo focuses on unique lifestyle experiences and drawing on “the story of its local area.” avid brand champions “everyday travel at a fair price”.

    • CONCENTRATED/NICHE MARKETING

    • Banyan Botanicals: Targets the growing naturalist niche of the personal care market, often neglected by giants like P&G’s Olay. Products are almost wholly organic, based on the ancient South Asian healing tradition of Ayurveda.

Risks of Concentrated Marketing

Can yield highly profitable market niches but involves higher-than-normal risks if those segments turn sour.

• It can also limit growth and lead larger competitors (threatened by success) to enter the same segments with greater resources.

McCormick’s Growth Strategy (Concentrated to Differentiated)

Long dominated the herbs, spices, and seasonings niche.

• Seeking growth, it strategically branched —> condiments market (closely related segment).

• Acquisitions like Frank’s RedHot and Cholula hot sauces position McCormick as a “global leader in flavor”.

Micromarketing

"the practice of tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments."

• Micromarketers see the individual in every customer.

Hyperlocal marketing

location-based targeting to consumers in using digital, mobile, and social media technologies

Burger King Whopper Detour (Hyperlocal Case)

ex) Offered discounted Whoppers (1 cent) to BK app users who drove within 600 feet of a McDonald’s.

• Burger King “geofenced” 14,000 McDonald’s locations.

• Resulted in 1.5 million app downloads and mobile sales 3x.

individual marketing

tailoring products and marketing programs to the needs and preferences of individual customers.

• AKA one-to-one marketing, mass customization, and markets-of-one marketing

FitMyFoot (Individual Marketing Example)

• Uses the brand’s Foot Science smartphone app to scan and transmit foot images.

• Uses hundreds of data points to 3-D print footwear—embossed with the customer’s name—that fits that customer and no one else.

Factors Influencing Targeting Strategy

1. Firm-level factors (goals, resources).

2. Nature of the product (uniform vs. variable design).

3. Product’s life-cycle stage (single product for new product, differentiated for mature).

4. Market variability (undifferentiated if tastes are the same).

5. Competitors’ marketing strategies.

Socially Responsible Target Marketing (Controversy)

Biggest issues involve targeting vulnerable or disadvantaged consumers with controversial or potentially harmful products.

Example: Fast-food chains pitching high-fat fare to low-income residents; YouTube accused of enticing children into an “ad-filled digital playground”.

Socially Responsible Marketing (Call to Action)

Calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.

Positioning Map

show consumer perceptions of their brands versus those of competing products on important buying dimensions.

Axes: Often Price (vertical) and Orientation (e.g., luxury versus performance, horizontal).

Size of Circle: Indicates the brand’s relative market share.

• Cadillac example

  • Consumers view the market-leading Cadillac Escalade as a moderately priced, large, luxury SUV with a balance of luxury and performance.

  • It is positioned on urban luxury.

Dunkin’ vs. Starbucks Positioning

Starbucks: Targets upscale professionals; positions itself as a high-brow “third place” (outside the home and office).

Dunkin’: Targets everyday folks with a decidedly more low-brow “America runs on Dunkin’” positioning.

Competitive advantage

The extent that a company can differentiate and position itself as providing superior or different customer value.

• Crucial Requirement: A solid positioning cannot be built on empty promises; companies must live their taglines.

  • ex) Clorox Glad “Torture Test” (Living the Tagline Case)

    Clorox positions its Glad trash bag as “Glad: The Toughest Trash Bag.”

    • To prove it, Glad ran a campaign where a Glad Force Flex Plus bag packed with items was checked as normal baggage through 10 major U.S. airports and emerged unscathed.

Ways to Differentiate the Offering

Product differentiation (features, performance, style, e.g., Bose’s “better sound through research”).

Services differentiation (customer service, e.g., The UPS Store).

Packaging differentiation (e.g., Altoids mints come in a metal box).

Channel differentiation (innovative design, e.g., DTC online brands like Glossier).

Wegmans People Differentiation Case

East Coast supermarket chain recognized for customer service.

• The secret lies in its carefully selected, superbly trained, happy employees.

• Cashiers aren’t allowed to interact with customers until they’ve had at least 40 hours of training.

Unique Selling Proposition (USP)

Rosser Reeves, a former advertising executive, said a company should aggressively promote only 1 benefit (USP) and stick to it, touting itself as “#1” on that attribute.

Land Rover Defender (Positioning on Multiple Advantages)

Positions its relaunched Defender as combining its legacy off-road performance with luxury and comfort and state-of-the-art electronics.

• The challenge is convincing buyers that one brand can provide both.

Criteria for Promoting Differences (7 Criteria Verbatim)

1. Important: Delivers a highly valued benefit.

2. Distinctive: Competitors do not offer it, or the company offers it in a more distinctive way.

3. Superior: Superior to other ways customers might obtain the same benefit.

4. Communicable: Visible or communicable to buyers.

5. Preemptive: Competitors cannot easily copy the difference.

6. Affordable: Targeted customers can afford to pay for the difference.

7. Profitable: The company can introduce the difference profitably.

Value Proposition

"the full mix of benefits on which a brand is differentiated and positioned."

• It is the answer to the customer’s question “Why should I buy your brand?”.

Winning Value Propositions

More for more (higher price, higher quality, prestige).

More for the same (Target: upscale discounter).

The same for less (Walmart, Costco: same brands, deep discounts).

Less for much less (ALDI: lower performance/selection, much lower price).

More for less (difficult to sustain long-term).

Positioning Statement Form

"should be summed up in a positioning statement".

Form:

“For (target customer or segment), who (statement of unsolved customer needs), our product is (short but vivid description of the product), which provides (statement of key benefits—how the product solves customer problems). Unlike (key competing brands), our product (mention key points of differentiation).”.

Communicating and Delivering Positioning

The company must take disciplined steps to deliver and communicate the desired positioning.

• All the company’s marketing mix efforts must support the positioning strategy.

Maintaining Positioning

Establishing or changing a position takes a long time, and positions can be lost quickly.

• Positioning should evolve gradually as it adapts to the ever-changing marketing environment.