CHAPTER FOUR

Designing Customer Driven Marketing Strategy

Targeting

Differentiation Positioning
 4. Introduction

• Once the marketers understand the marketplace

and customers, they need to design core
strategies to create superior value for their
customers.

• They must select the best strategies: whether to

go for mass marketing or segmentation.
 cont’d
• However, companies today recognize that they
cannot appeal to the needs of all buyers in the
market due to different reasons:
• Buyers are too numerous
• Too widely scattered
• Too varied in their needs and buying practices
• Companies themselves vary widely in their
abilities to serve different segments of the
market
• Therefore, marketers need to identify the markets
that they can serve better than competitors.
Designing customer-driven marketing
strategies
Designing customer-driven marketing strategy
is the process of creating superior value for
customers to best satisfy their needs.
• It involves two steps.
• Market segmentation The company selects the
• Market targeting customers to serve better
• Differentiation
The company decides on a
• Positioning value proposition
 Market segmentation
• dividing a market into distinct groups of buyers
with different needs, characteristics or behaviors,
who might require separate products or marketing
mixes.

wants,
resources,
locations, buying
attitudes, and
buying practices
Etc.
Important segmentation concepts
• Levels of market segmentation
• Steps in segmentation
• Importance of segmentation
• Bases for segmenting consumer market
• Segmenting business market
• Requirements for effective segmentation
 Levels of market segmentation

Companies can practice:

A. No segmentation (mass marketing),
B. Complete segmentation
C. Something in between (segment
marketing or niche marketing).
D. Micro-marketing (marketing at individual
level)
 A. Mass marketing

 Mass producing, mass distributing and mass

promoting about the same product in about the
same way to all consumers.

 Adopting the same program to every one in the

market

 Largest potential market, which leads to the lowest

costs, which in turn can translate into either lower
prices or higher margins.
 B. Segment marketing
• involves breaking a market into segments and
then concentrating your marketing efforts on one or
a few key segments.

 Segment marketing offers several benefits than

mass marketing.

• Market more efficiently, targeting its products or

services, channels and communications programs
towards only consumers that it can serve best.
 C. Niche marketing
• Focuses on subgroups within segments.

• A niche is a more narrowly defined group, usually

identified by dividing a segment into sub-segments or by
defining a group with a distinctive set of traits who may
seek a special combination of benefits.

• Niching offers smaller companies an opportunity to

compete by focusing their limited resources on serving
niches that may be unimportant, or overlooked to larger
competitors.
D. Micro-marketing
is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and
locations. Such as local and individual marketing
I. Local marketing
 involves tailoring brands and promotions to the needs
and wants of local customer groups – cities,
neighborhoods and even specific stores. e.g. CBE
opens branches service outlets in different places
 drive up manufacturing and marketing costs by
reducing economies of scale.
 create logistical problems as companies try to meet the
varied requirements of different regional and local
markets.
Cont’d
Individual marketing
• Tailoring products and marketing programs to the needs
and preferences of individual customers.

• Also called one-to-one marketing, customized marketing

• E.g. if a particular cafeteria provides ready-made tea

with a cup of hot water, sugar, and spoon for a
customer to make on his/her own as per his/her need.
• Withdrawing money from your account using ATM
 Steps in market segmentation
Segmenting markets is a research-based exercise with
several stages.
1. Survey stages; the researcher conducts explanatory
interviews and focus group discussions to gain
insight.
• Identifying all possible segmentation variables
2. Analysis stage; Evaluating variables features or
characteristics and classifying market into specified
number of segments
3. Profiling stage; each cluster is profiled in terms of its
distinguishing character and give a name based on a
dominant factor. Then select one or more groups as a
target.
 Bases for segmenting consumer market
Even through there is no single way to segment a market,
marketers has to try different segmentation variables, alone
and in combination. Like geographic, demographic,
behavioral and psychographic segmentation.
A. Geographic segmentation
• calls for dividing the market into different
geographical units, such as nations, states, regions,
counties, cities or neighborhoods.

• A company may decide to operate in one or a few

geographical areas, or to operate in all areas but
pay attention to geographical differences in needs
and wants.

e.g. most pharmacies are near to clinic and hospitals

 B. Demographic segmentation
A market split into sub-segments on the basis of
variables such as:

• Age • Culture
• Gender • Occupation
• Family • Profession
• Income • Ethnicity
• Education
• Religion
 Cont’d

Demographic factors are the most popular bases for

segmenting customer groups. The reason is that:

 Consumer needs, wants, and usage rates often

vary closely with demographic variables.

 Demographic variables are easier to measure than

most other types of variables.

 It is the base to use other segmentation variables

Age:
• Infant product: baby cream, anti colic, baby
clothes
• Child product : bikes, balls, sport
• Adult product: jeans, school,
• Young product: college, University, car,
employment,
• Elder product: insurance, then retirement,
pension and even death
Gender: clothing, cosmetics, beauty products, hair
styles, careers,
C. Psychographic segmentation

• divides buyers into groups based on social class,

lifestyle or personality characteristic
• The combination of demographic and personality
traits.
social class: cars, clothing's
 The member of Upper social class needs luxury
cars to express their status or class
 The lower class needs car for transportation
Lifestyles: achievers, believers,
Personality: ideal, expressive, achiever
 D. Behavioral segmentation
• divides buyers into groups based on their knowledge,
attitudes, uses or responses to a product.
 Occasions
Dividing the market into groups according to occasions
 when buyers get the idea to buy,
 When actually make their purchase, or
 When use the purchased item.
 Benefits sought
 grouping buyers according to the different benefits that they
seek from the product.
 Example: toothpaste buyer may look for economy,
medicinal, cosmetics, and taste
 Cont’d
 User status:
 markets can be segmented into non-users, ex-users,
potential users, first-time users and regular users of a
product.
 Potential users and regular users may require different
kinds of marketing appeal.
 E.g. Market share leaders will aim to attract potential
users, whereas smaller firms will focus on attracting
current users away from the market leader.
 Usage rate
 light, medium and heavy-user groups
E.g. Airlines’ frequent flyer programs are aimed at heavy
users
Cont’d

Loyalty status

 Buyers can be divided into groups according to

their degree of loyalty

Completely loyal: they buy one brand all the

time.

Somewhat loyal: loyal to one or more brands and

favor than one
 No loyalty to any brand
E. Using multiple segmentation bases

• Using multivariate bases provide an

segmentation effort to the marketers.

• better-defined target groups.

• Demographic, geographic, behavioral, etc

 Segmenting Business Market
 Consumer and business marketers use many of the
same variables to segment their markets.
 Business buyers can be segmented on the basis of:
 Demographic variable
o Industry
o Company size
o Location
 Operating variables
o Technology
o User/non-user status
o Customer capabilities
 Cont’d
Purchasing Situational factors
approaches o Urgency
o Purchasing function o Specific application
organizations o Size of order
o Power structure
 Personal characteristics
o Nature of existing
o Buyer–seller similarity
relationships
o General purchase o Attitudes towards risk
policies o Loyalty
o Purchasing criteria
Segmenting international markets
What is International market?
International market is the collection of buyers from more
than one nations (countries) of the world.
 Many reasons underlie for working in international market.
• Companies abundant resources (excess production)
• To operate in all and Saturation of home market
 Operating in international market present new challenges
to marketers
 The different countries of the world vary dramatically in
their economic, cultural and political make-up.
 Thus, international firms need to segment their
international market into distinct buying needs and
behaviors.
 Base for segmenting international market
Companies can segment international markets using one or a
combination of several variables.
1. Geographic location:
 Grouping countries by regions such as:
 Western Europe,
 The Pacific Rim
 The Middle East or
 Africa
 Countries in many regions have already organized geographically into
market groups or ‘free-trade zones’, such as:

These associations  The European Union (EU)

reduce trade barriers  The Association of South-East Asian Nations (ASEAN)
between member
 The North American Free Trade Association (NAFTA)
countries, creating
larger and more  Economic Community of West Africa States (ECOWAS)
homogeneous markets.
 Cont’d
2. Economics Factors • Receptivity towards
 Countries might group by foreign firms
population income levels or • Monetary regulations
by their overall level of and
economic development • The amount of
 Highly industrialized bureaucracy
 Newly industrialized or 4. Cultural factors
developing economies
• Common languages,
 Less developed
• Religions
3. Political and legal factors • Values and attitudes,
• The type and stability • Customs and behavioral
of government patterns
 Cont’d
5. Inter- market segmentation
 Many international firms form segments of
consumers who have similar needs and
buying behavior even though they are from
different countries.
Example
• Many companies target teenagers with
worldwide campaigns.
 Importance of segmentation
1. Customer needs
 Market segmentation enables a producer to understand the
needs of consumers, their behavior and expectations as
information is collected segment-wise in an accurate manner.

 Effective and beneficial decisions regarding to 4Ps

2. Profit Potential

 Matching of products with consumer needs gives

satisfaction to consumers and higher sales and profit
to the marketing firm.
 Cont’d
3. Growth
 Market segmentation helps to identify promising market
opportunities by effective utilization of resource for only
specified target market.

4. Retaining Customer
 Firms can establish a life-long relationship with their consumers
via formulating an effective market segmenting strategy.

 It helps to satisfy customer by matching the products to their

expectation.
 Cont’d
5. Right Target Market;

 The Company’s resources are utilized for producing the right

product for the right customer.

 A firm can concentrate efforts on most productive/ profitable

segments of the total market due to segmentation techniques.

6. Market Share;

 A successful company needs to gain competitive advantage

by looking closely at the specific needs of customers and
devising strategies to provide maximum benefit and value.
 Requirements for effective segmentation
For segment to be effective, it must fulfill the following criteria:
Measurable: The degree to which the size, Purchasing power
and profits of a market segment can be measured.

Accessible: The degree to which a market segment can be

reached and served.
Substantial: A segment should be the largest possible
homogenous group: large or profitable enough to serve.

Differentiable: The segments are conceptually distinguishable and

respond differently to different marketing mix elements and programs.

Actionable: the degree to which effective programs can be designed for

attracting and serving a given market segment.
 Market targeting
The firm now has to evaluate the various
segments and decide how many and which
ones to target. Three steps are important in
targeting:
 Evaluating market segments,
 Selecting target market and
 Choosing targeting strategy
I. Evaluating market segments
A. Segment size and growth: The company must first collect and
analyze data on current sales volume, projected sales-growth
rates and expected profit margins
B. Segment structural attractiveness: The company also needs to
examine major structural factors that affect long-run segment
attractiveness.

• Intensity of competition • Power of suppliers

• Power of buyers • Quality and quantity of other
products
C: Company objectives and resources: Company must select the
one which fit to its objectives, resources, skills and capabilities
 II. Selecting target market
Target Market: a set of buyers who share common needs or
characteristics that the company decides to serve.

 After evaluating different segments, the company must now decide which
and how many segments to serve.

 The company should enter segments only where it can offer superior
value and gain advantages over competitors.

 The firm can adopt one of three market-coverage strategies:

 undifferentiated marketing
 Differentiated marketing and
 Concentrated marketing
  undifferentiated marketing
A firm might decide to ignore market segment differences and go after the

whole market with one offer. What is common in need rather than what is

different.
 provides cost of economies

 Down production, inventory and transportation costs.

 Down advertising costs.
 Lowers the costs of market research and product management

 Doubts

 Difficulties arise in developing a product or brand that will satisfy all

consumers
 The larger segments may be less profitable because they attract heavy
competition
  Differentiated marketing

A firm decides to target several market segments and designs

separate offers for each.
 Creates more total sales than undifferentiated marketing.

 Concentrated marketing
Instead of going after a small share of a large market, the firm goes after a
large share of one or a few submarkets.
• Especially appealing when company resources are limited.
• A strong market position in the segments (or niches) it serves
• greater knowledge of the segments
• Its special reputation.
• Enjoys many operating economies because of specialization in
production, distribution and promotion.
 III. Choosing market targeting strategies

Many factors need consideration when choosing a

market target strategy. Such as:

• company resources
• The degree of product variability
• Product’s stage in the life cycle
• Market variability
• Competitors’ marketing strategies
 Deciding on value proposition
Consumers typically choose products and services that give
them the greatest value.

Thus, the firm need to gain competitive advantage over

competitors through positioning itself as providing superior
value to selected target markets either by

• Offering lower prices than competitors do or

• By providing more benefits to justify higher prices

So that positions are not built upon empty promises.

Positioning therefore begins with differentiating the company’s
marketing offer
 Differentiating markets
Organization must be differentiate to good positioning. A company or market offer
can be differentiated along the lines of product, services, personnel or image.
A. Physical Product differentiation
Product can be differentiated by its
• Design parameters,
• Features and style,
• Performance
• Innovation, consistency, durability, reliability or repair-ability.
B. Services Differentiation
The firm can also differentiate the services that accompany the product through;
• Speedy, reliable or careful delivery
• Installation
• Repair services
• customer training service
• free or paid consulting services
 Cont’d
C. Personnel differentiation
Companies can gain a strong competitive advantage through hiring and
training better people than their competitors do.
Company personnel must be competent –
• They must possess the required skills and knowledge
• They need to be courteous, friendly and respectful
D. Image differentiation
• Buyers may perceive a difference based on company or brand images.
• A company or brand image should convey a singular and distinctive
message that communicates the product’s main benefits and
positioning.
• Symbols can provide strong company or brand recognition and image
differentiation.
• Signs and logos
 Value positioning
Value positioning is a range of positioning alternatives based on the value
an offering delivers and its price.
There are five winning Value positioning that enables the company to
conquer/capture customers mind than competing products.
• More for more: involves providing the most upscale product or service
and charging a higher price to cover the higher costs.
• More for the same: Companies can attack a competitor’s more for
same positioning by introducing a brand offering comparable quality
but at a lower price.
• More for less: the winning value proposition would be to offer ‘more
for less’.
• the same for less: Offering ‘the same for less’ can be a powerful value
proposition – everyone likes a good deal
• Less for much less: products that offer less and therefore cost less
 Product Positioning
A product’s position is the way the product is defined by consumers on
important attributes

• The place the product occupies in consumers’ minds relative to

competing products.

• A product’s position is the complex set of perceptions, impressions and

feelings that consumers hold for the product compared with competing
products.

• Through positioning consumers form association with the product

attributes, Benefits offered, Usage occasions, user category, Activities,
Personalities, and Origin