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key steps in designing a customer-driven market strategy
market segmentation, market targeting, differentiation, and market positioning.
provides a method to divide or segment the market into narrow segments that can be better reached with the resources of the marketer.
examines each of the designated segment's attractiveness and chooses one or more that match the marketing desires and objectives of the organization. Various coverage strategies are explained and detailed.
The concept of market positioning
arranges for a product to occupy a clear, distinctive, and desirable place relative to competition.
Most companies have moved away from mass marketing and toward
marketing segmentation and target marketing
Major steps in target marketing
1. market segmentation, 2. target marketing 3. differentiation 4.market positioning
setting the competitive positioning for the product and creating a detailed marketing mix
How do companies use marketing 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.
calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods. Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods.
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.
a. Demographic factors are the most popular basis for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables.
age and life-cycle segmentation
offering different products or using different marketing approaches for different age and life-cycle groups. Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation. Age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power.
has long been used by the marketers of products and services such as automobiles, boats, clothing, cosmetics, financial services, and travel. Many companies target affluent consumers with luxury goods and convenience services. Many retailers successfully target lower income groups.
divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeup. Marketers often segment their markets by consumer lifestyles.
divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.
powerful form of segmentation is to group buyers
according to the different benefits that they seek from the product
requires finding the major benefits people look for in their product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.
Markets can be segmented into groups of
nonusers, ex-users, potential users, first-time users, and regular users of a product, light, medium, and heavy product users
segmented by consumer loyalty
Consumers can be loyal to brands, stores, and companies. Buyers can be divided into groups according to their degree of loyalty. By studying its less loyal buyers, the company can detect which brands are most competitive with its own.
Marketers rarely limit their segmentation analysis to
only one or a few variables. They are increasingly using multiple segmentation bases in an effort to identify smaller, better defined target groups.
multivariable segmentation, Several business information services have arisen to help marketing planners link U.S. census and consumer transaction data with consumer lifestyle patterns to better segment their markets down to zip codes, neighborhoods, and even city blocks.
leading lifestyle segmentation systems
is the PRIZM "You Are Where You Live" system by Claritas. The PRIZM system marries a host of demographic factors—such as age, educational level, income, occupation, family composition, ethnicity, and housing—with buying transaction data and lifestyle information taken from consumer surveys.
Business buyers can be segmented
geographically, demographically (industry, company size), or by benefits sought, user status, usage rate, and loyalty status.
business marketers also use some additional variables
such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.
many marketers believe that
buying behavior and benefits provide the best basis for segmenting business markets
Different countries, even those that are close together
can vary greatly in their economic, cultural, and political makeup.
Geographic segmentation assumes
that nations close to one another will have many common traits and behaviors. Although this is often the case, there are many exceptions
can also be segmented on the basis of economic factors. Countries might be grouped by population income levels or by their overall level of economic development.
Countries can be segmented by
political and legal factors such as the type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.
common languages, religions, values and attitudes, customs, and behavioral patterns.
Using this approach, they form segments of consumers who have similar needs and buying behavior even though they are located in different countries.
The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs
The firm now has to evaluate the various segments and decide how many and which segments it can serve best.
In evaluating different market segments, a firm must look at three factors:
segment size and growth, segment structural attractiveness, and company objectives and resources
The existence of many actual or potential substitute products
may limit prices and the profits that can be earned in a segment
A segment may be less attractive if
it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services
Even if a segment has the right size and growth and is structurally attractive, the company must consider
its own objectives and resources
A target market consists of
a set of buyers who share common needs or characteristics that the company decides to serve.
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.
Using a differentiated marketing (or segmented marketing) strategy
a firm decides to target several market segments and designs separate offers for each
By offering product and marketing variations to segments, companies hope for
higher sales and a stronger position within each market segment
Developing a stronger position within several segments creates more
total sales than undifferentiated marketing across all segments
also increases the costs of doing business. Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion, planning, and channel management.
concentrated marketing (or niche marketing)
is especially appealing when company resources are limited. Instead of going after a small share of a large market, the firm goes after a large share of one or a few segments or niches.
concentrated marketing, the firm achieves a
strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.
Niching offers smaller companies an opportunity to compete by
focusing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors.
Concentrated marketing can be
highly profitable, highly risky, Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or large competitors may decide to enter the same segment with greater resources.
the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Rather than seeing a customer in every individual, micromarketers see the individual in every customer.
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 some drawbacks
It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different regional and local markets. The advantages of local marketing often outweigh the drawbacks.
The best target marketing strategy
depends on Company resources
Product life-cycle stage
Competitor's marketing strategies
Differentiated marketing or concentrated marketing is more suited
Products that can vary in design, such as cameras and cars
product's life-cycle stage also must be considered
When a firm introduces a new product, it may be practical to launch only one version, and undifferentiated marketing or concentrated marketing may make the most sense.
If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.
competitors' marketing strategies
When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal
Smart targeting helps companies to be more
efficient and effective by focusing on the segments that can satisfy best and most profitably
biggest issues usually involve the targeting of
vulnerable or disadvantaged consumers with controversial or potentially harmful products.
In target marketing, the issue is
not really who is targeted by rather how and for what. Controversies arise when marketers attempt to profit at the expense of targeted segments.
Socially responsible marketing
calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.
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. Positioning involves implanting the brand's unique benefits and differentiation in customers' minds.
A product's position
is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products.
Marketers often prepare perceptual positioning maps that show consumer perceptions of their brand versus competing products on important buying dimensions.
to find points of differentiation
marketers must think through the customer's entire experience with the company's product or service
Product differentiation takes place
along a continuum. At one extreme we find physical products that allow little variation: chicken, steel, and aspirin. At the other extreme are products that can be highly differentiated, such as autos, clothing, and furniture. Such products are differentiated on features, performance, style, or design.
Not all brand differences are meaningful or worthwhile; not every difference makes a good differentiator. A difference is worth establishing to the extent that it satisfies the following criteria
1. Important—the difference delivers a highly valued benefit to target buyers.
2. Distinctive—competitors do not offer the difference, or the company can offer it in a more distinctive way.
3. Superior—the difference is superior to other ways that customers might obtain the same benefit.
4. Communicable—the difference is communicable and visible to buyers.
5. Preemptive—competitors cannot easily copy the difference.
6. Affordable—buyers can afford to pay for the difference.
7. Profitable—the company can introduce the difference profitably.
The positioning task consists of three steps
To build profitable relationships with target customers, marketers must understand customer needs better than competitors do and deliver more value. To the extent that a company can position itself as providing superior value, it gains competitive advantage.
"More for more" positioning
involves providing the most upscale product or service and charging a higher price to cover the higher costs. In general, companies should be on the lookout for opportunities to introduce a "much-more-for-much-more" brand in any underdeveloped product or service category.
involves meeting consumers' lower performance or quality requirements at a much lower price.
"more for the same."
Companies can attack a competitor's more-for-more positioning by introducing a brand offering comparable quality but at a lower price.
"more for less."
winning value proposition, Many companies claim to do this. Yet in the long run, companies will find it difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the "for less" promise. Companies that try to deliver both may lose out to more focused competitors.
Each brand must adopt a positioning strategy designed to
serve the needs and wants of its target market.
The important thing is that each company must develop its own winning positioning strategy, one that
makes it special to its target consumers. Offering only "the same for the same" provides no competitive advantage, leaving the firm in the middle of the pack.
Company and brand positioning should be summed up in a
positioning statement. The statement should follow the form: "To (target segment and need) our (brand) is (concept) that (point of difference)." For example: "To busy professionals who need to stay organized, Palm is an electronic organizer that allows you to backup files on your PC more easily and reliably than competitive products."
Once a company has built the desired position, which can take years to establish and moments to destroy
it must take care to maintain it through consistent performance and communication. It must closely monitor and adapt the position over time to match changes in consumer needs and competitors' strategies.
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