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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 Generation Y: born between 1977 - 1994 Generation X: born between 1965 - 1976 Baby Boomers: born between 1946 - 1964 Older consumers

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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

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?

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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 and benefits

Reposition: – Create a different market position to respond to

marketplace changes• Retro brands

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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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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.)

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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