Figure 7.1
Shows the four major steps in designing a customer-driven marketing strategy. In the first two steps, the company selects the customers that it will serve. Market segmentation involves dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments. Market targeting (or targeting) consists of evaluating each market segment's attractiveness and selecting one or more market segments to enter.
Four major steps in designing a customer-driven marketing strategy
In the final two steps, the company decides on a value proposition--how it will create value for target customers.
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.
Market Segmentation
Buyers in any market differ in their wants, resources, locations, buying attitudes, and buying practices. 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.
In this section, we discuss four important segmentation topics: segmenting consumer markets, segmenting business markets, segmenting international markets, and the requirements for effective segmentation.
Segmenting Consumer Markets
There is no single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view market structure.
• Table 7.1 outlines variables that might be used in segmenting consumer markets.
Here we look at the major geographic, demographic, psychographic, and behavioral variables.
Table 7.1 | Major Segmentation Variables for Consumer Markets
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Geographic segmentation
Geographic segmentation calls for dividing the market into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. A company may decide to operate in one or a few geographical areas or operate in all areas but pay attention to geographical differences in needs and wants.
Demographic Segmentation
Demographic segmentation divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. Demographic factors are the most popular bases 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. Even when marketers first define segments using other bases, such as benefits sought or behavior, they must know segments' demographic characteristics to assess the size of the target market and reach it efficiently.
Age and life-cycle segmentation
Dividing a market into different ace and life-cycle groups.
Gender segmentation
has long been used in marketing clothing, cosmetics, toiletries, toys, and magazines.
Income segmentation
Dividing a market into different income segments.
Psychographic Segmentation
Psychographic segmentation divides buyers into different segments based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic characteristics.
Behavioral Segmentation
Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses concerning a product. Many marketers believe that behaviour variables are the best starting point for building market segments.
Occasion 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.
Benefit segmentation
Dividing the market into segments according to the different benefits that consumers seek from the product.
User Status
Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users of a product
Usage Rate
Markets can also be segmented into light, medium, and heavy product users.
Loyalty Status
A market can also be segmented by consumer loyalty
completely loyal
somewhat loyal
less-loyal buyers
Market Targeting
Market segmentation reveals the firm's market segment opportunities. The firm now has to evaluate the various segments and decide how many and which segments it can serve best.
We now look at how companies evaluate and select target segments.
• FIGURE | 7.2
Market-Targeting Strategies
Selecting Target Market Segments
A set of buyers sharing common needs or characteristics that the company decides to serve.
After evaluating different segments, the company must decide which and how many segments it will target. A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Market targeting can be carried out at several different levels.
• Figure 7.2 shows that companies can target very broadly (undifferentiated marketing), very narrowly (micromarketing), or somewhere in between (differentiated or concentrated marketing).
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. 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 program that will appeal to the largest number of buyers.
As noted earlier in the chapter, most modern marketers have strong doubts about this strategy. Difficulties arise in developing a product or brand that will satisfy all consumers.
Moreover, mass marketers often have trouble competing with more focused firms that do a better job of satisfying the needs of specific segments and niches.
Differentiated Marketing
Using a differentiated marketing (or segmented marketing) strategy, a firm decides
to target several market segments and design separate offers for each.
Concentrated (niche) marketing
A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches.
Micromarketing
Tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; it includes local marketing and individual marketing.
Local marketing
Tailoring brands and marketing to the needs and wants of local customer segments -cities, neighborhoods, and even specific stores.
Individual marketingTailoring products and marketing programs to the needs and preferences of individual customers.
Differentiation and Positioning
Beyond deciding which segments of 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. A product position is the way a product is defined by consumers on important attributes the place the product occupies in consumers' minds relative to competing products. Products are made in factories, but brands happen in the minds of consumers.
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