Marketing Strategy: Customer Value-Driven Approach

Customer Value-Driven Marketing Strategy

Core Questions

  • Marketing boils down to:
    • Which customers will we serve?
    • How will we serve them?
  • The goal: to create more value for customers than competitors.

Key Steps

  • Segmentation: Divide the total market into smaller segments.
  • Targeting: Select the segment(s) to enter.
  • Differentiation: Differentiate the market offering to create superior customer value.
  • Positioning: Position the market offering in the minds of target customers.

Market Segmentation

  • Dividing a market into smaller segments with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.
  • Includes segmenting:
    • Consumer markets
    • Business markets
    • International markets
  • Requirements for effective segmentation.
Segmenting Consumer Markets
  • Geographic segmentation: Dividing the market into different geographical units like nations, regions, states, counties, cities, or even neighborhoods.
  • Demographic segmentation: Dividing the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.
    • Age and life-cycle stage segmentation: Dividing a market into different age and life-cycle groups.
    • Gender segmentation: Dividing a market into different segments based on gender.
    • Income segmentation: Dividing a market into different income segments.
  • Psychographic segmentation: Dividing a market into different segments based on social class, lifestyle, or personality characteristics.
    • Lifestyle segmentation: Example: Panera caters to a healthy eating lifestyle segment.
  • Behavioral segmentation: Dividing a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product.
    • Occasions: Segments divided according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.
    • Benefits sought: Dividing the market into segments according to the different benefits that consumers seek from the product.
      • Example: Schwinn makes bikes for every benefit segment.
    • User status: Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users of a product.
    • Usage rate: Markets can also be segmented into light, medium, and heavy product users.
    • Loyalty status: A market can also be segmented by consumer loyalty.
Multiple Segmentation
  • Used to identify smaller, better-defined target groups.
  • Examples:
    • Experian’s Mosaic U S A system classifies U.S. households into one of 71 lifestyle segments and 19 levels of affluence.
    • Acxiom’s Personicx segmentation system provides a precise picture of consumers and what they buy.
Segmenting Business Markets
  • Use many of the same variables as consumer marketers.
  • Additional variables:
    • Customer operating characteristics
    • Purchasing approaches
    • Situational factors
    • Personal characteristics
Segmenting International Markets
  • Variables:
    • Geographic location
    • Economic factors
    • Political and legal factors
    • Cultural factors
  • Intermarket segmentation: Forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries.
Requirements for Effective Segmentation
  • Measurable: The size, purchasing power, and profiles of the segments can be measured.
  • Accessible: The market segments can be effectively reached and served.
  • Substantial: The market segments are large or profitable enough to serve.
  • Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.
  • Actionable: Effective programs can be designed for attracting and serving the segments.

Market Targeting

Evaluating Market Segments
  • Factors to consider:
    • Segment size and growth
    • Segment structural attractiveness
    • Company objectives and resources
Selecting Target Market Segments
  • A target market is a set of buyers who share common needs or characteristics that the company decides to serve.
Market-Targeting Strategies
  • Range from mass marketing (virtually no targeting) to individual marketing.
    • Undifferentiated (mass) marketing: targets the whole market with one offer.
      • Focuses on common needs rather than what’s different.
    • Differentiated (segmented) marketing: targets several different market segments and designs separate offers for each.
      • Goal is to achieve higher sales and a stronger position.
      • More expensive than undifferentiated marketing.
      • Example: Marriott International with its 30+ differentiated hotel brands.
    • Concentrated (niche) marketing: targets a large share of a smaller market.
      • Appropriate when company resources are limited.
      • Effective when the company has knowledge of the market.
      • Example: Fila's resurgence through creating narratives about its products.
    • Micromarketing (local or individual marketing): tailoring products and marketing programs to suit the tastes of specific individuals and locations.
      • Local marketing: tailoring brands and promotion to the needs and wants of local customer segments in cities, neighborhoods, or stores.
      • Individual marketing: tailoring products and marketing programs to the needs and preferences of individual customers; also known as one-to-one marketing or mass customization.
        • Example: Rolls-Royce Bespoke design team.
Choosing a Targeting Strategy
  • Depends on:
    • Company resources
    • Product variability
    • Product life-cycle stage
    • Market variability
    • Competitor’s marketing strategies

Differentiation and Positioning

  • Product position: the way the product is defined by consumers on important attributes.
    • Example: Sonos positions itself as unleashing “All the music on earth, in every room of your house, wirelessly.”
  • Positioning maps: show consumer perceptions of marketers’ brands versus competing products on important buying dimensions.
Choosing a Differentiation and Positioning Strategy
  • Involves:
    • Identifying a set of possible competitive advantages to build a position
    • Choosing the right competitive advantages
    • Selecting an overall positioning strategy
    • Communicating and delivering the chosen position to the market
  • Competitive advantage: an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.
  • Differentiation can be along the lines of:
    • Product
    • Services
    • Channels
    • People
    • Image
      • Example: Quicken Loans’ Rocket Mortgage differentiates through its online-only interface for quick loan decisions.
  • A competitive advantage should be:
    • Important
    • Distinctive
    • Superior
    • Communicable
    • Preemptive
    • Affordable
    • Profitable
  • Value proposition: the full mix of benefits upon which a brand is positioned.
  • Positioning statement: summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference).
Communicating and Delivering the Chosen Position
  • Choosing the positioning is often easier than implementing it.
  • Establishing or changing a position takes a long time.
  • Maintaining the position requires consistent performance and communication.