Title (2) Chapter 7 - Customer-Driven Marketing Strategy.pdf ✅

Objective Outline OBJECTIVE 1 Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning. Customer-Driven Marketing Strategy (205–207) OBJECTIVE 2 List and discuss the major bases for segmenting consumer and business markets. Market Segmentation (207–218) OBJECTIVE 3 Explain how companies identify attractive market segments and choose a market-targeting strategy. Market Targeting (219–225) OBJECTIVE 4 Discuss how companies differentiate and position their products for maximum competitive advantage. Differentiation and Positioning (225–235) 9780133795028_CH07.indd 204 27/10/16 6:52 pm
Customer- Driven Marketing Strategy: Creating Value for Target Customers Previewing the Concepts So far, you’ve learned what marketing is, and the importance of understanding consumers and the marketplace environment. This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve target customers (differentiation), and position the offerings in the minds of consumers (positioning). The chapters that follow explore the tactical marketing tools—the four Ps—by which marketers bring these strategies to life. As an opening example of segmentation, targeting, differentiation, and positioning at work, let’s look at Charles & Keith, a fast-growing shoes and accessories company that is making headway in Asia and the Middle East. Charles & Keith: If the Shoe Fits Charles & Keith changed the face of footwear and accessories for women in Asia, and other countries, by building on their unique selling positioning—offering timeless, sophisticated, and one- of-a-kind products to serve a particular market segment that wants affordable fashion. Charles Wong and his younger brother Keith learned how to manage a shoe business by helping their parents at their shoe store in Ang Mo Kio. The shoes were bought from the same wholesalers used by its competitors, and manufactured in the same factories used by rivals. Based on customer feedback, Charles observed that just selling the shoes bought from wholesalers didn’t give the customers much to choose from and didn’t cater to what they desired. There was a lack of product differentiation and positioning to help expand this market. In his early 30s, Charles, together with Keith, decided to create an Chapter 7 205 Chapter 7 < Customer-Driven Marketing Strategy: Creating Value for Target Customers 9780133795028_CH07.indd 205 27/10/16 6:52 pm
Charles & Keith continues to offer timeless, sophisticated, and one-of-a-kind products by focusing on marketing segmentation based on consumer feedback. from different markets. This translates to 20 new items every week; regular customers will have around 80 new designs to choose from every month. To keep up with a customer-driven market, three percent of revenue is set aside for the training of designers—mainly Singaporeans, Malaysians, and Chinese—who have to make regular trips to Europe and the United States to attend fashion shows and conduct market research. In the Middle East, where Islam is the predominant religion, they learnt that most women wear a burqa, hijab, or niqab. In this geography and culture, complementary items are more in demand—shoes paired with bags or shoes with accessories like belts and sunglasses; and Charles & Keith delivered such complementary pieces. The appeal of its in-house designs is evident from its catalog featuring European photo shoots of lanky models with trendy shoe designs, bags, and sunglasses. This is also translated to its online sales store to help Charles & Keith reach out to markets that it does not have a retail presence. After its first overseas store in Indonesia in 1998 there are now more than 60 stores in China and around 350 stores worldwide, including Tokyo, Seoul, and Dubai. In 2006, it launched Pedro, a new store offering lavish leather footwear, unlike Charles & Keith that caters to people looking for contemporary and trendy styles. In 2010, luxury conglomerate Louis Vuitton Moet Hennessy (LVMH), Asia, bought a 20 percent stake in the company for $24 million. With this capital injection, Charles & Keith set its sight on the United States, China, India, and Western Europe.1 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 vary widely in their abilities to serve different segments of the market. Instead, like Charles & Keith, 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. As one shopkeeper who runs a general store in Qiaoliufan, just outside Beijing, says, “Before, we offered just one product to consumers and they accepted that. Now, they have a brand in mind when they walk through the door.” edge over their competitors and took over the business and started afresh. By the end of 1997, the brothers began designing shoes on the basis of consumer demands. Charles Wong said, “It was a time where we got to interact with customers and listen to their feedback, while learning the foundations of running a business.” With their primary target group being women of 25–35 years, today the 70-member strong design team introduce new designs at break-neck speed—around 750 new footwear designs and 300 new bags and accessories every year to cater to the diverse needs of their customers Part 3 < 206 Designing a Customer-Driven Marketing Strategy and Integrated Marketing Mix 9780133795028_CH07.indd 206 27/10/16 6:52 pm
Thus, most companies have moved away from mass marketing and toward 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), firms are focusing on the buyers who have greater interest in the values they create best (the “rifle” approach). Figure 7.1 shows the four major 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 dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors, who might each require separate products or marketing mixes. The company identifies different ways to segment the market and develops the 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. In the final two steps, the company decides on a value proposition—how it will create value for target customers. Differentiation involves differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. 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: segmenting consumer markets, segmenting business markets, segmenting international markets, and 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 7.1 outlines the major variables that might be used in segmenting consumer markets. Here we look at the major geographic, demographic, psychographic, and behavioral variables. Market segmentation Dividing a market into smaller groups with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes. Market targeting (or targeting) The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Differentiation Actually differentiating the firm’s market offering to create superior customer value. Positioning Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. ❯ Consumers have such varied preferences that stores are offering different brands to capture their business. ◗ FIGURE 7.1 Steps in market segmentation, targeting, and positioning 207 Chapter 7 < Customer-Driven Marketing Strategy: Creating Value for Target Customers Segmentation Divide the total market into smaller segments Targeting Select the segment or segments to enter Select customer to serve Differentiation Differentiate the market offering to create superior customer value Positioning Position the market offering in the minds of target customers Decide on a value proposition Create value for targeted customers 9780133795028_CH07.indd 207 27/10/16 6:52 pm