Lebanese International University

BMKT300 – Marketing Theory and Principles

 CHAPTER 7

Customer Value-Driven Marketing Strategy

Creating Value for Target Customers
The Marketing Process
 Designing a Customer Driven Marketing Strategy

Once the marketing management of the company fully understands its

consumers and its marketplace, it can design a customer-driven marketing

strategy which is based on expected customer behavior in a certain

market. In order to know the customer and its expected buying behavior, a

segmenting, targeting and positioning (STP) process is used as a basis of

deciding on the most effective marketing strategy and marketing mix.

Customer Value-Driven Marketing Strategy

I III

II IV
 Design a Customer Driven Marketing Strategy

The STP process should answer two important questions:

1) What customers will we serve?  Select Customers to serve

2) How can we serve these customers best?  Decide on a value

proposition.
 Answering the First Vital Question: What Customers Will we Serve?

The company must first decide whom it will serve. It does this by
dividing the market into segments of customers (Market
Segmentation) and selecting which segments it will go after (Market
Targeting). Some people think of marketing management as finding
as many customers as possible and increasing demand. But marketing
managers know that they cannot serve all customers in every way. By
trying to serve all customers (Mass Marketing ), the company may
not serve any customers well. Instead, it wants to select only
customers that it can serve well and profitably (Target Marketing).
Ultimately, marketing managers must decide which customers they
want to target and on level, timing, and nature of their demand.
Market Segmentation & Target Market
A market is the set of all actual and potential buyers who
have sufficient interest in, income for, and access to a product
or service

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The way a market is defined impacts upon how
it can be segmented. For example, a market
could be called 'small cars' or 'personal
transport', depending upon the definition, the
segments which emerge could be very different.

Copyright © 2013 Pearson Education

SMALL CARS Vs PERSONAL
TRANSPORT*

Copyright © 2013 Pearson Education

 I - Market Segmentation

• Market segmentation is the process that companies use to

divide a large heterogeneous market into small homogenous

segments that can be reached more efficiently and effectively

with products and services that match their unique needs.

• Market segment a market segment consists of a group of

customers who share a similar set of needs

Market Segment

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Market Segmentation

Mass
Market

In this
market we
have four
Market
Segment
Example: The Toothpaste Market

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 I - Market Segmentation

 A Target Market Segment is a specific group of people

that have been identified as the most likely potential
customers for a company’s product because of their shared
characteristics such as age, income, and lifestyle.

 A company may target more than one segment (multi-

segment marketing) with several product lines that appeal to
each target segments.
Target Market Segment

Mass
Market

Market
Segment
A company may target more than
one segment (multi-segment
marketing) by customizing its
product in order to appeal to each
target segments.
For Example, Coca Cola employ multi-segment marketing to
sell its carbonated soda to different population segments.
Coca Cola customize its product to fit the needs and wants of
each target segment *.

Principles of Marketing- Section A- LIU-

Tripoli- Spring 2015
 I - Market Segmentation

Types of Markets

There are four types of markets:

1- Consumer Markets
2- Business Markets
3- Governmental Market
4- International Markets

Ch 7 -22 Copyright © 2011 Pearson Education

 I - Market Segmentation
Segmenting Consumer Markets

Consumer market refers to

all of the personal
consumption of final 1. Geographic
2.
Demographic
consumers. Segmentation
Segmentation

There are four major

variables that might be used
in segmenting consumer
3. Psychographic 4. Behavioral
markets: Segmentation Segmentation
Consumer Segmentation Bases

Copyright © 2013 Pearson Education

 I - Market Segmentation
Segmenting Consumer Markets
1. Geographic Segmentation:
• Divides the market into different geographical units such
as nations, regions, states, counties, cities, or even
neighborhoods.
• A company may decide to work in one, a few, or all areas.
• Must pay attention to geographical differences in needs and
wants.
 I - Market Segmentation
Segmenting Consumer Markets
1. Geographic Segmentation Example:
McDonalds divides its market into geographic segments, for
example, different countries, states, regions and cities.
McDonalds sells burgers and target local markets and with
customized menus. Let’s say, instead of using beef, in India
McDonalds burgers are made from chicken due to religious
beliefs.
McDonalds Customized Menus Based on Geographic Segmentation

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

 Geographic Segmentation
Samsung refrigerators for
Samsung refrigerators for
the Korean Market
the U.S. Market
 I - Market Segmentation
Segmenting Consumer Markets
2. 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.
• The most popular bases for segmenting customer groups
because:
o Customer needs, wants, and usage rates vary closely with
demographic variables.
o Easy to measure.
 I - Market Segmentation
Segmenting Consumer Markets
2. Demographic Segmentation:
a) Age and Life-Cycle Stage Segmentation:
o Needs and wants change with age.
o It involves offering different products or using different
marketing approaches for different age and life‑cycle
groups.
o Be careful against stereotyping.
o Age is often a poor predictor of a person’s life cycle,
health, work or family status, needs, and buying power.
 I - Market Segmentation
Segmenting Consumer Markets
2. Demographic Segmentation:
a) Age and Life-Cycle Stage Segmentation Example:
A vitamin manufacturer may offer a children’s formula for
ages 4-12, a vitamin specially formulated for young
teenagers, an adult version for adult men and women, and a
high-energy formula for people over the age 50.
Example of Demographic Segmentation (Age)

Colgate Toothbrush for Children

Colgate Toothbrush for Adults
 I - Market Segmentation
Segmenting Consumer Markets
2. Demographic Segmentation:
b) Gender Segmentation:
• Divides the market based on gender (male or female).
• Has long been used in clothing, cosmetics, toiletries, and
magazines.
• Example:
Demographic Segmentation (Gender)
 I - Market Segmentation
Segmenting Consumer Markets
2. Demographic Segmentation:
c) Income Segmentation:
• Divides the market into affluent (rich), middle- or low-
income consumers.
• Has long been used by the marketers of products and
services such as automobiles, clothing, cosmetics,
financial services, and travel.
 I - Market Segmentation
Segmenting Consumer Markets
2. Demographic Segmentation:
c) Income Segmentation Example:
The customers of the brand Ferrari are super rich with an
income over $100,000.
 I - Market Segmentation
Segmenting Consumer Markets

3. Psychographic Segmentation

Divides buyers into different groups based on

social class, lifestyle, or personality characteristics,
providing a deeper understanding about the
customers.
Demographic Vs Psychographic Segmentation
 I - Market Segmentation
Segmenting Consumer Markets
3. Psychographic Segmentation Example:
Psychographic variables are used by Starbucks noticing
that their customers like to socialize and share a
neighbourhood. College students use Starbucks as a place
to hang out, study, write papers and meet new people.
Example of Psychographic Segmentation
Porshe Panamera
Porshe Boxter
for “Top Guns”
for “Bon Vivants”
Psychographic Segmentation
 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
Divides buyers into groups based on their knowledge,
attitudes, uses, or responses to a product.
a) Occasion Segmentation is grouping buyers according to
occasions when they get the idea to buy, actually make their
purchase, or use the purchased item.
o Some companies try to increase consumption by
promoting usage during non-traditional occasions.
Example: Tropicana promotes
drinking orange juice at
any time of day as a cool,
refreshing drink.
 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
b) Benefit Sought is grouping buyers according to the
different benefits that they seek from the product.
Example: Some of the benefits toothpaste users expect
include reduce sensitivity, teeth whitening, tartar control,
cavity protection, and fresh breath.
Behavioral Segmentation (Benefits Sought )
 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
c) User Status is segmenting markets into nonusers, ex-users,
potential users, first-time users, and regular users of a product.
Marketers want to:
o Reinforce and retain regular users.
o Attract targeted non-users.
o Regain relationships with ex-users.

Example: to get new parents (attract

potential users), Proctor & Gamble
promotes its Pampers as
“The #1 Choice of Hospitals!”
 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
d) Usage Rate is grouping markets into light, medium, and
heavy product users.
Example: LG Electronics market their products offering the
biggest discounts to the highest purchaser by offering a 15%
discount on a TV and a 35% discount on the purchase of an
Air Conditioner.
Behavioral Segmentation (Usage Rate)

Marlboro Light Smoker Marlboro Heavy Smoker

 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
e) Loyalty Status is dividing buyers into groups according to
their degree of loyalty into:
o Completely loyal: they buy one brand all the time.
o Somewhat loyal: they are loyal to two or three brands.
o No loyalty to any brand.
Customers can be loyal to :
o Brands (Ex: Crest)
o Stores (Ex: Zara)
o Companies (Ex: Apple)
 I - Market Segmentation
Segmenting Consumer Markets
4. Behavioral Segmentation:
e) Loyalty Status Example:
Ladles restaurant offering
a $2 discount on
a future purchase for being
a loyal customer.
 I - Market Segmentation
Using Multiple Segmentation Bases /Variables / Criteria

Marketers rarely limit their segmentation analysis to only one

or a few variables. Rather, they often use multiple

segmentation bases / variables / criteria in an effort to

identify smaller, better-defined target groups.

For each target group, the company will designs a separate

market offer.
Example of Using Multiple Segmentation Bases : BMW

Principles of Marketing- Section A- LIU-

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Tripoli- Spring 2015
 I - Market Segmentation
Multivariable Segmentation Systems

Several business information services—such as Nielsen and Acxiom —

provide multivariable segmentation systems that merge geographic,

demographic, lifestyle, and behavioral data to help companies segment

their markets down to zip codes, neighborhoods, and even households.

One of the leading segmentation systems is the PRIZM® system by

Nielsen. PRIZM classifies U.S. households into 66 demographically and

behaviorally distinct segments, organized into 14 different social groups

Principles of Marketing- Section A- LIU-
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Tripoli- Spring 2015