Chapter 8 – Customer-Driven Marketing Strategy. Creating Value for Target
Designing customer-driven marketing strategies that build the right relationships with the right customers:
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!
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
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.
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
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
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