An Introduction Marketing

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Marketing

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MarketingAn IntroductionTWELFTH EdITIon

Gary Armstrong • Philip Kotler

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Chapter 6: customer-Driven Marketing strategy: creating Value for target customers 201



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to a treasure trove of G-rated movies, games, and books, including premium content from Nickelodeon, Disney, Sesame Street, and DC Comics. Not only does FreeTime Unlimited generate revenues for Amazon, it helps sell more Kindle Fire tablets to young families.4

Marketers must be careful to guard against stereotypes when using age and life-cycle seg-mentation. For example, although some 80-year-olds fit the stereotypes of doddering shut-ins with fixed incomes, others ski and play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families. Thus, age is often a poor predictor of a person’s life cycle, health, work or family status, needs, and buying power.

gender. Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. For example, P&G was among the first to use gender segmentation with Secret, a brand specially formulated for a woman’s chemistry, packaged and advertised to reinforce the female image. More recently, the men’s cosmetics industry has exploded, and many cosmetics makers that previously catered primarily to women now successfully market men’s lines. Just don’t call them “cosmetics.”5

L’Oréal’s Men’s Expert line includes a host of products with decidedly unmanly names such as Men’s Expert Vita Lift SPF 15 Anti-Wrinkle & Firming Moisturizer and Men’s Expert Hydra-Energetic Ice Cold Eye Roller (for diminishing under-eye dark circles). Other brands, how-ever, try to craft more masculine positions. For example, Mënaji promises “Skincare for the Confident Man.” Manly men such as Tim McGraw, Kevin Bacon, and Kid Rock use it. Mënaji products come in discreet packaging such as old cigar boxes, and the line’s “undetectable” foun-dation and concealer (or rather “Camo”) come in easy-to-apply Chap Stick-style containers. Mënaji founder Michele Probst doesn’t call any of it makeup. “The M word is cancer to us,” she says. “We are skin care that looks good.” Whatever you call it, Mënaji sales are up 70 percent in each of the past 4 years, as the U.S. men’s grooming market has grown to $3 billion.

Similarly, Unilever’s testosterone-heavy male body spray brand, Axe, is now waking up to new gender segments. It recently released a new scent, Anarchy, marketed in different versions to both men and women. Nearly one-quarter of Axe’s 4 million Facebook and Twitter fans are women, and Unilever’s research suggested that these women have been wanting an Axe scent of their very own. Past Axe commercials have featured young men spraying the brand on themselves to gain an edge in the mating game. “Now women also have something to spray on themselves,” notes an Axe marketer, creating “more of an equilibrium between the sexes.”6

Income. The marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel have long used income segmentation. Many companies target affluent consumers with luxury goods and convenience services. Other marketers use high-touch marketing programs to court the well-to-do:7

Seadream Yacht Club, a small-ship luxury cruise line, calls select guests after every cruise and offers to have the CEO fly out to their home and host, at Seadream’s expense, a brunch or recep-tion for a dozen of the couple’s best friends. The cruisers tell the story of their cruise. Seadream

gender segmentation: Many cosmetics makers now successfully market men’s lines. Mënaji tells men to “Put your best face forward.”Mënaji Skincare LLC.

gender segmentationDividing a market into different segments based on gender.

Income segmentationDividing a market into different income segments.

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offers a great rate to their guests and sells several cruises at $1,000 per person per night to the friends (and even friends of friends). Such highly personal marketing creates a community of “brand evangelists” who tell the story to prospective affluent buyers and friends—precisely the right target group. This has been so successful for Seadream that it has abandoned most traditional advertising.

However, not all companies that use income segmentation target the affluent. For ex-ample, 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. When Family Dollar real estate experts scout locations for new stores, they look for lower-middle-class neighbor-hoods where people wear less-expensive shoes and drive old cars that drip a lot of oil. With their low-income strategies, dollar stores are now the fastest-growing retailers in the nation.

Psychographic segmentationPsychographic segmentation divides buyers into different segments based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic characteristics.

In Chapter 5, we discussed how the products people buy reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles and base their mar-keting strategies on lifestyle appeals. For example, in 2008, Hyundai was propelled into the luxury brands segment with its launch of the Genesis and Equus sedans, under the “Think About It” ad campaign, marking its big foray into premium lifestyle automobiles (See Marketing at Work 6.1).

VF Corporation offers a closet full of more than 30 premium lifestyle brands that “fit the lives of consumers the world over, from commuters to cowboys, surfers to soccer moms, sports fans to rock bands”:8

VF is the nation’s number-one jeans maker, with brands such as Lee, Riders, Rustler, and Wrangler. But jeans are not the only focus for VF. The com-pany’s brands are carefully separated into five major lifestyle segments—Jeanswear, Imagewear (work-wear), Outdoor and Action Sports, Sportswear, and Contemporary. The North Face and Timberland brands, both part of the Outdoor unit, offer top-of-the-line gear and apparel for outdoor enthusi-asts. From the Sportswear unit, Nautica focuses on people who enjoy high-end casual apparel inspired by sailing and the sea. Vans began as a skate shoe-maker, and Reef features surf- inspired footwear and apparel. In the Contemporary unit, Lucy features upscale active-wear, whereas 7 for All Mankind supplies premium denim and accessories sold in boutiques and high-end department stores such as Saks and Nordstrom. At the other end of the spec-trum, Horace Small, part of the Imagewear unit, markets uniforms for police and fire departments and other first responders. No matter who you are, says the company, “We fit your life.”

Marketers also use personality variables to segment markets. For example, differ-ent soft drinks target different personalities. On the one hand, Mountain Dew projects a youthful, rebellious, adventurous, go-your-own-way personality. Its ads remind customers that “It’s different on the Mountain.” By contrast, Coca-Cola Zero appears to target more mature, practical, and cerebral but good-humored personality types. Its subtly humorous ads promise “Real Coca-Cola taste and zero calories.”

Psychographic segmentationDividing a market into different segments based on social class, lifestyle, or personality characteristics.

Differentiated marketing: VF Corporation offers a closet full of over 30 premium lifestyle brands, each of which “taps into consumer aspirations to fashion, status, and well-being” in a well-defined segment.VF Corporation.





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Chung Ju-Yung established the Hyundai Motor Company in South Korea in 1967. The world’s fifth- largest automaker, Hyundai now has overseas plants in the U.S., India, China, Turkey, Russia, and the Czech Republic.

Hyundai’s target market was always the middle-class con-sumer who couldn’t afford expensive luxury cars but still wanted a durable, quality car. Many consumers who care more about a car’s features than its brand have been switching to Hyundai, which offers a wide range of vehicles—compact, mid-sized, and large sedans as well as sportier coupes, SUVs, eco-friendly cars, and commercial trucks.

In 2007, Hyundai decided to enter the premium luxury market segment. Their intention was to cut across all lifestyle segments. Convincing upper-middle-class consumers about Hyundai’s ca-pability to produce top-class luxury vehicles presented many challenges. Hence, Hyundai began the “Think About It” ad cam-paign aimed at closing the enormous gap between the reality of Hyundai’s vehicles and consumer perceptions that had been built around the brand over the years. The thought-provoking campaign allowed Hyundai to define itself in the eyes of the consumer.

Genesis, Hyundai’s first luxury Sedan, was introduced in 2008. According to Kim Dong-jin, Hyundai’s vice chairman, the name Genesis would imply that the vehicle was the first of many premium cars to follow. True to its promise, Hyundai launched the Genesis Coupe and the Equus in quick succession. The Gen-esis sedan competed with the BMW 5 Series, Mercedes E-Class, Infiniti M, and Lexus GS. In 2009, the company jumped from being a price player to a mainstream one.

Hyundai’s market share also shot to 4.3 percent in the first 10 months of 2009, from 3.1 percent in the prior year. In September 2009, even though the automotive industry suffered an overall 22 percent sales drop, Hyundai managed to increase its new-vehicle tally by 27 percent to reach 31,511 units. In October 2009, Hyundai launched the Web site HyundaiMomentum.com, a place for people to see all the positive press and accolades the company garnered from its luxury vehicles segment.

The Genesis Coupe, introduced in 2008, is a rear-wheel-drive sports car popular with younger drivers because of its aggressive, head-turning styling and fun-to-drive performance. In August 2012, Hyundai made a smart move by partnering with Gameloft, a leading global publisher of digital and social games. It introduced the Genesis Coupe on one of the most famous mobile racing games, “Asphalt 7: Heat,” on iOS and Android smartphones and tablets. This gave customers the chance to experience the Hyundai first-hand. This partnership was a great success because Gameloft’s Asphalt series was downloaded more than 50 million times, which meant that more than 50 million people were now aware of the Genesis Coupe’s features. This high level of mass awareness could not have been achieved using any other marketing medium.

MarkETIng aT WOrk 6.1

hyundai’s Turning Point: Tapping the Premium Market

Lifestyle segmentation: hyundai’s slick Equus sedan breaks new ground for a brand traditionally associated with manufacturing mid-budget affordable vehicles. The 429-horsepower sedan has propelled the brand into a niche luxury segment. © CenturionStudio.it/Fotolia.com

Hyundai introduced the luxurious Genesis Prada in 2009. It was a limited three-unit version of the Genesis sedan produced in collaboration with the European luxury fashion label Prada, which targeted only a niche market of wealthy people. This model had a significant effect on customers’ perceptions of the brand. The Genesis Prada was offered in three colors, and the car’s interior was elegantly dressed with Prada’s signature Saf-fiano leather, and had a new rear entertainment system.

The Equus, Hyundai’s third luxury car, uneveiled its second upgraded version in 2009, a makeover of the old Equus. The face-lifted model mirrored the feedback from its target custom-ers, a class of busy leaders that consciously sought social status symbols in vehicles while still requiring practical space and fea-tures. It sported a more refined and modern look and an improved design with performance and convenience features. The Equus competed with the BMW 7 Series, Mercedes S-Class, Audi A8, and Lexus LS. The new Equus was actually the turning point of its brand image worldwide. To properly identify Equus’s target market, Hyundai created analytic models based on luxury vehicle owner profiles. The models were applied to the Hyundai database to create a list of potential owners who might be interested in an Equus. Hyundai decided to implement a strategic campaign to promote and differentiate the Equus. Capitalizing on social me-dia, Hyundai created a unique Facebook page for Equus fans and a LinkedIn group for professionals who used their vehicles for business travel. Then, Hyundai introduced multiple phases from pre-launch through ownership, including delivery of a welcome package and an Apple iPad with a download of the film Sideways and an exclusive Equus Sommelier mobile application.


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Behavioral segmentationBehavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses concerning a product. Many marketers believe that behavior variables are the best starting point for building market segments.

Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchases, or use the purchased items. 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 garden products. Other marketers prepare special offers and ads for holiday occasions. For example, M&M’s runs ads throughout the year but prepares special ads and packaging for holidays and events such as Christmas, Easter, and the Super Bowl.

Still other companies try to boost consumption by promoting usage during nontraditional occasions. For example, most consumers drink orange juice in the morning, but orange grow-ers have promoted drinking orange juice as a cool, healthful refresher at other times of the day. And Taco Bell’s First Meal campaign attempts to build business by promoting the chain’s A.M. Crunchwrap, Mtn Dew A.M., and other items as a great way to start the day.

Benefits sought. A powerful form of segmentation is grouping buyers according to the different benefits that they seek from a product. Benefit segmentation requires 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.

For example, people buying bikes are looking for any of numerous benefits, from com-petitive racing and sports performance to recreation, fitness, touring, transportation, and just plain fun. To meet varying benefit preferences, Trek makes bikes in three major benefit

Occasion segmentationDividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.

Benefit segmentationDividing the market into segments according to the different benefits that consumers seek from the product.

Most important, the Equus was the first luxury vehicle to offer its owner’s manual as a downloadable application for the iPad. To differentiate the Equus further, Hyundai added a whole new list of luxury amenities, including Hyundai’s “Your Time, Your Place” test-drive. The owners of an Equus could avail of “At Your Service”—a program offering regularly scheduled complimentary maintenance and vehicle service. In its first year, this campaign achieved over 2,000 sales with a high e-mail open rate of 72 percent. The Equus became a symbol of prestige in Korea, China, the U.S., and the Middle East.

In 2013, Hyundai partnered with the French luxury brand Hermès to present a limited-edition version of the Equus, known as the “Equus Concept Vehicle,” which was a modi-fied limousine with plush interiors made of premium Hermès leather and crocodile skin.

There were nearly 20 new handcrafted fixtures in the car. Additionally, the redesigned four-door sedan was given a lon-ger wheelbase and cabin styling, producing a bigger interior for passengers in the back seat. The three Equus Concept Vehicles, however, are not for sale; they only exist to showcase to the world how luxurious Hyundai vehicles can be.

The total sales for Hyundai’s luxury vehicles—Genesis Sedan, Genesis Coupe, and Equus—reached 37,945 in 2012, rising by 5 percent from 2011. John Krafick, Hyundai Motor America’s CEO, decided that Hyundai would be better positioned to focus on the premium market with specialized staff. So, Hyundai hired

field managers in sales, marketing, and retail strategies for all three sedans. The premium group’s primary task is to spot best practices used by Hyundai’s certified dealers to sell each luxury vehicle, and help all Hyundai dealers implement those practices and de-velop new premium sales, marketing, and customer service ideas. Moreover, evolving a special department to focus on this new demographic segment would accelerate the growth and success of Hyundai’s luxury line-up as Hyundai announces a forthcoming new generation of its three luxury cars in early 2014.

With its smart marketing strategies that matched the life-styles of its upper-class customers, Hyundai proved that it is capable of producing a luxury line that can compete with other established players.

Sources: Based on information from www.hyundaiusa.com/equus/ comparison .aspx, accessed October 2013; Keith Barry, “2014 Hyundai Equus: Luxury for a Modest Price,” USA Today, October 17, 2013, www.usatoday.com/story/ money/cars/2013/10/17/reviewed-2014-hyundai-equus/2995289/; www . imediaconnection.com, accessed October 2013; Kirby Garlitos,“2012 Hyundai Genesis Prada Limited Edition,” Top Speed, May 19, 2012, www.topspeed.com/cars/hyundai/2012-hyundai-genesis-prada-limited-edition-ar109769.html; Harte Hanks, Inc., “Hyundai Equus Launch,” The Agency Inside, http:// theagencyinside .com/work/casestudy/hyundaiequus, accessed October 2013; Jean Halliday “Marketer of the Year: Hyundai,” Advertising Age, November 9, 2009, http://adage.com/article/special-report-marketer-of-the-year-2009/hyundai-marketer-year-2009/140380/; and information and press releases from http://globalpr. hyundai .com/prCenter/main.do and http://worldwide.hyundai.com/WW/Main/index .html, accessed December 2012.

Behavioral segmentationDividing a market into segments based on consumer knowledge, attitudes, uses of a product, or responses to a product.





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groups: road bikes, mountain bikes, and town bikes.9 Road bikes are “fast bikes designed to fly over pavement—for racing, recre-ating, or both.” Trek further divides the road bike segment into six benefit subsegments, such as race performance (“train, race, win”), fitness (“from fitness to fun and all points in between”), and touring (“escapism at its finest). Trek’s mountain bikes are for people seeking rugged competition or recreational trail bikes. These bikes are “sure-footed off-road bikes built to conquer any trail, from tame to treacherous,” including cross-country, off-road sport, and single-track trail bikes. Finally, Trek’s town bikes are for people seeking recreation, fitness, and urban utility. They “let you live the two-wheeled life—haul, commute, get fit, have fun.”

In all, Trek makes some 40 different families of bikes, each designed for a specific benefit segment or subsegment. For exam-ple, the high-tech Trek Madone 7 (priced at $4,000 to $12,000) is a race performance bike—“the road racing bike champions have dreamed of. The lightest. The fastest. Incredibly aero. Built by hand to win it all.” In contrast, Trek’s most popular bike is the Trek FX (at a more affordable $600 to $1,300), a fitness and trans-portation bike that gives riders a great bike for everyday exercise or getting around. “Roadies, commuters, fitness fans, errand run-ners, Sunday riders . . . everybody loves FX,” says the company.

user status. Markets can be segmented into 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. Included in the potential users group are consumers facing life-stage changes—such as new parents and newlyweds—who can be turned into heavy users. For example, to get new parents off to the right start, P&G makes certain that its Pampers Swaddlers are the diaper most U.S. hospitals provide for newborns. And to capture newly engaged couples who will soon be equipping their new kitchens, upscale kitchen and cookware retailer Williams-Sonoma takes the usual bridal registry a step further. Through a program called “The Store Is Yours,” it opens its stores after hours, by appointment, exclusively for individual couples to visit and make their wish lists. About half the people who register are new to the Williams-Sonoma brand.

usage rate. Markets can also be segmented into 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, Carl’s Jr. and Hardee’s restaurants, both owned by parent company CKE Restaurants, focus on a target of “young, hungry men.” These young male customers, ages 18 to 34, fully embrace the chain’s “If you’re gonna eat, eat like you mean it” positioning. That means they wolf down a lot more Thickburgers and other indulgent items featured on the chains’ menus. To attract this audience, the company is known for its steamy hot-models-in-bikinis commercials, featuring models such as Kate Upton, Padma Lakshmi, and Nina Agdal to heat up the brands’ images. Such ads clearly show “what our target audience of young, hungry guys like,” says CKE’s chief executive.10

Loyalty status. A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Tide), stores (Target), and companies (Apple). 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. For example, whether they own a MacBook computer, an iPhone,

Benefit segmentation: Trek makes a bike to fit every bike benefit segment. For example, its popular Fx model is a fitness and transportation bike, a favorite for “roadies, commuters, fitness fans, errand runners, and sunday riders.”Jarrod Weaton/Weaton Digital, Inc.

Targeting heavy users: sister chains hardee’s and Carl’s, Jr. focus on a target of “young, hungry men” who fully embrace the chains’ “If you’re gonna eat, eat like you mean it” positioning.Fuse.


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