Creating Value for Target Customers - Chapter 7 Marketers cannot appeal to all buyers in the marketplace since they are: 1. numerous 2. vary in their needs and buying practices. CO’s must design a customer-driven marketing strategy that builds right (customer+ relationships). Thus, co’s move from marketing (mass to target). Marketing strategy: Customer-driven marketing strategy consists of 4 stages: First 2 stages, consumer selection by the co. = Marketing (segmentation + targeting). Segmentation: divide the market into distinct groups of buyers who have different characteristics and needs and might need different mkt strategies. Targeting: evaluate each mkt segment attractiveness and select 1/> segments to entre. Last 2 stages, the co. identify the value proposition, how it will create value for customers = Market (differentiation + positioning). Differentiation: differentiating g/s to create superior customer value. Positioning: creating a promise of the value of the g/s in the minds of the customers. Marketing Segmentation: Co. divide large/diverse markets into smaller segments that can be reached efficiently/effectively with products that match their specific needs. 4 types of segmentation = segmenting markets of (consumer+ business international) - #1: Consumer markets: geographic/demographic/psychographic/behavioral Geographics: Divide market into diff. regions. Co. can decide to operate in one region or operate in all areas but considering diff. needs/wants = localize g/s/ promotions/advertisements to fit the customers’ needs in that region. Ie: Unilever. Demographics: Divide market based on age/lifecycle/religion/occupation/income. These variables are easily measurable. Creating Value for Target Customers - Chapter 7 - Age/ lifecycle stages: mkt’ers offer diff. products using diff. approaches for diff. age groups. Gender: used in marketing clothing/ personal care industry. Income: mkt’ers can target affluent customers with luxury goods/ convenience services & middle-low classes as well. Psychographic: Divide market based on lifestyle (attitude, beliefs, opinion)/ personality. Behavioral: Divide market based on knowledge/ attitude/ response towards product. Occasional: buyers can be grouped when they think/buy/use g/s. Ie: soups are heavily advertised in winter. Benefit sought benefits ppl seek in diff. products. Ie: wearable health watches to measure steps/ calories/etc. User status: mkt’ers aim to attract non/ reinvigorate ex/ potential/1st time/reinforce regular users. User rate: light/ medium/heavy product user (heavy account small % but most consumption). Loyalty status: consumers can be loyal to brand/store/co. High-loyal customers can promote brand via social media/ word of mouth. Hence, co.’s should make them partners to build the brand. Low-loyal customers can let co.’s study their competitive brands and learn about its weaknesses and correct them. Multiple base segmentation: Co’s collaborate with business info service which provide multivariable segmentation businesses that merge geo/demo/psycho/behavioral variables to help co.’s segment their markets. #2: Business markets: Business buyers can be segmented g/d/p/b but also use additional variables like: 1. Characteristics (personal+ operational) 2. Situational factors 3. Purchasing approaches. #3: international markets: Int. markets need to group their world markets into segments with distinct buying needs/behaviors. Geographics: group countries by region (assume that close countries will have common behaviors). Economic: countries economic structure shapes its population’s needs and mkt opportunities it offers. Hence, countries can be grouped by population income levels. Political & Legal Cultural: group market to common language/religion/values. Cross-market segmentation: forming segments of consumers with similar needs/buying behavior although they are in different countries. Creating Value for Target Customers - Chapter 7 Market targeting: - Co. now evaluates several segments and selects which one will it target. #1: evaluating market segments: Size & growth: Co’s must target segments that are smaller and < attractive. They are > profitable. Attractiveness: Segment is < attractive if it contains aggressive competitors OR ease of new entrants. Presence of actual substitutes products can limit price/ profit earned in the segment. Buyers with strong bargaining power can lower seller’s profitability. Powerful suppliers can lower the attractiveness of a segment. Company’s objective & resources: - A co. should entre a segment that will create superior customer value & gain adv. / competitors. #2: Select target mkt segments: After evaluating the segments, the co. should select its target market, which consists of buyers who share common characteristics/needs that the co. wants to serve. Co’s can target market by marketing (undifferentiated + micromarketing + differentiated). Undifferentiated marketing: Co. decide to ignore market segment differences and target whole market with 1 offer. Ie: electricity/ water/ table salt. The strategy focuses on what consumer need in common rather on the differences. They appeal to largest no. of buyers. Although they face difficulties in competing with markets that satisfy the needs of specific segments/niches. Differentiated marketing: Target several market segments & design separate offers for each. Ie: P&G designing diff. detergents to diff. segments. They try to create promotion campaigns to maintain brand image. Offering production variation to segments develop stronger positioning in the minds of the consumer higher sales. Creating Value for Target Customers - Chapter 7 Concentrated marketing: Co. targets a large share of a smaller segment/niche. Hence, they achieve strong positioning due to knowledge of the consumer needs in the niche it serves = they target only consumers that it can serve best and most profitable. Niching allows small co.’s to focus their limited resources on the markets that large competitors do not overlook. Although they are profitable, they are also risky as co.’s rely on few segments to generate revenue. Micromarketing: Customize products to suit the tastes of specific (local + individual) customer segments. Local marketing: tailor brands to the needs/wants of local customers. The drawback of this strategy is that it reduces economies of scale and can create logistics problems. Individual marketing: tailor brands to the needs of individual customers. This strategy is also called mass customization, where co.’s interact 1-to-1 with the customers to design g/s. ie: you can design and have your own customized sneakers in Nike. Mkt’ers can also customize their mkt message to engage their customers on 1-to-1 basis. Choosing a targeting strategy: Co’s must consider 5 factors when choosing their mkt strategy. Co’s resources: if resources are limited then concentrated mkt strategy might be most suitable. Product’s variability: uniform products like steel can be suited best for undifferentiated strategy. Market variability: if most buyers have same taste, undifferentiated will be appropriate. Product life-cycle stage: if a product with 1 version is still launched then undifferentiated/concentrated mkt strategy will suit best. However, if the product is mature then differentiated strategy will fit more. Competitors mkt strategy: if competitors have a differentiated strategy, then your firm must also have the same strategy. Differentiation & positioning: After segmenting which market the firm will target, the firm must decide on a value proposition. Product position: the promise created by the brand in the consumers’ minds. It reflects the value. Type of product & analysis you do will tell you what kind of positioning you have to create. There are up-scale and down-scale positioning. Maintaining the positioning of the BRAND, not the COMPANY is risky. Creating Value for Target Customers - Chapter 7 Positioning maps: In planning the differentiation & positioning strategy, mkt’ers prepare perceptual positioning maps, which shows consumer perception of the brand VS competing products. Postion of the circle: brand percieved postioning on basis of orientation & price. Size of the circle: brand relative marketshare. Choosing a differentiation & proposition strategy: Consists of 3 steps. - #1: Identify differentiating competitive adv. on which to build a position: Mkt’ers must understand customer needs serve customer value better than competitors do provide superior customer value = competitive adv. Co’s can differentiate via product/service/channels/people/image. - #2: Choose the right competitive adv.: A co. must choose 1 differentiation/attribute on which it will build its positioning strategy. How many differences to promote: a co. should develop unique selling proposition (USP) for each brand and stick to it. Using USP (unique positioning proposition) and IMC (integrated marketing communication) to help positioning instil in consumers’ minds via customer service/ digital mkt campaigns. - Which differences to promote: not all differences are meaningful. They must satisfice the following important/distinctive/superior/affordable/profitable/communicable. #3: Selecting a positioning strategy: Value proposition: values on which brand is differentiated and positioned. The 5 green cells show winning value propositions, in which differentiation/proposition gives the co. competitive advantage. More for more: provide “most upscale” p/s for higher price to cover costs. It offers high quality/ prestige to buyer/ lofty lifestyle. Can be vulnerable if imitators claim same quality with lower costs. criteria: Creating Value for Target Customers - Chapter 7 Can be risky during economic recessions as consumers become more cautious in their spendings. More for same: positioning the brand as offering more benefit/product for the same price to attack competitor’s value proposition. Referred as “Upscale discounter”. More for less: wining value proposition. In short run, co’s can achieve best selection (product + service) & lowest prices compared to competitors. In long run, co.’s will not be able to sustain best of both positioning, as p/s will cost more making it no more “for less” The same for less: co.’s offer the same brand at a discounted price. They do not claim to offer diff./better products. Less for much less: products provide less benefit for less price, as few ppl afford best in everything they buy. Its positioning includes meeting customers’ lower quality requirements for lower prices. Ie: Uber vs Careem.
