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BUILDING CUSTOMER RELATIONSHIPS THROUGH

SEGMENTATION AND RETENTION STRATEGIES

Dr. Scott Swanson

OBJECTIVES

• Discuss “Relationship Marketing”

• Note the segmentation bases for both consumer and organizational markets.

• Present some target marketing strategies.

• Attract, retain, and enhance customer relationships.

RELATIONSHIP MARKETINGa focus on building and maintaining a base of loyal and

profitable customers.

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A Portrayal of the Characteristics of Relationship Marketing

•Products/Services•Individualized attention•Continuous information•Price offers•Customer services•Extras and perks, etc.

•Repeat Purchase•Increased Loyalty•Goodwill•Positive word-of-mouth•Lower costs for the firm

The Firm provides The Customer provides

A MARKET IS DEFINED AS A GROUP OF PEOPLE WHO:

• Need and want a particular product.• Have the ability (i.e., buying power) to

purchase the product.• Are willing to spend resources to

obtain the product.• Have the authority to buy the product.

Three Phases of Marketing Strategy

• Phase 1: Market Segmentation

• Phase 2: Target Market and Marketing Mix Selection

• Phase 3: Product/Brand Positioning

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Market SegmentationThe process of dividing a total market into market segments or groups consisting of people that share one or more similar characteristics which make them have relatively similar product needs.

MARKET SEGMENT TYPES

CONSUMER MARKET

ORGANIZATIONAL MARKET

Criteria For Effective Targeting of Market Segments

• Identification• Sufficiency• Stability• Accessibility

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Common Bases for SegmentingConsumer Markets

Demographics Psychographic

Geographic Behavioral

SocioculturalSociocultural

SEGMENTATION

• The process of dividing the market on the basis of

•Zip Code Analysis•Regional Analysis

DEMOGRAPHICS - the process of dividing the market on the basis of

• Demographics give us an understanding of how people look and act on the exterior.

•Age•Gender•Income•Others

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Analysis• Life-style refers to how people live, how

they spend their money, and how they allocate their time

The distinction between personality and life-style:

– Personality refers to the internal characteristics of the person and life-style refers to the external manifestations of how a person lives.

Psychographic Analysis• Psychographics is the quantitative

investigation of consumers’ life-styles, personality, and demographic characteristics.

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AIO statements identify activities, interests, and opinions of consumers

– Activity questions ask consumers

– Interest questions focus on

– Opinion questions ask for consumers’

The Vals2 Inventory

• The VALS life-style classification scheme is a psychographic inventory of consumers developed by the Stanford Research Institute (SRI).

• Goal of VALS 2 is to identify specific relationships between consumer attitudes and purchase behavior.

SRI C

onsu

lting

’sV

alue

s and

Life

styl

e Sy

stem

(VA

LS2

TM

) ACTUALIZERS

STRUGGLERS

FULFILLEDS

BELIEVERS

ACHIEVERS EXPERIENCERS

STRIVERS MAKERS

Low Resources

High Resources

Action OrientedStatus OrientedPrinciple Oriented

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BEHAVIORAL• Buyers are divided into

groups based on their knowledge of, attitude toward, use of, or response to a product.

Organizational MarketsGeographic

LocationType of

Organization

Size of Customer Product Use

Segmentation in the Global Marketplace

• There are two approaches to market segmentation

– Localization: treating each country as a separate market and seeking consumer segments accordingly

– Intermarket segmentation: selecting groups of consumers who exhibit similar consumption behavior across different countries

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Target Marketing

• The evaluation of the attractiveness of the segments and selecting ones the firm will serve.

TARGET MARKET SELECTION

Undifferentiated or Mass Market Approach

Single

Marketing

Mix

Target

Market

TARGET MARKET SELECTION

Single

Marketing

Mix

Segment I

Segment II(target market)

Segment III

Concentration or Niche Approach

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TARGET MARKET SELECTION

Differentiated or Multi-Segment Approach

Marketing Mix I

Marketing Mix II

Marketing Mix III

Target Segment I

Target Segment II

Target Segment III

TARGET MARKET SELECTION

Single

Marketing

Mix

Segment I

Segment II(target market)

Segment III

Mass Customization or “One-to-One” Marketing

THE SEGMENTATION PROCESS• Isolate heavy, moderate, and light users.• Divide user groups in terms of benefits derived for

the product and compare traits of the groups. • Segment Identification• Segment Attractiveness• Selection of Target Markets• Positioning Strategy

– Develop a communications strategy utilizing themes appropriate to the chosen target.

• Positioning “Acid Test”• Implementation

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PositioningPositioning

Positioning requires designing a company and product image and developing a marketing mix to promote the image to the target segment(s).

Steps in Product Positioning

• Who are our competitors?• How are our competitors perceived

and evaluated by consumers?• How do consumers’ preferences

compare with competitor positions?• How should we position ourselves

in consumers’ minds?