marketing unit, slide no. 1 designing a customer-driven marketing strategy step 2 in the marketing...

Marketing Unit, Slide No. 1

Designing a Customer-Driven Marketing Strategy

Step 2 in the Marketing Process


Elements of a Marketing Plan

Marketing Strategy

Product

Promotion

Distribution

Price

Marketing Mix

Business Mission Statement

Situation Analysis(SWOT)

Marketing Objectives

Implementation&

Evaluation/Control

Target Market & Positioning Strategy

Marketing Budget

Time & Action Plan

Marketing Department Organization

Marketing Budget

Time & Action Plan

Marketing Department Organization

A Sound Marketing Strategy StartsWith a Sound

Marketing Plan


Business Vision or Mission

• A company’s business vision or business mission is a brief, concise statement of a company’s business model that tells stakeholders:

- why the firm is in business;

- how it intends to satisfy customer needs; and

- why it will satisfy their needs better than its competitors.

• A clear mission statement acts as an “invisible hand” that guides the people in the organization.


Defining a Market-Oriented Business Mission

• Some companies define their mission myopically in product or technology terms. But mission statements should be market-oriented and defined in terms of customer needs, which are more enduring.

• Just as a mission statement should not be narrow (myopic), organizations must also avoid being too broad or generic. In other words they must be realistic and specific (to a point), so as to provide real guidance and inspiration. The key is striking the right balance.

• In addition to being market-oriented, a mission statement should also:- Fit the market environment;

- Be based on distinctive competencies; and

- Be motivating.

• Mission statements are not written in stone. As circumstances change or if an organization starts to drift, it should re-examine its mission statement.

• In addition to focusing on how the company serves consumers, mission statements often address the needs of employees, shareholders, and other stakeholders.


Market-Oriented vs. Product-Oriented Business Missions

From Armstrong & Kotler, Marketing: An Introduction (9th Edition)

From Armstrong & Kotler, Marketing: An Introduction (9th Edition)


Let’s Talk!

Compare the two mission statements above for Microsoft. Which one do you feel is more market-oriented? Which one

do you feel is more effective? Why?

In 2002 Microsoft’s mission was "To empower people through great software -- any time, any place, and on any device.”

The mission statement now reads, "At Microsoft, we work to help people and businesses throughout the world realize their full potential.”

For more examples of mission statements, visit

www.missionstatements.com.

For more examples of mission statements, visit

www.missionstatements.com.


Identifying Growth Opportunities

• An important part of the marketing planning process is identifying opportunities for growth.

• Marketing has the main responsibility for achieving profitable growth for the firm. Marketing must identify, evaluate, and select new opportunities, and set forth strategies for capturing them.

• One useful tool for identifying growth opportunities is the Product/Market Expansion Grid.


The Product/Market Expansion Grid


The Product/Market Expansion Grid Explained

MarketPenetration

MarketPenetration

Market

Development

Market

Development

Product Development

Product Development

DiversificationDiversification

Increase sales of existing productsto existing customers

Attract new customers segmentsto existing products

Start up/acquire businesses outside current products & markets

Create modified or new productsfor present markets


Exploring Intensive Growth Options, i.e., Growth Within Current Businesses

Market Penetration

Increase market share through advertising; sales promotion aimed at customers (price reductions, coupons, etc.); and promotion aimed at distributors.

Add new locations in existing markets; extend hours. Cross-selling, i.e., sell other products/services offered by the

firm to existing customers. Increase product usage (see next slide). Attract non-users.

Market Development

Geographic expansion. Target new segments. Opening up additional channels of distribution.

Product Development

Line extensions:– Modify existing products/services e.g., new sizes, new

flavors, new features; and/or– Add new products/services to existing product

categories served by the firm. Launch a new product in a new category.


Tactics For Increasing Product Usage

Approach Strategy ExamplesIncrease frequency of use, consumption, purchase (including loyalty)

Reminder messages Position for regular or frequent

use Provide incentives for frequent

purchase/loyalty Make use easier or more

convenient Reduce undesirable effects of

frequent use Develop positive associations

with use occasions

Gillette’s “change your blade” ads “Apple a day keeps the doctor away”

Frequent flyer and other reward programs

Campbell’s “Soup at Hand,” microwaveable soup cans

Gentle shampoo

Crackerjack and baseball; beer and sports in general

Increase amount used, consumed or purchased

Reminder messages Provide incentives

Reduce undesirable effects of increased usage level

Change packaging

Increase amount of insurance coverage Quantity discounts; free checking with

larger balance Low-fat potato chips; light beer

Super-size French fry portions

New applications or use/purchase occasions

Use/purchase at different occasions

Use/buy at different locations Use for a different purpose

Eat cereal as a snack; buy lottery tickets for holiday gifts

Selling nachos at movie theaters Arm & Hammer baking soda as a

refrigerator deodorizer; take aspirin to reduce risk of heart disease

Adapted from Strategic Marketing Management by David Aaker, 1988.Adapted from Strategic Marketing Management by David Aaker, 1988.


Applying The Product/Market Expansion Grid

Existing Products/Services

New Products/Services

Existing Markets

• Loyalty Program

• ????

• ????

• QVC Q-card (credit card)

• ?????

• ?????

New Markets • Entering Foreign Markets

• ????

• ????

• Acquisition of QVC’s by Liberty Media Corp.

• ?????

• ?????


Designing A Customer-Driven Marketing Strategy Involves Two Sets of Questions

• Target Market Selection:

- What customers will we serve? What is our target market?

- Within our target market, are all consumers (or businesses) the same, or are there are groups or segments we should/should not attempt to serve?

• Positioning:

- How can we best serve these customers? How will we create value for these customers?

- How will we distinguish our products and services from our competitors?

- In short, what is our value proposition?


Markets & Customer Groups

• What Is a Market?

- The set of actual and potential buyers of a product.

- A market can consist of individuals and/or businesses and organizations.

• What is a Customer Group?

- A group of people (or organizations) who have a similar need for a particular product or service, and respond in a similar way to a given set of marketing efforts.

- Also referred to as a market segment.

Two Customer Groups or Market Segments:Females vs. Males

Market for Harley-Davidson


Selecting Customers to Serve: Segmentation and Target Marketing

• Successful marketers realize they cannot serve all consumers. By trying to serve all consumers, they may not serve any consumers particularly well.

• Furthermore, a “one-size-fits-all” approach, i.e., serving all customers the same way, while less costly in the short-term, is not as profitable or effective over the long-term.

• Instead, savvy marketers engage in:

- Market Segmentation—dividing a market into distinct groups of buyers (segments) with different needs, characteristics, and behavior who might require separate products and/or marketing programs; and

- Target Marketing—selecting one of more these segments to target.


The Benefits of Market Segmentation

Nearly all markets include groups of people (or organizations) with different product needs and preferences. Market segmentation helps marketers define customer needs and wants more precisely.

Consumers are more likely to respond if the marketing mix is tailored more closely to their needs and preferences.

Because segments differ in size and profit potential, market segmentation helps marketers more accurately define objectives and more efficiently allocate resources.

Bottom Line: In the long-run, segmentation improves aprofitability, provided there are meaningful, actionabledifferences among consumers in the relevant market.

Nearly all markets include groups of people (or organizations) with different product needs and preferences. Market segmentation helps marketers define customer needs and wants more precisely.

Consumers are more likely to respond if the marketing mix is tailored more closely to their needs and preferences.

Because segments differ in size and profit potential, market segmentation helps marketers more accurately define objectives and more efficiently allocate resources.

Bottom Line: In the long-run, segmentation improves aprofitability, provided there are meaningful, actionabledifferences among consumers in the relevant market.


The Concept of Market Segmentation Illustrated


Step 2

Use research to divide the market into segments

Step 2

Use research to divide the market into segments

Step 3

Select the segment or segments to

target

Step 3

Select the segment or segments to

target

Steps in Segmenting A Market

Step 4

Develop a customized

marketing mix for each target

segment

Step 4

Develop a customized

marketing mix for each target

segment

Step 1

Select the market or product

category to be segmented

Step 1

Select the market or product

category to be segmented


Methods of Identifying Market Segments

• Four main categories of factors or variables:

- Geographic characteristics;

- Demographic characteristics;

- Psychographic or lifestyle characteristics; and

- Behavioral, i.e., product usage, characteristics.

• Combination of multiple categories, e.g., geodemographic segmentation


Geographic Variables

• Geographic segmentation divides a market into different geographic units.

• Variables and breakdowns include:

- World Region or Country: North America, Western Europe, Pacific Rim, Mexico, etc.

- Country Region: Pacific, Mountain, etc.

- City or Metro Size: defined numerically

- Density: rural, suburban, urban

- Climate: northern, southern

• A very useful method of segmenting markets. Segments are relatively easy to identify and can be easily reached through a variety of media.


Demographic Variables

• Use differences personal characteristics, such as:- Age or Generation (i.e., Gen X vs. Baby Boomers);- Gender;- Income or Occupation;- Race/Ethnicity.

• Helps to combine various demographic variables. For example, family life cycle stage is a combination of three demographic variables: age, marital status, and presence/absence of children in the household.

• Demographic variables are frequently used for segmentation. Among the main advantages: it is relatively easy to identify and reach members of various demographic segments.

• Downside is that demographics, while related to differences in behavior, don’t necessarily cause these differences. More like a statistical association, rather than cause and effect. So even though we can easily reach different demographic segments, it can be hard to change their purchasing habits. For example, not all women have the same purchasing tendencies.


Psychographic Variables

Psychographic Psychographic segmentation divides a segmentation divides a

market into different market into different groups based on lifestyle, groups based on lifestyle, attitudes, or personality attitudes, or personality

characteristics.characteristics.

Very useful because people in the same demographic classification often have very different lifestyles and

purchasing habits.


Behavioral or Product Usage Variables

• Occasion of Use:- Special promotions & labels for

holidays.- Special products for special

occasions.

• Benefits Sought from the Product:- Different segments desire

different benefits from products.- For example, some consumers

are focused mainly on price, while others might be more concerned about quality.

• Usage Rate: - Light, medium, heavy.

• User Status:- Nonusers, ex-users,

potential users, first-time users, regular users.

• Loyalty Status:- Those who always purchase

the same brands, or from the same firms vs. those who vary the brands they buy or the firms they purchase from.


Marketing in Action

Citicards’ various products offer different benefits:

•Rewards

•Establishing credit

•Low interest rates

•No frills/value (no annual fee)

Segmenting by Benefits Sought


MiddleIncome:

White Collar/ProfessionalEmployment Levels:

Some College, College GraduateEducation Levels:

18-24, 25-34, 35-44Age Ranges:

SinglesFamily Types:

Predominantly WhiteEthnic Diversity:

Demographics Traits:

2002 Statistics:

US Households: 927,246 (0.86%)

US Population: 2,005,299 (0.7%)

Median HH Income: $45,170

Young people in the fast-growing smaller cities in the South, Midwest, and West fall into cluster 35. They are young professionals and "techies" in public service and private industries who live in multi-unit rentals. They like music and outdoor activities such as boating and skiing.

Boomtown Singles

Lifestyle Traits

Go in-line skating

Purchased a GTE cell phone last year

Listen to modern rock radio

Watch primetime dramas

Read Tennis magazine

The best known geodemographic segmentation approach is the PRIZM™ system developed by Claritas. The firm has identified 66 unique clusters using demographic data, such as age,

income, ethnicity, and occupation; location and housing factors, such as mobility, urbanization, and market value; and lifestyle and behavioral data, such as media habits and buying habits. Claritas then assigns every U.S. neighborhood (at the zip + 4 level) to these 66 clusters. For

example, consider the “Boomtown Singles” cluster profiled below:

The best known geodemographic segmentation approach is the PRIZM™ system developed by Claritas. The firm has identified 66 unique clusters using demographic data, such as age,

income, ethnicity, and occupation; location and housing factors, such as mobility, urbanization, and market value; and lifestyle and behavioral data, such as media habits and buying habits. Claritas then assigns every U.S. neighborhood (at the zip + 4 level) to these 66 clusters. For

example, consider the “Boomtown Singles” cluster profiled below:

Using Multiple Segmentation Bases:Geodemographic Segmentation


Marketing in Action

Click on the link below to look up

your home zip code and learn about the

PRIZM clusters most common in

the area where you live.

Checking Out the PRIZM System

http://www.claritas.com/MyBestSegments/

Default.jsp

Marketing Unit, Slide No. 27Copyright 2007, Prentice-Hall Inc.

6-27

• Segment Size, Growth, and Profitability- Analyze current and future segment sales, growth

rates, usage rates, penetration, and profitability.

• Segment Structural Attractiveness- Consider competition, existence of substitute

products, and the power of buyers & suppliers.

• Company Objectives and Resources- Examine company skills & resources needed to

succeed in that segment.- Offer superior value & gain advantages over

competitors.

Evaluating Market Segments for Selection


Choosing A Targeting Strategy

The marketer also has to decide whether to serve one, several, or all of the segments within the market. The options typically are as follows:- Mass marketing or undifferentiated marketing:

• Selling a mass-produced product to all customers (one size fits all).

- Multiple-segment (differentiated) marketing:

• Different models of a product are made and sold to different customer groups, each with a tailored marketing plan. (Note: The marketer might opt to serve all of the segments within the market in this differentiated fashion.)

- Focused or concentrated (niche) marketing:

• Developing products for customers in one targeted market segments.


• Tailoring products and marketing programs to suit the tastes of specific individuals and locations.

- Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.

- Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores.

Other Targeting Options:Micromarketing


Target Marketing Strategies Illustrated


Factors To Consider When Choosing a Targeting Strategy

• Company resources- When resources are limited, a niche strategy often makes the most sense

• Product variability- Mass-marketing is most common for products that are uniform

• Product’s life-cycle stage- When a product is first introduced, it is typically not practical to market more

than one version. However, over time a using a differentiated approach makes sense.

• Market variability- If all consumers have the same taste for the particular product, an

undifferentiated approach makes the most sense.

• Competitors’ marketing strategies- When competitors are using a differentiated approach, a mass-market

approach would be fatal. However, when competitors are mass-marketing, a differentiated approach can provide a firm with a real advantage.


How Toyota Maps Its Product Lineup to Various Market Segments

Figure 10.5

What factors is Toyota using to segment

the vehicle market?

What factors is Toyota using to segment

the vehicle market?

Marketing in Action


How Dell Segments The Computer Market

Figure 10.7

Marketing in Action


• Once the firm has determined who it is going to serve, it must determine how to serve these target market segment(s). This raises two key questions:

- How can we best serve these customers, that is, what characteristics should particular products possess in order to satisfy the needs of our target customers?

- How will we distinguish our products and services from our competitors?

• Product differentiation, in general, is the process of setting a company’s goods and services apart from those of its competitors in order to satisfy customers’ needs.

• As shown on the next slide, there are essentially three main ways a firm can achieve competitive advantage.

Creating a Competitive Advantage


Methods of Achieving Competitive Advantage

Niche StrategiesNiche Strategies

CostCost

DifferentiationDifferentiationTypes of Types of

Competitive Competitive AdvantageAdvantage

Types of Types of Competitive Competitive AdvantageAdvantage


Using Differentiation to Set Your Product Apart

• Advantage achieved when a firm provides something unique and valuable to buyers beyond simply offering a lower price than the competition.

• Differentiation can be achieved by tangible and/or intangible means, including:- The products and services you offer, i.e.,

features and benefits, how well they perform, how they’re made, etc.;

- Customer service;

- Channels you use to distribute your products/services;

- Your reputation or image; and

- Your people.

How is Tylenol attempting to differentiate its products from

competitors’ products?


How the Marketing Mix Creates Product Differentiation

Figure 10.8


Positioning and Value Proposition

• Through the firm’s marketing mix, it is able to define its products or brand in the minds of consumers. This is referred to as the product or brand’s positioning.

• A product’s position is the way the product is defined by consumers on important attributes or benefits—the place the product occupies in consumers’ minds relative to competing products.

• Another marketing term that is synonymous with positioning, product differentiation, and competitive advantage is value proposition.

• A firm or brand’s value proposition is the set of benefits or values a company promises to deliver to consumers to satisfy their needs. Such value propositions differentiate one brand from another, and answer the question, “Why should I buy your brand rather than a competitor’s?”

“Have It Your Way”

One of the all-time great value propositions. A clear

way to distinguish BK’s products from the mass-

produced products offered by McDonald’s.

One of the all-time great value propositions. A clear

way to distinguish BK’s products from the mass-

produced products offered by McDonald’s.


Choosing the Right Competitive AdvantagesWhich Differences to Promote

• Not all brand differences are meaningful and worthwhile, nor do all differences make a good differentiator.

• Differences can be based on the tangible or the intangible.

• Each difference has the potential to create company COSTS as well as consumer value.

• The best competitive advantages are those that meet the following criteria:

- Important- Distinctive- Superior- Communicable- Preemptive- Affordable (buyers can afford to pay

for the difference)- Profitable (company can provide the

difference profitably)• You must have the credentials to support

your differentiating idea, to make it real and believable. Must be able to demonstrate or prove your difference. (Think Tylenol “rapid release” gel caps.)


Definition of “Unique Selling Proposition” According to Rossner Reeves in

Reality in Advertising

• Each ad must make a proposition to the consumer. Not just words, not just product puffery, not just show-window advertising. Each advertisement must say to each reader: “Buy this product and you will get this specific benefit.”

• The proposition must be one that the competition either cannot, or does not, offer. It must be unique—either a uniqueness of the brand or a claim not otherwise made in that particular field of advertising.

• The proposition must be so strong that it can “move the mass millions,” i.e., to pull over new customers to your product.

Choosing the Right Competitive AdvantagesHow Many Differences to Promote?

Many marketers, including me, think that companies

should aggressively promote only one benefit to the target market. In other words, develop a

unique selling proposition (USP) for each brand and

stick to it.

Others think that companies/brands should

position themselves on more than one differentiator.


Selecting a Viable Value Proposition:Alternate Strategies


Product Differentiation and Market Segmentation

• When a company decides to make and sell different types or models of a product aimed at different market segments—whether it’s cars or clothes—differentiating the products to avoid customer confusion becomes very important.

• To accomplish this, a company develops and implements a different marketing mix for the product in each market segment in which the firm chooses to compete. (Product positioning)

• In this way, the company distinguishes its products in the consumer’s mind, and consumers are able to determine why some of the firm’s different products are better suited to their needs than others.

• For example, Toyota manufactures and markets both the Avalon and the Lexus. All elements of the marketing mix for both products are different, so each product is clearly distinguished in the minds of potential buyers.

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