Principles of Marketing

Seventeenth Edition
Chapter 7

Customer Value-
Driven Marketing
Strategy:
Creating Value for
Target Customers
HENKEL’S PERSIL : A “Glocal” Marketing Success

By focusing on generating insights to

understand market trends and
customers’ special needs in different
regions, Henkel found huge success
with its brands.
 Learning Objectives

Define the major steps in designing a

7-1 customer value-driven marketing strategy:
market segmentation, targeting,
differentiation, and positioning.

List and discuss the major bases for

7-2 segmenting consumer and business
markets.
 Learning Objectives

Explain how companies identify

7-3 attractive market segments and choose a
market-targeting strategy.
Discuss how companies differentiate and
7-4 position their products for maximum
competitive advantage.
 Learning Objectives 1
Define the major steps in designing a customer value-
driven marketing strategy: market segmentation,
targeting, differentiation, and positioning.

Marketing Strategy
 Marketing Strategy

FIGURE | 7.1Designing a Customer-Driven Market Strategy

Figure7.1 shows the four major steps in designing a

customer value-driven marketing strategy.
 Marketing Strategy

Differentiation
Market
It involvesSegmentation
actually differentiating Market Targeting
the firm’s market offering to create
superior customer value.
It involves dividing a market
into smaller segments of It consists of evaluating each
buyers with distinct needs, market segment’s attractive-
Positioning
It consistsness
characteristics, or behaviors and selecting
of arranging for a one or
market
offering tomore
that might require separate occupymarket segments
a clear, to
distinctive,
marketing strategies orand enter.
desirable
mixes. place relative to
competing products in the minds of
target consumers.
 Learning Objectives 2
List and discuss the major bases for segmenting
consumer and business markets.

Market Segmentation
 Market Segmentation

Market segmentation requires dividing a market into

smaller segments with distinct needs, characteristics, or
behaviors that might require separate marketing
strategies or mixes.
• We discuss four important segmentation topics:
segmenting consumer markets

segmenting business markets

segmenting international markets

requirements for effective segmentation

 Market Segmentation

Segmenting Consumer Markets

 Market Segmentation

Segmenting Consumer Markets

Geographic segmentation divides the market into
different geographical units such as nations, regions,
states, counties, cities, or even neighborhoods.
 Market Segmentation

Segmenting Consumer Markets

Demographic segmentation divides the market into
segments based on variables such as age, life-cycle stage,
gender, income, occupation, education, religion,
ethnicity, and generation.
 Market Segmentation

Segmenting Consumer Markets

Age and life-cycle stage segmentation

divides a market into different age and life-cycle
groups.
Gender segmentation divides a market into
different segments based on gender.

Income segmentation divides a market into

different income segments.
 Market Segmentation

Segmenting Consumer Markets

Psychographic segmentation
divides a market into different
segments based on lifestyle, or
personality characteristics.
 Market Segmentation

Segmenting Consumer Markets

Behavioral segmentation divides a market into
segments based on consumer knowledge, attitudes, uses
of a product, or responses to a product.

Benefits User
Occasions
sought status

Usage Loyalty
rate status
 Market Segmentation

Segmenting Consumer Markets

Behavioral segmentation

Occasions

• Occasion segmentation divides the market into segments

according to occasions when buyers get the idea to buy,
actually make their purchase, or use the purchased item.
 Market Segmentation

Segmenting Consumer Markets

Behavioral segmentation

Benefits Sought

• Benefit segmentation divides the market into

segments according to the different benefits that
consumers seek from the product.
 Market Segmentation

Segmenting Consumer Markets

Behavioral segmentation
User Status
• Markets can be segmented into nonusers, ex-users, potential
users, first-time users, and regular users of a product.
• Marketers want to reinforce and retain regular users, attract
targeted nonusers, and reinvigorate relationships with ex-
users.
Usage Rate

• Markets can also be segmented into light, medium, and heavy product
users.
 Market Segmentation

Segmenting Consumer Markets

Behavioral segmentation

Loyalty Status
• A market can also be segmented by consumer loyalty.
• Consumers can be loyal to brands (Tide), stores
(Target), and companies (Apple).
 Market Segmentation

Segmenting Consumer Markets

Multiple segmentation is
used to identify smaller, better-
defined target groups.

Experian’s Mosaic USA

system classifies U.S.
households into one of 71
lifestyle segments and 19 levels
of affluence.
 Market Segmentation

Segmenting Business Markets

Consumer and business marketers use many of the
same variables to segment their markets.
Additional variables include:
• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
 Market Segmentation

Segmenting International Markets

• Few companies have either the resources or the will to operate in
all, or even most, of the countries that dot the globe.
• Operating in many countries presents new challenges. Different
countries, even those that are close together, can vary greatly in
their economic, cultural, and political makeup. International firms
need to group their world markets into segments with distinct
buying needs and behaviors.

Geographic Economic Political and Cultural

location factors legal factors factors
 Market Segmentation
Segmenting International Markets
Intermarket segmentation involves forming
segments of consumers who have similar needs and
buying behaviors even though they are located in
different countries.
 Market Segmentation

Requirements for Effective Segmentation

• The size, purchasing power, and profiles of
Measurable the segments can be measured.

• The market segments can be effectively

Accessible reached and served.

• A segment should be the largest possible

Substantial homogeneous group worth purchasing
with a tailored marketing program.

• The segments are conceptually

Differentiable distinguishable and respond differently to
different marketing mix elements and
programs.
• Effective programs can be designed for
Actionable attracting and serving the segments.
 Learning Objectives 3
Explain how companies identify attractive market
segments and choose a market-targeting strategy.

Market Targeting
 Market Targeting
Evaluating Market Segments
• Segment size and growth
1

• Segment structural attractiveness

2

• Company objectives and resources

3
 Market Targeting
Selecting Target Market Segments
A target market is a set of buyers who share common
needs or characteristics that the company decides to
serve.

FIGURE | 7.2
Market-Targeting Strategies
 Market Targeting
Selecting Target Market Segments
Undifferentiated marketing targets the whole
market with one offer.
 Mass marketing
 Focuses on common needs rather than what’s different
 Market Targeting
Selecting Target Market Segments
Differentiated marketing
targets several market segments
and designs separate offers for
each.
• Goal is to achieve higher sales
and stronger position
• More expensive than
undifferentiated marketing
 Market Targeting
Selecting Target Market Segments
Concentrated marketing
targets a large share of a
smaller market.
• Limited company resources

• Knowledge of the market

• More effective and efficient

 Market Targeting
Selecting Target Market Segments

Micromarketing is the practice of tailoring products

and marketing programs to suit the tastes of specific
individuals and local customer segments.

Local marketing

Individual marketing
 Market Targeting
Selecting Target Market Segments
Micromarketing
Local marketing involves tailoring brands and
promotion to the needs and wants of local customer
segments.
 Cities
 Neighborhoods

 Stores
 Market Targeting
Selecting Target Market Segments
Micromarketing
Individual marketing
involves tailoring products
and marketing programs to
the needs and preferences of
individual customers.
Also known as:
 One-to-onemarketing
 Mass customization
 Market Targeting
Selecting Target Market Segments

Firm’s resources are limited Concentrated

marketing

Uniform products

A firm introduces a new product Undifferentiated

marketing

Mature stage of the product

Buyers have the same tastes, Differentiated

buy the same amounts, and marketing
react the same way to
marketing efforts
 Market Targeting

Selecting Target Market Segments

Choosing a targeting strategy depends on
 Company resources
 Product variability
 Product life-cycle stage
 Market variability
 Competitor’s marketing strategies
 Market Targeting
Selecting Target Market Segments
Socially Responsible Target Marketing

• Thus, in target marketing, the issue is not really

who is targeted but rather how and for what.
• Controversies arise when marketers attempt to
profit at the expense of targeted segments ─ when
they unfairly target vulnerable segments or target
them with questionable products or tactics.
• Socially responsible marketing calls for
segmentation and targeting that serve not just the
interests of the company but also the interests of
those targeted.
 Learning Objectives 4
Discuss how companies differentiate and position their
products for maximum competitive advantage.

Differentiation and Positioning

 Differentiation and Positioning

Product position is the

way the product is defined
• Consumers are overloaded with
by consumers on
information about products and services.
important attributes.
• They cannot reevaluate products every
time they make a buying decision.
• To simplify the buying process,
consumers organize products, services,
and companies into categories and
“position” them in their minds.
 Differentiation and Positioning

Positioning Maps
Positioning maps show consumer perceptions of
marketer’s brands versus competing products on
important buying dimensions.
 Differentiation and Positioning

Choosing a Differentiation and Positioning

Strategy
• The differentiation and positioning task consists of
three steps:
Identifying a set of differentiating competitive
advantages on which to build a position
The company must then effectively
communicate and deliver the chosen position to
Choosing the right competitive advantages
the market.

Selecting an overall positioning strategy

 Differentiation and Positioning

Choosing
Identifyingaa Differentiation and
set of differentiating Positioning
competitive Strategy
advantages

Competitive advantage is an advantage over

competitors gained by offering greater customer value,
either through lower prices or by providing more benefits
that justify higher prices.
•To find points of differentiation, marketers must think
through the customer’s entire experience with the
company’s product or service.
•An alert company can find ways to differentiate itself at
every customer contact point.
 Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Identifying a set of possible

competitive advantages to
differentiate along the lines of:
Product
Services
Channels
People
Image
 Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Choosing the right competitive advantages

How Many Differences to Promote.

A company should develop a unique selling
proposition (USP) for each brand and stick to it.
Which differences to Promote.
Important Distinctive Superior Communicable
A difference is worth establishing to the extent that it
satisfies the following criteria:
Preemptive Affordable Profitable
 Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Selecting an overall positioning strategy

Value proposition is the

full mix of benefits upon
which a brand is positioned.
 Differentiation and
• Thus, in any market, there Positioning
is usually room for
many different companies, each successfully
Choosing a Differentiation
occupying different
The Same and
positions. Positioning Strategy
for Less
• The important thing is that each company must
develop its own winning positioning strategy,
• It canone
be athat
powerfulMore
makesvalue for More
proposition
the company ─ everyone
special likes
to its target
a goodconsumers.
deal.

• It involves providing the most upscale product or service

Lessprice
and charging a higher for Much
to coverLess
the higher costs.
• It
A market
not onlyalmost
offers always exists for
higher quality, it products
also givesthat offer to
prestige less
andbuyer.
the More for Less
therefore cost less.
• Few people need,More want, for
or the
can Same
afford “the very best” in
• Of course, the winning value proposition would be to offer
everything they buy.
• Companies
more for less.
can attack a competitor’s more-for-more
• In many cases, consumers will gladly settle for less than
• positioning
Many companies claim to do
by introducing this. And,
a brand in short
offering run, some
comparable
optimal performance or give up some of the bells and
companies
quality at a can
loweractually
price. achieve such lofty positions.
whistles in exchange for a lower price.
 Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Developing a Positioning Statement

Positioning statement summarizes company or brand

positioning using this form: To (target segment and
need) our (brand) is (concept) that (point of difference)
 Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Developing a Positioning Statement

Positioning Statement Example for 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 the Web.”
 Differentiation and Positioning
Communicating and Delivering the Chosen Position

 Choosing the positioning is often easier than

implementing the position.
 Establishing a position or changing one usually takes a
long time.
 Maintaining the position requires consistent
performance and communication.
The End