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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)
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Steps in the Target Marketing Process: STP
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Goals of Segmentation
Why? – Effectiveness – Efficiency – Better meets consumer needs
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 they buy
Exercise: Bicycles
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Steps in the Target Marketing ProcessStep 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:• Demographics—size, age, gender, ethnic group, income,
education, occupation, family structure• Psychographics—psychological, values and lifestyles, and AIO
factors• Behavior-based variables – usage rate, usage occasion, product
benefits
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Demographic Dimensions
Age Gender Occupation Family structure Income and social class Race and ethnicity Geography
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Segmenting by Demographics: Age: Generational Marketing
Children Tweens Teens Older Adults : born <1946 (various names) Baby Boomers: born between 1946 – 1964 Generation X: born between 1965 – 1976 (or ‘80) Generation Y: born between 1977 – late 90s (also
called Millenials) Generation Z: born late 90s to present (also called
Gen Tech)
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Segmenting by Demographics: Gender & Other
Many products appeal to one sex or the other Family Structure Income Social Class Race and Ethnicity
– African Americans
– Asian Americans
– Hispanic Americans
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Segmenting by Geography
Geodemography: – combines Geography with demographics
(*and psychographics*)– Claritas– PRIZM
Geocoding: – Customizes web advertising so people who
log on in different places see ad banners for local businesses
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Missoula, MT 59802's
Most common PRIZM NE Segments are: 47 City Startups 56 Crossroads Villagers 53 Mobility Blues 44 New Beginnings 60 Park Bench Seniors
Note: Not always entirely accurate – Karen, CO
http://www.claritas.com/MyBestSegments/Default.jsp?ID=20&id1=1027&id3=59802
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Segmenting by Psychographics
Psychographics: – Segments formed on the basis of values and
lifestyles (VALs) and shared activities, interests, and opinions (AIOs).
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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 product’s sales• Heavy, medium, light users & nonusers of a product
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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
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Segmenting Business-to- Business Markets
North American Industry Classification System (NAICS)
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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
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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? Developing a “persona”
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Evaluation of Market Segments
A viable target segment should:– Have members with similar product needs
and wants – Be measurable in size and purchasing power– Be large enough to be profitable – Be reachable by marketing communications– Be one that the marketer’s company has the
strengths and capabilities to adequately serve well
Also consider:* growth rates by segment * competition by segment
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Select a Target Marketing Strategy
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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)
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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
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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 brand’s character & beneftis (Ben & Jerry vs. Haagen Dazs)
Repositioning– Create a different market position to respond to
marketplace changes• Baby shampoo example – successful• Oldsmobile -- unsuccessful
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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 market’s responses and
modify strategies as needed
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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
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Perceptual Map – Example 1
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Perceptual Map – Example 2
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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 individual’s 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
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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
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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.)
– Example: gift shop customer data base with purchasing history and customer details
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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