Principles of Marketing

Nineteenth Edition, Global Edition

Chapter 7
Customer Value–Driven
Marketing Strategy: Creating
Value for Target Customers

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Learning Objectives
7.1 Define the major steps in designing a customer
value-driven marketing strategy: market segmentation,
targeting, differentiation, and positioning.
7.2 Discuss the major bases for segmenting consumer and
business markets.
7.3 Explain how companies identify attractive market
segments and choose a market-targeting strategy.
7.4 Discuss how companies differentiate and position their
products for maximum competitive advantage.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

FACEBOOK (META): Targeting the Diverse
Needs of Different Social Media Segments

Thanks to successful segmentation and targeting, Facebook/Meta’s four

huge social media platforms—Facebook, Instagram, WhatsApp, and
Messenger—now constitute four or the world’s top five social media
brands.

rvlsoft/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Learning Objective 1
Define the major steps in designing a customer value-driven
marketing strategy: market segmentation, targeting,
differentiation, and positioning.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Customer Value–Driven Marketing
Strategy
Figure 7.1 Designing a Customer Value–Driven Marketing
Strategy

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Learning Objective 2
Discuss the major bases for segmenting consumer and
business markets.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (1 of 14)
Market segmentation requires dividing a market into
smaller segments with distinct needs, characteristics, or
behaviors that might require separate marketing strategies
or mixes.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (2 of 14)
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective segmentation

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (3 of 14)
Segmenting Consumer Markets
• Geographic segmentation
• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (4 of 14)

Segmenting Consumer Markets

Geographic segmentation divides the market into different geographical units
such as nations, regions, states, counties, cities, or even neighborhoods.

A company may decide to operate in one or a few geographical areas or operate

in all areas but pay attention to geographical differences in needs and wants.

Many companies today are localizing their products, advertising, promotion, and
sales efforts to fit the needs of individual regions, cities, and neighborhoods.

For example, Many large retailers—from Target and Walmart to Kohl’s and
Staples—are now opening smaller-format stores designed to fit the needs of
smaller markets not suited to their
typical large suburban superstores.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (6 of 14)

Hyperlocal social marketing: Mazda uses

personalized ads for customers within a
certain radius of a dealer.

The surge in digital and mobile

technology has given a boost to
hyperlocal social
marketing—location-based targeting to
consumers in local communities or
neighbor- hoods using digital and social
media.
For example, to energize its mobile app
presence, Burger King devised an
innovative hyperlocal social marketing
promotion called Whopper Detour. The
mobile promotion
offered discounted Whoppers to people Car Collection/Alamy Stock Photo
close to competing McDonald’s outlets.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (5 of 14)
Segmenting Consumer Markets
Demographic segmentation divides the market into segments based on
variables such as age, life-cycle stage, gender, income, occupation, education,
religion, ethnicity, and generation.

Demographic factors are the most popular bases for segmenting customer
groups.

One reason is that consumer needs, wants, and usage rates often vary closely
with demographic variables.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (7 of 14)
Segmenting Consumer Markets
Demographic
Age and life-cycle stage segmentation divides a market into different
age and life-cycle groups.
P&G’s Crest 3D White Brilliance vs Crest Frozen and Star Wars
characters
age is often a poor predictor of a person’s life cycle, health, work or
family status, needs, and buying power

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (7 of 14)
Gender segmentation divides a market into different segments based
on gender.
P&G was among the first to use gender segmentation with Secret, a
deodorant brand specially formulated for women, packaged and
advertised to reinforce the feminine image
there is shift from
.
Gender segmentation: Toy
company L E G O Group
announced recently that it will work
harder to remove gender
stereotypes from its products and
marketing.

Creativa Images/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (7 of 14)

Income segmentation divides a market into different income segments.

Many companies target affluent consumers with luxury goods and

convenience services.

Not all companies that use income segmentation target the affluent. For
example, many retailers—such as the Dollar General, Family Dollar, and
Dollar Tree store chains—successfully target low- and middle-income
groups. The core market for such stores is represented by families with
incomes under $30,000.

Creativa Images/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (7 of 14)
Psychographic segmentation divides a market into different segments
based on social class, lifestyle, or personality characteristics.

• Marketers also use personality

variables to segment markets. For
example, Loews, a luxury-boutique
hotel chain that offers high-level
personal service, targets “personas”
segments, such as “weekend explorer
couples,” “confident business
travelers,” “serious planners,” “luxury
jetsetters,” “vacationing families,” and
“Loews loyalists.” The chain creates
personalized offers, messages, and
media plans for each segment

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (8 of 14)
Segmenting Consumer Markets
Behavioral segmentation divides a market into segments based on
consumer knowledge, attitudes, uses of a product, or responses to a
product.

Segmenting Consumer Markets

Behavioral Segmentation
• Occasions
• Benefits sought
• User status
• Usage rate Benefit segmentation: Schwinn
• Loyalty status makes bikes for every benefit
segment. “No matter what you’re
looking for,” says Schwinn, “we’ve
got a line of bikes for you.”
Copyright © 2024 Pearson Education Ltd. All Rights Reserved.
Market Segmentation (9 of 14)

• Occasion segmentation can help

firms build up product usage.
Campbell’s advertises its soups more
heavily in the cold winter months, and
Home Depot runs special springtime
promotions for lawn and gardens
products. Other marketers prepare
special offers and ads for holiday
occasions or nontraditional occasions.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

• Benefits sought refers to finding the major benefits people look for in a product class, the kinds of
people who look for each benefit, and the major brands that deliver each benefit.

• Markets can be segmented by user status: nonusers, ex-users, potential users, first-time users,
and regular users of a product. Marketers want to reinforce and retain regular users, attract
targeted nonusers, and reinvigorate relationships with ex-users.
– P&G makes certain that its Pampers Swaddlers are the diaper most U.S. hospitals provide
for newborns and then promotes them as “the #1 choice of hospitals.” And it promotes the
brand to doctors to reinforce its position as the number-one pediatrician recommended
brand.

• Markets can also be segmented by usage rate: light, medium, and heavy product users. Heavy
users are often a small percentage of the market but account for a high percentage of total
consumption. For instance, a recent study showed that heavy seafood consumers in the United
States are a small but hungry bunch. Less than 5 percent of all shoppers buy nearly 64 percent of
unbreaded seafood consumed in the United States.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

• Consumers can be loyal to brands, and buyers can be divided into groups according to
their degree of loyalty. Some consumers are completely loyal—they buy one brand all
the time and can’t wait to tell others about it. Other consumers are somewhat
loyal—they are loyal to two or three brands of a given product or favor one brand while
sometimes buying others. Still other buyers show no loyalty to any brand—they either
want something different each time they buy, or they buy whatever’s on sale. A
company can learn a lot by analyzing loyalty patterns in its market, starting with its
own loyal customers.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (3 of 14)

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (11 of 14)

Segmenting Business Markets

Consumer and business marketers use many of the same
variables as consumers to segment their markets.
Additional variables include:
• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (11 of 14)

Almost every company serves at least some business markets. For example,
Starbucks has developed distinct marketing programs for each of its two
business segments: the office coffee and food service segments.

Many companies establish separate systems for dealing with larger or

multiple-location customers. For example, Steelcase, a major producer of office
furniture, first divides customers into seven segments, and salespeople work with
independent Steelcase dealers to handle smaller, local, or regional Steelcase
customers in each segment.

Many national, multiple-location customers, such as ExxonMobil or IBM, have

special needs that may reach beyond the scope of individual dealers. Therefore,
Steelcase uses national account managers to help its dealer networks handle
national accounts.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (12 of 14)

Segmenting International Markets

Few companies have either the resources or the will to operate in all, or even most, of the
countries that dot the globe. Operating in many countries presents new challenges.

Different countries, even those that are close together, can vary greatly in their economic,
cultural, and political makeup. International firms need to group their world markets into
segments with distinct buying needs and behaviors.

Companies can segment international markets using one or a combination of several

variables:

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (12 of 14)
Segmenting International Markets

• Geographic location involves grouping countries by regions such as Western Europe, the Pacific Rim,
the Middle East, or Africa. Geographic segmentation assumes that nations close to one another will
have many common traits and behaviors, however there are many exceptions. For example, the
Dominican Republic is no more like Brazil than Italy is like Sweden. Many Central and South
Americans don’t even speak Spanish.

• Economic factors involve grouping countries by population income levels or by their overall level of
economic development. A country’s economic structure shapes its population’s product and service
needs and, therefore, the marketing opportunities it offers.

• Political and legal factors involve segmenting by the type and stability of the government, government
receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.

• Cultural factors involve grouping markets according to common languages, religions, values and
attitudes, customs, and behavioral patterns.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (13 of 14)
Segmenting International Markets
Intermarket segmentation involves
forming segments of consumers who
have similar needs and buying behaviors
even though they are located in different
countries.

Intermarket segmentation: Today’s

technologies let fast-fashion retailer
Zara target like-minded style conscious
Eyal Dayan Photography
but value-seeking consumers anywhere
in the world they live.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Segmentation (14 of 14)
Requirements for Effective Segmentation
• Measurable: The size, purchasing power, and profiles of the segments can be
measured.

• 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 elements and programs.

• Actionable: Effective programs can be designed for attracting and serving the
segments.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Discussion Question (1 of 2)
What are the requirements for effective segmentation?

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Learning Objective 3
Explain how companies identify attractive market segments
and choose a market-targeting strategy.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (1 of 10)
Evaluating Market Segments
• Segment size and growth
• Segment structural attractiveness
• Company objectives and resources

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (2 of 10)
Selecting Target Market Segments
A target market is a set of buyers who share common
needs or characteristics that the company decides to serve.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (3 of 10)
Figure 7.2 Market-Targeting Strategies

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (4 of 10)
Selecting Target Market Segments
Undifferentiated marketing targets the whole market with
one offer.
• Mass marketing
• Focuses on common needs rather than what’s different

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (5 of 10)
Selecting Target Market Segments
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
• Differentiated marketing: The
InterContinental Hotels Group (I H G)
serves a wide range of customer
segments through 16 differentiated hotel
brands. It offers something for every travel
segment, from the Holiday Inn (for
customers looking for essentials) to Hotel
atgof.co/Alamy Stock Photo; Radharc
Indigo (for those who want to be “part of Images/Alamy Stock Photo
the pulse and rhythm of a place”).

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (6 of 10)
Selecting Target Markets
Concentrated marketing targets
a large share of a smaller market.
• Limited company resources
• Knowledge of the market
• More effective and efficient
Concentrated marketing: Apparel
company American Giant has
grown explosively in its David Paul Morris/Bloomberg via Getty Images
back-to-basics, made-in-America
niche.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (7 of 10)
Selecting Target Market
Segments
Micromarketing is the practice of
tailoring products and marketing
programs to suit the tastes of
specific individuals and locations.
• Local marketing
• Individual marketing

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (8 of 10)
Selecting Target Market Segments
Local marketing involves tailoring brands and promotion to the needs
and wants of local customer segments.
• Cities
• Neighborhoods
• Stores

Local marketing: The Kroger app

personalizes and optimizes the
customer’s experience in a
preferred local store. Its Google
Maps pickup service shares a
pick-up customer’s estimated time
of arrival with the store so orders
are ready for handover just when
the customer arrives at the store. Koshiro K/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (9 of 10)
Selecting Target Markets
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

Individual marketing: Based on

images submitted by a customer
using its smartphone app,
FitMyFoot 3-D prints footwear
that fits that customer and no
one else.
FitMyFoot

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Market Targeting (10 of 10)
Selecting Target Market Segments
Choosing a targeting strategy
depends on
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies Cagkan Sayin/Shutterstock

Socially responsible targeting: In

this era of increased social
responsibility, marketers must
consider not just whether targeted
consumers buy and like their
products but also whether they use
them wisely.
Copyright © 2024 Pearson Education Ltd. All Rights Reserved.
Learning Objective 4
Discuss how companies differentiate and position their
products for maximum competitive advantage.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (1 of 9)
Product position is the way the product is defined by
consumers on important attributes.

Positioning: Spotify does

more than just stream music.
It gives you “Music for every
mood.”

rafapress/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (2 of 9)
Positioning maps show consumer perceptions of
marketer’s brands versus competing products on important
buying dimensions.
Figure 7.3 Positioning Map: Large Luxury S U V s

rafapress/Shutterstock

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (3 of 9)
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
• Communicating and delivering the chosen position to the
market

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (4 of 9)
Choosing a Differentiation and Positioning Strategy
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.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (5 of 9)
Choosing a Differentiation and
Positioning Strategy
Identifying a set of possible competitive
advantages to differentiate along the
lines of:
• Product
• Services
• Channels anzheni/Shutterstock

• People
• Image
Positioning on multiple competitive
advantages: Land Rover positions its
new Defender as combining its legacy
off-road performance with
state-of-the-art electronics and luxury
on-road comforts.
Copyright © 2024 Pearson Education Ltd. All Rights Reserved.
Differentiation and Positioning (6 of 9)
Choosing a Differentiation and Positioning Strategy
A competitive advantage should be:
• Important: The difference delivers a highly valued benefit to target buyers.

• Distinctive: Competitors do not offer the difference, or the company can offer it in a
more distinctive way.

• Superior: The difference is superior to other ways that customers might obtain the same
benefit.

• Communicable: The difference is communicable and visible to buyers.

• Preemptive: Competitors cannot easily copy the difference.

• Affordable: Buyers can afford to pay for the difference.

• Profitable: The company can introduce the difference profitably.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (7 of 9)
Choosing a Differentiation and Positioning Strategy
Value proposition is the full mix of benefits upon which a brand is
positioned.
Figure 7.4 Possible Value Propositions

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (8 of 9)
Choosing a Differentiation and
Positioning Strategy
Positioning statement summarizes
company or brand positioning using
this form: To (target segment and
need) our (brand) is (concept) that
(point of difference)
Positioning statement: Public Goods
Courtesy of Public
is positioned as an online food and Goods
household goods retailer that makes
healthy, sustainable, everyday
essentials accessible at a fair price.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Differentiation and Positioning (9 of 9)
Communicating and Delivering the Chosen Position
Choosing the positioning is often easier than implementing
the position.
Establishing a position or changing one usually takes a long
time.
Maintaining the position requires consistent performance
and communication.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.

Discussion Question (2 of 2)
Describe the more-for-more positioning strategy.

Copyright © 2024 Pearson Education Ltd. All Rights Reserved.