Figure 7.1 shows the four major steps in designing a customer value–driven marketing strategy. In the first two steps, the company selects the customers that it will serve. Market segmentation involves dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments. Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.

Figure 7.1

Designing a Customer-Driven Marketing Strategy

In the final two steps, the company decides on a value proposition—how it will create value for target customers. Differentiation involves actually differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. We discuss each of these steps in turn.