Principles of Marketing

Seventeenth Edition

Chapter 7

Customer Value-Driven Marketing Strategy:

Creating Value for Target Customers

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Learning Objectives
7-1 Define the major steps in designing a customer-driven marketing
strategy: market segmentation, targeting, differentiation, and
positioning.
7-2 List and discuss the major bases for segmenting consumer and
business markets.
7-3 Explain how companies identify attractive market segments and choose
a market-targeting strategy.
7-4 Discuss how companies differentiate and position their products for
maximum competitive advantage.

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Learning Objective 1
Define the major steps in designing a customer-driven marketing strategy:
market segmentation, targeting, differentiation, and positioning.

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Customer Value-Driven Marketing Strategy

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Major Steps In Designing A Customer Value-driven
Marketing Strategy
• Most companies have moved away from mass marketing and toward target
marketing—identifying market segments, selecting one or more of them, and
developing products and marketing programs tailored to each.
• Market segmentation involves dividing a market into smaller groups of buyers
with distinct needs, characteristics, or behaviors that might require separate
marketing strategies or mixes.
• Market targeting (or targeting) consists of evaluating each market segment’s
attractiveness and selecting one or more market segments to enter.
• Differentiation involves actually differentiating the firm’s market offering to
create superior customer value.
• Positioning consists of arranging for a market offering to occupy a clear,
distinctive, and desirable place relative to competing products in the minds of
target consumers.
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Learning Objective 2

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

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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.

Through market segmentation, companies divide large, heterogeneous markets

into smaller segments that can be reached more efficiently and effectively with
products and services that match their unique needs. They may require separate
marketing strategies or mixes.

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Market Segmentation
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective segmentation

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Market Segmentation
Segmenting Consumer Markets

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation

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Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Market Segmentation
Segmenting Consumer Markets

Geographic segmentation divides the market into different geographical units

such as nations, regions, states, counties, cities, or even neighborhoods.

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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, nationality and generation.

Demographic factors are the most popular bases for segmenting customer
groups.

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Market Segmentation
Segmenting Consumer Markets
Age and life-cycle stage segmentation means offering different products or
using different marketing approaches for different age and life-cycle groups.
Gender segmentation divides a market into different segments based on
gender and has long been used in clothing, cosmetics, toiletries, and
magazines.
Income segmentation divides a market into different income segments and
has long been used by the marketers of products and services such as
automobiles, clothing, cosmetics, financial services, and travel.

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Market Segmentation
Segmenting Consumer Markets
Psychographic segmentation divides a market
into different segments based on social class,
lifestyle, or personality characteristics.

Marketers also use personality variables to segment

markets.

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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.

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Market Segmentation
Segmenting Business Markets

Consumer and business marketers use many of the same

variables to segment their markets.
Business marketers also use some additional variables include:
Customer
• operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics

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Market Segmentation
Segmenting International Markets

Geographic Economic
location factors

Political and Cultural

legal factors factors
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Segmenting International Markets
• Geographic location: Nations close to one another will have
many common traits and behaviors.
• Economic factors: Countries may be grouped by population
income levels, or by their overall level of economic development.
• Political and legal factors: Type and stability of government,
receptivity to foreign firms, monetary regulations, and the amount
of bureaucracy.
• Cultural factors: Grouping markets according to common
languages, religions, values and attitudes, customs, and
behavioral patterns.

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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.

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Market Segmentation

Requirements for Effective Segmentation

Measurable Accessible Substantial

Differentiabl
Actionable
e

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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.
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Learning Objective 3

Explain how companies identify attractive market segments and

choose a market-targeting strategy.

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Market Targeting
Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors:
• Segment size and growth
• Segment structural attractiveness
• Company objectives and resources

The largest, fastest-growing segments are not always the most attractive ones
for every company.
The company also needs to examine major structural factors that affect long-
run segment attractiveness.

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Porters five forces model

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Evaluating Market Segments
• A segment is less attractive if it already contains many strong
and aggressive competitors.
• The existence of many actual or potential substitute products
may limit prices and the profits.
• The relative power of buyers also affects segment
attractiveness.
• A segment may be less attractive if it contains powerful
suppliers who can control prices.

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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.

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Market Targeting
Figure 7.2 Market-Targeting Strategies

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Market Targeting
Selecting Target Market Segments
Using an undifferentiated marketing (or mass-marketing) strategy, a
firm might decide to ignore market segment differences and target the
whole market with one offer.

This mass-marketing strategy focuses on what is common in the needs

of consumers rather than on what is different.

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Market Targeting
Selecting Target Market Segments
Using a differentiated marketing (or
segmented marketing) strategy, a firm
decides to target several market
segments and designs separate offers
for each.
It hopes for higher sales and a stronger
position within each market segment.
But it also increases the cost of doing
business.

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Market Targeting
Selecting Target Markets
Using a concentrated marketing (or niche
marketing) strategy, instead of going after a small
share of a large market, the firm goes after a large
share of one or a few smaller segments or niches.
It can market more effectively by fine-tuning its
products, prices, and programs to the needs of
carefully defined segments.
It can market more efficiently, targeting its products
or services, channels, and communications
programs toward only consumers that it can serve
best and most profitably.

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Market Targeting
Selecting Target Market Segments
Micromarketing is the practice of tailoring products and marketing programs to suit the
tastes of specific individuals and locations.
Micromarketing includes:
Local marketing involves tailoring brands and promotions to the needs and wants of local
customer groups—cities, neighborhoods, and even specific stores.
Local marketing has drawbacks.
• It can drive up manufacturing and marketing costs by reducing economies of scale.
• It can create logistics problems.

Individual marketing is the tailoring of products and marketing programs to the needs and
preferences of individual customers.
Individual marketing has also been labeled one-to-one marketing, mass customization, and
markets-of-one marketing.
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Market Targeting
Choosing a targeting strategy
Choosing a targeting strategy depends on
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies

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Learning Objective 4
Discuss how companies differentiate and position their products for maximum
competitive advantage.

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Differentiation and Positioning

Value proposition: How a company

will create differentiated value for
targeted segments and what
positions it wants to occupy in those
segments.

Product position is the way the

product is defined by consumers on
important attributes.

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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy

The differentiation and positioning task consists of three steps:

• Identifying a set of possible competitive advantages to build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy

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Differentiation and Positioning
Identifying Possible Value Differences and Competitive Advantages

Competitive advantage is an advantage over competitors gained by offering

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

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Differentiation and Positioning
Identifying Possible Value Differences and Competitive Advantages

Identifying a set of possible competitive

advantages to differentiate along the lines of:

Product
Services
Channels
People
Image

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Differentiation and Positioning
Choosing the Right Competitive Advantages
Which Differences to Promote
A competitive advantage should be: Important Distinctive Superior
Important: The difference delivers a highly valued benefit to
target buyers.
Distinctive: Competitors do not offer the difference, or the
Communicable Preemptive Affordable
company can offer it in a more distinctive way.
Superior: The difference is superior to other ways that
customers might obtain the same benefit.
Profitable
Communicable: The difference is communicable and visible
to buyers.
Preemptive: Competitors cannot easily copy the difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference
profitably.
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 Differentiation and Positioning
Selecting an Overall Positioning Strategy
Value proposition is the full mix of benefits upon which a brand
is positioned.
More for more positioning involves providing the most upscale
product or service and charging a higher price to cover the
higher costs.
More for the same positioning involves introducing a brand
offering comparable quality but at a lower price.
The same for less positioning can be a powerful value
proposition—everyone likes a good deal.
Less for much less positioning involves offering products that
offer less and therefore cost less. This involves meeting
consumers’ lower performance or quality requirements at a
much lower price.
More for less positioning is the winning value proposition.
In the long run, companies will find it very difficult to sustain such
best-of-both positioning.
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Differentiation and Positioning
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)

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Differentiation and Positioning
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.”

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Differentiation and Positioning
Communicating and Delivering the Chosen Position

• Once it has chosen a position, the company must take

strong steps to deliver and communicate the desired
position to target consumers.
• All the company’s marketing mix efforts must support
the positioning strategy.
• Once a company has built the desired position, it must
take care to maintain the position through consistent
performance and communication.
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Copyright

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