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Customer Driven Marketing Strategy

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Customer Driven Marketing Strategy

Suppose you're looking for a new bike and there are two bike shops in the neighbourhood: one sells standard bikes, the other specialises in mountain bikes. Which one would you choose? The answer is: it depends. The general shop will give you plenty of affordable options if you are only looking for a simple bike. On the other hand, it's better to go to the mountain bike shop if you want to get a professional bike. Just like you choose different places to purchase depending on your needs, companies can choose what customers they want to serve to save time, money, and effort. One tool that helps them target the right customer is a customer-driven marketing strategy.

Definition of customer-driven marketing strategy

Buyers differ wildly in needs, wants, and shopping behaviour. To increase their chance of success, companies need to select the right customers to direct their marketing effort. This is where a customer-driven marketing strategy comes into play.

Customer-driven marketing strategy is a marketing strategy that helps companies focus their marketing effort on specific groups of customers.

Customer-driven marketing is the opposite of mass marketing. Instead of serving everyone, the strategy focuses on smaller, more specific groups in the market (segments). Individuals in these segments tend to be similar in age, gender, occupation, income levels, or buying behaviour.

The target market of Nike is people between 11-55 year-olds. Their demographic includes middle-aged individuals with disposable income who purchase more expensive shoes and the younger customer groups who can become lifelong brand enthusiasts.1

Importance of customer-driven marketing strategy

Customer-driven marketing strategy comes with two main benefits:

Meet customer needs

Customer-driven marketing strategy focuses on customer needs and often begins with extensive customer research: To which age group do they belong? How much do they earn per year? What are their pain points, dreams, and deepest desires? Where do you often go to find the solution? By answering these questions, the marketing team can better understand the customer and design product offerings that suit their needs.

Airbnb realises that not everyone wants to spend a night at luxury hotels and creates a business that provides travellers with affordable, home-like accommodation. Though a latecomer (founded in 2008), the service has a presence in all parts of the world and could be driving many traditional hotels out of business.

Build customer loyalty

Customers with fulfilled needs will most likely return and buy more. This can result in recurring revenue for the company. To encourage repeat purchases, companies can also introduce a rewards programme with points to motivate satisfied customers. Each purchase can earn customers points to be redeemed for free or discounted products.

Happy customers are also the best brand evangelists. They can spread the word and tell others about what you do, giving your business free promotion.

Pinterest started as a small site with 3,000 followers in 2010 and now has an impressive user base of over 400 million. One significant contributor to its success is the "Pin It Forward" referral campaign that encourages users to create stunning pinboards and invite their friends to join. 2

Designing a customer-driven marketing strategy

Customer-driven marketing, also called target marketing, includes identifying the target customer and developing products tailored to their specific needs.

Here is the detailed process for creating a customer-driven marketing strategy:

Customer-driven marketing strategy steps

Figure 1 depicts the four steps of designing an effective customer-driven marketing strategy.

On the left are market segmentation and targeting steps to select customers.

Market segmentation is dividing the market into groups of customers with similar needs, characteristics, and buying behaviour.

Market targeting is the evaluation and selection of segments to direct marketing efforts towards.

Market segments can be geographic, demographic, or psychographic.

On the right side, we have steps to determine the company's value proposition: differentiation and positioning.

Differentiation involves making the company's product unique and distinct from competitors.

Positioning determines where a company's product or service stands relative to its competitors in the customer's mind.

Market segmentation and targeting must be carried out before differentiation and positioning.

Elements of a customer-driven marketing strategy

Each customer-driven marketing strategy consists of five main elements:

  1. Target the segment - This is the second step to designing a marketing strategy after market segmentation. To select and target the right customers, marketers need to gain as much data about the customer as possible during market research.

  2. Fulfil customer needs - Once the target market is defined, marketers can develop a product offering that matches their needs and then deliver it in a way that generates a positive experience.

  3. Build customer loyalty - A customer-driven marketing strategy should aim to build customer loyalty through reward programs and communications via SMS or emails (organisations should only send SMS and emails if customers agree to it).

  4. Use customer feedback - Customer-driven companies can collect feedback from customers to improve their future performance or create new product offerings. Positive reviews can also be used as testimonials to increase the company's authenticity.

  5. Gain referrals - Businesses with a customer-driven marketing strategy can gain referrals from their happy customers.

Customer-driven marketing strategy examples

Starbucks is a great example of a company that successfully applies a customer-driven marketing strategy. The company has successfully employed segmentation, targeting, differentiation and positioning to build a loyal customer base and dominate the coffee industry globally.

  • Segmentation & Targeting - Starbucks targets middle and high-income customers willing to pay more for premium coffee and a great time with friends. Their customers tend to be students, professionals, and employees.

  • Differentiation - The brand differentiates itself with premium products, inviting ambience, and adaptive menus to different regions and cultures.

  • Positioning - The company establishes itself as a customer-based business that serves the best coffee and works for environmental and social causes.2

Customer Driven Marketing Strategy - Key takeaways

  • A customer-driven marketing strategy helps businesses choose the right customer to direct their marketing efforts towards.
  • The most important reasons to design a customer-driven marketing strategy are to meet customer needs and build customer loyalty.

  • Market segmentation is dividing the market into groups of customers with similar needs, characteristics, and buying behaviour.

  • Market targeting is the evaluation and selection of segments to direct marketing efforts towards.

  • Differentiation involves making the company's product unique and distinct from competitors.

  • Positioning determines where a company's product or service stands relative to its competitors in the customer's mind.

  • Developing a customer-driven marketing strategy includes four steps: 1. Identify the market, 2. Target the market, 3. Differentiation, and 4. Positioning.

  • The five elements of a customer-driven marketing strategy are 1. Target market, 2. Fulfil customer needs, 3. Build customer loyalty, 4. Use customer feedback, and 5. Gain referrals.


References

  1. Start.io, Nike Target Market Analysis – Demographic Segmentation Marketing Goals, https://www.start.io/blog/nike-target-market-analysis/, 2021.
  2. Wondershare Edrawmind, Starbucks Market Segmentation, Targeting, and Positioning, https://www.edrawmind.com/article/starbucks-market-segmentation-targeting-and-positioning.html, 2022.

Frequently Asked Questions about Customer Driven Marketing Strategy

A customer-driven marketing strategy is a strategy that helps businesses choose the right customer to direct their marketing effort. The target customer tends to be similar in their needs, characteristics, or shopping behaviour. 

The elements of customer-driven marketing strategy include: 

  1. Target the segment
  2. Fulfil customer needs
  3. Build customer loyalty
  4. Use customer feedback

The four steps to designing a customer driven marketing strategy are: 

  1. Segmentation
  2. Targeting
  3. Differentiation
  4. Positioning

Starbucks adapts its menus to match the tastes and preferences of people in different regions. Rather than targeting everyone in the market, the company focuses on middle and high-income customers who are willing to pay the extra price for premium coffee. 

Without a customer-driven marketing strategy, companies will drown in a sea of information and may not be able to decide on what market or market segment to target. In global marketing, the wrong choice of market segments can lead to a substantial loss of time and money. 

Final Customer Driven Marketing Strategy Quiz

Question

__________ studies how organisations buy goods and services to include in their production process or to supply them to other consumers.

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Answer

Business buying behaviour

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Question

Business-to-business (B2B) marketing refers to marketing goods or services to ______ and organisational buyers.

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Answer

industrial

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Question

B2B decision-makers are always rational; therefore, B2B advertisements are boring and emotionless. 

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Answer

False

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Question

Are the B2B stereotypes still valid today?

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Answer

No

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Question

Outline an example of a commercial buyer and the type of product it is likely to buy.

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Answer

For example, a manufacturing firm that requires industrial goods (e.g. parts or tools) to use in its manufacturing process, which it then turns into final products.

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Question

A local council might buy industrial goods to deliver certain ______ or facilitate ________.


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Answer

A local council might buy industrial goods to deliver certain services or facilitate operations.

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Question

Demand in business markets tends to be _____ in the short run.


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Answer

inelastic

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Question

The business buying process is more formal and more complex.


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Answer

True

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Question

What is derived demand?

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Answer

Derived demand is the idea that demand in business markets ultimately comes from the demand for consumer products.

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Question

What are the three main buying situations?

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Answer

1. Straight rebuy

2. Modified rebuy

3. New task buy

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Question

'The buyer acts out of routine and looks for no or very little information' is usually the case for a:


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Answer

Straight rebuy

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Question

What is the first step of the buying process?

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Answer

Problem recognition or opportunity identification.

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Question

During the 'description of needs and product specifications' phase, the buyer chooses the supplier, date, and terms of the order.

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Answer

False

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Question

What is a key account manager?

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Answer

Key account managers work with the company's most important (largest) customers to build long-term relationships.

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Question

________ is the act of purchasing products electronically (most often online).

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Answer

E-procurement

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Question

________, in the B2B context, is about aligning your digital marketing efforts with the buyer's decision-making and buying process.


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Answer

Inbound marketing

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What is the main goal of inbound marketing?

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Answer

Engagement

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What should the seller focus on to retain profitable customers?

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Answer

  • Providing superior value,

  • Offering a set of core and add-on benefits that suit the client's needs,

  • Trying to reduce the client's operational costs with an outstanding offering.

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Question

Market segments can be geographic, demographic, or ________. 

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Answer

psychographic

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Question

Product differentiation and positioning can take place before market segmentation and targeting. 

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Answer

True

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Question

What is NOT an element of a customer-driven marketing strategy? 

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Answer

Target a specific customer group

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Question

How can a business with a customer-driven marketing strategy build customer loyalty?

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Answer

Loyalty programs

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Question

What is another name for customer-driven marketing?

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Answer

Target marketing

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Question

Define consumer behavior. 

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Answer

The study of consumer behavior in terms of their buying choices i.e., why they buy or don’t buy a certain product/service, the processes of decision making, and the motivations behind those decisions. 

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Question

Consumers find it easier to explain why they buy a certain brand. 

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Answer

True

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Question

Why is it a difficult task for marketers to find out why consumers buy certain brands? 

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Answer

Lack of data

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Question

Name the four marketing stimuli

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Answer

Product, price, place, and promotion. 

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What is the purpose of marketing stimuli? 

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Answer

The purpose of marketing stimuli is to get consumers to react to a marketing offer.

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Question

How do marketers see consumer buying patterns? 

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Answer

Marketers see consumer buying patterns through consumer buying behaviors. 

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What is the role of consumer behavior in devising marketing strategies? 

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Answer

To develop the products/services, set the correct prices, decide on effective distribution channels, and optimize the promotional activities to maximise the impact on consumers. 

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Question

Cultural, social, personal, and ______ factors could influence consumer buying behavior. 

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Answer

Psychological

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Question

Why do cultural factors influence consumer buying behavior? 

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Answer

Culture is one of the main sources through which human behaviors are formed. The household and societal values and norms serve as guidelines for developing values and perceptions. 

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Economic condition is one of the personal factors. 

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Answer

True

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Question

People sharing similar personal factors are likely to exhibit the same buying behavior.


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Answer

True

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Question

Human needs arise due to biological factors and ________ factors. 


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Answer

Cultural

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Question

Post-purchase behavior is not a part of purchase decision process

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Answer

False

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Question

Significant variations between brands and a high degree of buyer involvement. 

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Answer

Complex buying behavior

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Question

Purchase behavior with high level of involvement and few perceived differences between brands is called ________ 


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Answer

Dissonance-reducing buying behavior

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Question

What is competitor analysis?

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Answer

Competitor analysis involves identifying competitors and assessing their strengths, weaknesses, and strategies.

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The goal of competitor analysis is to understand which competitors to _____ and which ones to _____.

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Answer

The goal of competitor analysis is to understand which competitors to attack and which ones to avoid.

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Question

To form competitive strategies, companies need to understand their ________.


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Answer

competitors

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Question

What are the three steps of competitor analysis?

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Answer

  1. Identify competitors, 
  2. Assess their objectives and strategies,
  3. Evaluate which ones to attack and avoid. 

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Question

Competitor analysis is an integral part of the ________.


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Answer

strategic management process

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Strategic analysis is concerned with evaluating strategy through environmental analyses, including the internal, external, and competitive environments.

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Answer

True

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Question

Strategic choice includes applying and evaluating the chosen strategy.

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Answer

False

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Question

__________ involves evaluating the environment, selecting an appropriate strategy, and implementing the chosen strategy.


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Answer

Strategic management

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Question

Market _______ want to maintain their current position in the market. They can use offensive tactics (like price cuts or excessive branding) or defensive tactics (responding/mimicking offensive tactics).

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Answer

leaders

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Question

_______ involve attacking a competitor based on its weaknesses

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Answer

Flank attacks

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Question

______ involve introducing low-cost communications or distribution tactics to undermine competitors.

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Answer

Guerilla attacks

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Question

Attacking a competitor based on both strengths and weaknesses is known as a(n):


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Answer

Encirclement attack

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