Chapter 6 Customer-Driven Marketing Strategy, Creating Value for Target Customers. So far, you have learned what marketing involves and the importance of gaining insights into consumers and the marketplace environment. With that as background, you are now ready to delve deeper into marketing strategy and tactics. This chapter takes us further into key customer-driven marketing strategy decisions, the basis upon which markets are broken up into meaningful customer groups, segmentation, how we choose which customer groups to serve at targeting, create market offerings that best serve targeted customers, differentiation, and position the offerings in the minds of consumers, positioning. The chapters that follow explore the tactical marketing tools, the extended marketing mix by which marketers bring these strategies to life.
For a visual representation of the chapter, please see the concept map below. Learning Objectives LO 6.1 defined the main steps in designing a customer-driven marketing strategy, market segmentation, targeting, differentiation, and positioning. LO 6.2 lists and discuss the main bases for segmenting consumer and business markets.
LO 6.3 explain how companies identify attractive market segments and choose a market targeting strategy. LO 6.4 discuss how companies differentiate and position their products for maximum competitive advantage. Customer-driven marketing strategy.
Companies today recognize that they cannot appeal to all buyers in the marketplace, or at least not to all buyers in the same way. Buyers are too numerous, too widely scattered, and too varied in their needs and buying practices. Moreover, the companies themselves vary widely in their ability to serve different segments of the market.
Instead, like any sound marketer. A company must identify the parts of the market that it can serve best and most profitably. It must design customer-driven marketing strategies that build the right relationships with the right customers.
Thus, most companies have moved away from mass marketing and towards target marketing identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each. Instead of scattering their marketing efforts, the shotgun approach, companies focus on the buyers who have greater interest in the values that the firms create and can serve best, the rifle approach. Figure 6.1 shows the four main 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 analyzing and dividing a market into distinctive groups with the aim of directing marketing focus towards these segments of buyers with different needs, characteristics. or behaviors that might require tailored 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.
Figure 6.1 Designing a Customer-Driven Marketing Strategy In the final two steps, the company decides on a value proposition on how it will create value for target customers. Differentiation involves differentiating the company's market offering from that offered by competitors to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place in the minds of target consumers relative to competing products.
We discuss each of these steps in turn. 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. 1. Segmenting consumer markets. 2. Segmenting business markets. 3. Segmenting international markets. And 4. 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 the market structure. Table 6.1 outlines the main variables that might be used in segmenting consumer markets. Here, we look at the main geographic, demographic, psychographic, and behavioral variables.
Table 6.1. Bases for Identifying and Analyzing Consumer Market Segments. An embedded table is located here in your e-text.
Reference it when you have a chance. Geographic Segmentation. Geographic segmentation calls for dividing the market into different geographical units, such as nations, regions, states, local government areas, cities, or even neighborhoods.
A company may decide to operate in one or a few geographical areas, or to operate in all areas, but pay attention to geographical differences in needs and wants. Many companies today are localizing their products, advertising, promotion and sales efforts to fit the needs of individual regions, cities and even neighborhoods. For example, retailers such as Kohl's and Woolworths operate nearly everywhere, but sometimes stock specialized products for specific types of geographic locations.
A shopper in the Sydney suburb of Double Bay may find smoked eel in the daily cabinet, whereas this product might not be stocked in Melbourne's Caroline Springs. Demographic segmentation. Demographic segmentation divides the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. 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, sort, or behavior, they must know segment demographic characteristics in order to assess the size of the target market and to reach it efficiently. Age and life cycle stage.
Consumer needs and wants change with age. Some companies use age and life cycle segmentation, offering different products, or using different marketing approaches for different age and life cycle groups. For example, clothing retailer Seed Heritage has clothing ranges for different age groups, baby, child, teenager, and adult woman.
Marketers must be careful to guard against stereotypes when using age and life cycle segmentation. Although some 80-year-olds fit the doddering stereotypes, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to university, others are just beginning new families. Thus, age is often a poor predictor of a person's life cycle, health, work, or family status, needs, and buying power. Companies marketing to consumers in a family unit usually employ images and appeals to stress the value and benefits of the market offering, rather than the age of the consumer themselves.
An example of such segmented advertising is an ad for funeral insurance. where the focus is on unburdening the remaining family members, regardless of age. Gender. Watch the checkout, Gender Marketing.
Copyright symbol 2018 Australian Broadcasting Corporation. All rights reserved. The checkout, Gender Marketing.
Watch the video and answer the following question. How has market segmentation affected your purchase choices? Gender segmentation has long been used as a segmentation variable by clothing, cosmetics, toiletries, and magazines marketers. More recently, many mostly women's cosmetics makers have begun marketing men's lines.
For example, Unilever's Lynx brand of body washers and deodorant sprays targets men with product names such as anarchy, adrenaline, and Africa to denote its various fragrances. Its duck brand has a men plus care line, which carries a full line of body washers, body bars, antiperspirants, and face and hair care products. Listen Tech Talks, Why Gender-Based Marketing Is Bad For Business Income The marketers of products and services such as cars, clothing, cosmetics, financial services and travel have long used income segmentation. The Marriott chain of hotels has different lodging options to accommodate different budgets. Its luxury range of hotels for the super, well-heeled customers includes the Ritz-Carlton in Perth, St. Regis, scheduled to open in Melbourne in 2022, and W Hotel in Brisbane.
Its premium range includes Marriott, Sheraton, the Meridian, Western and Renaissance hotels that meet the needs of affluent tourists and business travelers. Its classic hotels include Courtyard, such as the one in Sydney's North Ride, and Four Points by Sheraton in several major Australian cities, and for the value for money. Segment the range includes Aloft, such as the one near Perth Airport, and AC and Moxa hotels. With economic upheavals and a looming recession triggered by the US-China trade talks and the global coronavirus pandemic, consumers at all income levels, including affluent consumers, have cut back on their spending and sought greater value from their purchases. In many cases, luxury marketers targeting high-income consumers have been the hardest hit.
Chinese consumers make up a substantial share of sales of global luxury products. But with the tariffs, and the weakening of the China economy, high-end European brands are seeing a slowdown in sales growth. 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 profiles.
In Chapter 5, we discussed how the products people buy reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals. For example, although both Gloria Jeans and Starbucks are coffee shops, they offer very different product assortments and store atmospheres. Yet each succeeds because it creates just the right value proposition for its unique mix of customer lifestyles.
Starbucks targets more highbrow young professionals, whereas L'Oreal jeans targets the average person. We see lifestyle differences emerging in attitudes towards insurance. Consider a high net worth customer looking for comprehensive insurance coverage for multiple properties, vehicles, and high value possessions. For such customers, a white glove service, including a dedicated phone number and a concierge style facility for completing administrative paperwork, may be appropriate.
In contrast, there are customers who buy insurance only because they are required to do so. For instance, they may buy car insurance only to meet state or provincial legislative requirements, or purchase homeowner insurance just to satisfy the requirements of a mortgage company. For such customers, price and ease of purchase are more important, and therefore, standardized.
automated or even self-service options may be more appropriate. Asterisk marketing and action 6.1 discusses a lifestyle segmentation used in Australia. Marketing and action 6.1. Value segments.
Understanding Australian psychographics. Roy Morgan is an Australian market research company with offices in Indonesia, New Zealand, the United Kingdom, and the United States. It has developed a proprietary system called value segments that divides the market based not only on demographics and psychographics, but also on values, mindsets, and attitudes that motivate consumer behavior.
In its study of Australians, Roy Morgan identified 10 segments of Australians based on their lifestyle, personality, and values that can be used to help marketers understand their target segment and develop marketing strategies suitable to them. Socially aware. Australians in this segment are community-minded and socially active.
Their life motto is learning a living. where they strive to learn new things by seeking new opportunities for training, education, and knowledge. Decision-making is deliberate, as they are thorough in their information search and consider carefully the consequences of each option.
Their strong commitment to social responsibility and somewhat idealistic outlook mean they believe they can change the world by being involved in pressure groups and convincing others of their opinions. Visible achievement. These are the have-made-it Australians.
They have a network of friends who, like them, are interested in economics and politics. Despite their success, traditional values about home, work, and society are important to them. They take pride in providing for their families without necessarily flaunting their wealth. They believe in buying high-quality products that are worth the money spent and not in buying something that is expensive with no commensurate quality.
Young optimism. As the name suggests, the young optimistic Australians are young. optimistic and seek to improve their prospects in life.
To do that, they are busy planning their careers and thinking about the future. They are willing to work abroad to gain an international perspective. Not into fads and fashion, they are instead image and style conscious and want to make good impressions on others. Young optimistic Australians want to experience what life has to offer.
Besides traveling and juggling their career aspirations with spending time with friends and family, they will give anything a go, for example, bungee jumping, skydiving and whitewater rafting. They work hard and they play hard. Real conservatism.
Unlike the young optimists, the real conservative Australians are cautious when it comes to new things and ideas. As part of the establishment, they favor disciplined, predictable and safe society. Savings are important to them and hence, the real conservatives accumulate assets such as property, antiques, art and gold.
They are conservative in their outlook concerning social, moral, and ethical values. The more established brands appeal to them because they associate these brands with consistent value and quality. Their old-school mentality means they believe in doing the right thing and being among the right people.
Look at me. The look-at-me Australians are young and rebellious. They want to stand out from the crowd and look for fashion, fun, and freedom away from family. They want to dissociate themselves from their parents' generation and instead conform to their peer group.
They lead an active social life and do not like to stay at home. Hence, partying is common. Part of their way of standing out from the crowd is to be seen as outrageous and taking part in cool or hip activities.
Unlike young optimists, who have long-term career plans, the look-at-me Australians have a shorter time perspective. For instance, they look for jobs rather than work to build a career. Conventional family life. Australians in this segment represent the core Australia, with values focused on personal and family lives.
They look for financial security, and want to give their children better opportunities than they had when they were young. This culminates into the great Australian dream of owning a home in the suburbs and driving a good car to ferry their children to sports and school activities, and to their friends' homes. This dream also means such Australians are mindful of mortgage payments and job security. Traditional family life. This is the older version of the conventional family life segment.
Australians in this segment are empty nesters, and may have extended families. With grown-up children, these Australians focus on rebuilding their relationship with one another, and doing things they could not do when their children were growing up. Since family is still central to them, though, it is not surprising to find traditional family Australians spending time and energy in getting the family to visit them for weekend barbecues, and are keen to babysit their grandchildren. This segment does not embrace change.
They prefer the old and the familiar. A fairer deal. Cynical and pessimistic, Australians in this segment feel that life has dealt them an unfair hand. They are angry, disillusioned and hostile.
Struggling financially, they feel that the world is falling apart. As a way to vent their feelings of frustration and escape from this unfair world, the fairer deal Australians drink beer or watch television with friends who are similar to them. They tend to like activities that are usually not socially acceptable, such as souping up their cars and driving motorbikes that are very loud. Work-wise, they care more about how much a job pays rather than the kind of work they do. Something better.
Australians in this segment are competitive, individualistic and ambitious individuals who want a bigger and better deal out Keeping up with the Joneses is their motto, which may see them overextending themselves financially by buying items they feel will portray their success. Outward appearances, such as driving the right car, wearing the right clothes and living in the right residential area, are important for something better Australians because they want people to look up to them. The key consideration for this segment is comparison, they want to be better than others.
As such, they are concerned with what other people are doing. Basic needs. Australians in this final consumer segment are retirees, pensioners and people on social security, who get by in life on a day-to-day basis. Contrary to expectations, they are happy and contented with what they have.
They do not look for more, but enjoy watching the world go by while still feeling a part of it. They tend to be churchgoers with strong Christian values. They desire order and security, and will take part in community programs such as Neighborhood Watch and Safety House.
They are not comfortable with the connected world of email and mobile phones. Sources. Adapted from Roy Morgan. About value segments.
www.roymorgan.com forward slash products forward slash values dash segments. Accessed August 2019. Roy Morgan value segments are devised by Michelle Levine of Roy Morgan and Colin Benjamin of the Horizons Network. See www.roymorgan.com.
Questions. A. How useful do you think this 10 segmentation approach is for the marketing of A. A zoo such as Melbourne Zoo.
B. Wine such as Margaret River Wine. And C. Tesla cars. B.
Which segments do you think the following clothing retailers appeal to? Country Road, Seed Heritage, and Tempt. Y. C. If you were a marketer, how would you reach out to the Look At Me segment?
D. If you were a producer of the TV cooking competition Showmaster Chef, what changes would you make to the program to appeal to the A, socially aware, and B, something better segments? Marketers also use personality variables to segment markets. For example, cruises to the Kingly region, or to West Papua, and Papua New Guinea target adventure seekers. While some cruisers to the Kimberley region appeal to high-energy couples and families, with their many outdoor activities, True North is designed to allow discerning adventurers to experience the wilderness in surroundings more akin to one of the world's most exclusive hotels.
By contrast, P&O cruisers are varied, and the six ships in the fleet offer choices for adventurers, cultural tourists, wilderness and wildlife seekers, beach lovers and sporty types, as well as catering for families both young and old, young couples and active older people, depending on their needs. Behavioral segmentation. Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments.
Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation can help firms build up product usage. For example, most consumers of fruit juice drink it in the morning, but marketers such as Boost Juice want juices to be seen as a part of a healthy lifestyle and to be consumed throughout the day.
Many marketers prepare special offers and ads for holiday occasions. Some holidays, such as Mother's Day and Father's Day, were originally promoted partly to increase the sale of chocolates and sweets, flowers, cards and other gifts. And chocolate marketers with impulse lines, such as Cherry Ripe, Mars and Violet Crumble Bars, and specialty brands such as Lindt, make up special Easter egg look-alike products to take advantage of the Easter selling period. In some countries, occasions are used to generate sales, for example, Valentine's Day is big business in Japan, where, unlike the usual practice in the rest of the world, women don't give things to men.
The tradition is that a woman gives chocolates to the man she likes. and also to other men she knows, even where there is no romantic interest. However, the type of chocolates given varies. The giri choco are the cheaper, mass-marketed chocolates that one gives to friends and family giri means obligation, so these chocolates are more of an obliterate gift while the fancier and more expensive honmei chocos are given to the men the women are romantically interested in. To generate even more sales, Japan also celebrates White Day a month later on the 14th of March.
On this occasion, men reciprocate the sentiment with another round of gift-giving, typically flowers and chocolates, to the women who gave them chocolates on Valentine's Day. Usually, men return the gifts threefold. Benefits sought.
A powerful form of segmentation is to group buyers according to the different benefits they seek from the product. Benefit segmentation requires finding the main benefits people look for in the product class, the kinds of people who look for each benefit. and the main brands that deliver each benefit. For example, people who buy wearable health and activity trackers look for a variety of benefits, from counting steps taken and calories burned to heart rate monitoring and high-performance workout tracking and reporting.
To meet the varied demand, Fitbit makes devices aimed at buyers in three major benefit segments, everyday fitness, active fitness, and performance fitness. For everyday fitness buyers who want only very basic fitness tracking, Fitbit's simplest device, Zip, tracks steps taken, distance traveled, calories consumed, and active minutes. The Fitbit One, also aimed at everyday fitness buyers, does everything the Zip tracker does and also monitors how long and how well users sleep.
At the other extreme, for the performance fitness segment, the high-tech Fitbit Surge helps serious athletes, providing GPS tracking, heart rate monitoring, all-day activity tracking, automatic workout tracking and recording, sleep monitoring. text notification, music control, and wireless syncing to Fitbit smartphone and computer asterisk. 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. Included in the potential user group are consumers facing life-stage changes, such as new lads and new parents, who can be turned into heavy users. For example, bounty bags are distributed to Australian mothers-to-be and new mothers by hospital staff or at antenatal classes. The bags contain product samples the new mother may not have used before, such as nappies and baby wipes, as well as parenting magazines and local area healthcare information booklets dot asterisk.
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.
For example, smartphone users who access the internet may be classified as heavy users based on their use of high-bandwidth services such as peer-to-peer file sharing, or on the amount of time they spend in social media communication. Heavy users may require more expensive data plans compared to those required by light users of these services. Either way, the telecommunications companies, telcos, target heavy users, as they provide a high return on investment.
Loyalty status A market can also be segmented by consumer loyalty. Consumers can be loyal to brands, cold power, stores, Target, and companies, Toyota. Buyers can be divided into groups according to their degree of loyalty.
Some consumers are completely loyal, they buy one brand all the time. For example, while Apple has an almost cult-like following of loyal users. Sony PlayStation users can be almost as fanatical, judging that some 1 million PS4s were sold in the first 24 hours following the product's release in November 2013. And almost 1 billion units were sold worldwide in the 6 years that followed. Asterisk, other consumers are somewhat loyal.
They are loyal to 2 or 3 brands of a given product, or favor one brand while sometimes buying others. Still, other buyers show no loyalty to any brand. Either they want something different each time they buy, or they buy whatever is a price special.
A company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers. For example, by studying PS4 fanatics, Sony can better pinpoint its target market and develop marketing appeals for its forthcoming PS5. Highly loyal customers can be a valuable asset.
They often promote the brand and the company through personal word of mouth and via social media. By studying its less loyal buyers, the company can detect which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses and take action to correct them. Using multiple segmentation bases Watch market segmentation and positioning at Marriott. Marketers rarely limit their segmentation analysis to only one or a few variables.
Rather, they mostly 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. Business information services, such as market research firm Nielsen, provide multivariable segmentation systems that merge geographic, demographic, lifestyle and behavioral data.
to help companies segment their markets down to postcodes, neighborhoods, and even households. Such segmentation provides a powerful tool for marketers of all kinds. It can help companies to identify and better understand key customer segments, target them more efficiently, and tailor market offerings and messages to their specific needs.
Segmenting business markets. Consumer and business marketers use many of the same variables to segment their markets. Business buyers can be segmented geographically, demographically, industry, company size, or by benefit sort, user status, usage rate, and loyalty status. Yet, business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.
Almost every company serves at least some business markets. For example, American Express targets businesses in three segments merchants corporations and small businesses It has developed distinct marketing programs for each segment in the merchant segment American Express focuses on convincing new merchants to accept the card and on managing Relationships with those merchants that already do for larger corporate customers The company offers a corporate card program that includes extensive employee expense and travel management services It also offers a segment a wide range of asset management retirement planning and financial education services Many companies set up separate systems for dealing with larger or multiple location customers For example progressive a marketer offers furniture first segments customers into four industries aged care commercial hospitality and health care Some national multiple location customers have particular requirements that may reach beyond the scope of progressives individual five stores So, Progressive uses national account managers to help its stores handle its national accounts. Within a given target industry and customer size, a company can segment by purchase approaches and criteria. As in consumer segmentation, many marketers believe that buying behavior and benefits provide the best basis for segmenting business markets. Segmenting international markets.
Few companies have either the resources or the will to operate in all, or even most, of the countries that dot the globe. Although some large companies, such as Coca-Cola or Samsung, sell products in more than 200 countries, most international firms focus on a smaller set. 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 behaviors.
Companies can segment international markets using one, or a combination of several variables. They can segment by geographic location, grouping countries by regions such as Western Europe, the Pacific Rim, the Middle East or Africa. Geographic segmentation assumes that nations close to one another will have many common traits and behaviors. This is often the case, but there are many exceptions. For example, although the countries in Southeast Asia have much in common, they differ culturally and economically.
As a case in point, Malaysia and the island state of Singapore are connected and are interdependent in some ways, but differ culturally, economically, and linguistically from each other and from the many other adjacent countries, such as Indonesia, Thailand and Vietnam. World markets 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.
A country's economic structure shapes its population's product and service needs, and therefore, the marketing opportunities it offers. For example, some companies target the BRIC countries of Brazil, Russia, India and China, due to their potential and rapidly increasing buying power, along with the so-called bottom of the pyramid countries that have vast untapped markets, although without such large individual buying power. Countries can also be segmented by political and legal factors, such as the type and stability of government, receptivity to foreign firms, monetary regulations, and amount of bureaucracy.
Cultural factors can also be used, grouping markets according to common languages, religions, values and attitudes, customs and behavioral patterns. Segmenting international markets based on geographic, economic, political, cultural and other factors assumes that segments should consist of clusters of countries. However, as communications technologies, such as satellite television, the internet, and social media, continue to connect consumers around the world, marketers can define and reach segments of like-minded consumers no matter where in the world they are. Using intermarket segmentation, also called cross-market segmentation, marketers form segments of consumers who have similar needs and buying behaviors even though they are located in different countries. For example, Lexus targets the world's well-to-do, the global elite segment, regardless of their country.
Coca-Cola creates special programs to target teens, core consumers of its soft drinks the world over. Hence, it partnered with Spotify to provide a global music network for music-loving teens to share their experiences with friends worldwide, both online and offline. Requirements for effective segmentation.
Watch segmenting, targeting and positioning at McDonald's Australia. There are many ways to segment a market, but not all segmentations are effective. For example, buyers of table salt could be divided into blonde and brunette customers. But hair color obviously does not affect the purchase of salt. Furthermore, if all salt buyers bought the same amount of salt each month, believe that all salt is the same and wanted to pay the same price, the company would not benefit from segmenting this market.
To be useful, market segments must be. Measurable. The size, purchasing power, and profiles of the segments can be measured. Accessible.
The market segments can be effectively reached and served. Substantial. The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.
It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than 2 meters. Differentiable. The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.
If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments. Actionable. Effective programs can be designed for attracting and serving the segments.
For example, although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment. Linking the concepts. Pause for a bit and think about segmentation.
As a consumer yourself, think about your own personal experience when you shop. Identify specific companies, other than the examples already mentioned, that practice the different types of segmentation just discussed. How do the stores you shop at use the segmentation concepts you are reading about here? And why do they do this? Using the segmentation bases you have just read about, segment the Australian footwear market.
Describe each of the major segments and sub-segments. Keep these segments in mind as you read the next section on market targeting. Market targeting.
Market segmentation reveals the company's market segment opportunities. The company 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. Evaluating market segments.
In evaluating different market segments, a firm must look at three factors. One, segment size and growth. Two, segment structural attractiveness.
And three, company objectives and resources. First, a company wants to select segments that have the right size and growth characteristics. But right size and growth is a relative matter. The largest, fastest growing segments are not always the most attractive ones for every company.
Smaller companies may lack the skills and resources needed to serve the larger segments. Or they may find these segments too competitive. Such companies may target segments that are smaller and less attractive, in an absolute sense, but that are potentially more profitable for them.
The company also needs to examine major structural factors that affect long-run segment attractiveness. Asterisk, for example. A segment is less attractive if it already contains many strong and aggressive competitors. The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment.
The relative power of buyers also affects segment attractiveness. Buyers with strong bargaining power relative to sellers will try to force prices down, demand more services, and set competitors against one another all at the expense of seller profitability. Finally, 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. Finally, even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources.
Some attractive segments can be dismissed quickly because they do not align with the company's long-run objectives. Or the company may lack the skills and resources needed to succeed in an attractive segment. For example, let us assume that the economy segment of the motor vehicle market is large and growing. Even so, given its company objectives and resources, it would make little sense for luxury performance car maker BMW to enter this segment and compete head-on with the likes of Hyundai and Kia. A company should enter only those segments in which it can create superior customer value and gain advantages over competitors.
Selecting target market segments 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 6.2 shows that companies can target very broadly undifferentiated marketing, very narrowly micro-marketing, or somewhere in between differentiated or concentrated marketing. Figure 6.2 Market targeting strategies.
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. This mass marketing 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 company decides to target several market segments. and design separate offers for each.
Toyota Corporation produces several brands of cars from Toyota, Corolla, Camry and Orion, and Lexus, IS, GS, and LS models, each targeting its own segments of car buyers. Procter & Gamble markets various household care brands, not to mention such beauty and grooming brands as Head & Shoulders, Olay & Pantene, which compete with each other and with competitor Unilever's brands on supermarket shelves. Unilever's personal care brands include Dove, Impulse, Lifebuoy, Lux, Lynx, Pairs, Rexona, Sunsilk, and Vaseline.
Multibrand distributor Unilever uses differential marketing to offer a range of personal care brands that tap into consumer lifestyles and aspirations. By offering product and marketing variations to segments, these 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 does undifferentiated marketing across all segments. But differentiated marketing also increases the costs of doing business. A firm usually finds it more expensive to develop and produce, say, 10 units of 10 different products rather than 100 units of one product.
Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion planning, and channel management. And trying to reach different market segments with different advertising campaigns increases promotion costs. Thus, the company must weigh increased sales against increased costs when deciding on a differentiated marketing strategy. Concentrated marketing.
Using a concentrated marketing, or niche marketing, strategy, instead of going after a small share of a large market, the company goes after a large share of one, or a few smaller segments or niches. Consider flora and fauna. This Australian online health and beauty store started because its owner, a vegan and environmentalist, struggled to find cruelty-free cosmetics.
The store's responsible retailing mission. was a hit with environmentalist consumers, and its range grew from 500 products to over 5,500 organic vegan skincare, makeup, body, home and lifestyle products. Through concentrated marketing, the company 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 towards only those consumers that it can serve best and most profitably. Whereas segments are fairly large and normally attract several competitors, niches are smaller and may attract only one or a few competitors. Niching lets smaller companies focus their limited resources on serving niches that may be unimportant to or overlooked by larger competitors. Many companies start as niches to get a foothold against larger, more resourceful competitors, and then grow into broader competitors.
In contrast, as markets change, some mega-marketers develop niche products to create sales growth. For example, in recent years, as consumers have grown more health-conscious, the demand for carbonated soft drinks has declined while the market for energy drinks and juices has grown. To meet this shifting demand, mainstream cola marketers PepsiCo and Coca-Cola have both developed or acquired their own niche products, ranging from low-kilajoule carbonated soft drinks to enhanced waters, energy drinks, and juices. Today, the low cost of setting up shop on the internet makes it even more profitable to serve seemingly minuscule niches.
Small businesses in particular are realizing riches from serving small niches on the web. Consider Etsy. Etsy is the world's handmade marketplace selling everything from handmade soaps to vintage fedoras. and even vampire hunting kits.
Sometimes referred to as eBay's funky little sister, the Etsy online craftspare website is a far cry from the old-fashioned street corner flea market. Thanks to the reach and power of the web, in 2019, Etsy counted 2.5 million active sellers in nearly every country in the world, and its merchandise sales stood at 4.97 billion US dollars. Etsy's vibrant marketplace is more than an e-business site, it is a thriving community. For example, it sponsors actual and virtual meetups organized by location from Syracuse to Saskatchewan and Singapore, Medium, Papier-Mache, Mosaic, and Interest Area, Chainmailers Guild, Lizards and Lollipops.
Etsy's mission is to reimagine commerce in ways that build a more fulfilling and lasting world. It aims to build a platform where creative entrepreneurs can find meaningful work selling their goods in both global and local markets. where thoughtful consumers can discover those goods and build relationships with the people who make and sell them. Concentrated marketing can be highly profitable. At the same time, it involves high financial risks.
Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or larger competitors may decide to enter the same segment with greater resources. For these reasons, many companies prefer to diversify in several market segments.
Micromarketing. Differentiated and concentrated marketers tailor their offers and marketing programs to meet the needs of various market segments and niches. At the same time, however, they do not customize their offers to each individual customer. Micromarketing is a practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Rather than seeing a customer in every individual, micro marketers see the individual in every customer micro marketing includes local marketing and individual marketing local marketing local marketing involves tailoring brands and promotions to the needs and wants of local customer groups cities neighborhoods and even specific stores for example large retailers customize their merchandise on a regional basis to meet the needs of local shoppers advances in communications technology have given rise to a new high-tech version of location-based marketing by coupling mobile phone services with gps devices many marketers are now targeting customers wherever they are with what they want for example starbucks mobile order and pay feature on a mobile app uses a customer's proximity to a store to enable the customer to order ahead then just walk in and collect their purchase dot asterisk local marketing has some drawbacks particularly in relatively small markets such as australia and new zealand 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. Further, a brand's overall image might be diluted if the product and message vary too much in different localities. Still, as companies face increasingly fragmented markets, and as new supporting technologies develop, the advantages of local marketing often outweigh the drawbacks. Local marketing helps a company to market more effectively in the face of pronounced regional and local differences in demographics and lifestyles.
It also meets the needs of the company's first-line customers, retailers, who prefer more finely tuned product assortments for their neighborhoods. Individual marketing. In the extreme, micromarketing becomes individual marketing tailoring products and marketing programs to the needs and preferences of individual customers. Individual marketing. has also been labeled one-to-one marketing, mass customization, and markets of one marketing.
The widespread use of mass marketing has obscured the fact that, for centuries, consumers were served as individuals, the tailor-customer made a suit, the cobbler designed shoes for an individual, and the cabinetmaker made furniture to order. Today, however, new technologies are permitting many companies to return to customized marketing. Sophisticated analytical techniques to track consumers' digital movements are available to build detailed customer profiles containing highly personal information that can be used to hyper-target individual consumers with personalized brand messages through mass customization.
Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs. Property conglomerate Daily and Wanda Group uses behavior recognition technology in its shopping malls to track shoppers' movements. As well as showing how long as a person lingers in a store, or whether they walk out with a bag in their hand, the installed cameras can identify shoppers' age, gender, and shopping patterns.
Such information can help the mall, and its merchants, make better decisions concerning layout configurations. Shui on Land, which owns Zintiand Plaza, found that the workforce in the city center tower located above this mall comprises 70% female employees. Hence, Shui on Land renovated five of the floors in the mall to appeal to female shoppers. To further attract female shoppers, Shui on Land uses big data for effective couponing.
Shoppers going to the mall for the first time key in their mobile number on a screen that links to their mobile payment WeChat accounts. This gives Shui on Land access to the shoppers' buying habits on Tencent Holdings, WeChat's parent company. Relevant shopping discount coupons are then sent to the shopper's e-wallet.
where peak shoppers need only stand in front of the screen, and information on their past shopping habits is accessed that prompts the screen to suggest which shops or brands might interest the shopper. Shoei on Land has also installed sensors that capture shopping hesitancy by counting the number of times a shopper picks up a product and then sets it down. Such data helps merchants recognize which store displays work or don't, and which accelerate sales.
Choosing a targeting strategy. Companies need to consider many factors when choosing a market targeting strategy. Which strategy is best depends on company resources. When the firm's resources are limited, concentrated marketing makes the most sense. The best strategy also depends on the degree of product variability.
Undifferentiated marketing is more suited to uniform products, such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration. The product's lifecycle 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.
In the mature stage of the product life cycle, however, differentiated marketing often makes more sense. Another factor is market variability. If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.
Finally, competitors' marketing strategies are important. When competitors use differentiated or concentrated marketing, undifferentiated marketing can be a high-risk strategy. 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.
Smart targeting helps companies to be more efficient and effective by focusing on the segments that they can satisfy best and most profitably. Targeting also benefits consumers. Companies serve specific groups of consumers with offers carefully tailored to their needs. However, target marketing sometimes generates controversy and concern. The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.
For example, marketers in a wide range of industries, from cereal and toys to fast food and fashion, have been heavily criticized for their marketing efforts directed towards children. Critics worry that premium offers and high-powered advertising appeals presented through the mouths of lovable animated characters will overwhelm children's defenses. Various state and Commonwealth consumer affairs departments and citizen action groups have accused tobacco and beer companies of targeting underage smokers and drinkers.
To encourage responsible advertising, the Australian Association of National Advertisers, AANA, publishes the Industry Code of Ethics. as the cornerstone of the self-regulatory system. This is supplemented by the Code of Advertising and Marketing to Children, Food and Beverages Code, Environmental Claims Code, and Wagering Advertising and Marketing Communication Code, to which all accredited agencies are expected to adhere. In effect, they have published extensive children's advertising guidelines that recognize the special needs of child audiences. The growth of the internet and other carefully targeted direct media has raised fresh concerns about potential targeting abuses.
The internet allows increased pinpointing of audiences, and in turn, more precise targeting. This might help makers of questionable products or deceptive advertisers to more readily victimize the most vulnerable audiences. Unscrupulous marketers may send tailor-made deceptive messages directly to the computers of millions of unsuspecting consumers despite spam filters and government legislation. Not all attempts to target children minorities or other special segments draw such criticism in fact most provide benefits to targeted consumers a melbourne-based technology startup company kisa markets the kisa phone directly to seniors who need a simple mobile phone that has larger personalized tactile buttons a dedicated sos button for emergency services and a louder ringtone in less developed countries such as india and indonesia where every year two million children under age five die due to infections such as diarrhea and pneumonia unilever's lifeway targets children in its advertisements with a focus on five children are encouraged to wash their hands five times a day for personal hygiene so that they can live beyond the age of five years 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 the company, but also the interests of those targeted. Linking the concepts. It is time to pause and review. At the last linking the concepts, you segmented the Australian footwear market. Refer to figure 6.2, Market Targeting Strategies, and select two companies that serve the footwear market.
Describe their segmentation and targeting strategies. Identify two companies serving the footwear market, one that targets many different segments and another that focuses on only one or a few segments. How does each company that you chose differentiate its market offering and image? How effectively has each company established this differentiation in the minds of targeted consumers?
The final section in this chapter deals with such positioning issues. Figure 6.2. market targeting strategies differentiation and positioning beyond deciding which segments of the market will target the company must decide on a value proposition or 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 the product is defined by consumers on important attributes that is the place the product occupies in consumers minds relative to competing products products are created in the factory but brands are created in the mind says positioning expert dot asterisk in the motor vehicle market the nissan micro and suzuki swift are positioned on economy lexus and mercedes-benz on luxury and audi bmw and porsche on performance volvo positions strongly on safety and toyota positions its fuel efficient hybrid camry and prius models as a high-tech solution to the energy shortage reaching out to environmentally conscious buyers. Consumers are overloaded with information about products and services. They cannot re-evaluate products every time they make a buying decision.
To simplify the buying process, consumers organize products, services and companies into categories, and position them in their minds. A product's position is a complex set of perceptions, impressions and feelings that consumers have for the product compared with competing products. Essentially, it is the way the product is defined by consumers on important attributes, the place the product occupies in consumers' minds relative to competing products.
Segmentation and product positioning are related. The product position must resonate with each of the segments the company chooses to target. For example, Volvo may segment the market in terms of income and family size. It decides to target the well-heeled buyer who can afford a European car and who has a young family. and wants to ensure the family is safe and protected while driving in the car.
Hence, Volvo positions its product as a safe car to meet the needs of this target segment. Consumers position products with or without the help of marketers. But marketers do not want to leave their product's positions to chance. They must plan positions that will give their products the greatest advantage in selected target markets, and they must design marketing mixes to create these planned positions.
Positioning Maps In planning their differentiation and positioning strategies, marketers often prepare perceptual positioning maps, which show consumer perceptions of their brands versus competing products on important buying dimensions. Figure 6.3 shows a hypothetical positioning map for carbonated beverages in the 15- to 18-year-old segment. The position of each circle on the map indicates the brand's perceived positioning on two dimensions, social acceptability with peers, and sweetness. The size of each circle indicates the brand's relative market share.
Figure 6.3. Positioning map. Carbonated beverages, 15 to 18-year-olds.
Thus, this age group perceives Coca-Cola as being the carbonated beverage to be seen consuming when drinking with friends. Pepsi is seen as being sweeter and less socially acceptable by this age group, while Solo is seen as low on sweetness and less socially acceptable. The perception of the Solo brand is perhaps understandable given its positioning in advertising with an older age group.
Given the larger market share achieved by Coke, as shown in figure 6.3 by the size of the circle, we could conclude that among this age group, Coke is closest to the ideal brand. Choosing a differentiation and positioning strategy. Some companies find it easy to choose a differentiation and positioning strategy.
For example, A firm well known for quality in certain segments will go for this position in a new segment if there are enough buyers seeking quality. But in many cases, two or more firms will go after the same position. Then, each will have to find other ways to set itself apart.
Each firm must differentiate its offer by building a unique bundle of benefits that appeals to a substantial group within the segment. Above all else, a brand's positioning must serve the needs and preferences of well-defined target markets. The differentiation and positioning task consists of three steps. One, identifying a set of differentiating competitive advantages upon which to build position. Two, choosing the right competitive advantages.
And three, selecting an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market, identifying possible value differences and competitive advantages. To build profitable relationships with target customers, marketers must understand customer needs better than competitors do and deliver more customer value. To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage.
But solid positions cannot be built on empty promises. If a company positions its product as offering the best quality and service, it must actually differentiate the product so that it delivers the promise quality and service companies must do much more than simply shout out their positions in ad slogans and taglines they must first leave the slogan for example if a department store conducts research and finds that customers place high value on an easy shopping experience then it should ensure that the stores do indeed offer this experience it would be wise to remake the stores to actually deliver the promise positioning even if it's meant a long delay to get it right to find points of differentiation marketers must think through the customer's entire experience with the company's product or service an alert company can find ways to differentiate itself at every customer contact point in what specific ways can accompany differentiate itself or its market offer it can differentiate along the lines of product services channels people or image through product differentiation brands can be differentiated on features performance or style and design thus both positions its speakers on their striking design and sound characteristics for meat retailers using the heart foundations heart smart helps them differentiate particular cuts of meat as being a healthy food choice beyond differentiating its physical product a firm can also differentiate the services that accompany the product some companies gain services differentiation through speedy convenient or careful delivery for example lexus makes fine cars but is perhaps even better known for the quality service that creates outstanding ownership experiences for lexus owners in an age where customer satisfaction with airline service is in constant decline singapore airlines sets itself apart through extraordinary customer care and the grace of its flight attendants when you're able to meet the expectations of your customers that's normal service however if there's an opportunity that arises to go beyond the expectation of a customer to anticipate what a customer wants to me that's good service says a crew member of the international airline i treat the aircraft as my home and every passenger that walks in through that door is my guest that i welcome into my home says another firms that practice channel differentiation gain competitive advantage through the way they design their channels coverage expertise and performance amazon.com sets itself apart with its smooth functioning direct channel companies can also gain a strong competitive advantage through people differentiation hiring and training better people than their competitors do people differentiation requires that a company selects its customer contact people carefully and trains them well for example disney trains its theme park people thoroughly to ensure they are competent courteous and friendly from hotel check-in agents to the monorail drivers to the right attendance to the people who sweep main street usa Each employee is carefully trained to understand customers and to make people happy. Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey the product's distinctive benefits and positioning.
Developing a strong and distinctive image calls for creativity and hard work. A company cannot develop an image in the public's mind overnight using only a few advertisements. If Sofitel means quality, this image must be supported by everything the company says and does in its luxury hotels. Symbols such as McDonald's golden arches, the Nike swoosh, the Qantas kangaroo, or Google's colorful logo can provide strong company or brand recognition and image differentiation.
The company might build a brand around a famous person, as Nike did with its Air Jordan basketball shoes. Some companies even become associated with colors, such as IBM blue, Cadbury purple. or coca-cola red the chosen symbols characters and other image elements must be communicated through advertising that conveys the company's or brand's personality choosing the right competitive advantages suppose a company is fortunate enough to discover several potential differentiations that provide competitive advantages it now must choose the ones on which it will build its positioning strategy it must decide how many differences to promote and which ones how many differences to promote many marketers think that companies should aggressively promote only one benefit to the target market advertising executive rosa reeds for example believes a company should develop a unique selling proposition usp for each brand and stick to it each brand should pick an attribute and tell itself as number one on the attribute buyers tend to remember number one better especially in our society where we receive so many communications each day.astroscus, Big W promotes its everyday savings, and Commonwealth Bank promotes its positive power for customers with its campaign. Other marketers think that companies should position themselves on more than one differentiator. This may be necessary if two or more firms are claiming to be based on the same attribute.
Today, in a time when the mass market is fragmenting into many small segments, companies are trying to broaden their positioning strategies to appeal to more segments. Which differences to promote? Not all brand differences are meaningful or worthwhile, not every difference makes a good differentiator. Each difference has the potential to create company costs as well as customer benefits. A difference is worth establishing to the extent that it satisfies the following criteria.
Important. The difference delivers a highly valued benefit to target buyers. Distinctive.
Competitors do not offer the difference. or the company can offer it in a more distinctive way. Superior.
The difference is superior to other ways in which 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.
The company can introduce the difference profitably. Many companies have introduced differentiations that failed one or more of these tests. When the Western Stanford Hotel in Singapore once advertised that it was the world's tallest hotel, it was a distinction that was not important or relevant to most tourists. In fact, it turned many off. Thus, choosing competitive advantages upon which to position a product or service can be difficult, yet such choices may be crucial to the brand's success.
Choosing the right differentiators can help a brand to stand out from the pack of competitors. Selecting an overall positioning strategy. The full positioning of a brand is called the brand's value proposition, the full mix of benefits upon which the brand is differentiated and positioned.
It is the answer to the customer's question, why should I buy your brand? Volvo's value proposition hinges on safety, but also includes reliability, luminous and styling, all for a price that is higher than average, but seems fair for this mix of benefits. Figure 6.4 shows possible value propositions upon which a company might position its products. In figure, the five green cells represent winning value propositions, differentiation, and positioning that give the company competitive advantage.
The red cells, however, represent losing value propositions. The center yellow cell represents, at best, a marginal proposition. In the following sections, we discuss the five winning value propositions upon which companies can position their products, one, more for more, two, more for the same. 3. The same for less, 4. Less for much less, and 5. More for less. Figure 6.4 Possible Value Propositions More for more.
More for more positioning involves providing the most prestigious product or service, and charging a higher price to cover the higher costs. Partech for leap watches, Hermes bags, Mornblank writing instruments, Mercedes-Benz motor vehicles each claim superior quality, craftsmanship, durability, performance or style, and charges a higher price. Here is another example.
Not all tea is the same. At least that's what TWG Tea wants you to believe. This Singapore-based tea company has brought a new level of tea appreciation to the world.
Its canary yellow canisters shout the company's passion for tea. Largely Asian-inspired, each canister holds fine teas with mysterious names such as Silver Moon and Always Sakura. Carefully curated.
There are more than 1,000 such single-state fine harvest teas and blends to choose from worldwide. TWG Tea was launched in Singapore by Toha Boudib, a French national of Moroccan descent, who is an experienced hand in the tea business, having worked in it since he was age 23. TWG Tea is positioned as a global luxury brand, with a distribution network of 42 countries, and a presence in 19 cities from Bangkok to Dubai to New York. Taking its bearings from Haute Couture, the company wants its customers to pay relatively more for its gourmet tea, much like a woman who, without batting an eye, might spend a large sum on a bespoke bag.
Its shops are called boutiques, and its restaurants are referred to as salons. Similar to the fashion world, TWG introduces a collection of new flavors each year. These blends have a sense of mystery and exoticism.
There's the Geisha Blossom, which is a blend of green teas accented with southern fruits, and the Magic Flute, which is a combination of robust black tea and exotic red berries. The idea behind these different blends and interesting names is to create a voyage-like experience when customers walk into its boutiques. TWGT wants its customers to feel they are traveling to a different place with their palate and the tea to evoke memories of these different experiences. Says Boudib, I aim to introduce our concept into key fashion capitals first and then expand to any other markets where there is a demand for luxury tea and opportunities for growth in tea appreciation. Although offering more for more can be profitable, this strategy can make brands vulnerable.
It often invites imitators who claim the same quality but at a lower price. For example, in the eyes of many users, smartphones such as the Samsung Galaxy Note 10 and Huawei P30 Pro offer even more desirable features than the iPhone does. Also, luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending.
More for the same. Companies can attack a competitor's more formal positioning by introducing a brand offering comparable quality, but at a lower price. For example, Toyota introduced its Lexus line with a more for the same value proposition versus Mercedes-Benz and BMW.
Its first North American ad headline read, Perhaps the first time in history that trading a $72,000 car for a $36,000 car could be considered trading up. It communicated the high quality of its new Lexus through rave reviews in car magazines. Many Mercedes-Benz owners switched to Lexus.
More recently, by introducing more advanced technologies and architecture, Lexus is targeting those who might seek greater performance, design and fun, and who might otherwise have become an Audi or BMW customer. The same for less. Offering the same for less can be a powerful value proposition everyone likes a good deal.
Discount stores such as Big W. and category killers such as Bunnings use this positioning. They do not claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores do, but at deep discounts, based on superior purchasing power and lower-cost operations. Other companies develop imitative, but lower-priced brands in an effort to lure customers away from the market leader.
For example, Amazon's Kindle Fire tablet sells for much less than the Apple iPad or Samsung Galaxy tablet. Amazon claims that it offers premium products at non-premium prices. Less for much less.
A market almost always exists for products that offer less and therefore cost less. Few people need, want or can afford the very best in everything they buy. In many cases, consumers will gladly settle for less than optimal performance, or give up some product features in exchange for a lower price.
For example, many travelers seeking lodgings prefer not to pay for what they consider unnecessary extras, such as a pool, attached restaurant, or mints on the pillow. Hotel chain Accor suspends some of these amenities in its Hotel F1 hotels and charges less accordingly. Less for much less positioning involves meeting consumers' lower performance or quality requirements at a much lower price.
Budget airlines such as Scoot and Jetstar practice less for much less positioning. Another example is the Daiso $2 chain from Japan, which sells more affordable goods at a very low price of $2. It relies on economies of scale to keep costs low.
Much of the merchandise is made in countries such as China, India, and Thailand. As long as the merchandise meets Daiso's quality standard, it does not matter where it is manufactured. The low prices also reduce customers' consideration time, which facilitates impulse purchases.
More for less. Of course, the winning value proposition would be to offer more for less. Many companies claim to do this. And, 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. When all is said and done, each brand must adopt a positioning strategy designed to serve the needs and wants of its target markets. More for more will draw one target market, less for much less will draw another, and so on.
Thus, in any market, there is usually room for many different companies, each successfully occupying different positions. The important thing is that each company must develop its own winning positioning strategy, one that makes it special to its target consumers. Developing a Positioning Statement 1. 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, for every athlete, Nike's experience and expertise ensures that you have the perfect shoe for your sport. Note that the positioning first states the product's membership in a category, athletics, sport, and then shows its point of difference from other members of the category, experience, expertise, perfection. Placing a brand in a specific category suggests similarities that it might share with other products in the category, but the case for the brand's superiority is made on its points of difference. Communicating and delivering the chosen position.
Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers. All the company's marketing mix efforts must support the positioning strategy. Positioning the company calls for concrete action, not just talk. If the company decides to build a position on better quality and service, it must first deliver that position.
Designing the marketing mix involves working out the tactical details of the positioning strategy. Thus, a firm that seizes on a more formal 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 formal position. Companies often find it easier to come up with a good positioning strategy than to implement it. Establishing or changing a position usually takes a long time. In contrast, positions that have taken years to build can quickly be lost. Once a company has built the desired position, 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 competitive 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.
Positioning Strategies Some managers say that positioning is far more important than segmentation or targeting. What is your view of this statement? Student Learning Center Reviewing the Learning Objectives In this chapter, you have learned about the main elements of a customer-driven marketing strategy, segmentation, targeting, differentiation, and positioning.
Marketers know that they cannot appeal to all buyers in their markets, or at least not to all buyers in the same way. Therefore, most companies today practice target marketing identifying market segments, selecting one or more of them, and developing products and marketing mixes tailored to each. Learning Objective 1. Define the main steps in designing a customer-driven marketing strategy, market segmentation, targeting, differentiation, and positioning. Customer-driven marketing strategy begins with selecting which customers to serve and deciding on a value proposition that best serves the targeted customers. It consists of four steps.
Market segmentation is the act of analyzing the basis upon which it might be best to divide a market into distinct segments of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes. Once the groups have been identified, market targeting evaluates each market segment's attractiveness and selects one or more segments to serve. Market targeting consists of designing strategies to build the right relationship with the right customers. Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of positioning the market offering in the minds of target customers.
Learning Objective 2. List and discuss the main bases for segmenting consumer and business markets. There is no single way to segment a market. Therefore, the marketer tries different variables to see which provide the best segmentation opportunities.
For consumer marketing, the main segmentation variables are geographic, demographic, psychographic, and behavioral. In geographic segmentation, the market is divided into different geographical units, such as nations, regions, states, local government areas, cities, or neighborhoods. In demographic segmentation, the market is divided into groups based on demographic variables, including age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.
In psychographic segmentation, the market is divided into different groups based on social class, lifestyle, or personality characteristics. In behavioral segmentation, the market is divided into groups based on consumers' knowledge, attitudes, uses, or responses to a product. Business marketers use many of the same variables to segment their markets. But business markets also can be segmented by business consumer demographics, industry, company size, operating characteristics, purchasing approaches, situational factors, and personal characteristics.
The effectiveness of segmentation analysis depends on finding segments that are measurable, accessible, substantial, differentiable, and actionable. Learning Objective 3. Explain how companies identify attractive market segments and choose a market targeting strategy. To target the best market segments, the company first evaluates each segment's size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four market targeting strategies, ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated, or mass, marketing.
This involves mass-producing, mass-distributing, and mass-promoting the same product in much the same way to all consumers. Or the seller can adopt differentiated marketing, developing different market offers for several segments. Concentrated, or niche, marketing involves focusing on only one or a few market segments.
Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product lifecycle stage, market variability, and competitive marketing strategies.
Learning Objective 4. Discuss how companies differentiate and position their products for maximum competitive advantage. Once a company has decided which segments to enter, it must decide on its differentiation and positioning strategy. The differentiation and positioning task consists of three steps.
One, identifying a set of possible differentiations that create competitive advantage. Two, choosing advantages upon which to build a position. And three, selecting an overall positioning strategy. The brand's full positioning is called its value proposition, the full mix of benefits upon which the brand is positioned.
In general, companies can choose from one of five winning value propositions upon which to position their products. More for more, more for the same, the same for less, less for much less, or more for less. Company and brand positioning are summarized in positioning statements that state the target segment and need, positioning concept and specific points of difference.
The company must then effectively communicate and deliver the chosen position to the market. Discussion questions. One. market segmentation and market targeting how does market segmentation differ from market targeting learning objective one aacsb communication reflective thinking two demographic and psychographic segmentation compare and contrast demographic segmentation and psychographic segmentation which is more useful to marketers justify your answer learning objective two aacsb communication reflective thinking three positioning strategies some managers say that positioning is far more important than segmentation or targeting what is your view of this statement learning objectives one two three and four aacsb communication reflective thinking four differentiation how can a company gain competitive advantage through differentiation Describe an example of a company that illustrates each type of differentiation discussed in the chapter.
Learning Objective 4. AACSB. Communication. Application. 5. Value Proposition.
What is a value proposition? Discuss what value proposition is employed by A. David Jones, B. Tempt, and C.
Woolworths. Learning Objective 4. AACSB. Communication. Application.
Communication. Use of IT. Reflective Thinking.
Critical Thinking Exercises. 1. Visit a supermarket and examine the brands of beverages on offer. Using the basis for segmenting consumer markets, identify the segmentation variables a specific brand peers to be using. Summarize the segmentation and targeting strategy for this brand. Identify other brands with a similar positioning strategy, IEs.
Learning Objective 1, AACSB, Communication, Reflective Thinking. 2. Various companies, such as Toyota, Nissan and BMW, have introduced hybrid technology-powered cars to suit the needs of various target markets. In a small group, identify the various models of hybrid cars offered in your marketplace. Discuss the likely profiles of the target markets for these vehicles. For example, do you think that BMW's i8 is targeting a different target market from Mitsubishi Motors' MIEV electric car?
Justify your answer. Learning Objective 2, AACSB. communication analytical thinking reflective thinking three hydrographics presents an idea for a new business in australia and new zealand first research hydrographics at www.hydroconcepts.com dot au forward slash index new dot htm using the steps described in the chapter identify relevant target markets and then develop a customer-driven marketing strategy describe your strategy and conclude with a positioning statement for this business learning objectives three and four aac sb communication use of it analytical thinking reflective thinking mini cases 6.1 target marketing targeting markets have one to make many australia's population really is much more homogeneous than the populations of many other countries even the united states yes there are conflates of various cultural groups in both urban and regional areas.
For example, Griffith, in regional New South Wales, has a large Italian population, which explains the focus on such agricultural pursuits as vineyards and wine production. However, there are so many cultural groups in Australia that there is more of a blending than occurs in the United States, where one might find even Walmart, the world's largest chain, offering particular formats tailored to specific types of geographic locations. Australian retailers do follow some U.S. practices, such as offering smaller Woolworths stores and even smaller Coles Express stores, where full-size stores would not be sustainable due to the size and composition of the local market.
U.S. department stores also allow customization to suit local markets. For example, Mesa's the second largest U.S. department store chain permits its 1,600 distant managers around the country to meet local needs with specialized assortments. In one Christmas trading period, Mesa's in Memphis stocked Elvis Presley Christmas ornaments, as it seems the locals still cannot get enough of their hometown king of rock and roll. Today, though, many organizations practice mass customization, using technology to tailor offers made to a mass market. If you visit the website of Mesa's Memphis from a country such as Australia or New Zealand, you will find that their web servers use the IP lookup services to identify where you are located and offer you flat fee shipping on a Christmas present purchase.
Catering to markets of one is a similar value-adding marketing strategy, as Amazon.com's marketing exemplifies. If you buy Kindle e-books on a regular basis, you will no doubt develop a list of favorite authors and favorite genres. Let us take the example of a digital book reader, who is hooked on books set in the Florida Keys, Key West, in particular, and the surrounding Caribbean islands. Having read one of the Matt Royal series by H. Terabrithin.
the reader will find that Amazon uses collaborative filtering technology to generate a list of recommended books by various authors, and then uses this information to recommend similar books to other readers of any book set in the Keys and the Caribbean. Amazon will even advise the reader when a new book is to be published, thus allowing pre-orders. In this way, target markets of one add up to become many.
This form of consumer-to-consumer advocacy is also practiced by TripAdvisor.com when travelers advise of their positive and negative experiences in places they have stayed, eaten, and played. So, when you next buy an e-book, visit a restaurant, or engage in some other activity and leave a review, remember that you are helping others as well as yourself, and turning markets of one into many. 1. Do you agree with the author's contention that Australia's population is much more homogeneous than that of the United States? Hint, see www.nationmaster.comindex.php. Learning objectives 1, 2, and 3, AACSB, analytical thinking, reflective thinking, diverse and multicultural environments.
It targets young trendy women and is positioned as being fun and playful. Its baby pink stores have activities that appeal to the young, such as tokens to win small gifts, and Cinderella-like carriages that customers can sit in and try the cosmetics. Innisfree products are nature-friendly, and its ingredients are sourced from Jeju Island, the island where Sartre turned wasteland into lush tea fields.
Innisfree products are based on green tea, orchid, camellia, and volcanic ashes. This distinction was not lost when U.S.-based luxury department store Bergdorf Woodman visited Innisfree's green tea farm. It was impressed with the way Innisfree extracted botanical ingredients and processed them for their dermatological benefits.
Innisfree has several stores in Australia, including one in the Queen Victoria building in Sydney. Australians can also buy Innisfree products online from third-party websites such as nudiglow.com. The Lanit line is technology-oriented.
It offers high-tech, hydration-packed formulas for fair skin. It uses natural ingredients and maximizes the potential of water to deliver the right solution for each skin type. Mamon targets smart women who want to feel feminine. Hence, its line of skincare products uses ingredients from such flowers as camellia, lotus and jasmine. Mamon studies what elements are essential for flowers to bloom and maintain their beauty, and applies these findings by incorporating elements in its products to re-energize and achieve the look of healthy skin.
Solvazu, APG's luxury brand that accounts for about one-sixth of its revenue, offers a skincare regime stemming from traditional Korean herbal medicinal ingredients such as ginseng. By harnessing Korean and Chinese knowledge of medicinal properties, SELVASY stands out from the range of highly competitive skincare brands that do not use such traditional ingredients. Another reason for APG's meteoric rise is the increased appetite among Asian women for all things Korean. The Korean wave inspired by many K-pop bands and K-dramas has taken Asia by storm.
Women in China, Hong Kong and Singapore want to look like Korean stars. APG has tapped into this fascination through Korean celebrity endorsements and product placements in drama series. In My Love from the Star, a Korean TV drama, APG incorporated skincare and cosmetic products throughout the 10-week series.
Sales skyrocketed almost immediately. Skincare products used by the leading actress saw a surge in sales of 75% and lipstick sales went up by a whopping 400%. The company also understands that Korean and Chinese consumers are different. While Korean women tend to be emotional, Chinese women are pragmatic, putting priority on scientific and dermatological testing.
Hence, APG recognizes that adaptation is key in the execution of its marketing strategies. For the Australian market, APG realizes that Australians are highly attentive to global beauty trends and also that they invest many hours and effort in skin care to protect the skin from the effects of exposure to the high sunshine hours and intense ultraviolet UV rays in Australia. Australians also prefer natural makeup on a healthy skin base. Given such consumer insights, for this market APG leverages on the needs expertise in skin protection.
APG's expertise in developing UV protection products has seen strong demand from consumers in Southeast Asia, which also experiences the sunny climate. Asterisk. 1. Identify the target markets that might find appeal in APGs, A, Etude House, B, Innisfree, and C, Salthus & Products. Learning Objectives 2, 3 and 4, AACSB, Analytical Thinking, Reflective Thinking, Diverse and Multicultural Environments. 2. How does APG differentiate its various offerings in its portfolio?
Learning Objectives 2, 3 and 4, AACSB, Communication, Analytical Thinking, Reflective Thinking. 3. Looking at the range of skincare brands provided by APG, do you think the positioning of one brand might cannibalize sales from other brands managed by this group? Why, or why not?
Learning Objectives 2, 3 and 4, AACSB, Communication, Analytical Thinking, Reflective Thinking. 6.3 Marketing Analytics at Work. Defense Health.
Defense Health. www.defensehealth.com.au was established in 1953 to support members of the Australian Defence Forces, ADF, and the wider defence community in their private health insurance needs. The members it serves include members of the ADF, their partners, children and extended families, as well as return servicemen and servicewomen, and those who have supported ADF serving personnel, such as past and present staff of the Department of Defence and other defence-related departments.
Defence Health prides itself on understanding the extra needs its members have, for example, when one parent is deployed overseas and on the move, there can be long periods when there's only one parent in the home. Defence Health provides tailor-made private health insurance packages to meet its members' particular needs. The many industry and consumer awards it has won indicate its members are quite satisfied by its market offerings. According to the Australian Department of Defence. There are currently about 58,600 permanent ADF personnel and 21,700 active reserves.
As of 2018, Defense Health had 295,000 people covered by over 138,000 policies, paying out over $493 million in benefits. There are 227 staff who work in Defense Health. Asterisk. 1. Assuming the annual cost of private health insurance is $900 and that potential customers purchase one policy per year, use the chain ratio method described in Appendix 3, Analytic Measure 6.2 Demand Estimates, to calculate the market potential for private health insurance in the ADF market. Learning Objective 3, AACSB, Analytical Thinking.
Learning objectives.