Ch. 6: Customer Value-Driven Marketing Strategies: Creating Value for Target Customers

What are the 4 major steps in designing a customer value-driven marking strategy?

1. Market Segmentation

2. Market Targeting

3. Differentiation

4. Positioning

What is market segmentation?

Market Segmentation is the first step in designing a customer-value driven marketing strategy.

Market Segmentation is dividing up the total buyers into separate groups based on characteristics, different needs, or behavior. Each group might require different marketing strategies and mixes (4 Ps).

Essentially market segmentation is dividing the buyers into smaller groups that would similarly to marketing because of who they are (charactersiticss, needs) 

What is Market Targeting?

Market targeting is the second step of designing a customer-value driven marketing strategy

Market targeting is looking at all of your different market segments (groups of similar customers) and choosing the best ones to market towards

What is differentitation?

Differentiation is the 3rd step in designing a customer-value driven marketing strategy.

Differentiation is actually adding something unique to your product so that consumers see superior (better) value in you product than competitors

essentially making your product different than competitors

“Why are we different than our competitors??”

What is positioning?

Positioning is the fourth step in designing a customer-value driven marketing strategy

Positioning is arranging for your market offering (product, idea, experience) to occupy a clear, distinctive, and desirable place relative to competing offerings in the mind of the consumer

basically, where companies want their product and brand in your head as a consumer. What do they want you to see their product is relative to the competitors? 

What is market offering? 

Any product, service, experience, or idea the company offers (provides) to satisfy the customer needs 

Why is low cost not always the best way to differentiate your product (market offering)?

If your compnay is focused on a low-cost business strategy, having the lowest cost is the best way to differentiate. Firms that are not set up with the low-cost business model should differentiate with additional value-adding features.

-You can’t beat Walmart for low costs (they are built for low costs)

What are the four market segmentation variables for consumer markets?

You can segment (divide) markets using variables like

1. Geographic

2. Demographic

3. Psychographic

4. Behavioral

What is geographic segmentation?

Dividing a market into segments by different geographical units like nations, states, regions, countries, cities, or even neighborhoods.

What is hyperlocal social marketing?

hyperlocal social marketing is location based (geographic) market targeting in which firms target consumers in specific local communities or neighborhoods using digital and social media. 

Give an example of hyperlocal social marketing

The whopper detour where Burger King would allow people within a geofenced area around McDonald’s locations to get a 1 cent whopper. This is targeting specific neighborhoods and communities using digial and social media. 

What is Demographic Segmentation?

Dividing a market of consumers based on variables such as age, life-cycle stage, gender, income, occupation,, education, religion, ethnicity, and generation.

What are age and life-cycle segmentation? (part of demographic segmentation)

Dividing a market into segments by age and their life-cyle

ex. Crest has a White brilliance toothpaste for adults and a Crest Pro-Health Junior with frozen characters on it targeted for kids 

-Age is not always a good indicator of life-cycle stage (ex. think of Sean’s friend who is as old as him but has a kid and is going to soccer games while Sean travels on the weekends)

What is gender segmentation? (part of demographic segmentation)

Dividing a market into segments based on gender

ex. ads targeted at women like Visa’s money is changing ad (Women in control of their own money and finances)

What is income segmentation? (part of demographic segmentation)

Dividing a market into segments by income levels.

ex. Cedit card companies have super exclusive black cards. There are also lots of money saving stores like dollar tree and dollar general. 

Psychographic Segmentation

Dividing a market into segments based on lifestyle or personality.

-people can have similar demographic characteristics but very different psychographic 

ex. Sean is in an older demographic and he likes to vacation, but he is not into cruises like other travelers his age. His lifestyle and personality differ from other in his same age demographic 

Example of psychographic segmentation

catering to the psychographic variables of consumers ((lifestyle and personality) Panera caters to a segment of consumers that want more than good tasting food — they want food that is healthy for them (this is lifestyle) 

Behavioral Segmentation

Dividing a market into segments based on occasions, benefits, user status, usage rate, and loyalty status

What are the different segmentation within the behavioral variables?

1. Occassion Segmentation

2. Benefit Segmentation 

3. User Status Segmentation 

4. Usage Rate Segmentation 

5. Loyalty Status Segmentation

Occassion Segmentation (within behavioral segmentation)

Dividing a market into segments based on occasions *when* buyers interact with the product (when buyers get the idea to buy, actually make their purchase, or use the purchased item.) 

Benefit Segmentation (within behavioral segmentation)

Dividing the market into segments based on the different benefits that consumers seek from the product

ex. There are different segments of the bike marke with some customers looking for recreational bikes while others look for speed bikes. They are segmented by desired benefit from the product. 

User Status Segmentation (within behavioral segmentation)

Markets can be segmented into nonusers, ex-users, potential users, firs-time users, regular users 

-Markets segmented by if they use the product or not. 

User Rate Segmentation (within behavioral segmentation)

Dividing markets into segments based on their usage rate of the product. Usage rate of light, medium, heavy product users. 

-”How much do they use the product” 

Difference between User Status Segmentation and Usage Rate Segmentation?

User Status is if they use the product or not

Usage Rate is saying yes they use the product and how heavily they use the product 

Loyalty Status Segmentation (within behavioral segmentation)

Dividing a market into segments based on how loyal consumers are to the brand 

Marketers __ just focus on one market segmentation base when identifying customers (variable)

do not. They use multiple segmentation bases to get more refined target groups

Acxiom’s Personicx Lifestage classification system

using many different market segmentation variables (not just user status and gender or income and geographic but multiple of these bases at a time) to identify specific groups.

US households are one of 70 distinct clusters within 21 life stage groups

“Summit Estates” “Raisin’ Grandkids” “Cartoons and Carpools”

shows that many segmentation bases are used to define target market segments that have similar purchasing behavior

Business Market Segmentation Variables 

Business Buyers can be split into groups based on 

1. geographic

2. demographic (industry, company size)

3. behavioral (occasion, benefits sought, user status, usage rate, loyalty status)

Unique variable for Business Buyer segments are

1. operating characteristics

2. purchasing approaches

3. situational factors

4. personal characteristics 

Give an example of business buyer market segmenting 

Keurig has developed business buyers segments and targeted these segments with specific ads for large and small offices, restaurant and food service operations, and hotel and hospitality. Keurig has a different marketing approach for each of these busines buyer segments 

Segmenting International Markets 

Different countries obviously vary a lot in their economic, political, and cultural makeup. So, international firms need to group world markets into segments that have unqiue buyer needs and behaviors 

What are factors we can segment world markets with?

1. Geographic location 

2. economic factors within country (weak currency? strong economy?) 

3. Political and Legal factors (stability of country, type of government, receptivity to foreign companies) 

4. Cultural factors (common languages, values, customs, history) 

Intermarket (Cross-Market) Segmentation

Segments of consumers who respond similarly to product offerings( have similar needs and buying behaviors) that are in many different countries. 

-You target a certain segment of a market that has similarities even though they are in diff. countries 

ex. Zara targets cost-conscious but also modern fashion appreciating customers across many borders and in many different countries. 

there are tons of ways of segmenting a market but not all ways of dividing a market will be effective for marketing or useful at all. 

You could divide buyers of salt by hair color, and have tow market segments for light and dark hair, but hair color does not affect their purchase of salt. Diving the consumers that buy salt by haircolor is not going to mean anything. Just because they have blonde hair does not mean they would need different marketing strategies to be targted.

Requirements for Effective Market Segmentation 

To be useful, market segments must be MASDA

1. Measurable - measurable size, purchasing power, profiles

2. Accessible - market can be reached and served

3. Substantial - large enough to serve profitably (no point making cars specially for ppl over 7 ft, tall not a substantial market)

4. Differentiable - certain segments show different responses

5. Actionable - our firm needs to be able to actually serve the segment