978-0134149530 Chapter 6 Lecture Note Part 1

Unlock access to all the studying documents.

View Full Document

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

CHAPTER 6

CUSTOMER VALUE-DRIVEN MARKETING STRATEGY: CREATING VALUE FOR

TARGET CUSTOMERS

PREVIEWING THE CONCEPTS – CHAPTER OBJECTIVES

1 Define the major steps in designing a customer-driven marketing strategy: market

segmentation, market targeting, differentiation, and positioning.

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

3 Explain how companies identify attractive market segments and choose a market-targeting

strategy.

4 Discuss how companies differentiate and position their products for maximum competitive

advantage.

JUST THE BASICS

CHAPTER OVERVIEW

This chapter looks further into key customer value-driven marketing strategy decisions—how to

divide up markets into meaningful customer groups (segmentation), choose which customer

groups to serve (targeting), create market offerings that best serve targeted customers

(differentiation), and position the offerings in the minds of consumers (positioning).

Then, the chapters that follow explore the tactical marketing tools—the Four Ps—by which

marketers bring these strategies to life.

ANNOTATED CHAPTER NOTES/OUTLINE

FIRST STOP

Dunkin’ Donuts: Targeting the Average Joe

Dunkin’ Donuts has rapidly expanded into a national coffee powerhouse, on par with Starbucks,

the nation’s largest coffee chain.

To prosper, Dunkin’ must have its own clear vision of just which customers it wants to serve and

how. Dunkin’ and Starbucks target very different customers who want very different things from

their favorite coffee shops.

Dunkin’s customers include more middle-income blue- and white-collar workers across all age,

race, and income demographics. By contrast, Starbucks targets a higher income, more

professional group.

6-1

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

Dunkin’ Donuts built its positioning on serving simple fare at reasonable prices to working-class

customers. It gained a reputation as a morning pit stop where everyday folks could get their daily

donut and caffeine fix. But in recent years, to broaden its appeal and fuel expansion, the chain

has been moving upscale—a bit, but not too far.

As it inches upscale, however, Dunkin’ Donuts is being careful not to alienate its traditional

customer base. There are no couches in the remodeled stores.

Dunkin’ Donuts’ targeting and positioning are pretty well summed up in its long-running ad

slogan “America Runs on Dunkin’.” No longer just a morning pit stop, Dunkin now bills itself as

America’s favorite all-day, everyday stop for coffee and baked goods.

Use Chapter Objective 1 here.

Use Discussion Question 6-1 here.

Use Figure 6.1 here.

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.

Use Key Terms Market Segmentation and Market Targeting (Targeting) here.

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.

Use Key Terms Differentiation and Positioning here.

MARKET SEGMENTATION

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.

Use Chapter Objective 2 here.

6-2

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

Segmenting Consumer Markets

Table 6.1 outlines the major variables that might be used in segmenting consumer markets.

Use Key Term Geographic Segmentation here.

Use Table 6.1 here.

Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical units such

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

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age,

gender, family size, family life cycle, income, occupation, education, religion, race, generation,

and nationality.

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

Use Key Term Demographic Segmentation here.

With age and life-cycle segmentation, firms offer different products or use different marketing

approaches for different age and life-cycle groups.

Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.

Income segmentation has long been used by the marketers of products and services such as

automobiles, clothing, cosmetics, financial services, and travel.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class,

lifestyle, or personality characteristics.

Marketers use personality variables to segment markets.

Use Key Terms Age and Life-Cycle Segmentation, Gender Segmentation, Income Segmentation,

and Psychographic Segmentation here.

Use Marketing at Work 6.1 here.

Behavioral Segmentation

6-3

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

Use Discussion Question 6-2 here.

Use Key Term Behavioral Segmentation here.

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes,

uses, or responses concerning a product.

Occasion segmentation involves grouping buyers according to occasions when they get the

idea to buy, actually make their purchase, or use the purchased item.

Benefit segmentation is grouping buyers according to the different benefits that they seek from

the product.

Use Online, Mobile, and Social Media Marketing here.

Use Key Terms Benefit Segmentation and Occasion Segmentation here.

User status refers to segmenting markets into nonusers, ex-users, potential users, first-time

users, and regular users of a product.

Usage rate involves grouping markets into light, medium, and heavy product users.

Loyalty status is dividing buyers into groups according to their degree of loyalty.

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables.

Experian’s Mosaic USA system (one of the leading segmentation systems) classifies every

American household into one of 71 lifestyle segments and 19 levels of affluence.

Segmenting Business Markets

Consumer and business marketers use many of the same variables to segment their markets.

Business marketers also use some additional variables, such as customer operating

characteristics, purchasing approaches, situational factors, and personal characteristics.

Segmenting International Markets

Companies can segment international markets using one or a combination of several variables.

Geographic factors: Nations close to one another will have many common traits and

behaviors.

6-4

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

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 should be considered.

Cultural factors: Markets can be grouped according to common languages, religions,

values and attitudes, customs, and behavioral patterns.

Intermarket segmentation is segmenting consumers who have similar needs and buying

behaviors even though they are located in different countries.

Use Discussion Question 6-3 here.

Use Key Term Intermarket (cross-market) Segmentation here.

Requirements for Effective Segmentation

To be useful, market segments must be:

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.

Use Linking the Concepts here.

Use Marketing by the Numbers here.

MARKET TARGETING

Evaluating Market Segments

In evaluating different market segments, a firm must look at three factors:

1. Segment size and growth,

2. Segment structural attractiveness, and

3. 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

6-5

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

attractiveness.

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.

Selecting Target Market Segments

A target market consists of a set of buyers who share common needs or characteristics that the

company decides to serve. (Figure 6.2)

Use Figure 6.2 here.

Use Discussion Question 6-4 here.

Use Key Term Target Market here.

Use Critical Thinking Exercise 6-8 here.

Undifferentiated Marketing

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.

Differentiated Marketing

Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target

several market segments and designs separate offers for each.

Concentrated Marketing

When 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.

6-6

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

Use Discussion Question 6-5 here.

Use Key Terms Undifferentiated (Mass) Marketing, Differentiated (Segmented) Marketing, and

Concentrated (Niche) Marketing here.

Micromarketing

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes

of specific individuals and locations.

Micromarketing includes local marketing and individual marketing.

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.

The brand’s overall image might be diluted if the product and message vary too much in

different localities.

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.

Use Critical Thinking Exercise 6-7 here.

Use Key Terms Micromarketing, Local Marketing, and Individual Marketing here.

Choosing a Targeting Strategy

Which strategy is best depends on:

Company resources;



Product variability;

Product’s life-cycle stage;

Market variability; and

Competitors’ marketing strategies.

Socially Responsible Target Marketing

6-7

Chapter 6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers

Target marketing sometimes generates controversy and concern. Issues usually involve the

targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful

products.

Problems arise when marketing adult products to kids, whether intentionally or unintentionally.

The growth of the Internet and other carefully targeted direct media has raised concerns about

potential targeting abuses.

The issue is not so much who is targeted, but how and for what. Controversies arise when

marketers attempt to profit 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.

Use Linking the Concepts 2 here.

Use Marketing Ethics here.

6-8