Principles of Marketing Summaries
Chapter 7: Customer driven Marketing Strategy: Creating value for target customers
Selecting customers to serve: Deciding on a value proposition:
Market segmentation Market targeting (targeting) Differentiation Positioning
Dividing a market into smaller the process of evaluating differentiating arranging for a market offering
segments with distinct needs, each market segment’s the market to occupy a clear, distinctive
characteristics or behaviour attractiveness and selecting offering to and desirable place relative to
that might require separate one or more segment to create superior competing products in the mind
marketing strategies or mixes. enter. customer value. of the target customers.
Designing a customer-driven marketing strategy:
Market Segmentation /// Segmenting consumer markets
Examples of major segmentation variables for consumer markets:
Geographic
World Region or Africa, Asia, europe, Oceania, North America, South America, Canada, Western europe, Middle
Country east, Pacific Rim, england, Scotland, Wales, China, India, Brazil
Country Region england: east Midlands, east of england, Greater London, North east england, North West
england, South east england, South West england, West Midlands, yorkshire and the Humber
City or Metro size Under 5,000; 5,000–20,000; 20,000–50,000; 50,000–100,000; 100,000– 250,000; 250,000–
(population) 500,000; 500,000–1,000,000; 1,000,000–4,000,000; over 4,000,000
Density Urban, suburban, exurban, rural.
Climatic Zones Northern, Southern, Polar, Temperate, Arid, Tropical, Mediterranean, Mountain
Demographic
Age (years) Under 6, 6–11, 12–19, 20–34, 35–49, 50–64, over 65
Gender Male, female
Family Size 1-2, 3-4, more than 5
Family Life Cycle young, single; married, no children; married with children; single parents; unmarried couples; older,
married, no children under 18; older, single; other
Income Under €20,000; €20,000–€30,000; €30,000–€50,000; €50,000–€100,000; €100,000–€250,000; over
€250,000 and over
Occupation A – professionals and senior managers; B – middle management executives; C1 – junior management,
owners of small establishments; C2 – skilled manual workers; D – semi-skilled and unskilled manual
workers; e – those dependent on long-term state benefits, unemployed, casual workers
Education Terminal education age 16, Terminal education age 18, university graduates, those with postgraduate
qualifications
Religion Catholic, Protestant, Jewish, Muslim, Hindu, Secularised, other
Race White, Asian, Hispanic, Black, Chinese
Generation Baby boomer, Generation X, Millennial
Nationality North American, South American, British, French, German, Russian, Japanese, American
Psychographic
Social Class Underclass, Working Class (unskilled, semi-skilled, skilled), Middle class (lower, middle upper), Upper
Class
Lifestyle Innovators, Thinkers, Believers, Achievers, Strivers, Experiencers, Makers, Survivors
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,Personality Compulsive, Outgoing, Authoritarian, Ambitious
Behavioural
Occasions Regular occasion; special occasion; holiday; seasonal
Benefits Quality; service; economy; convenience; speed
User Status Non-user; ex-user; potential user; first-time user, regular user
User Rates Light user, medium user, heavy user
Loyalty Status None, medium, strong, absolute
Readiness Stage Unaware, aware, informed, interested, desirous, intending to buy
Attitude toward Enthusiastic, positive, indifference, negative, hostile
Product
Geographic segmentation: Dividing a market into different geographical units, such as nations, states, regions,
counties, cities or even neighbourhoods.
Demographic segmentation: dividing the market into segments based on variables such as age, gender, family size,
family life cycle, income, occupation, education, religion, race, generation and nationality.
- Age and life-cycle segmentation: dividing a market into different age and life-cycle groups. Consumer
needs and wants change with age; such as family with children, people aged 50+…
- Gender segmentation: dividing the market into different segments based on gender. Often used in
clothing, cosmetics, toiletries and magazines. (Cola light vs Cola Zero, Nivea Men Care…)
- Income segmentation: dividing a market into different income segments. Often used with products and
services such as motor cars, clothing, cosmetics, financial services and travel.
Psychographic segmentation: dividing a market into different segments based on social class, lifestyle or personality
characteristics.
Behavioural segmentation: dividing a market into segments based on consumer knowledge, attitudes, uses or
responses to a product.
- Occasions segmentation: Dividing the market into segments according to occasions when buyers get the
idea to buy, actually make their purchase or use the purchased item. Such as mother’s day promoting
chocolate.
- Benefit segmentation: Dividing the market into segments according to the different benefits that
consumers seek from the product. Such as Value-seeking mothers have low sports interest and low
sportswear involvement; they buy for the family and seek durability and value
- User status: Markets can be segmented into non-users, ex-users, potential users, first-time users and
regular users of a product. Marketers want to reinforce and retain regular users, attract targeted non-
users, and reinvigorate relationships with ex-users. Like Ikea turning the ‘newly-single’ into major buyers
of Ikea’s low budget home furnishings
- Usage rate: Markets can also be segmented into light, medium and heavy product users. Heavy users are
often a small percentage of the market but account for a high percentage of total consumption. Such as
“Whopper-wolfing fans” which eats at Burger King an average of 13 times a month: Burger King targets
these Super Fans openly with ads that exalt monster burgers suitable for the biggest appetites.11
- Loyalty Status: A market can also be segmented by consumer loyalty. Consumers can be loyal to brands
(e.g. Tide), stores (e.g. Waitrose) and companies (e.g. Apple). Buyers can be divided into groups
according to their degree of loyalty. Such as Apple’s loyal customers only buying from their brand.
Using multiple segmentation bases:
Marketers rarely limit their segmentation analysis to one or a few variables only. Rather, they often use multiple segmentation
bases in an effort to identify smaller, better-defined target groups. Thus, a bank may not only identify a group of wealthy, retired
adults but also, within that group, distinguish several segments based on their current income, assets, savings and risk
preferences, housing and lifestyles.
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, ACORN is a geodemographic segmentation system, used to understand consumers’ lifestyle, behaviour and
attitudes, as well as needs of local neighbourhoods or communities.
Segmenting Business Markets
Business buyers can also be segmented by:
- Geographically
- Demographically (E.G. By Industry Or Company Size)
- Benefits Sought
- User Status
- Usage Rate
- Loyalty Status.
Yet, business marketers also use some additional variables, such as:
- Customer Operating Characteristics
- Purchasing Approaches
- Situational Factors
- Personal Characteristics.
Segmenting International Market
Operating in many countries presents new challenges. Different countries, even those that are close together, can
vary greatly in their economic, cultural and political makeup. Thus, just as they do within their domestic markets,
international firms need to group their world markets into segments with distinct buying needs and behaviours.
They can segment using several variables:
- Geographical location: Western Europe, the Pacific Rim, the Middle East, Africa.
- Economic Factors: population income levels, overall level of economic development.
- Political and legal factors: type and stability of government, receptivity to foreign firms, monetary
regulations, amount of bureaucracy.
- Cultural factors: common language, religions, values, attitude, customs and behavioural patterns.
With the internet connecting consumers around the world; Intermarket Segmentation (Cross-market
segmentation) is used; segments of consumers who have similar needs and buying behaviours even though they
are located in different countries.
Requirements for Effective Segmentation
Measurable Accessible Substantial Differentiable Actionable
The size, The market The market The segments are Effective programmes
purchasing power segments can segments are large conceptually distinguishable can be designed for
and profiles of be effectively or profitable and respond differently to attracting and serving
the segments can reached and enough to serve. different marketing mix the segments.
be measured. served. elements and programmes.
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,Market Targeting /// How companies evaluate and select target segments
Evaluating Market Segments
A firm must look at three factors to evaluate different market segments:
Segment Size And Growth Segment Structural Attractiveness Company Objectives And Resources
The company must first collect and analyse data on current segment sales, growth rates and the expected profitability for
various segments.
A Company must also examine major structural factors
that affect long-term segment attractiveness (Porter’s Five Forces?):
Aggressive Actual/Potential Strong relative power of buyers vs seller Powerful suppliers
competitors Substitute products (bargaining power of buyer)
May limit prices and Buyer will try to force prices down, demand more Can control price or reduce
profit services and set competitors against one another – the quality or quantity or
costing seller profitability ordered goods and services
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.
Marketing Targeting Strategies:
- Undifferentiated Marketing (mass marketing): A market-coverage strategy in which a firm decides to ignore
market segment differences and go after the whole market with one offer. Such a strategy focuses on what
is common in the needs of consumers rather than on what is different. The company designs a product and a
marketing programme that will appeal to the largest number of buyers.
- Differentiated Marketing (segmented marketing): A market-coverage strategy in which a firm decides to
target several market segments and designs separate offers for each. (multiple brands for different
segments). This marketing approach is more expensive; extra research, forecasting, sales analysis, promotion
planning and channel management, different advertising campaigns… The company must weigh increased
sales against increased costs when deciding on a differentiated marketing strategy.
- Concentrated Marketing (niche marketing): A market-coverage strategy in which a firm goes after a large
share of one or a few segments or niches. A company can market more effectively by fine-tuning its
products, prices and programmes to the needs of carefully defined segments. It can also market more
efficiently, targeting its products or services, channels and communications programmes toward consumers
that it can serve best and most profitably. High-risks.
- Micromarketing: Tailoring products and marketing programmes to the needs and wants of specific
individuals and local customer segments; it includes local marketing and individual marketing.
o Local Marketing: Tailoring brands and promotions to the need and wants of local customer
segments – cities, neighbourhoods and even specific stores.
o Individual Marketing: Tailoring products and marketing programmes to the needs and preferences
of individual customers – also called one-to-one marketing, customised marketing and markets-of-
one marketing.
- Individual marketing has also been labelled one-to-one marketing, mass customisation and markets-of-one marketing.
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,Choosing a Targeting Strategy
Depends on: degree of product variability, product’s lifecycle (PLC).
When a firm’s resources are limited, concentrated marketing makes the most sense.
Undifferentiated marketing is more suited for uniform products (such as grapefruit/steel).
Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration.
- Market Variability: More buyers buy the same amounts and react the same = undifferentiated marketing is
appropriate
- Competitors’ marketing strategies: When competitors use differentiated or concentrated marketing,
undifferentiated marketing can be suicidal. Conversely, when competitors use undifferentiated marketing, a
firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of
buyers in specific segments.
Socially Responsible Target Marketing
Criticism: targeting of vulnerable or disadvantaged consumers with controversial or potentially
harmful products. Targeting specific groups generate controversy and concern.
Children segments being targeted intentionally – or unintentionally (such as with lingerie, beers,
fast-food, cigarettes) Selling products that the consumer can’t afford (mortgage…)
Thus, in target marketing, the issue is not really who is targeted but rather how and for what. Controversies
arise when marketers attempt to profit at the expense of targeted segments – 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 a
company but also the interests of those targeted.
Differentiation and Positioning /// Beyond the market it will target, the company must decide on a
value proposition – how it will create differentiated value for targeted segments and what positions it wants to
occupy in those segments.
Product’s Position: the way a product is defined by consumers on important attributes – the place a product
occupies in consumers’ minds relative to competing product. Product are made in factories, but brands
happen in the minds of consumers.
Positioning Maps
Marketers often prepare perceptual
positioning maps: shows consumer
perceptions of their brands versus
competing products on important
buying dimensions.
Positioning map: Large luxury SUVs
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,Choosing a Differentiation and Positioning Strategy
The differentiation and positioning task consists of three steps:
- Identifying a set of differentiating competitive advantages on which to build a position
- Choosing the right competitive advantages
- Selecting an overall positioning strategy.
A company must then effectively communicate and deliver the chosen position to the market.
Identifying possible value differences and competitive advantages
Competitive Advantage: An advantage over competitors by offering greater customer value, either
by having lower prices or providing more benefits that justify higher prices.
If a company positions its product as offering the best quality and service, it must actually
differentiate the product so that it delivers the promised quality and service. Companies must do
much more than simply shout out their positions with slogans and taglines. They must first live the
slogan.
Product Differentiation: brands can be differentiated on features, performance, or style and
design.
Services Differentiation: speedy, convenient or careful delivery.
Channel Differentiation: gains competitive advantage through the way they design their
channel’s coverage, expertise and performance.
People Differentiation: hiring and training better people than their competitors do.
Image Differentiation: A company or brand image should convey a product’s distinctive
benefits and positioning. Developing and distinctive image calls for creativity and hard work.
Choosing the right competitive advantages
How many Differences to Promote
Unique Selling Proposition (ESP): developing a proposition for each brand and stick to it.
Each brand should pick and attribute and tout itself as ‘number one’ on that attribute.
Differentiators: This type of positioning might be necessary if two or more firms are claiming
to be best on the same attribute.
Which differences to promote
Important: The difference delivers a highly valued benefit to target buyers.
Distinctive: Competitors do not offer the difference, or one company can offer it in a more
distinctive way.
Superior: The difference is superior to other ways that customers might obtain the same
benefit.
Communicable: The difference is communicable and visible to buyers.
Preemptive: Competitors cannot easily copy the difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: A company can introduce the difference profitably.
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, Selecting an Overall Positioning Strategy
Value proposition: Full positioning of a brand - the full mix of benefits on which it is positioned.
In the figure, the five green cells represent winning value
propositions – differentiation and positioning that gives the
company competitive advantage. The red cells, however,
represent losing value propositions. The centre yellow cell
represents at best a marginal proposition. In the following
sections, we discuss the five winning value propositions on
which companies can position their products: more for
more, more for the same, the same for less, less for much
less, and more for less.
o More for More: Upscale product with higher price to cover the costs.
o More for the Same: comparable quality for a lower price.
o The Same for Less: They don’t claim to offer different or better products. Instead, they offer many of
the same brands as department stores and speciality stores but at deep discounts based on superior
purchasing power and lower-cost operations. Deals.
o Less for much Less: Less features for lower price. ‘Less-for-much-less’ positioning involves meeting
consumers’ lower performance or quality requirements at a much lower price.
o More for Less: in the short run, some companies can actually achieve such lofty positions. Yet in the
long run, companies will find it very 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.
Developing a Positioning Statement
Positioning Statement: A statement that summarizes company or brand positioning. It takes this
form: To (target segment and needs) our (brand) is (concept) that (point of difference).
Example: To busy, mobile professional who need to always be in the loop, the BlackBerry is a wireless
connectivity solution that gives you an easier, more reliable way to stay connected to data, people and
resources while on the go.
Communicating and Delivering the Chosen Position
All the company’s marketing mix efforts must support the positioning strategy.
Needs tactical details that delivers said position. Thus, a firm that seizes on a more-for-more position knows that it
must produce high-quality products, charge a high price, distribute through high-quality dealers and advertise in
high-quality media. It must hire and train more service people, find retailers who have a good reputation for service,
and develop sales and advertising messages that broadcast its superior service. This is the only way to build a
consistent and believable more-for-more position.
Easier to come with it than to implement it. Needs consistent performance and communication to maintain. It must
closely monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.
However, the company should avoid abrupt changes that might confuse consumers. Instead, a product’s position
should evolve gradually as it adapts to the ever-changing marketing environment.
Quizzlet: https://quizlet.com/50154660/principles-of-marketing-kotler-armstrong-14th-edition-chapter-7-flash-cards/
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, Chapter 8: Product, services and brands: building customer value
What is a Product?
Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might
satisfy a want or need.
Service: An activity, benefit or satisfaction offered for sale that is essentially intangible and does not result in
the owner-ship of anything
Products, Services and Experiences
Product = Key element in the overall market offering. Marketing mix planning begins with building an
offering that brings value to target customers. The market offering includes both tangible goods and
services:
- Pure Tangible Goods: No service accompanies the product (such as soap, or salt)
- Pure Service: No product, such as a doctor’s examination or financial services such as insurance.
- In the middle, companies are developing customer experience with the brands or company.
Customers consequently buy more than just the product, but also what the offers will do for them. The
connection to the brand adds value to it.
Experiences: represent what buying the product or service will do for the customer.
Levels of Product and Services
Products planner must think about products on three levels:
- Core Customer Value: addresses the question: “What is the buyer
really buying?”. This is about the core problem-solving benefits or
services that consumers seek.
- Actual Product: This is where planners must develop product and
service features, design, a quality level, a brand name and packaging.
- Argument Product: This must be built around the core benefit and
actual product by offering additional consumer services and benefits.
Consumers see products as complex bundles of benefits that satisfy
their needs. When developing products, marketers first must identify
the core customer value that consumers seek from a product. They
must then design the actual product and find ways to augment it to
create this customer value and the most satisfying customer
experience.
Product and Service Classifications
There are two broad classes based on the types of consumers that use the product or service: Consumer or
Industrial Products. It also includes Experiences, organisations, persons, places and ideas.
Consumer Products
o Consumer Products: A Product bought by final consumers for personal consumption
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