Choose Your Customer

Submitted by sylvia.wong@up… on Tue, 10/05/2021 - 04:29
Sub Topics

Welcome to Topic 4: Choose Your Customer. In this topic, you will learn about:

  • Segmenting
  • Targeting
  • Positioning
  • Customer personas.

This topic will help you understand the importance of knowing the right customers and reaching them effectively. To be a customer-centric business, you will first need to understand your customers and what they need from you. Studying this topic will enhance your understanding of the significant concepts of segmentation, targeting and positioning that form the basis for most marketing strategies and plans.

These relate to the Subject Learning Outcomes:

  1. Demonstrate an understanding of the importance in business practice of market orientation.
  2. Evaluate market conditions and consumer needs when forming marketing strategies.

Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.

Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.

Read Chapter 7 of Kotler, P & Armstrong, G 2021, Principles of Marketing Global Edition, 18th edn., Pearson.

Read the following journal articles:

Read the following web articles and industry reports:

Read and watch the topic content.

There are discussion forum activities for this topic, which will enhance your knowledge and give you the opportunity to interact with your peers. You can access the activities by clicking the following links. You can also navigate to the forum by clicking on ‘MKT100 Subject Forum’ in the navigation bar for this subject.

A group of marketers sitting at a table discussing a project

Businesses recognise that they cannot appeal to all potential buyers in the market because:

  • There are too many consumers
  • They are widely scattered
  • They are too varied in terms of their characteristics, preferences and behaviours.
A diagram showing customers are too numerous
A diagram showing customers are too widely scattered
A diagram showing customers are too varied

In order to have the best strategy of creating values for customers, companies divide markets into meaningful customer groups, select one or a few segments within the market and develop market offerings that best serve that target market (Armstrong et al. 2020).

A diagram showing the parts of value creation strategy
Adapted from Principles of Marketing Global Edition, by P Kotler & G Armstrong, 2021, 18th edn., Copyright 2021 by Pearson Education Limited.

Segmentation

To segment a market means identifying and breaking down a single, large market into smaller, distinctive and homogenous groups (segments) that share everyday needs, characteristics or behaviours so businesses can effectively reach them.

Basis of segmentation for consumer markets (B2C)

There are many different ways to identify different markets. The following are examples of some variables that might be used in segmenting the business-to-consumer (B2C) market (Tynan & Drayton 1987; Armstrong et al. 2020).

  • Geographic variables, such as regions, political areas and postcodes.
  • Demographic variables, such as age, gender and income.
  • Psychographic variables, such as lifestyle, attitudes, interests and opinions.
  • Behavioural variables, such as frequency of product usage and occasions for product use.

These segmentation variables can be used alone or in combination depending on the level of specificity required (Beane & Ennis 1987). As markets become more complex, some marketers use combinations of the variables mentioned above. For example, geo-demographic variables could be used to identify the consumer behaviour of homemakers from affluent suburbs.

Basis of segmentation for business markets (B2B)

Consumer markets and business markets share some segmentation variables, such as geographic and demographic (industry, size of company) variables. However, additional variables are proposed for business-to-business (B2B) markets (Shapiro & Bonoma 1984; Kalafatis & Cheston 1997; Johnson & Flodhammer 1980). These include:

  • purchasing approaches variables, such as purchasing criteria and purchasing policies
  • situational variables, such as product application, the urgency of order and size of the order.

Requirements for effective segmentation

While there are certainly many different ways a market can be segmented, not all are useful or effective. Effective segmentation addresses five (5) main criteria (Kotler & Armstrong 2020). Effective segmentation should be:

  • Measurable, which indicates that a numerical measure should be available to assess the size and potential growth of the segment.
  • Accessible, which indicates that a marketer should be able to reach potential customers through marketing communications.
  • Substantial, which refers to the market segment being large and profitable enough to serve.
  • Differentiable, the segments are distinguishable and respond differently to the marketing mix.
  • Actionable, which means that marketers should be able to create an actionable marketing program that effectively attracts and serves the segments.
Activity

Watch the following advertisement for Bic For Her – pens developed and marketed specifically to women. What do you think about it? Gather your thoughts and post your response in Discussion forum activity 1: Effective segmentation.

Knowledge check

Complete the following four (4) tasks. Click the arrows to navigate between the tasks.

Targeting

After you have identified these homogenous groups and understood them, it is time to select who will be your customers and target them. Targeting begins with evaluating previously identified market segments with respect to their size and potential growth. In addition, the extent of a segment's attractiveness, with reference to the purchasing power of buyers and the presence of competitors, helps in identifying and evaluating an appropriate segment. Dibb & Simkin (1997) also stressed the stability of segments, which refers to the longevity of a segment and a certainty that the selected segment would exist long enough for actions to be taken.

The following framework of segment attractiveness criteria was proposed by Dibb (1999) to help marketers identify their most ideal customers:

Market Attractiveness Factors

Market factors:

  • size of segments 
  • growth rate
  • stage of industry evolution
  • predictability
  • price elasticity and sensitivity
  • bargaining power of customers
  • seasonality and cyclicality of demand

Economic and technological factors:

  • barriers to entry
  • barriers to exit
  • bargaining power of suppliers
  • level of technology utilisation
  • investment required
  • margins available

Competitive factors:

  • competitive intensity
  • quality of competition
  • threat of substitution
  • degree of differentiation

Environmental factors:

  • exposure to economic fluctuation
  • exposure to political and legal factors
  • degree of regulation
  • social acceptability and physical environment impact

Adapted from Dibb (1999).

Market Coverage Strategies

After the evaluation phase, one or more market segment(s) will be selected to be the target market of a business (Armstrong et al. 2020).

When a business decides to ignore segments and focus on the entire market as one segment, it is called an undifferentiated or mass-market strategy. For example, a business could sell the same product at the same price with the same messaging to multiple segments.

On the other hand, a business can focus on selected segments and have different marketing mixes (product, price, plan and promotion) and plans for each segment. For example, a business could have multiple products or a few price points to cater to the needs of multiple segments. Businesses can be as differentiated as they would like to be, depending on the extent to which they target specific or unique market needs.

A diagram showing market coverage strategies
Adapted from Principles of Marketing Global Edition, by P Kotler & G Armstrong, 2021, 18th edn., Copyright 2021 by Pearson Education Limited.

The following video explains the difference between undifferentiated and differentiated marketing while highlighting the pros and cons of each strategy.

Positioning and differentiation

Armstrong et al. (2020) explains a product’s position as the way the product is defined by consumers based on important attributes. In other words, it is the place the product occupies in consumers’ minds relative to competing products. It is about differentiating the way consumers think and feel about the product offerings.

Product positioning is complex and based on consumers' perceptions, impressions, and feelings about a particular product compared to the competitors (Armstrong et al. 2020). Therefore, marketing is mainly about creating a distinctive place in the minds of the consumers. In order to do this, a marketer must first examine the business’s current position in the market and the position of its competitors. Then the gaps and strength of the business in terms of various attributes should be highlighted. Once the gaps are identified, and the desired position is decided, comprehensive communication strategies must be implemented to deliver and communicate the desired product position to the target customers (Armstrong et al. 2020; Kotler & Armstrong 2021).

A value proposition is a benefit or value that a business delivers to its customers (Twin 2020). A benefit that sets a business apart from its competitors is a point of difference, while a point of parity indicates shared benefits amongst competitors (Armstrong et al. 2020). Suppose your value proposition is unique and different from your competitors. In that case, it is a source of competitive advantage that you could use to convince customers to buy from you rather than from your competitors.

A venn diagram explaining value proposition

Adapted from Create an awesome value proposition with these 3 points, by C Goward 2021, Copyright 2021 by Widerfunnel Marketing Inc.

When we think about ways to differentiate offerings, the first thing that pops into your mind might be the product quality or another distinctive product feature. However, there are other ways to differentiate, such as highlighting better processes or services (Jesnoewski 2012). Read the article, Finding your point of difference to learn more about how to differentiate your offerings.

Customer personas

Customer personas are semi-fictional representations of characters that are created to present the target market or ideal customers. They are used by businesses to understand better the target market and their perspectives (Vaughan 2021).

Activity

To kickstart your preparation for our seminar, read this detailed explanation of How to Create Detailed Buyer Personas for Your Business, which was provided as part of your pre-seminar learning tasks.

Knowledge check

Complete the following three (3) tasks. Click the arrows to navigate between the tasks.

Key takeouts

Congratulations, we made it to the end of the fourth topic! Some key takeouts from Topic 4:

  • Segmentation is the process of dividing markets into meaningful customer groups that share similar characteristics.
  • Targeting is the process of choosing one or more customer groups to serve based on a number of factors.
  • Positioning is the process of communicating the uniqueness of your market offerings to your chosen customer groups and highlighting the differences in relation to other brands.
  • Customer personas are semi-fictional characters created by businesses to represent the target market.

Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your seminar.

The learning tasks are listed below. These will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

In-seminar learning tasks

The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.

“A positioning statement is a brief description of a product or service and target market, and how the product or service fills a particular need of the target market. It's meant to be used as an internal tool to align marketing efforts with the brand and value proposition.” (Hart 2021).

Working in a breakout room assigned by your lecturer during the scheduled seminar, this learning task will require you to create a positioning statement for an existing business of your choice. Here are some questions to consider when crafting your statement:

  1. TARGET MARKET
    1. Who are your customers, or who should choose your brand/products?
    2. What are their needs or wants?
  2. YOUR BRAND
    1. What are your company values/mission, or what do you stand for?
    2. How do you want your customers to describe your brand?
    3. What products does your brand offer, or in which category does your brand compete?
  3. YOUR PRODUCT
    1. How do your products satisfy the needs or wants of customers?
    2. What are the end benefits you are promising and will deliver?
    3. What are the reasons to believe your promises?
  4. THE DIFFERENCE
    1. What is unique about your brand/products?
    2. What differentiates your brand/products from your competitors?

If you require more guidance, refer to the blog post explaining How To Write A Positioning Statement, which was also provided as a pre-seminar task.

Your lecturer will request that you present the findings back to the class.

In this learning task, you will put what you have learned into practice and create buyer personas. In the same breakout room and using the same business as in the previous learning task, develop at least two (2) buyer personas that are representative of their target market.

It is up to your group how you would like to present the customer personas. You can use the exemplars and sample templates from your pre-seminar learning tasks. While these templates differ, most of them will contain the persona’s demographic/background information, personality traits, likes, dislikes and so on.

Your lecturer will request that you present the findings back to the class.

Welcome to your post-seminar learning tasks for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if any of these are to be completed during your consultation session.

Click the following headings to learn more about your post-seminar learning tasks.

Reflect on this topic. Prepare a list of key terms with their definitions and summarise the key points in your own words. Share these with your lecturer in your reflective journal.

You can also access the reflective journal by clicking on ‘Journal’ in the navigation bar for this subject.

Review the instructions and requirements for Assessment 2. Contact your members for this group assessment and start drafting a group contract.

Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your consultation session.

Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

References

  • Abraham, K 2018, How to create a unique point of difference, Passionate Performance, https://keithabraham.com/create-unique-point-difference/
  • Armstrong, G, Denize, S, Volkov, M, Adam, S, Kotler, P, Ang, SH, Love, A, Doherty, S & Esch, PV 2020, Principles of Marketing, 8th edn., Pearson.
  • Baker, K 2021, The ultimate guide to customer segmentation: How to organize your customers to grow better, Hubspot, https://blog.hubspot.com/service/customer-segmentation
  • Beane, TP & Ennis, DM 1987, ‘Market segmentation: A review’, European Journal of Marketing, 21(5):20-42.
  • Decker, A 2020, The Marketer’s Guide to segmentation, targeting and positioning, https://blog.hubspot.com/marketing/segmentation-targeting-positioning
  • Dibb, S & Simkin, L 1997, ‘A program for implementing market segmentation’, Journal of Business and Industrial Marketing, 12(1):51-65.
  • Dibb, S 1999, ‘Criteria guiding segmentation implementation: reviewing the evidence’, Journal of Strategic Marketing, 7(2):107-129.
  • Dickson, J n.d., How to frame your competitive advantage, Alloy, https://alloy.institute/publishing/points-of-parity-versus-points-of-difference-what-makes-your-business-unique
  • Dvornechcuck, A n.d., How to write a positioning statement, ebaqdesign, https://www.ebaqdesign.com/blog/positioning-statement
  • Gavett, G 2014, What you need to know about segmentation, Harvard Business Review, https://hbr.org/2014/07/what-you-need-to-know-about-segmentation
  • Goward, C 2021, Create an awesome value proposition with these 3 points, Widerfunnel, https://www.widerfunnel.com/blog/how-to-create-an-awesome-value-proposition/
  • Hart, M 2021, 12 examples of positioning statements & how to craft your own, Hubspot, https://blog.hubspot.com/sales/positioning-statement
  • Johnson, H & Flodhammer, A 1980, ‘Some factors in industrial market segmentation’, Industrial Marketing Management, 9:201-205.
  • Kalafatis, SP & Cheston, V 1997, ‘Normative models and practical applications of segmentation in business markets’, Industrial Marketing Management, 26:519-530.
  • Keller, KL, Sternthal, B & Tybout, AM 2002, Three questions you need to ask about your brand, Harvard Business Review, https://hbr.org/2002/09/three-questions-you-need-to-ask-about-your-brand
  • Kotler, P & Armstrong, G 2021, Principles of Marketing Global Edition, 18th edn., Pearson.
  • Maggard, JP 1976, ‘Positioning revisited: is positioning something old, new, or borrowed?’, Journal of Marketing, 40(1):63-66.
  • Shapiro BP & Bonoma, TV 1984, How to segment industrial markets, Harvard Business Review, https://hbr.org/1984/05/how-to-segment-industrial-markets
  • The Brand Gurus 2020, Building a winning brand: points of parity and difference, BottomLine Marketing, https://blmllc.com/building-a-winning-brand-points-of-parity-and-difference/
  • Twin, A 2020, Value proposition, Investopedia, https://www.investopedia.com/terms/v/valueproposition.asp
  • Tynan, AC & Drayton, J 1987, ‘Market segmentation’, Journal of Marketing Management, 2(3):301-335.
  • Vaughan, P 2021, How to Create Detailed Buyer Personas for Your Business [Free Persona Template], Hubspot, https://blog.hubspot.com/marketing/buyer-persona-research
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