MARKETING CH 7: Customer-driven Marketing Strategies: Creating Value for

target customers

Objectives:

1. Define 4mjr steps in designing a CDMS: Market segmentation, market

targeting, differentiation and positioning.

2. List and discuss the major bases for segmenting consumer and business
markets.

3. Explain how firms identify attractive market segments and choose a

market targeting strategy.

4. Discuss how firms position their products for maximum competitive

advantage in the the marketplace.

Firms recognise cannot appeal to all buyers in the marketplace, or at least not to
all in the same way: too numerous, varied needs and buying practices. Identify
parts of the market that serve best and are most profitable.

Market segmentation: dividing a market into smaller

groups with distinct needs, characteristics or
behaviours who might require separate products or
marketing mixes.
Market targeting: process of evaluating each market
segment’s attractiveness and selecting one or more
segments to enter.
Differentiation: actually differentiating the firm’s
market offering to create superior customer value.
Positioning: Arranging for a product to occupy a clear,
distinctive and desirable place relative to competing
products in the minds of target consumers.

INSERT FIG 7.1

MARKET SEGMENTATION (M.S.)

Differ in wants, resources, locations, buying attitudes

and practices
M.S. firms divide large heterogeneous markets into smaller segments that are
reached more efficiently and effectively with products and services that match
exact needs. Use multiple segmentation bases in an effort to identify smaller,
better defined target groups. EG bank identifies a group of wealthy retired adults
but also within that group distinguishes several segments based on their current
income, assets, saving, risk preference, housing and lifestyles.

Segmenting consumer markets:

• Demographic: Most popular to segment. Needs, wants and usage

rates often vary closely with demographic variables. Easiest to
measure than other variables.

Age, gender, family size (Careful not to sterotype. Some 70

year olds are in wheelchair but others 70 year olds are
playing tennis)

Lifecycle :single, married, children, under 18, old

Income: <10,000, 600,000+

Occupation, education, religion, race, and nationality

Generation: Baby boomer, Generation X, Generation Y

• Geographic: firms localise products, advertising, promotion and

sales efforts to fit individual provinces, cities and neighbourhoods.
(Starbucks)

World/Region/Country: Southern Africa, North America,

Canada

Province: northern cape Western Cape

City/Metro: <5,000/ 500,000-1,000,000

Density: urban, suburban, rural

Climate: hot, cold, wet, dry

• Psychographic:
 Social class: lower lowers, upper lowers, middle class, upper
middle class, lower uppers, upper uppers.

Lifestyle: Achievers, survivors, strivers. Pattern of living as

expressed through activities, interests and opinions. E.G.
Woman moves to expensive suburb-claims for security
reason but to show status- choose to wear denim. Classify of
SA lifestyle: Getting the ‘look’ (independent, rich, confident),
make it mine and save me time (use technology & like
simplicity, efficiency and quality), keeping in (need to belong
and interact with others), it’s my right (loyal and expect
reward, LSM 3-6 want to gain for effort), fortressing (yearn for
youthful days, want to keep possessions secure, and use eco-
friendly products), surviving the rat race(under financial
pressure, want affordable relief from stress).

Personality characteristics: Extrovert, introvert, compulsive,

gregarious, authoritarian, ambitious. Using personality
variables E.G.- Honda- hip 22 year olds, but also to
the ‘kid’ in all of us- the rebellious side, buying for kicks.

• Behavioural: knowledge, attitudes, user or responses. Believed to

be best starting point for building market segments.

Occasions: when buyers get the idea to buy, actually make

their purchase or use the purchase item- regular/ special

Benefits: sought form the product-quality, service, economy,

convenience, speed. E.G whiter teeth, healthier teeth,
breath, sensitivity.

User status: non-user, ex-user, potential user, first-time user,

regular user

Usage rates: light, medium, heavy

Loyalty status: degree- none, medium, strong, absolute

Readiness stage: unaware, informed, interested, desirous,

intending to buy

Attitude toward product: Enthusiastic, positive, indifferent,

negative, hostile

• SU-LSM SAARF Universal Living Standard Measure- developed in

1993
INSERT TABLE

The Gender Report

South Africa has widespread gender segmentation characterized by different

attitudes to the roles of males and females and influenced by socio political
history. Eight:

1. Conservative/ Traditional black males: rural- non metro areas- less likely to
embrace changing gender roles. Protector, Provider & Dominant

2. Conservative/ traditional white male: dominant in sport, business or

home. Power & masculinity

3. Young black males: 2 environments: first is low self-esteem and moral

brought by changing gender roles and unemployment Vrs new SA with
greater opportunities to achieve potential

4. Young white males: perceive increased gender and race competition and
therefore feel pressure to achieve and succeed. Threatened, resigned to
impact of affirmative action on their advancement

5. Conservative/ traditional black female: remain in repressed position due

to financial and cultural constraints

6. Young black women: fiercely independent, feisty and ambitious

7. Young white women: career orientated and independent. Greater need

for male affirmation and thus many do still subscribe to traditional gender
roles

8. The black diamond women: fastest growing and most influential segment
of SA society. Spending power of R120 bn. Assuming role of breadwinners

Segmenting Business markets

Geogrpahically

Demographically (industry, sixe of firm)

Benefits sought

User status

Usage

Loyalty status
 Customer operating characteristics

Purchasing approaching

Situational factors

Personal characteristics

EG FNB targets individuals but also targets segments it calls Commercial

(innovative banking solutions to help business grow- financing,
investments, specialist solutions, BBE solutions ), Corporate (building long
lasting relationships- pament and collection solutions, cash and risk
management) and Public Sector.

Segmenting International Markets: similar needs and buying behaviour even

though they are located in different countries. Play a big role in whether firm will
enter countries and how.

Geographic location

Economic factors: population income levels, overall lever of economic

development.

Political and Legal factors: stability of government, receptivity to foreign

firms, monetary regulations, and amount of bureaucracy.

Cultural: group on common languages, religions, values, and attitudes,

customs and behavioural patterns.

E.G.s MTV targets worlds teenagers: shop, study, eat, sleep. Experience
similar issues: love, crime, homelessness, working parents. Mercedes
targets worlds well-to-do irrespective of country. Roxy teenage girls with
clothing and apparel and accessories through stores.

REQUIREMENTS FOR EFFECTIVE SEGMENTATION

Measurable: The size, purchasing power and profiles of the segments can be
measured. Eg 35million left handed people in America. But no demographics of
lefties- census does not record demo’s of left handedness.

Accessible: effectively reached and served. By location/ exposure

Substantial: large and profitable enough

Differentiable: Distinguishable and respond differently to diff marketing mix

elements and programmes
Actionable: effective programmes designed for attracting and serving the
segments.

MARKETING TARGETING

Market segmentation reveals firms market segment opportunities. Must now

evaluate each segment and decide home many and which it can best serve.

Evaluating.

Data to be gathered on segment sales, growth rates and expected profitability

for various segments.

Segment Size and Growth: capacity to serve with current

resources

Segment Structural Attractiveness: presence of competition,

substitute products, relative power of buyers, power of
suppliers,

Objectives and Resources of the Firm: skills and resources

Selecting target Segments

Target market is a set of buyers sharing common needs or characteristics

that the firm decides to serve.

Because buyers have such unique needs and wants, a seller could
potentially view each buyer as a separate target market, may need to
design a separate marketing programme for each buyer/ broad segments
of buyers undifferentiated marketing), very narrow (micro-marketing or in
between (differentiated or concentrated marketing).

Undifferentiated (Mass) Marketing

A market-coverage strategy in which a firm decides to ignore market

segment differences and go after the whole market with one offer: focuses on
what is common to all not different.

Differentiated (segmented) marketing

 Target several segments. EG KFC put together different roduct bundles
aimed at different segments. Eg Moms night off Feast- most sought after
commodity is time. Vrs the pimped colonel burger aimed at the student market.
Influences use of language and features of the ad. EG2 Edcon has Edgars and Jet
to serve very different needs.

Hope is for higher sales and a stronger position within each market
segment however increases the cost of doing business as lose out on economies
of scale, and higher promotion costs.

Concentrated Marketing/ Niche marketing

Appealing when firm’s resources are limited. Eg Tropical fish food/

military binoculars, rescue trucks. Achieves a strong niche market position as it
has greater knowledge of consumer needs in the niches it serves and special
reputation. Fine tunes products, prices and programmes to the needs of
market more efficiently,
carefully defined segments. Also
targeting products and service, channels and
communications programmes towards only the
consumers that it can serve best and most profitably.
May only attract one or two competitors. EG Apple- was in personal computer
market- innovated to create ipod and then captured 70% of music download
market. Now people willing to pay more for Apple’s cutting-edge
products.However higher than moral risks.

Micro Marketing

Tailoring products and marketing programmes to the needs and wants of

specific individuals and local customer groups, includes local marketing and
individual marketing

Local Marketing: tailoring brands and promotions to the needs and wants
of local customer groups. Eg Wooly’s clothes, food and accessories depending on
local customers. Meets the needs of the firm’s first line customers, retailers, who
prefere more fine tuned product assortments for their neightbourhood.

Individual Marketing: tailoring products and marketing programmes to

meet the needs and preferences f individual customers- also laberlled ‘markets
of one marketing’, customized marketing, and one to one marketing. EG
furniture made to order, cobbler shoes to order. Internet plays powerful
role in mass customisation. Allows interaction on a one to one basis- trend of
interactive dialogue and less advertising monologue. Dell- custom configured
computers. Bear Worx design own bear.
Choosing a targeting strategy depends on

• Available resources

• Product Variability: uniform (grapefruit) or high design (camera)

• Product’s lifecycle stage: if early then one version may exist for which
undifferentiated marketing approach/ concentrated marketing.

• Competitors marketing strategies

Socially Responsible Target Marketing

Targeting of disadvantaged or vulnerable consumers with controversial or

harmful products.

• Overwhelming children ‘s defences by using loveable characters

• Obesity

• Nutritional content: calories, fat, sodium and sugar

• Misleading ‘Vitamin Water’

• Use of internet – tailor made deceptive messages

DIFFERNETIATION and POSTIONING

Product position: way the product is defined by consumers on

important attributes- the place it occupies in the consumers’ minds relative
to competing products. A complex set of perceptions, impressions and feelings
that customers have. Customers do so with or without the help of marketers.

Value proposition: create differentiated value for targeted segments.

Toyota Yaris and Honda Civic: economy, Mercedes and Audi”: luxury, Porsche
and BMW on performance. To simplify buying process customers organise
products, services and firms into categories and position them in their minds.

Positioning Maps

Preparation of a perceptual positioning map which helps plan their differentiation

and positioning strategies. Shows consumer perceptions of their brands. Grid
with 2 axes (Eg X: Reliability & Y:Safety)

Mercedes
 Lexus

Reliability BMW
Audi
Volvo

Safety

Choosing a differentiation and positioning Strategy

Formed by building a unique bundle of benefits that appeal to a substantial

group within the segment.

1. Identify possible Value difference and competitive advantages

Competitive advantage: advantage over competitors gained by

offering consumers greater value either by offering consumers
greater value, either through lower prices or providing more
benefits that justify higher prices.

Must deliver on offering. To find offering marketers must think

through the entire customer’s experience with the firms product or
service. Differentiate at any point of contact. EG through product:
features, style, taste, design. Services: Speed, convenient, careful
delivery, exceeds expectations, promptness, courtesy and
efficiency. Channels: coverage, expertise and performance (smooth
functioning). People: hiring and training suited for position eg.
Disney upbeat, Singapore Airlines grace. Image: image should
convey the products distinct benefit and positioning. Logo and
colours can aid, but all communication requires integration.

2. Choosing right competitive advantage

• How many differences to promote: Debate over one or more. Many

think develop a USP and stick to it (unique selling proposition). Pick
attribute and tout it as being number one. VERSE Aquafresh who
tout more: All in one- stripes reinforce that position in minds.

• Which differences to promote: Must be- important, distinctive,

superior, communicable, pre-emptive (competitors cannot easily
copy), affordable, profitable.

3. Selecting an overall positioning strategy

 Full position of a brand is called brand’s value proposition: full mix of
benefits upon which it is positioned. Below is possible value propositions.
Pric
e
More The Same Less

More More for more More for the More for less
same
Benefit
s The Same The same for
less

Less Less for much

less

More for More: higher price for superior quality, craftsmanship, durability,
performance or style (Mont Blanc/ Mercedes)

More for the same: comparable quality for same price

• Develop a positioning statement: summed up “ To (target segment and

need) our (brand) is (concept) that (point of difference). EG To busy,
mobile professionals who always need to be in the loop, Blackberry is a
wireless connectivity solution that allows you to stay connected to
data, people, and resources while on the go, easily and reliably- more
so than competing technologies.

• First state products membership in a category and then show point of

difference. As suggest similarities but displays superiority.

4. Effectively communicate and deliver the chosen position to market

Concrete action on talk: must deliver. Designing the marketing mix-

product, place, price, promotion- involves working out technical details of
the positioning strategy. EG a firm producing high quality goods must: 1.
Charge a high price, 2. Distribute through high-quality dealers, and 3.
Advertise in high-quality media, 4. Hire and develop more service people,
find retailers who have a good reputation for service and develop sales
and marketing messages that broadcast its superior service. Build a
consistent and believable more for more position.