Customer-driven marketing strategy:

creating value for target customers

Topic 6:

Developing Great African Leaders

 Learning Objectives
OBJECTIVES
To understand the concept of market segmentation and target markets.
To know the process of market segmentation.
To know the benefits of market segmentation.
To discuss the bases for segmenting consumer markets.
To understand the alternative target market strategies available.
To understand positioning and the strategies

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 Introduction
▪ Markets consist of buyers but buyers differ in one or more ways – needs, wants, resources, location,
buying attitudes, buying practices etc.
▪ Within the same general market there are groups of customers (market segments) with different
wants, buying preferences, or product-use behaviour.
▪ In some markets, these differences are relatively minor and benefits sought by consumers can be
satisfied with a single marketing mix e.g. salt, sugar, and toilet paper markets, while in others they
are not.
▪ Hence such markets must be segmented and targeted individually with alternative marketing mixes.
▪ Companies today recognize that they cannot appeal to all buyers in the market place or at least to all
buyers in the same way.

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 WHY?
▪ Because buyers are too many, too widely scattered, and have diverse needs and buying
practices.
▪ On the other hand, companies themselves also have limitations in their abilities to serve
markets.
▪ Where a company has limited resources or may come up against aggressive competitors, it
has been proven that it is better for the company to identify parts of the market that it can
serve best and most profitably.
▪ This has led to most companies moving away from mass marketing towards market
segmentation and targeting (target marketing)

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 Target marketing thus has three major steps:
1. Market segmentation

2. Market targeting

3. Market positioning

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 Meaning of Market Segmentation
• The process of dividing markets into distinct subset of customers, each of which can be
considered as a target market with common needs and can be approached with a distinct
marketing mix, actions or programs.

• It aims to identify and delineate market segments or "sets of buyers“ which would then
become targets for the company's marketing plans .

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 Benefits of Market Segmentation
1. Easier to develop and implement a suitable market mix (4ps)for each segment since
marketing mix variables can be tailored to appeal to specific customer groups
2. Marketing effort can be focused on customers with the greatest purchase interest instead of
scattering it everywhere
3. Easier to understand customer needs and respond appropriately
4. Ability to identify marketing opportunities
5. Easier to build customer relationship to promote repeat purchases
6. Easier to monitor competitors activities
7. Easier to get in-depth knowledge of the segment through marketing research
8. Possible to specialize in products or services for small segments
9. Price discrimination can be undertaken in different segments to increase profitability.

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 Problems of Segmentation
1. Difficult to select the most appropriate segmentation variable

2. Costs may increase due to many segments e.g. inventory , advertising promotional costs

3. Small segments may be unprofitable

4. Lack of economies scale

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 Requirements for Effective Segmentation

For effectiveness, the market segments should exhibit the following characteristics:
Measurability – segment should ideally be quantifiable. The size, purchasing power and
profiles of the segments can be measured. Certain segmentation variables are difficult to
measure. For example, around 10 per cent of the world's population of 7 billion people is
left-handed. This group is larger than many countries. Yet few products are targeted
toward this left-handed segment. The major problem may be that the segment is hard to
identify and measure. There are no data on the demographics of lefties, and few
governments keep track of left-handedness in their population surveys.

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 ▪ Accessibility – segment must be accessible i.e. can be reached. The market segments can
be effectively reached and served. Suppose a fragrance company finds that heavy users of
its brand are single men and women who stay out late and socialise a lot. Unless this group
lives or shops at certain places and is exposed to certain media, its members will be
difficult to reach.

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 Substantiality – segment should be large enough to allow profitability operations. The
market segments are large or profitable enough to serve. A segment should be the largest
possible homogeneous group worth pursuing with a tailored marketing programme. It would
not pay, for example, for a motor manufacturer to develop cars especially for people whose
height is greater than seven feet.
Actionability – it should be possible to formulate effective programmes for attracting and
serving the chosen segments. Effective programmes can be designed for attracting and
serving the segments. For example, although one small airline identified seven market
segments, its staff was too small to develop separate marketing programmes for each
segment.

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 Requirements for Effective Segmentation
Differentiability – segments should be conceptually distinguishable and respond differently
to different marketing mix. The segments are conceptually distinguishable and respond
differently to different marketing mix elements and programmes. If men and women respond
similarly to marketing efforts for soft drinks, they do not constitute separate segments.

Responsiveness – segment should be willing to react to the unique marketing programmes

developed e.g. willingness to buy in response to variations in marketing mix

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13 Developing Great African Leaders www.sbs.strathmore.edu
 Bases for Segmenting Consumer Markets
1. Geographic segmentation
• Rationale for geographic segmentation is that consumers needs and wants vary
geographically
• Company concentrates in one geographic area instead of operating nationally

• Market divided into different geographical units eg

• Provinces, regions or districts – soft drinks
• Rural versus urban – bakeries, newspapers
• Useful in initially defining markets

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 Geographic segmentation
• Ability to create a more fine-tuned product or service

• Enables an organization to select the most suitable distribution and communication

channels.
• For example?

• An organization is also able to get a clearer picture of its competitors

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 2.Demographic Segmentation
Uses population characteristics such as:
a. Age – babies, young, teenager, old e.g. clothes, toys, music
b. Sex – male, female e.g. clothes, hairdressing cosmetics, magazines which appeal to men or
women
c. Health condition/concerns – diet foods, low-tar cigarettes, clubs
d. Family size – products packaged in family sizes
e. Marital status – married, single, divorced e.g. counselling,
f. Income-low, medium, high-income groups e.g. cars, houses, hotels, clubs
g. Occupation – teacher, lawyer, doctor, judge, banker

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 h. Education -training courses, books, etc

i. Religion – Catholic, Protestant, Muslim e.g. clothes, food, books, radio and TV station

j. Ethic group e.g. FM radio stations, food, clothes

k. Race/Nationality e.g. Food such as Indian, Chinese; clothes.

*The above factors are the most popular bases for distinguishing between customer
groups

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 3. Psychographic segmentation.
Social class – lower, middle, upper

Lifestyle – high fashion, traditionalist, sophisticate, luxurious living.

Personality – ambitious, aggressive, detached, social

• Products can be designed to appeal to particular social classes or lifestyle e.g.. Clothing,
luxury cars, leisure activities, hobbies, games (golf), schools (academies), homes,
hospitals etc

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 4. Behavioural segmentation
• Benefits sought - quality, economy, convenience, prestige, durability, comfort, safety,
taste.
• Use occasion - regular vs. special occasion e.g.. Flower giving (Valentine’s Day,
Hospital, Weddings, Funeral);
• User status – non-user, ex user, potential user, first-time user, regular user e.g. airline
–flier vs. non flier; drug users rehabilitation programmes could focus on regular users to
quit the habit or to discourage non- users
• Usage rate – light, medium, heavy users e.g.. Coffee and beer drinkers, cigarette smokers,
bank accounts.

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 • Readiness stage- unaware, aware, informed, interested e.g. HIV tests, pap tests, breast
screening.

• Attitude towards the product- enthusiastic, positive, negative, indifferent, hostile, eg

voting for a party

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 Loyalty Status – Consumers have varying degrees of loyalty to specific brands, stores and
companies. The types of loyalty status are:

• Hardcore loyalty – buy one brand all the time

• Split loyalty – Loyal to two or three brands
• Shifting loyalty – Shift brands regularly
• Switchers – have no loyalty

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 2. MARKET TARGETING
• Process of dividing the market into major market segments, evaluating them, and selecting
and targeting one or more segment, and deciding on the company’s positioning in each
market
RATIONALE FOR MARKET TARGETING
• 1. CONSUMER DIVERSITY OR HETEROGENEITY
• Buying habits and requirements are heterogeneous
• Different tastes and preferences
• Consumers widely scattered /spread geographically
• Consumers may be too numerous
• Difficult to serve all these consumers through mass marketing

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 2. Scarcity of Resources Available To Firm
1. Lack of resources and energy to serve everywhere
2. Difficulties in competing everywhere sometimes against superior odds
3. Easier to serve smaller than larger market due to better focus and concentration
4. More efficient and effective use of resources
5. Enables firm to match organizational capabilities with specific groups of customers
6. Firms perform better by identifying and concentrating on the most attractive parts of
the market

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 Market coverage strategy
• Three strategies are available for the firm when deciding how many market it will serve
and how it will do it .These are: Undifferentiated marketing strategy, Differentiated
marketing strategy and concentrated marketing strategy
1.Undifferentiated marketing strategy
• Firm can realize economies of scale leading to low costs and low prices
• Strategy appropriate when market is largely homogeneous i.e. buyers has the same tastes,
buy similar amounts
• Strategy fails to recognize variety in consumer tastes and preferences

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 • Strategy inappropriate when competitors practice active segmentation using differentiated
products
2.Differentiated marketing strategy
• Firm decides to operate in several segments of the market
• Firm designs separate differentiated offer for each market segment e.g. cars , tooth pastes

• A good competitive strategy leading to higher profits

• Business costs could, however, increase if markets are small

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 3.Concentrated marketing strategy
• The firm goes after a large share of one or a few sub – markets e.g. VW concentrating on
small car
• Strategy used when the firm‘s resources are limited
• Firm can get strong market position in the market segment served
• Firm can get greater knowledge of segment’s needs
• Firm may enjoy economics of scale
• High risks should the segment turn sour

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 Factors affecting choice of market coverage strategy
1. Company resources
–If resources are limited use concentrated marketing or undifferentiated if possible

2. Product homogeneity
–Undifferentiated marketing more suited for homogeneous products e.g. steel , cement
–Products capable of design variation more suited to differentiation or concentration e.g.
cameras , cars

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 3. Product life cycle stage
–During introduction of a new product one version may be launched and undifferentiated
or concentrated marketing may be used
–In other stages of PLC use differentiated marketing
4. Market homogeneity
If buyers have same tastes, buy the same amounts per period, react in the same way to
market stimuli, use undifferentiated strategy

5. Competitive marketing strategies

–If a competitor practices active segmentation , undifferentiated marketing can be suicidal
–If competitor practice undifferentiated marketing , use differentiated or concentrated
marketing to gain advantage

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 3.PRODUCT POSITIONING
• Positioning is the act of designing the company’s product and marketing mix to fit a given
place in the consumer’s mind
• You position or place the product in the mind of the consumer or prospect
• Positioning is what you do to the mind rather than the product
• For each segment the company develops and communicates a product-positioning strategy
to compete effectively

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 Positioning Methods or Strategies
1. Attribute positioning: the enterprise positions itself in terms of one or more
outstanding attributes. Benson & Hedges has chosen to position its cigarettes in terms of
lightness and taste.
2. Benefit positioning: this emphasizes the unique benefits the enterprise or product
offering offers its customers, e.g. Gillette Blades promise a closer shave
3. Use/application positioning: an enterprise can position itself or its products in terms of
the product use or application possibility, e.g. Graca wine, is positioned as wine to be
enjoyed at all kinds of fun occasions.

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 4. User positioning: the enterprise may position their product with their users in mind.
Marketers of bungee jumping can position their market offering to appeal to the thrill
seekers.
5. Competitor positioning: some products can best be positioned against competitive
offerings. BMW finds it useful to position their cars directly against that of Mercedes-Benz,
their closest rival.
6. Product category positioning: an enterprise can position itself in a product category not
traditionally associated with it thereby expanding business opportunities. A museum
traditionally regarded as an educational institution may elect to position itself as a tourist
attraction.
7. Quality: the enterprise may claim their product is of exceptional quality

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 8.Price Positioning-competitively priced or the lowest price.

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 Brand Repositioning
Repositioning refers to the process of altering the unique space a brand occupies in the
minds of the customers.

What would cause this?

New Management
Competitive pressures
Obsolesce –Need for relevance
Need to expand market share

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 • Changing customer needs
• Erosion of brand’s position of strength

Discuss these and provide appropriate examples

What else?

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 Chase Bank Collapses and Rebrands to SBM Bank
https://www.the-star.co.ke/news/2019-02-18-revealed-how-insiders-loans-fraud-sank-chase-
bank/

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 Positioning Errors
1. Under positioning: Market only has a vague idea of the product.

2. Over positioning: Only a narrow group of customers identify with the product. For
example, buyers think that Apple only comes out with expensive products where Apple has a
range of products at different prices.

3. Confused positioning: Buyers have a confused image of the product as it claims too many
benefits or it changes the claim too often.

4. Doubtful positioning: Buyers find it difficult to believe the brand’s claims in view of the
product’s features, price, or manufacturer.
Provide appropriate example

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