Chapter 7

Customer Driven Marketing

Strategy
Designing a Customer-Driven Marketing Strategy
In concept, marketing boils down to two questions:
(1) Which customers
2
will we serve?
(2) How will we serve them?
Segmenting Consumer Markets
Different Segmentation Variables
3

• 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 market structure

• The variables that might be used in segmenting consumer markets are as

following
• Geographic
• Demographic
• Psychographic
• Behavioral
 Segmenting Consumer Markets|Geographic Segmentation
Geographic segmentation
Dividing the market into different geographical units, such as nations, regions, states, counties,
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cities, or even neighborhoods
 Pakistan – understanding the geography
 Mobile Network Providers: In Pakistan, mobile network providers such as Jazz, Zong, and Telenor utilize
geographic segmentation to cater to the specific needs and preferences of consumers in different regions.

 In urban areas like Karachi, Lahore, and Islamabad, where population density is high and there's a demand
for high-speed internet and premium services, mobile network providers focus on offering 4G packages
with high data limits and additional perks like free access to entertainment content.

 In rural areas of Sindh and Punjab provinces, where access to technology may be limited and purchasing
power differs, mobile network providers offer more affordable packages with basic calling and texting
services, along with options for feature phones that are more cost-effective.

 In the mountainous regions of northern Pakistan, such as Gilgit-Baltistan and Azad Kashmir, where terrain
and infrastructure pose challenges for connectivity, mobile network providers offer specialized coverage
solutions like satellite-based communication services or rugged handsets designed for outdoor use.
Segmenting Consumer Markets|Demographic Segmentation
Demographic segmentation

Dividing
5
the market into segments based on variables such as age, life-cycle
stage, gender, income, occupation, education, religion, ethnicity, and generation.
 Age and life-cycle segmentation
Dividing a market into different age and life-cycle groups.
 Wants and abilities change with age
 Important to do it carefully by understanding consumers’ preferences as they
change
 What events and stages a person goes through in his/her life affects buying
behavior
 A furniture retailer recognizes the life cycle stage of its consumers and sell its
products accordingly. Families with young children may prioritize durable and
child-friendly furniture, while retired and elderly consumers may seek
downsizing solutions or luxury items for their retirement years.
Segmenting Consumer Markets
Demographic Segmentation
6

 Gender Segmentation
 Importance of understanding how they differ in purchasing behavior
 How they approach purchase decision is to be observed
 Nivea Men

A clothing brand differentiates its marketing strategies for men and

women based on gender preferences.
Segmenting Consumer Markets
Demographic Segmentation
 7
Income

Income segmentation is a long-standing practice in such categories as cars,

clothing, cosmetics, financial services and travel.

 Examples: Rolex, Rolls Royce, Walmart

 A luxury car manufacturer targets high-income individuals with premium vehicles

that emphasize comfort, performance, and status symbols. They may offer
exclusive features and customization options tailored to affluent buyers.

 Understanding the exact behaviors and preferences of this demographic is crucial

for effective marketing strategies, ensuring that the brand aligns with the lifestyle
and aspirations of high-income consumers.
Segmenting Consumer Markets
Demographic Segmentation
8
Generation
 A generation is impacted by lifestyle of times it grows in

 Cohorts are formed whose members share same political, cultural and economic
experiences. For Example: Profiling of American generation is done famously as:
Baby boomers (born: 1946-64) Generation X (born: 1965-77)
Generation Y (born: 1978-94) Millennials (born: 1995-2002)
 Behaviors are (believed to be) highly coherent
 A technology company launches a new line of smartphones targeted specifically
at millennials, incorporating features such as social media integration, high-
quality cameras, and customizable interfaces. By understanding the lifestyle and
preferences of this generation, the company can design products and marketing
campaigns that resonate with millennials' values and technological expectations.
Segmenting Consumer
Markets
Demographic Segmentation
 Segmenting Consumer Markets
Demographic Segmentation

MG1002 Marketing Management

Social Class
• Has strong impact on lifestyle, product preferences etc.

•Example: A high-end fashion brand caters to consumers from upper social classes by

offering luxury clothing and accessories made from premium materials and designer

labels. Their marketing campaigns may focus on exclusivity, elegance, and

sophistication, appealing to the lifestyle and product preferences of affluent

individuals.
Segmenting Consumer Markets
Psychographic Segmentation
12

 Psychographic Segmentation
is dividing buyers into
groups/segments based on:
 Psychological / personality traits
 Lifestyle
 Values

 Culture may also play role

in Psychographics
 A good example is VALS™ (values and lifestyles) model
used in the Unites States
Segmenting Consumer Markets
Psychographic Segmentation

 The VALS™ model categorizes US consumers into segments based

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on their values, attitudes, and lifestyles:

1. Innovators: High-resource individuals seeking uniqueness and early adoption.

2. Thinkers: Rational consumers valuing functionality and reliability.
3. Achievers: Success-oriented consumers valuing stability and brand prestige.
4. Experiencers: Young, adventurous consumers seeking novel experiences. They
spend a comparatively high proportion of income on socializing and fashion
5. Believers: Traditional, conservative individuals prioritizing stability and tradition.
They prefer familiar, domestic products and are loyal to established
brands.
6. Strivers: Trendy and fun-loving people who are resource constrained. They like
stylish products that emulate the purchases of those with greater material wealth
7. Makers: Practical, down-to-earth people who like to work with their hands. They
seek domestic products with a practical or functional purpose.
8. Survivors: Elderly, passive people. They are loyal to their favorite brands.
Segmenting Consumer Markets
Behavioral Segmentation
14

 In Behavioral segmentation
buyers are divided into groups based on:
 Their knowledge of product
 Attitude towards product
 Use of product
 Response to a product

 Decision Roles
 Who buys what? What influence they have
 Consumers may have following roles in buying process
(Initiator, Influencer, Decider, Buyer, User etc.)
Segmenting Consumer Markets
Behavioral Segmentation
15

 Behavioral Variables
 Occasions: Activities in different occasions impact needs & purchasing
(e.g. holidays, start of month etc.)
 Benefits: Based on benefits sought by consumers
 User Status: Non-users | Ex-users | Potential Users | First-time users |
Regular Users
 Usage Rate: Light, medium and heavy users
 Buyer-Readiness Stage: Unaware | Aware | Interested | Intend to
buy
 Loyalty Status: Hard core loyals | Split loyals | Shifting loyals | Switchers
 Attitude: Enthusiastic | Positive | Indifferent | Negative | Hostile
Split Loyals:
•Definition: Split loyals are consumers who
consistently purchase two or more brands within
a specific product category.

Shifting Loyals:
•Definition: Shifting loyals are consumers who
frequently switch between brands within a
product category over time.
Behavioral Segmentation Example:
A tech company segments consumers for its new smartphone:
1.Tech Enthusiasts: Knowledgeable about latest tech, seek detailed specs.
2.Brand Loyalists: Trust brand reputation, buy without extensive research.
3.Heavy Users: Prioritize battery life, storage, willing to pay more.
4.Early Adopters: Quick to embrace new technology, eager for new releases.

Decision Roles:
Consumers may play different roles in the buying process:
•Initiator: Suggests buying the new smartphone.
•Influencer: Shares positive experiences, influences decision.
•Decider: Evaluates options, makes final decision.
•Buyer: Makes the purchase.
•User: Utilizes the smartphone daily.
 Segmenting Consumer
Markets
Behavioral Segmentation
Behavioral Variables (breakdown)
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Target Market

Unawar
Aware
e

Not tried Tried

Not yet
Repeate
Rejector repeate
d
d
Negativ Favorabl
e Neutral e Loyal to
Switche Loyal to
opinion opinion other
r brand
brand

Light Regular Heavy

user user user
Marketing in Practice
Segmentation in Practice
class exercise
If you were to segment Pakistan’s total population
for:
 Nestle’ Nescafe launch – aim is to get as many customers
 Launching Tesla in Pakistan

WHAT VARIABLES YOU’D USE? WHY?

(RATIONALITY FOR CHOICE)

Make reasonable assumptions

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•Income Level: Determines purchasing power; middle to
high-income segments for Nescafe, high-income segments
for Tesla.
•Urban vs. Rural Residence: Urban areas for higher
demand due to modern lifestyles; rural areas may prefer
traditional beverages.
•Age Group: Nescafe targets young adults and
professionals; Tesla focuses on affluent middle to older age
groups.
•Education Level: Higher education correlates with
appreciation for quality products.
•Lifestyle and Urbanization: Urban, cosmopolitan areas
show higher demand; modern lifestyle and environmental
Levels of Market Segmentation

Mass marketing is the mass production, mass distribution and mass marketing
communication of one market offering for all buyers.

 Examples include Picasso pen (standard) and Pak Fan standard ceiling fan
 The company designs a product and a marketing program that will appeal to
the largest number of buyers
 BUT…. Mass marketing is becoming difficult as it is not profitable to reach
mass audience always
 Increasing levels of competition present customers with a wide choice of
possible suppliers
Levels of Market Segmentation
Micro-marketing

Now a days, mass-marketing is in decline and most companies are

turning to micro-marketing

Micro-Marketing is done at one of four levels:

 Segments - Segment Marketing

 Niches – Niche Marketing

 Local Areas – Local Marketing

 Individuals - Customerization
Levels of Market Segmentation
1) Segmented Marketing

 A firm decides to target several market segments and designs separate offers for each. For
example, Unilever markets different variants of soaps (Lux, Dove) and laundry detergents
( Surf excel, Sunlight) in Pakistan

2) Niche Marketing
 A niche market is a more narrowly defined customer group seeking a distinctive mix of
benefits or values.
 The customers pay a premium to the firm that provides the market offering with the best
consumer-perceived value
 Niche markets are generally fairly small in terms of volume but constitute a sufficiently
attractive profit and growth potential
 Marketers usually identify niches by dividing a market segment into sub-segments.
 Rolls Royce, Rolex, Qarshi La’ Cola (caffeine-free & phosphoric acid-free soft drink)
Levels of Market Segmentation

3) Local Marketing
 It involves tailoring brands and promotions to the needs and wants of local customer groups
(cities, neighborhoods)
 For example, Walmart customizes its merchandize store by store to meet the needs of local
shoppers
 Retailer such as “Imtiaz” may run in-store promotions, such as buy one get one free offer, to
attract local customers

4) Individual Marketing
 Tailoring products and marketing programs to the needs and preferences of individual
customers.
 Also labeled “one-to-one marketing” or “customized marketing”
 Mass customization is the process through which firms interact one-to-one with masses of
customers to design products and services tailor made to individual needs.
 For example, Nike lets you customize its shoes for you.
Market Targeting
25

 A target market consists of a set of buyers who share common needs or

characteristics that the company decides to serve

 Marketers job is to identify segments and

select which ones to target

 Segments are identified =>

Now selecting which ones to target

 More and more refinement helps identify smaller, more focused segments and
Better target them
 Market Targeting
•Marketers identify segments for a new product
•The next step is selecting which segments to target.
•Refinement of segmentation helps identify smaller, more
focused segments.
•Targeting these focused segments allows tailored
marketing efforts.
•Result: Better alignment with consumer needs and
preferences, leading to improved outcomes.
Market Targeting
Effective Segmentation Criteria
 Market segments must rate favorably on following criteria:
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Measurable
• Size, purchasing power, characteristics can be measured easily
• It should not be vague

Substantial
• Large & profitable enough to serve
• Worth going after with a tailored marketing program/effort

Accessible
• Can be effectively reached and served

Differentiable
• Conceptually distinguishable
• Respond differently to different marketing-mix elements

Actionable
• Effective programs can be formulated for that particular segment
Market Targeting
Evaluating and Selecting the Market Segments
 Choice to 28
be made between going for:
Segments (Segment marketing)
or
Individuals (Customization)

 Arguments for/against segmentation concept:

 FOR Segmentation(they favor segmentation):

i) Segmentation is more efficient ----> Targeting similar groups saves costs
ii) Less customer information -----> Requires less detailed data.
iii) More standardization ------> Streamlines operations with standardized strategies

 AGAINST Segmentation (they favor customization):

i) Segments are fictional ---------> Segments may not reflect real behavior.
ii) Those in a segment differ greatly ------> Individuals within segments differ widely
Market Targeting
Evaluating and Selecting the Market Segments
Evaluation process
 Based on 29
five criteria (measurable, substantial, accessible, differentiable, actionable)
 Vis-à-vis two factors:
 Segment’s overall attractiveness
Assessing the segment's potential profitability, size, growth rate, and alignment with the
company’s brand.
 Company’s objectives and resources
Evaluating how well each segment aligns with the company's objectives, such as market
expansion or profit maximization, and its resources, including budget and manpower.
By carefully analyzing each segment against these criteria, the company ensures that it selects
the most promising segments to target, optimizing its marketing efforts and resource allocation
for maximum impact
Market Targeting
Effective 30
Segmentation Criteria – Competitive Forces

Porter’s Five Forces Model

1. Threat of intense segment rivalry
INDUSTRY COMPETITORS’ intense rivalry

can make a segment unattractive

2. Threat of new entrants

Depending on what kind of entry & exit barriers exist:
 If both are high: profits are high and risks are high too
 If entry barrier is high but exit barrier is low: firms enter
 If both are low: returns are low and stable

3. Threat of substitute products

If there are actual or potential substitute products
Market Targeting
Effective
31 Segmentation Criteria – Competitive Forces

Porter’s Five Forces Model

4.Threat of buyer’s growing bargaining power
If buyers possess strong or even growing bargaining power, it can erode
margins

5.Threat of suppliers’ growing bargaining

power
If suppliers can raise prices or reduce quantity supplied and have
bargaining power IMPORTANT CLASS
it can make an industry unattractive DISCUSSION:
WHY & HOW PORTER’S FORCES MODEL
IS USED?
- For market and/or market segment
Consider the smartphone industry analyzed through Porter's Five
Forces Model:
1.Threat of Intense Segment Rivalry:
 In the smartphone industry, there is intense rivalry among
competitors like Apple, Samsung, and Huawei, leading to
frequent price wars and aggressive marketing strategies. This
rivalry can make the segment unattractive due to pressure on
prices and margins.
2.Threat of New Entrants:
 Entry barriers in the smartphone industry are relatively high due
to significant capital requirements for R&D, brand recognition,
and distribution channels. However, exit barriers are low,
allowing firms to enter easily but exit if necessary, leading to
continuous competition.
3.Threat of Substitute Products:
 In the smartphone industry, potential substitutes include feature
phones, tablets, and wearable devices. As technology advances,
4.Threat of Buyers’ Growing Bargaining Power
(Smartphone Industry):
•Abundant choices and price sensitivity empower buyers to
negotiate.
•Access to information and low switching costs increase buyer
leverage.
•Manufacturers must innovate and offer competitive pricing to
retain customers.

5.Threat of Suppliers' Growing Bargaining Power

(Smartphone Industry):
•Suppliers provide critical components with limited alternative
Market Targeting
Ethical choice of market targets

•Firms must ensure that their marketing efforts are not exploiting
vulnerable groups in society OR promoting harmful products
• For example, targeting children online raises concerns about information
privacy.
•Also, questions regarding children's understanding of their well-being
arise.
•Not all marketing to children is harmful, as seen in Safeguard and
Lifebuoy's handwashing campaigns
•Companies must balance profit with social responsibility when targeting