Step 2 in the Marketing Process
Designing a Customer-Driven
Marketing Strategy
Marketing Unit, Slide No. 1
Business Mission
Statement
Elements of a
Marketing Plan
Situation Analysis
(SWOT)
Marketing
Objectives
Marketing Strategy
Target Market &
Positioning Strategy
Marketing Mix
A Sound Marketing
Strategy Starts
With a Sound
Marketing Plan
 Marketing Budget
Product
Distribution
 Time & Action Plan
Promotion
Price
 Marketing Department
Organization
Implementation
&
Evaluation/Control
Marketing Unit, Slide No. 2
Business Vision or Mission
• A company’s business vision
or business mission is a brief,
concise statement of a
company’s business model
that tells stakeholders:
- why the firm is in business;
- how it intends to satisfy
customer needs; and
- why it will satisfy their needs
better than its competitors.
• A clear mission statement
acts as an “invisible hand”
that guides the people in the
organization.
Marketing Unit, Slide No. 3
Defining a Market-Oriented
Business Mission
• Some companies define their mission myopically in product or technology
terms. But mission statements should be market-oriented and defined in
terms of customer needs, which are more enduring.
• Just as a mission statement should not be narrow (myopic), organizations
must also avoid being too broad or generic. In other words they must be
realistic and specific (to a point), so as to provide real guidance and
inspiration. The key is striking the right balance.
• In addition to being market-oriented, a mission statement should also:
- Fit the market environment;
- Be based on distinctive competencies; and
- Be motivating.
• Mission statements are not written in stone. As circumstances change or if an
organization starts to drift, it should re-examine its mission statement.
• In addition to focusing on how the company serves consumers, mission
statements often address the needs of employees, shareholders, and other
stakeholders.
Marketing Unit, Slide No. 4
Market-Oriented vs. ProductOriented Business Missions
From Armstrong & Kotler, Marketing: An
Introduction (9th Edition)
Marketing Unit, Slide No. 5
Let’s Talk!
In 2002 Microsoft’s
mission was "To empower
people through great
software -- any time, any
place, and on any device.”
The mission statement
now reads, "At Microsoft,
we work to help people
and businesses throughout
the world realize their full
potential.”
Compare the two mission statements above for Microsoft.
Which one do you feel is more market-oriented? Which
one do you feel is more effective? Why?
For more examples of mission
statements, visit
www.missionstatements.com.
Marketing Unit, Slide No. 6
Identifying Growth Opportunities
• An important part of the
marketing planning process is
identifying opportunities for
growth.
• Marketing has the main
responsibility for achieving
profitable growth for the firm.
Marketing must identify,
evaluate, and select new
opportunities, and set forth
strategies for capturing them.
• One useful tool for identifying
growth opportunities is the
Product/Market Expansion Grid.
Marketing Unit, Slide No. 7
The Product/Market Expansion Grid
Marketing Unit, Slide No. 8
The Product/Market Expansion Grid
Explained
Market
Penetration
Market
Development
Product
Development
Diversification
Increase sales of existing products
to existing customers
Attract new customers segments
to existing products
Create modified or new products
for present markets
Start up/acquire businesses outside
current products & markets
Marketing Unit, Slide No. 9
Exploring Intensive Growth Options,
i.e., Growth Within Current Businesses
 Increase market share through advertising; sales promotion
Market
Penetration




Market
Development
aimed at customers (price reductions, coupons, etc.); and
promotion aimed at distributors.
Add new locations in existing markets; extend hours.
Cross-selling, i.e., sell other products/services offered by the
firm to existing customers.
Increase product usage (see next slide).
Attract non-users.
 Geographic expansion.
 Target new segments.
 Opening up additional channels of distribution.
 Line extensions:
Product
Development
– Modify existing products/services e.g., new sizes, new
flavors, new features; and/or
– Add new products/services to existing product
categories served by the firm.
 Launch a new product in a new category.
Marketing Unit, Slide No. 10
Tactics For Increasing Product Usage
Approach
Strategy
Examples
Increase frequency of
use, consumption,
purchase (including
loyalty)
 Reminder messages
 Position for regular or frequent
 Gillette’s “change your blade” ads
 “Apple a day keeps the doctor away”
use
 Provide incentives for frequent
purchase/loyalty
 Make use easier or more


Increase amount
used, consumed or
purchased
 Reminder messages
 Provide incentives
 Reduce undesirable effects of

New applications or
use/purchase
occasions
convenient
Reduce undesirable effects of
frequent use
Develop positive associations
with use occasions
increased usage level
Change packaging
 Use/purchase at different
occasions
 Use/buy at different locations
 Use for a different purpose
 Frequent flyer and other reward
programs
 Campbell’s “Soup at Hand,”

microwaveable soup cans
Gentle shampoo
 Crackerjack and baseball; beer and
sports in general
 Increase amount of insurance coverage
 Quantity discounts; free checking with

larger balance
Low-fat potato chips; light beer
 Super-size French fry portions
 Eat cereal as a snack; buy lottery
tickets for holiday gifts
 Selling nachos at movie theaters
 Arm & Hammer baking soda as a
refrigerator deodorizer; take aspirin to
reduce risk of heart disease
Adapted from Strategic Marketing Management by David Aaker, 1988.
Marketing Unit, Slide No. 11
Applying The Product/Market
Expansion Grid
Existing
Markets
Existing
Products/Services
New
Products/Services
• Loyalty Program
• ????
• QVC Q-card
(credit card)
• ????
• ?????
• ?????
New Markets
• Entering Foreign
Markets
• ????
• Acquisition of
QVC’s by Liberty
Media Corp.
• ????
• ?????
• ?????
Marketing Unit, Slide No. 12
Designing A Customer-Driven Marketing
Strategy Involves Two Sets of Questions
• Target Market Selection:
- What customers will we serve? What is our target market?
- Within our target market, are all consumers (or businesses) the
same, or are there are groups or segments we should/should not
attempt to serve?
• Positioning:
- How can we best serve these customers? How will we create
value for these customers?
- How will we distinguish our products and services from our
competitors?
- In short, what is our value proposition?
Marketing Unit, Slide No. 13
Markets & Customer Groups
• What Is a Market?
- The set of actual and potential
buyers of a product.
- A market can consist of individuals
and/or businesses and organizations.
Market for
Harley-Davidson
• What is a Customer Group?
- A group of people (or organizations)
who have a similar need for a
particular product or service, and
respond in a similar way to a given
set of marketing efforts.
- Also referred to as a market
segment.
Two Customer Groups or
Market Segments:
Females vs. Males
Marketing Unit, Slide No. 14
Selecting Customers to Serve:
Segmentation and Target Marketing
• Successful marketers realize they cannot
serve all consumers. By trying to serve all
consumers, they may not serve any
consumers particularly well.
• Furthermore, a “one-size-fits-all” approach,
i.e., serving all customers the same way,
while less costly in the short-term, is not as
profitable or effective over the long-term.
• Instead, savvy marketers engage in:
- Market Segmentation—dividing a market into
distinct groups of buyers (segments) with
different needs, characteristics, and behavior
who might require separate products and/or
marketing programs; and
- Target Marketing—selecting one of more these
segments to target.
Marketing Unit, Slide No. 15
The Benefits of Market
Segmentation
 Nearly all markets include groups of people (or
organizations) with different product needs and
preferences. Market segmentation helps marketers
define customer needs and wants more precisely.
 Consumers are more likely to respond if the marketing

mix is tailored more closely to their needs and
preferences.
Because segments differ in size and profit potential,
market segmentation helps marketers more accurately
define objectives and more efficiently allocate resources.
Bottom Line: In the long-run, segmentation improves a
profitability, provided there are meaningful, actionable
differences among consumers in the relevant market.
Marketing Unit, Slide No. 16
The Concept of Market
Segmentation Illustrated
Marketing Unit, Slide No. 17
Steps in Segmenting A Market
Step 1
Select the
market or
product
category to be
segmented
Step 2
Step 3
Use research
to divide the
market into
segments
Select the
segment or
segments to
target
Step 4
Develop a
customized
marketing mix
for each target
segment
Marketing Unit, Slide No. 18
Methods of Identifying
Market Segments
• Four main categories of factors or
variables:
- Geographic characteristics;
- Demographic characteristics;
- Psychographic or lifestyle characteristics; and
- Behavioral, i.e., product usage, characteristics.
• Combination of multiple categories, e.g.,
geodemographic segmentation
Marketing Unit, Slide No. 19
Geographic Variables
• Geographic segmentation divides a market
into different geographic units.
• Variables and breakdowns include:
- World Region or Country: North America,
Western Europe, Pacific Rim, Mexico, etc.
- Country Region: Pacific, Mountain, etc.
- City or Metro Size: defined numerically
- Density: rural, suburban, urban
- Climate: northern, southern
• A very useful method of segmenting
markets. Segments are relatively easy to
identify and can be easily reached through
a variety of media.
Marketing Unit, Slide No. 20
Demographic Variables
• Use differences personal characteristics, such as:
-
Age or Generation (i.e., Gen X vs. Baby Boomers);
Gender;
Income or Occupation;
Race/Ethnicity.
• Helps to combine various demographic variables. For example, family life
cycle stage is a combination of three demographic variables: age, marital
status, and presence/absence of children in the household.
• Demographic variables are frequently used for segmentation. Among the
main advantages: it is relatively easy to identify and reach members of
various demographic segments.
• Downside is that demographics, while related to differences in behavior,
don’t necessarily cause these differences. More like a statistical association,
rather than cause and effect. So even though we can easily reach different
demographic segments, it can be hard to change their purchasing habits.
For example, not all women have the same purchasing tendencies.
Marketing Unit, Slide No. 21
Psychographic Variables
Psychographic segmentation
divides a market into
different groups based on
lifestyle, attitudes, or
personality characteristics.
Very useful because people in the same demographic
classification often have very different lifestyles and
purchasing habits.
Marketing Unit, Slide No. 22
Behavioral or Product Usage
Variables
• Occasion of Use:
- Special promotions & labels for
holidays.
- Special products for special
occasions.
• Benefits Sought from the
Product:
- Different segments desire
different benefits from products.
- For example, some consumers
are focused mainly on price,
while others might be more
concerned about quality.
• Usage Rate:
- Light, medium, heavy.
• User Status:
- Nonusers, ex-users, potential
users, first-time users,
regular users.
• Loyalty Status:
- Those who always purchase
the same brands, or from the
same firms vs. those who
vary the brands they buy or
the firms they purchase from.
Marketing Unit, Slide No. 23
Marketing in Action
Segmenting by Benefits Sought
Citicards’ various
products offer
different benefits:
•Rewards
•Establishing
credit
•Low interest
rates
•No frills/value
(no annual fee)
Marketing Unit, Slide No. 24
Using Multiple Segmentation Bases:
Geodemographic Segmentation
The best known geodemographic segmentation approach is the PRIZM™ system developed by
Claritas. The firm has identified 66 unique clusters using demographic data, such as age,
income, ethnicity, and occupation; location and housing factors, such as mobility, urbanization,
and market value; and lifestyle and behavioral data, such as media habits and buying habits.
Claritas then assigns every U.S. neighborhood (at the zip + 4 level) to these 66 clusters. For
example, consider the “Boomtown Singles” cluster profiled below:
Boomtown Singles
Young people in the fast-growing smaller cities in the South,
Midwest, and West fall into cluster 35. They are young
professionals and "techies" in public service and private industries
who live in multi-unit rentals. They like music and outdoor
activities such as boating and skiing.
2002 Statistics:
Lifestyle Traits
US Households: 927,246 (0.86%)
Go in-line skating
US Population: 2,005,299 (0.7%)
Purchased a GTE cell phone last year
Listen to modern rock radio
Median HH Income: $45,170
Watch primetime dramas
Read Tennis magazine
Demographics Traits:
Ethnic Diversity:
Predominantly White
Family Types:
Singles
Age Ranges:
18-24, 25-34, 35-44
Education Levels:
Some College, College Graduate
Employment Levels:
White Collar/Professional
Income:
Middle
Marketing Unit, Slide No. 25
Marketing in Action
Checking Out the PRIZM System
Click on the link
below to look up
your home zip code
and learn about the
PRIZM clusters
most common in
the area where you
live.
http://www.claritas.com/My
BestSegments/Default.jsp
Marketing Unit, Slide No. 26
Evaluating Market Segments
for Selection
• Segment Size, Growth, and Profitability
- Analyze current and future segment sales, growth
rates, usage rates, penetration, and profitability.
• Segment Structural Attractiveness
- Consider competition, existence of substitute
products, and the power of buyers & suppliers.
• Company Objectives and Resources
- Examine company skills & resources needed to
succeed in that segment.
- Offer superior value & gain advantages over
competitors.
Marketing Unit, Slide No. 27
Choosing A Targeting Strategy
The marketer also has to decide whether to serve one,
several, or all of the segments within the market. The
options typically are as follows:
- Mass marketing or undifferentiated marketing:
• Selling a mass-produced product to all customers (one size fits all).
- Multiple-segment (differentiated) marketing:
• Different models of a product are made and sold to different
customer groups, each with a tailored marketing plan. (Note: The
marketer might opt to serve all of the segments within the market in
this differentiated fashion.)
- Focused or concentrated (niche) marketing:
• Developing products for customers in one targeted market
segments.
Marketing Unit, Slide No. 28
Other Targeting Options:
Micromarketing
• Tailoring products and marketing programs to
suit the tastes of specific individuals and
locations.
- Individual Marketing: Tailoring products and
marketing programs to the needs and preferences of
individual customers.
- Local Marketing: Tailoring brands and promotions
to the needs and wants of local customer groups—
cities, neighborhoods, specific stores.
Marketing Unit, Slide No. 29
Target Marketing Strategies
Illustrated
Marketing Unit, Slide No. 30
Factors To Consider When
Choosing a Targeting Strategy
• Company resources
- When resources are limited, a niche strategy often makes the most sense
• Product variability
- Mass-marketing is most common for products that are uniform
• Product’s life-cycle stage
- When a product is first introduced, it is typically not practical to market more
than one version. However, over time a using a differentiated approach
makes sense.
• Market variability
- If all consumers have the same taste for the particular product, an
undifferentiated approach makes the most sense.
• Competitors’ marketing strategies
- When competitors are using a differentiated approach, a mass-market
approach would be fatal. However, when competitors are mass-marketing, a
differentiated approach can provide a firm with a real advantage.
Marketing Unit, Slide No. 31
Marketing in Action
How Toyota Maps Its Product Lineup to
Various Market Segments
What
factors is
Toyota
using to
segment
the vehicle
market?
Figure 10.5
Marketing Unit, Slide No. 32
Marketing in Action
How Dell Segments
The Computer Market
Figure 10.7
Marketing Unit, Slide No. 33
Creating a Competitive Advantage
• Once the firm has determined who it is going to serve, it must
determine how to serve these target market segment(s). This raises
two key questions:
- How can we best serve these customers, that is, what characteristics
should particular products possess in order to satisfy the needs of our
target customers?
- How will we distinguish our products and services from our competitors?
• Product differentiation, in general, is the process of setting a
company’s goods and services apart from those of its competitors in
order to satisfy customers’ needs.
• As shown on the next slide, there are essentially three main ways a
firm can achieve competitive advantage.
Marketing Unit, Slide No. 34
Methods of Achieving
Competitive Advantage
Cost
Types of
Competitive
Advantage
Differentiation
Niche Strategies
Marketing Unit, Slide No. 35
Using Differentiation to Set Your
Product Apart
• Advantage achieved when a firm
provides something unique and
valuable to buyers beyond simply
offering a lower price than the
competition.
• Differentiation can be achieved by
tangible and/or intangible means,
including:
- The products and services you offer, i.e.,
features and benefits, how well they
perform, how they’re made, etc.;
- Customer service;
- Channels you use to distribute your
products/services;
- Your reputation or image; and
- Your people.
How is Tylenol attempting to
differentiate its products from
competitors’ products?
Marketing Unit, Slide No. 36
How the Marketing Mix Creates
Product Differentiation
Figure 10.8
Marketing Unit, Slide No. 37
Positioning and Value
Proposition
•
Through the firm’s marketing mix, it is able to
define its products or brand in the minds of
consumers. This is referred to as the product
or brand’s positioning.
•
A product’s position is the way the product
is defined by consumers on important
attributes or benefits—the place the product
occupies in consumers’ minds relative to
competing products.
•
Another marketing term that is synonymous
with positioning, product differentiation, and
competitive advantage is value proposition.
•
A firm or brand’s value proposition is the
set of benefits or values a company
promises to deliver to consumers to satisfy
their needs. Such value propositions
differentiate one brand from another, and
answer the question, “Why should I buy your
brand rather than a competitor’s?”
“Have It Your Way”
One of the all-time great value
propositions. A clear way to
distinguish BK’s products from
the mass-produced products
offered by McDonald’s.
Marketing Unit, Slide No. 38
Choosing the Right Competitive Advantages
Which Differences to Promote
• Not all brand differences
are meaningful and
worthwhile, nor do all
differences make a good
differentiator.
• Differences can be
based on the tangible or
the intangible.
• Each difference has
the potential to create
company COSTS as
well as consumer value.
• The best competitive advantages are
those that meet the following criteria:
- Important
- Distinctive
- Superior
- Communicable
- Preemptive
- Affordable (buyers can afford to pay
for the difference)
- Profitable (company can provide the
difference profitably)
• You must have the credentials to support
your differentiating idea, to make it real
and believable. Must be able to
demonstrate or prove your difference.
(Think Tylenol “rapid release” gel caps.)
Marketing Unit, Slide No. 39
Choosing the Right Competitive Advantages
How Many Differences to Promote?
 Many marketers, including
me, think that companies
should aggressively
promote only one benefit
to the target market. In
other words, develop a
unique selling proposition
(USP) for each brand and
stick to it.
 Others think that
companies/brands should
position themselves on
more than one
differentiator.
Definition of “Unique Selling Proposition”
According to Rossner Reeves in
Reality in Advertising
•
•
•
Each ad must make a proposition to the
consumer. Not just words, not just product
puffery, not just show-window advertising. Each
advertisement must say to each reader: “Buy this
product and you will get this specific benefit.”
The proposition must be one that the competition
either cannot, or does not, offer. It must be
unique—either a uniqueness of the brand or a
claim not otherwise made in that particular field of
advertising.
The proposition must be so strong that it can
“move the mass millions,” i.e., to pull over new
customers to your product.
Marketing Unit, Slide No. 40
Selecting a Viable Value Proposition:
Alternate Strategies
Marketing Unit, Slide No. 41
Product Differentiation and
Market Segmentation
• When a company decides to make and sell different types or models
of a product aimed at different market segments—whether it’s cars or
clothes—differentiating the products to avoid customer confusion
becomes very important.
• To accomplish this, a company develops and implements a different
marketing mix for the product in each market segment in which the
firm chooses to compete. (Product positioning)
• In this way, the company distinguishes its products in the consumer’s
mind, and consumers are able to determine why some of the firm’s
different products are better suited to their needs than others.
• For example, Toyota manufactures and markets both the Avalon and
the Lexus. All elements of the marketing mix for both products are
different, so each product is clearly distinguished in the minds of
potential buyers.
Marketing Unit, Slide No. 42