B2 - Customer-focused business, market segmentation and targeting

What is a business philosophy?

Business philosophy is a guiding principle for managers on how they should operate their business.

Exists of:

• Marketing concept

• Production concept

• Technology/Product conept

• Selling concept

A focal firm is…

A unit in a supply chain that…

• Has its own set of competitors

• Competes based on a brand (or several brands that logically go together)

• Has a leader responsible for strategic planning (and profitability)

• Has its own vision or culture (though possibly influenced by higher corporate levels)

Example Nestle

• Claim: “as a company, we continuously evolve our product offerings to meet consumer needs and excite consumer preferences.”

• This claim can be reached by doing market research to best adres the wants and needs of consumers.

• This leads to product development, marketing & food science & technology research. To be able to offer innovative products consumers asked for.

Customer-focused food businesses premises

• A customer-focused food business is managed from the marketing concept

• The marketing concept is a guideline for management

• The marketing concept can be distinguished from the production, product and selling concepts.

Production vs Marketing concepts

Example for Marvel:

• Production concept: We make movies

• Marketing concept: We entertain people

Example Shell:

• Production concept: We provide fuel

• Marketing concept: We supply you with energy

Marketing concept

• Based on fulfilling “what customers want” or, more precisely, on “what customers value”

• Valuing means that the products of a company are worth something for the customer.

• Profit is made by satisfying customers.

Production concept

• These companies are more orientated towards their internal environment, trying to make their processes ever more efficient, producing offerings at a consistent quality level.

• Their risk however is that consumers preferences change and that the company recognizes this too late.

Steps of the selling concept

Main purpose: sell as much as possible and focus lies in the short term. Profit through sales volume.

• Emphasis is on making a deal in the short term rather than keeping customers satisfied in the long term.

• High switching costs. (for e.g. wifi)

The marketing concept steps.

• High competition

• Consumers can easily switch products.

Technology/product concept

• These companies place a particular emphasis on technology. Believing that if they are the first to come up with a new technology, they will conquer new markets.

• Often operate in specialized markets like food for sports, baby food, health food, etc.

• Focus is on the long term.

• Downside: They may create technology without a demand for it.

Segmentation-Targeting-Positioning (STP) (Segmentation)

• Segmentation: A group of customers with relatively similar wants and needs and value of perceptions

• About increasing the variance between segments and decreasing the variance within segments

Segmentation-Targeting-Positioning (STP) (Targeting)

• Selecting market segments to create value that are attractive for both the customer and the company

• To avoid competition: Define customer groups that competitors don’t (yet recognize

Segmentation-Targeting-Positioning (STP) (Positioning)

• Communicating and delivering value to the customer that is unique

• Distinguish the product/brand from competitors.

Different types of preferences (e.g. ice cream)

Steps in Segmentation Process

1. Criteria

   • Choice and application of segmentation criteria

2. Assessment

   • Analysis of the identified segments

3. Evaluation

   • Segments on attractiveness

Segmentation criteria split in objective and subjective and general and specific

Demographic segmentation example

• Demographic: e.g. age, gender, race, religion

• Socio-economic: e.g. income, occupation, education

Brand loyalty segmentation example

Classic loyalty thinking

• Potential customer → loyalty strategy: draw them in

Reversing the approach

• Giver customer loyalty privileges → customers turn into very interesting customers

Targeting strategies

Undifferentiated mass marketing

• Undifferentiated mass marketing

• Whole market with one offer

• no segments

• For example gasoline

Differentiated (segmented) marketing

• Target on several market segments

• Separate offers

• e.g. Aldi → aims for low cost customers

Concentrated (Niche) Marketing

• Concentrate on one or a few segments or niches

• e.g. Nintendo → aims for gamers.

• Selective specialization: One companies with different specialities.

Micromarketing

• Exists of local marketing and individual marketing

• Local: Cities, neighbourhoods, specific stores

• Individual: Buying a house, a realtor will find houses within your budget for example.

Nivea as an example of market targeting

• They have different demographics. One being suncare

• Split into amount of usage. Just sunblock or more

• Different key consumer segments:

  • Self-tan

  • Primary sun care users

  • Secondary sun care users.

How to segment a market well, segments should be…

• Identifiable

• measurable

• Sufficiently large

• Approachable

• Homogenous

• Stable over time