Designing a Customer Driven Statergy

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Part 3: Designing a Customer-Driven Marketing Strategy and Integrated Marketing Mix


Customer-Driven Marketing Strategy
Creating Value for Target Customers

Previewing the Concepts
So far, you’ve learned what marketing is and about the importance of understanding consumers and the marketplace environment. With that as background, you’re now ready to delve deeper into marketing strategy and tactics. This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve target customers (differentiation), and position the offerings in the minds of consumers (positioning). Then, the chapters that follow explore the tactical marketing tools—the Four Ps—by which marketers bring these strategies to life. As an opening example of segmentation, targeting, differentiation, and positioning at work, let’s look at Dunkin’ Donuts. Dunkin’, a largely Eastern U.S. coffee chain, has ambitious plans to expand into a national powerhouse, on a par with Starbucks. But Dunkin’ is no Starbucks. In fact, it doesn’t want to be. It targets a very different kind of customer with a very different value proposition. Grab yourself some coffee and read on.


ast year, Dunkin’ Donuts paid dozens of faithful customers in Phoenix, Chicago, and Charlotte, North Carolina, $100 a week to buy coffee at Starbucks instead. At the same time, the no-frills coffee chain paid Starbucks customers to make the opposite switch. When it later debriefed the two groups, Dunkin’ says it found them so polarized that company researchers dubbed them “tribes”— each of whom loathed the very things that made the other tribe loyal to their coffee shop. Dunkin’ fans viewed Starbucks as pretentious and trendy, whereas Starbucks loyalists saw Dunkin’ as plain and unoriginal. “I don’t get it,” one Dunkin’ regular told researchers after visiting Starbucks. “If I want to sit on a couch, I stay at home.” William Rosenberg opened the first Dunkin’ Donuts in Quincy, Massachusetts, in 1950. Residents flocked to his store each morning for the coffee and fresh doughnuts. Rosenberg started franchising the Dunkin’ Donuts name, and the chain grew rapidly throughout the Midwest and Southeast. By the early 1990s, however, Dunkin’ was losing breakfast sales to morning sandwiches at McDonald’s and Burger King. Starbucks and other high-end cafes began sprouting up, bringing more competition. Sales slid as the company clung to its strategy of selling sugary doughnuts by the dozen. In the mid-1990s, however, Dunkin’ shifted its focus from doughnuts to coffee in the hope that promoting a more frequently consumed item would drive store traffic. The coffee push worked—coffee now makes up 62 percent of sales. And Dunkin’s sales are growing at a double-digit clip, with profits up 35 percent over the past two years. Based on this recent success, Dunkin’ now has ambitious plans to expand into a national coffee powerhouse, on a par with Starbucks, the nation’s largest coffee chain. Over the next three years, Dunkin’ plans to remake its nearly 5,000 U.S. stores and to grow to triple that number in less than 15 years. But Dunkin’ is not Starbucks. In fact, it doesn’t want to be. To succeed, it must have its own clear vision of just which customers it wants to serve (what segments and targeting) and how (what positioning or value proposition). Dunkin’ and Starbucks target very different customers, who want very different things from their favorite coffee shop. Starbucks is strongly positioned as a sort of high-brow “third place”—outside the home and office—featuring couches, eclectic music, wireless Internet access, and art-splashed walls. Dunkin’ has a decidedly more low-brow, “everyman” kind of positioning. With its makeover, Dunkin’ plans to move upscale—a bit but not too far—to rebrand itself as a quick but...
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