Principles of Marketing: Seventeenth Edition

Principles of Marketing
Seventeenth Edition
Chapter 7
Customer Value-Driven Marketing Strategy:

Creating Value for Target Customers
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
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.
Learning Objective 1
Define the major steps in designing a customer-driven marketing strategy:
market segmentation, targeting, differentiation, and positioning.
Customer-Driven Marketing Strategy
Market Segmentation, targeting, positioning
Market segmentation requires dividing a market into smaller segments with
distinct needs, characteristics, or behaviors that might require separate
marketing strategies or mixes.
Market targeting consists of evaluating each market segment’s attractiveness
and selecting one or more market segments to enter.
Market 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
Market Segmentation
Marketer can :
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
Market Segmentation
Segmenting Consumer Markets
Geographi Demograp
c hic
segmentat segmentat
ion ion
Psychogra Behaviora
phic l
segmentati segmentat
on ion
Market Segmentation
1. Geographic segmentation divides the market into different geographical
units such as nations, regions, states, counties, cities, or even neighborhoods.
Market Segmentation
2. Demographic segmentation divides the market into segments based on

variables such as age, life-cycle stage, gender, income, occupation,
education, religion, ethnicity, and generation.
Demographic segmentation is the most popular bases for segmenting
consumer market. This is because consumer needs, wants, and usage rates
vary with demographic factors, and easy to measure.
Market Segmentation
a. Age and life-cycle stage segmentation divides a market into different age
and life-cycle groups.
b. Gender segmentation divides a market into different segments based on
gender.
c. Income segmentation divides a market into different income segments.
Market Segmentation
3. Psychographic segmentation divides a
market into different segments based on
lifestyle, or personality characteristics.
• Lifestyle- person’s pattern of living as
expressed in his or her activities, interest,
opinion
• Personality- the unique psychological
characteristics that distinguish a person or
group
*even female customers are different in terms
of their lifestyle and personality traits.
Market Segmentation
4. Behavioral segmentation divides a market into segments based on
consumer knowledge, attitudes, uses of a product, or responses to a
product.
Market Segmentation
Behavioral Segmentation
• Occasions : segment market according to
occasion in terms of when consumers get
idea to buy product, actually make
purchase, or use the purchased item.
• Benefits sought : segment market
according to the different benefits sought
by consumer from a product.
• User status : segment market into non-
user, ex-user, potential user, first-time user,
and regular user of products
• Usage rate : segment market into light,
medium, heavy user of product
• Loyalty status : segment market
according to customer degree of loyalty
Market Segmentation
Sometimes, marketer can use multiple
segmentation (combine few segmentation
bases) to segment consumer market.
Multiple segmentation is used to help identify
smaller, better-defined target groups e.g
Cosmopolitan magazine use geodemographic
segmentation (demographic+geographic)
whereby its magazine is distributed to
women(demographic) in different countries
(geographic)
Market Segmentation
Segmenting Business Markets
Consumer and business marketers use many of the same

variables to segment their markets (e.g geographic, demographic,
behavioral segmentation)
Additional variables include:
• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
Market Segmentation
Segmenting International Markets
Geographic Economic
location factors
Political and Cultural

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
Accessible- the
Measurable- size, market segment Substantial- the
purchasing power, can be effectively market segment are
profiles of segment reached & served large & profitable
can be measured enough to serve
Differentiable – segments are Actionable – effective

conceptually distinguishable & programs can be
respond differently to different designed for attracting &
mktg mix element programs serving the segments
Market Targeting
Evaluating Market Segments
• Segment size and growth – find segment with the right size and growth.
Largest & fastest growing segments are not always attractive
• Segment structural attractiveness –segment is less attractive if already
contains aggressive competitors, has many substitute goods, powerful
consumers, and powerful suppliers
• Company objectives and resources – co. long run objectives should be in
line with market segment to serve and co also need to consider its
resources and skill to serve one particular segment
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.
Market Targeting
Figure 7.2 Market-Targeting Strategies.
Market Targeting
1. Undifferentiated marketing targets the whole market with one offer.
• It is also known as mass marketing (no segmentation done) whereby
company designs a product and marketing program that will appeal to the
largest number of buyers
• This strategy focuses on common needs rather than what’s different
• Coca cola company previously tailor one coca-cola drink (original coke) to
the whole world
Market Targeting
2. Differentiated marketing targets several different
market segments and designs separate offers for
each.
• Goal is to achieve higher sales and stronger position
• More expensive than undifferentiated marketing
because producing variety of products targeting to
different customer segments
* Colgate Palmolive producing different colgate
toothpaste formula to cater to different
customer segments that want different
benefits
Market Targeting
Selecting Target Markets
3. Concentrated marketing targets a large of
a smaller market. Companies use this
strategy if they have :
• Limited company resources
• Knowledge of the specific market
• More effective and efficient
* Coffee shop (Coffee Bean) is established
to fulfill desire of those coffee lovers
Market Targeting
4. Micromarketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations. Micromarketing
includes :
• Local marketing – tailoring product/marketing to the needs and wants of
local customer segment – e.g to specific cities, neighborhoods, even specific
store. For example KFC serve different menus in different countries
• Individual marketing – tailoring products/marketing programs to the needs
and preferences of individual customers. It is also known as one-to-one
marketing or mass customization (hyper customization). For example
Subway caters its menu to those who love sandwiches and the customers
are given option to choose their own bread, sauce, vegetables, and meat.
Market Targeting
Choosing a targeting strategy (whether undifferentiated or differentiated or
concentrated or micromarketing) depends on these factors :
• Company resources (small company with limited resources can use concentrated
@ micromarketing)
• Product variability (if co. produce one version of product, use mass
marketing/undifferentiated marketing but if it wants to produce variety of products
targeted to various customer segments then differentiated marketing is appropriate)
• Product life-cycle stage (if product is now at introduction stage, use concentrated
mktg or undifferentiated. When the product reach growth stage, differentiated
marketing is possible)
• Market variability (if buyers have same taste, and react the same way to the mktg
effort, use undifferentiated mktg strategy)
• Competitor’s marketing strategies (use strategy that is not used by competitor)
Differentiation and Positioning
Product position is the way the
product is defined by consumers on
important attributes – the place
product occupies in consumer’s
mind relative to competing firm’s
product
In planning the product’s

differentiation and positioning
strategies, mktr often prepare
perceptual positioning maps.
Positioning maps show consumer
perceptions of marketer’s brands
versus competing products on
important buying dimensions.
e.g Price Vs Quality
Price Vs Performance
Price Vs Innovation
Choosing a Differentiation and Positioning
Strategy (the tasks)
1. Identify possible value differences and competitive advantages to build a
position
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy
4. Communicating and delivering the chosen position to the market
1. Identify possible value differences and competitive advantages
Marketers must understand customer needs and deliver more customer value
than competitors do by differentiating and position itself as providing superior
customer value to gain competitive advantage.
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.
Choosing a Differentiation and Positioning Strategy
Marketers must identify a set of possible
competitive advantages to differentiate along
the lines of:
1. Product- brand, performance, price,
features, styles, safety
2. Services- speedy, convenient service,
quality customer service
3. Channels- channel coverage, expertise,
performance
4. People- well trained, skilled staff
5. Image- brand logo, symbol
2. Choosing the right competitive advantages
Some companies promote/choose only one benefit to differentiate their products, and some
choose more than one to position their products. Which differences to promote should
satisfy the following criteria:
Important – the
Communicable-
difference delivers Distinctive- Superior- the
the difference is
a highly values competitors do not difference is
communicable and
benefit to target offer the difference superior
visible to buyers
buyers
Profitable- the
Preemptive-
Affordable- buyers company can
competitors
can afford to pay introduce the
cannot easily copy
for the difference difference and
the difference
making profit
3. Selecting an overall positioning strategy
Value proposition is the full mix of benefits upon which a brand is
positioned.
It is the answer to the customer’s question “why should I buy your
brand?”
The figure shows possible value proposition but only the green
cells represent winning value proposition :
More 4 more : offer product with high price than competitor to get
more benefits
More 4 the same : offer same price as competitor and get more
benefits
*More 4 less : offer less price than competitor but benefits are
more
*The same 4 less : offer the same product benefits as competitor
but price is less
Less 4 much less : offer less costly product with less benefits
Positioning statement – is a statement that summarizes company or brand
positioning. It is written as follow:
Positioning statement summarizes company or brand positioning using this

form: To (target segment and need) our (brand) is (concept) that (point of
differrence)
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.”)
Choosing a Differentiation and Positioning Strategy
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.”
4. 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 marketer should use the right marketing mix strategy to deliver the chosen
position
Companies that choose more 4 more position should reflect its positioning
strategy in its >>>> product – high quality product
price – charge high price
place – distribute through exclusive retailer
promotion – advertise in high quality media
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Principles of Marketing

Customer Value-Driven Marketing Strategy:

2. Demographic segmentation divides the market into segments based on

Consumer and business marketers use many of the same

Political and Cultural

Differentiable – segments are Actionable – effective

In planning the product’s

5. Image- brand logo, symbol

Positioning statement summarizes company or brand positioning using this

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