Customer-Driven Marketing Strategy Creating Value for Target Customers

Customer-Driven Marketing Strategy Topic Outline

• Customer-Driven Marketing Strategy
• Market Segmentation
• Market Segmentation in Coca-Cola
• International Market Segmentation
• Market Targeting
• Differentiation and Positioning

A customer-driven marketing strategy

A customer-driven marketing strategy refers to meeting customers’ needs in a more personalized way and helps businesses to optimize marketing return on investment (RoL). By identifying and targeting customers with higher lifetime value, businesses can strengthen relationships by crafting solutions to fit their wants.

Starbuck’s 

Starbuck’s excellent customer service is based on their distomer-driven marketing strategy. Starbucks does this by segmenting its customers first.

The whole idea of Starbucks is to let the customers enjoy their cup of coffee or tea in a convenient area. Besides that Starbucks is being innovative by providing all different/special kinds of coffee or tea

The location of the Starbucks shop is very convenient for the customers. The Starbuck shops give the customers a comfortable feeling like they are home. The combination of the unique product offerings, the comfort feeling, and excellent customer service are the main reasons for the customers to keep retaining.

AirAsia

AirAsia has developed a competitive advantage by targeting price-conscious, short-haul travelers who don’t mind a no-frills service if it means lower fares.

Market Segmentation

Market Segmentation is the process that companies use to divide large, mixed markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs

• Segmenting consumer markets
• Segmenting business markets
• segmenting international markets

Segmenting Consumer Markets

Geographic segmentation

Geographic segmentation divides the marketing info into different geographical units such as nations, regions, states, counties, or cities.

For example, Tourism marketers can use geographic segmentation to target only the surrounding communities. This limited approach is wise for a small town trying to attract only a few additional visitors to attend the local arts fair. However, tourism marketers may also use geographic segmentation to target the entire state or even a region that encompasses neighboring status. Larger cities can even decide to use national geographic segmentation.

Demographic segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family, size, family life cycle, income, occupation, education, religion, race, generation, and nationality

For example, The age range for business travelers may usually span from their late twenties to their mid-fifties. Younger travelers are less likely to book air travel based on loyalty program perks. They are more likely to book their flight according to the airline service and the customer experience they offer. Moreover, young travelers are more likely to use room share services like Airbnb, than other segments (Skift, 2018)

In the past, middle-aged males dominated the business travel market. However, recently, the advertising and promotion of airline services have increasingly targeted female business travelers. This market controls 60% of the U.S. wealth and influences 85% of purchasing decisions (Skift, 2014)

The female gender is high-tech, connected, and social. They represent 58% of online sales (Skift, 2014). To maintain their competitive edge, travel brands must start focusing their campaigns to better target women. The leisure travel market is far more balanced in terms of gender. In fact, in older categories of leisure travelers, that is over the age of sixty, women outnumber men due to their longer life expectancy (Boston Globe, 2016).

Segmenting Consumer Markets

Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups.

Gender segmentation divides the market base on sex (male or female)

• Income segmentation divides the marketing into affluent or low-income consumers
• Income segmentation is when the customers are segmented as per the annual or monthly income they are earning. Income segmentation is best suited for products that are very specific, niche, and are priced high. It helps companies to understand the relation between the earning of a customer, the price being offered by the company, and the number of potential customers that a company can have
• Suppose there is a car manufacturer who wants to introduce a premium car for its customers. The premium car would have exclusive features like powerful engine, luxurious interiors, personalized styling, prioritized after sales service etc. All these would increase the price of the car. So, if they company targets a normal customer with this car, it would overshoot his budget. Hence, the company would take a decision of have a group of people based on income segmentation who have a high annual income. This would enable the company to focus better on these potential customers and make a sale.
• Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits.
• A common example of psychographic segmentation is a luxury mobile-manufacturing brand that specializes in customization.
• These mobiles are not available for people from every class. A certain standard of living and family income is essential to be able to purchase an expensive mobile that is customized for each customer.
• By using psychographic market segmentation, the marketing team of this mobile-manufacturing brand can divide the target market according to their social status first and then on the basis of lifestyles, attitudes, or
• personality.
• They can also evaluate the same variables for their competitor’s target market as well for the better selection of a market for their branding activities.

Segmenting Consumer Markets

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, users, or responses to a product

Using Multiple Segmentation Bases

• Multiple segmentation is used to identify smaller, better-defined target groups
• Geo – demographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns
• PRIZM NE will continue to lead the industry in helping marketers reach a deep understanding of their most important customer groups.
• Classifies every American household into 66 unique segments organized into 14 different social groups These groups segment people and locations into marketable groups of like-minded consumers that exhibit unique characteristics and buying behavior based on a host of demographic factors

Market Segmentation Examples CocaCola

Coca Cola is an American Multinational Beverage manufacturer marketer and distributor. Coca cola has in placed multi-segment and targeting strategy.

Demographic Segmentation of Coca Cola:

• Age: Coca Cola targets youngster from 15 to 25 years old.
• Gender: Both Men and Women on the target list of the company.
• Income: The income level segments include different
• packing, for example, returnable glass bottles, plastic bottles and Tins with different pricing strategies.

Geographic Segmentation of Coca Cola

• Asia Pacific
• North America
• Latin America
• Europe
• Eurasia and Africa
• Fruktime Russia and Ukraine
• Minute Maid Pulpy Super Milky China

Psychographic Segmentation of Coca Cola

• Diet Coke for those who are health conscious people
• Coke also provide a variety of energy drinks who need energy specially in sport
• Real Gold targets busy people in offices

Behavioral Segmentation of Coca Cola

• Occasions like wedding, festivals, birthdays etc.
• Benefit sought. Drink to quench thirst and to refresh

International Market Segmentation

Market Targeting

Selecting Target Market Segments

Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve

Evaluating Market Segments

• Segment size and growth
• Segment structural attractiveness
• Company objectives and resources

For example:

Pizza Hut successfully developed database of 9 million pizza lovers customers. By using this database, Pizza Hut developed target market campaigns to reach its consumers.

Another good market targeting examples is Citibank, it offers different services on branch level based on neighborhood demographics. Walmart and Sears Store customizes its inventory and promotion to meet the requirements of specific clients

Target Market Of Snapchat: More than 178 million users below the age of 25 (18-24), most of which are still in high school and college, preferably females, form the target market of Snapchat.

Target Market Of McDonald’s: McDonald’s targets students, employees, and professionals in the age group of 8 to 45 years belonging to low & middle-income groups and having an easy-going and careless personality.

Target Market Analysis

The target market analysis starts with yourself. You have to focus on the 5 W’s of your potential customers to select the most beneficial target market for your business.

• Who: Start with questioning yourself about who is going to buy your product. Are they children, teens, or baby boomers? Are they males or females? Are they service classed or self-employed? What’s their yearly income?
• What: What type of products and services do they buy now and what do they expect from it? Does your product fits their requirements?
• When: When do they buy the product? Is it daily or rarely? When do they use the product?
• Where: Where do they live? Where do they use the product?
• Why: Do they buy it because it’s their need, or is it a luxury product for them?

Once analyzed, you can differentiate the profitable segment from
the non-profitable ones.

• Big Enough: Is the market segment big enough to make you profits in the present as well as in the future?
• It is still growing: A big market today can be a dead market tomorrow. Always analyze the growth statistics before moving ahead and choosing the segment as your target market.
• Not Many Competitors: Having some competitors might be beneficial for your company. But having a market full of existing established players isn’t a good market till the time you have an exceptionally well product to position yourself differently.
• Your Product Can Fulfill Their Need/Want/Luxury: Does your product has all that it takes to fulfil the needs of your target customers?

Target Market Strategies

• A marketer can select a single market or many markets to target its efforts to. The target market strategies can be divided into three types depending upon the number of target markets.
• Multisegmented Marketing
• Multisegmented marketing refers to the practice of targeting more than one market segment. Some companies market the same product to different segments differently, while some manufacture different product lines to cater to different market segments.
  For example, selling auto parts to auto manufacturers and other finished products to the end-user is a multisegmented marketing strategy.
• Concentrated Marketing: Concentrated marketing refers to the practice of directing every marketing effort to a single segment of the market.
  For example, selling auto parts only to auto manufacturers is a concentrated marketing strategy.
• Microtargeting: Microtargeting is a relatively new targeting strategy which involves isolation of the markets and collection of as much data as possible to target them in a personalized way. This strategy was used in the recent U.S. presidential elections.
• Undifferentiated marketing targets the whole market with one offer
  • Mass marketing
  • Focuses on common needs rather than what’s different
• Differentiated marketing targets several different market segments and designs separate offers for each
  • Goal is to achieve higher sales and stronger position
  • More expensive than undifferentiated marketing
• Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers
• Also known as:
  • One-to-one marketing
  • Mass customization
  • Markets – of – one marketing
• Choosing a Targeting Strategy, depends on:
  • Company resources
  • Product variability
  • Product life-cycle stage
  • Market variability
  • Competitor’s marketing strategies
• Socially Responsible Target Marketing
• Benefits customers with specific needs
• Concern for vulnerable segments
• Children
  • Alcohol
  • Cigarettes
  • Internet abuses

Differentiation and Positioning

Differentiation in marketing means creating specialized products that gain competitive advantage with a particular segment of the market. The former adds specialized aspects with a broad appeal to its products or services, and the latter develops a product that appeals to a niche market.

Which teams are responsible for differentiation?

• Marketing
• Product Management
• Engineering
• Sales
• Support and Success

What are Types of Product Differentiation?

• Horizontal Differentiation
• Horizontal differentiation refers to any differentiation that is not associated with the product’s quality or price point. Instead, these products offer the same thing at the same price point. When making decisions regarding horizontally differentiated products, it often boils down to the customer’s personal preference.
• Examples of Horizontal Differentiation: Pepsi vs. Coca-Cola, bottled water brands, types of dish soap.

Vertical Differentiation

In contrast to horizontal differentiation, vertically differentiated products are extremely dependent on price. With vertically differentiated products, the price points and marks of quality are different. And, there is a general understanding that if all the options were the same price, there would be a clear winner for “the best.”

Examples of Vertical Differentiation: Branded products vs. generics, A basic black shirt from Hanes vs. a basic black shirt from a top designer, the vehicle makes.

Mixed Differentiation

Also called “simple differentiation,” mixed differentiation refers to differentiation based on a combination of factors. Often, this type of differentiation gets lumped in with horizontal differentiation.

Examples of Mixed Differentiation: Vehicles of the same class and similar price points from two different manufacturers.

What are the Factors of Product Differentiation?

• Quality: How does your product’s quality, reliability, and ruggedness compare to others on the market?
• Design: Have you done something different with your design? Is it minimalistic and sleek? Easy-to-navigate?
• Service and interactions: Do you offer faster support than anyone else on the market? Does your team provide custom onboarding? How are your customers’ interactions with your team different from those of your competition?
• Features and functionalities: Does your product do something the competition does not? Is it faster than anything else out there? Is it the only one to offer a certain integration?
• Customization: Can you customize parts of the product that competitors cannot?
• Pricing: How does your product’s price or pricing model differ from that of the competition? Cheaper is not the only differentiating factor to consider with product

Product position

Product position is the way the product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products

• Perceptions
• Impressions
• Feelings

Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions

Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
• Developing a positioning statement

Identifying Possible Value Differences and Competitive Advantages

Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices

Choosing a Differentiation and Positioning Strategy

Identifying a set of possible competitive advantages to build a position by providing superior value from:

• Product differentiation
• Services differentiation
• Channel differentiation
• People differentiation
• Image differentiation

Choosing the Right Competitive Advantage

Difference to promote should be:

References:

• https://consumervaluecreation.com/2013/02/15/theexperience-of-starbucks-customers/
• https://www.hippocampus.si/ISSN/2335-4194/5_2_19-26.pdf
• https://drmarkcamilleri.com/2018/02/26/the-segmentation-of-demographics-in-the-travel-industry/
• http://www.uvm.edu/rsenr/gradgis/advanced/prizm_method.pdf
• https://www.revechat.com/blog/customer-driven-marketing/
• http://www.ijbmi.org/papers/Vol(7)4/Version2/I0704027780.pdf
• https://www.researchgate.net/publication/319085560_Market_Segmentation_Targeting_and_Positioning/link/5a93fe15a6fdccecff05ee2a/download
• https://www.ebookbou.edu.bd/Books/Text/SOB/MBA/mba_3313/Unit-05.pdf