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MGMA01H3 (184)
Chapter 8

Chapter 8 - Customer-Driven Marketing Strategy - Creating Value for Target Customers.docx

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Management (MGM)
Alison Jing Xu

Chapter 8 – Customer-Driven Marketing Strategy. Creating Value for Target Customers Designing customer-driven marketing strategies that build the right relationships with the right customers:  Market Segmentation Market segmentation – dividing a market into smaller groups with distinct needs, characteristics, or behaviours that might require separate marketing strategies or mixes.  Although there are benefits to mass marketing (economies of scale), everyone is different!  Different consumers o wants different things o are able to pay different prices respond differently to information  In most markets, a firm cannot appeal to all customers in the same way  And most firms cannot serve all potential customers profitably  Most firms have abandoned mass marketing in favour of segmentation and targeting Segmenting Consumer Markets  Geographic segmentation – dividing a market into different geographical units such as nations, regions, provinces, countries, cities, or neighborhoods. o Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods. o Other companies are seeking to cultivate as-yet-untapped geographic territory.  Demographic segmentation – dividing the market into groups based on variables such as age, gender, gamily size, family life cycle, income, occupation, education, religion, race, generation, and nationality.  Psychographic Segmentation – dividing a market into different groups based on social class, lifestyle, or personality characteristics. o Aspirational personality - Hopes for the future - e.g., my first apartment, be a ‘grown up’, ‘corner office’, play pro sports  Behavioural Segmentation – dividing a market into groups based on consumer knowledge, attitudes, usage, or responses to a product. o Relationship  Frequency of Contact: Do they visit often?  Loyalty: Do they only visit you? 1 o Occasions – dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.  Can help firms build up product usage. o Benefit segmentation – dividing the market into groups according to the different benefits that consumers seek from the product.  Requires finding the major benefits people look for in the product class, the kinds of people who look for each benefits, and the major brands that deliver each benefit  Sensories: Comfortable fabric  Sociables: Stylish look  Worriers: Hypo-allergenic  Price sensitive: Lowest price o Usage rate – markets are segmented into light, medium, and heavy product users.  How much and how often?  Using Multiple Segmentation Bases o Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, better-defined target groups. Segmenting Business Markets  Business can be segmented geographically, demographically (industry, company size), or by benefits sought, 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.  Within a given target industry and customer size, the company can segment by purchase approaches and criteria. Many marketers believe that buying behavior and benefits provide the best bases for segmenting business markets. Segmenting International Markets  Companies can segment international markets using one or a combination of several variables. They can segment by geographic location, grouping countries by regions. Geographic segmentation assumes that nations close to one another will have many common traits and behaviours.  World markets can also be segmented on the basis of economic factors. A country’s economic structure shapes its population’s product and service needs and, therefore, the marketing opportunities it offers.  Countries can 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 behavioural patterns. Intermarket segmentation – forming segments of consumers who have similar needs and buying behavior even though they are located in different countries. Requirements for Effective Segmentations  Measurable: the size, purchasing power, and profiles of the segments.  Accessible: the market segments can be effectively reached and served.  Substantial: the market segments are large or profitable enough to serve.  Differentiable: the segments are conceptually distinguishable and respond differently to different marketing mix element and programs.  Actionable: effective programs can be designed for attracting and serving the segments. 2  Market Targeting Marketing targeting (targeting) – the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Evaluating Marketing Segments In evaluating different market segments, a firm must look at three factors:  “Right size and growth” o 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.  Segment structural attractiveness o A segment is less attractive is it already contains many strong and aggressive competitors. o The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment. o Buyer with strong bargaining power relative to sellers will try to force prices down, demand more services, and set competitors against one – all at the expense of seller profitability. o If a segment contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.  Company’s objectives and resources o Target segments should be compatible with the organization’s goals and image (e.g., BMW). o The market opportunity represented by the segment must match the company’s resources. o The segment must represent an opportunity to generate enough sales to generate a profit. o The company should select target segments where it can enj
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