Chap 7

Customer Driver Marketing

Strategy:
Creating Value for Target Customers

PART 3:
CUSTOMER DRIVEN
STRATEGY AND MIX
A Customer Driven Marketing Strategy
 Segmenting Consumer Markets
Different Segmentation Variables
3

• Geographic (Cities, Areas, Regions or even neighbourhoods etc.)

• Demographic (Age & Lifecycle, Life Stage, Gender, Income, SEC,
Generation, Social Class)

• Psychographic (e.g. Personality, Lifestyle, Values etc.)

• Behavioral (e.g. knowledge, attitude, consumption ocassions, or
responses to a product)

 A market is hence divided into distinct consumer segments,

and it needs to be seen whether they have different
preferences towards product/service or not

MG 220 Marketing Management

 Segmenting Consumer Markets
Geographic Segmentation
4

 Based on Nations, states, regions, countries, cities or even

neighbourhoods.
 Many banks have specialized branches to serve corporate, organizational, or
premium customers in respective areas.
 Geographical markets also vary in their product preferences and
requirements. Examples:
 Air Coolers in dry and hot Lahore vs. coastal areas i.e. Karachi.
 Consumers in Tamil Nadu (Southern state of India) prefer freshly
brewed coffee vs. Other States prefer tea.
 Food preferences
 Northern Pakistan and KPK – More meat, less spices, little use of bread.
 Punjab etc. – Use of bread, Ghee, Vegetables with and without Meat, Moderate Spices
 Karachi – More spices, multicultural, Seafood etc.

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 Segmenting Consumer Markets
Demographic Segmentation
5

 Age and Life-Cycle Stage

 Wants and abilities change with age | Age segmentation can be refined further
 Imp. to do it carefully by understanding consumers’ preferences as they change
 Most brands target youngsters, (e.g. Maggi, Lays, Kurkure) why?
 Insurance Companies target Young Parents.
 What events and stages a person goes through in his/her life affects buying
behavior
 E.g. Users in age group of 50-60 are about to retire from work life and are
segmented/targeted for pension plans etc. Banks target them for deposits.
 Gender
 Women more communal minded; Men more goal oriented and self expressive.
 Importance of understanding how they differ in purchasing behavior
 How they approach purchase decision is to be observed
 Marketers in India are targeting women for specifically designed two wheelers.
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 Segmenting Consumer Markets
Demographic Segmentation
6

 Income
 Long-standing and established practice
 Understanding of exact behaviors is important
 E.g. Wristwatches Rolex/Longiness to Omega to Tag Huer etc.
 Big Bazar Stores in India Is Se Sasta Aur Kahann?

 Generation
 A generation is impacted by lifestyle of times it grows in
 Cohorts are formed whose members share same political, cultural and economic experiences. For
Example: Profiling of American generation is done famously as:
Baby boomers (born: 1946-64) Generation X (born: 1965-77)
Generation Y (born: 1978-94) Millennials (born: 1995-2002)
 Behaviors are (believed to be) highly similar to each other

 Social Class
 Has strong impact on lifestyle, product preferences etc.
 Similar Lifestyles/Incomes/Habits
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 Segmenting Consumer Markets
Psychographic Segmentation
7

 People within the same demographic group may exhibit very

different psychographic profiles. Hence…
 Psychographic Segmentation - dividing buyers into
groups/segments based on:
 Psychological / personality traits

 Lifestyle

 Values

 Culture may also play role

in Psychographic orientation of individuals.
 Tapal uses the steriotypical rustic, extrovert, and macho culture of Punjab
to sell its Tezdum brand of tea
 Tagra Josh, Tagra Rang, Tagra Maza
 Segmenting Consumer Markets
Behavioral Segmentation
8

 In Behavioral segmentation
buyers are divided into groups based on: Their knowledge of
product, Attitude towards product, Use of product, or
Response to a product.
 Behavioural variables to look at:
 Occasions (i.e. consumption occasions, Festivals, Events etc.)
 Benefits Sought (Sporty vs. Casual wear for Serious sports
enthusiasts vs. Casual Lifestyle group)
 User Status (e.g ex users, potential users, first time users etc.)
 Usage Rate (Light, Medium or Heavy usage of product)
 Loyalty Status (Diehard fans, fanatics or frequent switchers)

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 Segmenting Consumer Markets
Behavioral Segmentation
9

 Behavioral Variables
 Occasions: Activities in different occasions impact needs & purchasing
(e.g. holidays, start of month, time of the day etc., Eid, Ramzan Etc.)
 Benefits (Needs or Wants): Based on benefits sought by consumers
 User Status: Non-users | Ex-users | Potential Users | First-time users |
Regular Users
 Usage Rate: Light, medium and heavy users
 Buyer-Readiness Stage: Unaware | Aware | Interested | Intend to buy
 Loyalty Status: Hard core loyals | Split loyals | Shifting loyals |
Switchers
 Attitude: Enthusiastic | Positive | Indifferent | Negative | Hostile

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Segmenting Business Markets
 Business Buyers can be segmented geographically,
demographically (industry, company size etc.) or by
benefits sought, user status, usage rate and loyalty
status.
 Additional variables, we may also consider following:
 Operating characteristics
 Purchasing approaches
 Situational Factors
 Personal Characteristics
 Requirements of Effective Segmentation
11
11

 Market segments must rate favorably on following criteria:

Measurable
• Size, purchasing power, characteristics can be measured easily
• It should not be vague

Substantial
• Large & profitable enough to serve
• Worth going after with a tailored marketing program/effort

Accessible
• Can be effectively reached and served

Differentiable
• Conceptually distinguishable
• Respond differently to different marketing-mix elements

Actionable
• Effective programs can be formulated for that particular segment
 MARKET TARGETING
Mass Marketing i.e. Undifferentiated Marketing
13

Mass Marketing (aka undifferentiated marketing)

is:
Mass Production, Mass Distribution and Mass
Promotion of one product for all buyers
Think of examples?
BUT…. Mass marketing is becoming difficult as it is not
profitable to reach mass audience always
Why is that?

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 Types of Differentiated Marketing

Undifferentiate Differentiated Concentrated Local or

d (Mass (Segmented) (Niche) Individual
Marketing) Marketing Marketing Marketing

Targeting broadly Targeting

narrowly
• Segmented Marketing  By offering product and marketing variations to different
segments companies hope to gain more Sales – it will happen when companies think that
sum of all parts (segments) > whole (All the Market)
• Niche Marketing  Instead of going for small share of a large market, company goes for
a large share of one or few smaller segments (called niches)
• Local Marketing  Tailoring brands and promotions to local customer groups, cities,
neighbourhoods, by coupling mobile phone services with GPS devices many marketers are
now targeting customers, whereever they are, with whatever they want. e.g. Starbucks.
Market Targeting
Evaluating and Selecting the Market Segments

 FULL MARKET COVERAGE

 Undifferentiated – Firm ignores segment differences and goes after the
whole market with one offer.
 Differentiated – Firm sells different products to all the different
segments of the market.
 MULTIPLE SEGMENT SPECIALIZATION
 Selective Specialization – Targeting a subset of all possible segments.
 Operate in Super Segments – Supersegment is a set of segments
sharing exploitable similarity
 Product Specialization – Selling a product with customized specs to
different customer segments.
 Market Specialization – Selling an assortment of products to serve
different needs of a single customer segment.

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MARKETING MANAGEMENT

SESSION 19

INSTRUCTOR: SALMAN TAHIR

Fall 2018
 Market Targeting
Evaluating Market Segments
17

Factors to Consider before entering a segment

1. Threat of intense segment rivalry
INDUSTRY COMPETITORS’ intense rivalry
can make a segment unattractive

2. Threat of new entrants

Depending on what kind of entry & exit barriers exist:
 If both are high: profits are high and
risks are high too
 If entry is high but exit is low: Most attractive
 If entry is low but exit is high: Worst case!
 If both are low: returns are low and stable

3. Threat of substitute products

If there are actual or potential substitute products

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 Market Targeting
Evaluating Market Segmets
18

Factors to Consider before entering a

segment
4. Threat of buyer’s growing bargaining
power
If buyers possess strong or even growing bargaining power, it
can erode margins. This happens when, product is
undifferentiated, when buyer’s switching cost is low, buyers are
price sensitive, or when they can integrate upstream.

5. Threat of suppliers’ growing bargaining

power
If suppliers can raise prices or
reduce quantity supplied and have bargaining power
it can make an industry unattractive – Think when will that
happen?

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 Market Targeting
Evaluating and Selecting the Market Segments
19

Evaluation process
 Based on Porter’s five criteria (mentioned previously)

 Vis-à-vis two factors:

 Segment’s overall attractiveness

 Company’s objectives and resources
 A company must evaluate segments carefully by answering all criteria clearly and ensuring
that it is favorable

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 Market Targeting
Evaluating and Selecting the Market Segments
20

 SINGLE SEGMENT CONCENTRATION e.g. Porche

 Choice to be made between going for:

Segments (Segment marketing)
+ More efficient
+ Less customer information
+ More Standardization

Individuals (Customerization)
+ Segments are fiction
+ Those in segment differ greatly
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 Market Targeting
Ethical choice of market targets
21

 Ensuring that marketing efforts are not exploiting vulnerable

groups in society NOR promoting harmful products
 Children for products of children (Question: Do they understand
their own benefit?)
 Targeting children online – Asking them to share their personal
information by giving incentives.

 Targeting children is not ALWAYS bad e.g. Dettol’s

campaign for washing hands.  Smart ways of reaching
children without offending advocacy groups.

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Differentiation and Positioning
 A product’s position is the way the product is defined by the
consumers on important attributes – the place the occupies in
the minds of the consumers relative to competing products.
 Pakistani Cooking Oil Industry
 Habib Oil – Kyun Ke Ye Dil Ka Maamla hai
 Dalda – Positioned as demonstration of Maternal love
 Tullo Light – Facilitator of healthly lifestyle
 Consumers position products in their minds with or without
the help of Marketers. But Marketers donot want to leave
their products position to chance – they must plan a position
that gives their products greatest advantage.
 Perceptual Positioning Maps

 Marketers often prepare perceptual positioning maps that

show consumer perceptions of their brands versus those
of competing products on important buying dimensions.
Steps in Differentiation & Positioning

1. Identifying a set of differentiating

competitive advantages upon which to build a
position.

2. Choosing the right competitive advantages

and an overall positioning strategy

3. Effectively communicate and deliver the

chosen position in the Market.
1) Identifying Value Differences and Competitive
Advantages

 Product differentiation – Differentiated on the basis of

product features, performance, style and design.
 Services Differentiation – Speedy, Convenient, or careful
delivery.
 Channel Differentiation – through their distribution
channel’s coverage, expertise and performance.
 People Differentiation – Hiring and training better people
than their competitors.
 Brand Image Differentiation – Even when the competing
offers look same, buyers can be made to perceive a
difference i.e. brand image should convey distinctive
benefits and positioning
2.1) Choosing Right Competitive Advantages

 How many differences to promote

 Which Differences to Promote
 Important
 Distinctive – Competitors do not offer that aspect
 Superior
 Communicable
 Premptive – Competitors can’t copy that aspect
 Affordable
 Profitable
2.2) Choosing Positioning Strategy
2.3) Developing a Positioning Statement

To (target segment and need) our (brand) is (concept) that (point of

difference).

EXAMPLE using the popular digital information management application Evernote:

“To busy multitaskers who need help remembering things, Evernote is a digital

content management application that makes it easy to capture and remember

moments and ideas from your everyday life using your computer, phone, tablet, and
3) Communicate and Deliver Chosen Position

 Needs Concrete Action – Not just talk

 Establishing a position or changing one usually
takes a long time
 Once a company has built the desired position, it
must take care to maintain the position through
consistent performance and communication
 Abrupt Changes must be avoided.