Ch. 7 Target Marketing Strategy: Selecting and Entering a Market Market fragmentation: The creation of many consumer groups due to the diversity of their needs and wants Target marketing strategy: Dividing the total market into different segments based on customer characteristics, selecting one or more segments, and developing products to meet those segments needs Also known as STP (segmentation, targeting, and positioning) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-2 Figure 7.1 Steps in the Target Marketing Process: STP Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-3 Goals of Segmentation (in class)
Why? Effectiveness Efficiency What makes a good segmentation outcome? p. 213, Without real differences in consumer needs, firms might as well use a mass-marketing strategy. Differentiate groups based on what and why consumer buy Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-4 Steps in the Target Marketing Process Step 1: Segmentation Segmentation: The process of dividing a larger market into smaller pieces based on one or more meaningful shared characteristics Segmentation variables (bases): Dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences Segmentation variables include: Demographicssize, age, gender, ethnic group, income, education, occupation, family structure Psychographicspsychological, values and lifestyles, and AIO factors Behavior-based variables usage rate, usage occasion, product benefits Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-5 Demographic Dimensions Age Gender Occupation Family structure Income and social class Race and ethnicity Geography Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-6 6 Segmenting by Demographics: Age: Generational Marketing Children Tweens Teens Generation Y: born between 1977 and 1994 Generation X: born between 1965 and 1976 Baby boomers: born between 1946 and 1964 Older consumers Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-7 7 Segmenting by Demographics: Gender Many products appeal to one sex or the other Metrosexual Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-8 8 Segmenting by Demographics (contd) Family Structure Income Social Class Race and Ethnicity African Americans Asian Americans Hispanic Americans
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-9 9 Segmenting by Geography Geodemography: combines Geography with demographics (*and psychographics*) www.claritas.com
Geocoding: Customizes Web advertising so people who log on in different places see ad banners for local businesses Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-10 Segmenting by Place of Residence Geodemography: Combines geography with demographics
Geocoding: Customizes Web advertising so people who log on in different places see ad banners for local businesses Learn more about PRYSM Visit ReachLocal.com Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-11 Missoula, MT 59802's most common PRIZM NE Segments are: 47City Startups 56Crossroads Villagers 53Mobility Blues 44New Beginnings 60Park Bench Seniors http://www.claritas.com/MyBestSegments/D efault.jsp?ID=20&id1=1027&id3=59802 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-12 12 Segmenting by Psychographics Psychographics: Segments formed on the basis of values and lifestyles (VALs) and shared activities, interests, and opinions (AIOs). www.sric-bi.com Lohas Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-13 13 Segmenting by Behavior Segments consumers based on how they act toward, feel about, or use a specific product category 80/20 rule: 20 percent of purchasers account for 80 percent of a products sales Heavy, medium, and light users and nonusers of a product (versus *BOP and long tail markets) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-14 80/20 rule versus: Long tail concept: Firms CAN make money selling small amounts of items IF they sell enough different items Base-of-pyramid markets* 20/80 rule? Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-15 World Resources Institute Billion 2 Billion 4 Billion Mature Markets > $20,000 * Emerging Markets $3,260 $20,000 Survival Markets <$3,260 (population) *Individual annual income Source: WRI Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-16 Segmenting by Behavior (Cont.) User status: Heavy, medium, and light users and nonusers of a product Usage occasions Segments on the basis of different occasions when customers buy or use various products Shoes, watches Benefit segmentation (not explicit in text) Segments on the basis of the specific benefits different customers desire when purchasing in a product category: OJ example, p. 211: added vitamins/calcium vs. pulp vs. no sugar
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-17 17 Segmenting Business-to- Business Markets North American Industry Classification System (NAICS) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-18 Steps in the Target Marketing Process Step 2: Targeting Targeting: Marketers evaluate the attractiveness of each potential segment and decide in which segment(s) they will invest resources to try to turn them into customers The customer group(s) selected are referred to as the target market Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-19 19 Developing Segment Profiles A profile is a description of the typical customer in a segment. Might include information on demographics, location, lifestyle, and product-usage frequency Why is it important? Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-20 Evaluation of Market Segments A viable target segment should: Have members with similar product needs/wants Be measurable in size and purchasing power Be large enough to be profitable Be reachable by marketing communications Be one that the marketers company has the strengths and capabilities to adequately serve well Also consider: * growth rates by segment * competition by segment Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-21 Figure 7.3 Select a Target Marketing Strategy Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-22 Choosing a Targeting Strategy Undifferentiated targeting strategy Appealing to the total market without regard to specific segments Mass marketing Commodities, often non-profit/social marketing causes, small marketing budget, little research Differentiated targeting strategy Developing one or more products for each of several customer groups Developing different advertising strategies (message/media) for different customer groups (but offering the same product) Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-23 Choosing a Targeting Strategy Concentrated (niche) target marketing strategy Offering one or more products to a single segment Custom marketing strategy Tailoring specific products to individual customers Common in personal and professional services, and in industrial marketing Mass customization Modifying a basic good or service that is mass produced to meet the specific needs of an individual Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-24 24 Step 3: Positioning What is positioning? Developing the (a) image of the product (b) in the mind of the customer (c) relative to competition on (d) important attributes (either objective or subjective) Brand personality A distinctive image that captures the brands character and benefits Reposition: Create a different market position to respond to marketplace changes Retro brands Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-25 Steps in Developing a Positioning Strategy Analyze competitors positions Offer a good or service with a competitive advantage Finalize the marketing mix by matching mix elements to the selected segment Evaluate target markets responses and modify strategies as needed Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-26 Positioning Tool: Perceptual map* A research technique marketers use to identify where products/brands are located in consumers minds Statistical method: multi-dimensional scaling Pair-wise similarity judgments A 2-dimensional product space the dimensions are attributes of the product objective or subjective Products are the evoked set 26 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-27 Customer Relationship Management Customer relationship management (CRM): A systematic tracking of consumers preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individuals unique wants and needs Views customers as relationship partners, with each partner learning from the other every time they interact Sees marketing as a process of building long-term relationships with customers to keep them satisfied and coming back. CRM facilitates one-to-one marketing Philadelphia 76ers Video Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-28 Four Steps in One-to-One Marketing Identify customers and get to know them in as much detail as possible Differentiate customers by their needs and value to the company Interact with customers; find ways to improve cost efficiency and the effectiveness of the interaction Customize some aspect of the products you offer each customer Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-29 CRM: A New Perspective on an Old Problem CRM systems use computers, software, databases, and the Internet to capture information at each touchpoint Touchpoints are any direct interface between customers and a company (online, by phone, in person, etc.)
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 7-30 30 Characteristics of CRM Share of customer (vs. share of market): focus on retention and loyalty (vs. acquisition of new customers) Lifetime value of the customer- Customer equity Focus on high-value customers Tiers/categories Personalize/customize one-to-one marketing.