Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
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.
Copyright © 2017 Pearson Education, Inc.
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.
Copyright © 2017 Pearson Education, Inc.
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
Copyright © 2017 Pearson Education, Inc.
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.
Copyright © 2017 Pearson Education, Inc.
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
Copyright © 2017 Pearson Education, Inc.
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.
Copyright © 2017 Pearson Education, Inc.
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
Copyright © 2017 Pearson Education, Inc.
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.
Copyright © 2017 Pearson Education, Inc.
6-8
