Suppose you're looking for a new bike and there are two bike shops in the neighborhood: one sells standard bikes, the other specializes 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 behavior. 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 target and meet the need of a specific group 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 behavior.
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: 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 realizes that not everyone wants to spend a night at luxury hotels and creates a business that provides travelers with affordable, home-like accommodations. 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 program to build customer loyalty. 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 good word and tell others about what you do. This is free promotion for your business.
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 teps
Figure 1 depicts the four steps of designing an effective customer-driven marketing strategy.
On the left are market segmentation and targeting; these are steps to select the right customers.
Market segmentation is dividing the market into groups of customers with similar needs, characteristics, and buying behavior.
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 four main elements:
Segment the market - 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.
Fulfill 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.
Build customer loyalty - A customer-driven marketing strategy should aim to build customer loyalty through reward programs and communications via SMS or emails (organizations should only send SMS and emails if customers agree to it).
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.
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
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