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Sharpen the Focus: Target Marketing Strategies and Customer Relationship Management Chapter Seven

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Chapter Objectives 1. Identify the steps in the target marketing process 2. Understand the need for market segmentation and the approaches available to do it 3. Explain how marketers evaluate segments and choose a targeting strategy 4. Understand how marketers develop and implement a positioning strategy 5. Explain how marketers increase long-term success and profits by practicing customer relationship management 7-2

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Market Segmentation Market Segment Market Segment Market Segmentation Market Segmentation People or organizations with needs or wants and the ability and willingness to buy. A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, identifiable segments or groups. 1

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The Importance of Market Segmentation Markets have a variety of product needs and preferences Marketers can better define customer needs Decision makers can define objectives and allocate resources more accurately 2 7-4

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Why Market Segmentation? Marketers can identify customers with similar needs Marketers can design marketing mixes matched to a specific segment Segmentation is consistent with the marketing concepts of satisfying customer needs and wants 2 7-5

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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 Because of diversity, the same goods/services will not appeal to everyone 7-6

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2012 Pearson Education, Inc. publishing as Prentice-Hall.7-7 Figure 7.1 Three Steps in the Target Marketing Process

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7-8 Figure 7.2 Step 1-Segmenting Consumers Markets Remember factors influencing consumer decision making?

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Segmenting by Demographics: Age and Generational Marketing Children Teens Tweens Generation Y: born between 1979 and 1994 Why do marketers engage in generational marketing? Because different age groups have different needs and wants Members of a generation share the same outlooks & priorities

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Segmenting by Demographics: Age and Generational Marketing Generation X: born between 1965 and 1976 Baby boomers: born between 1946 and 1964 Older consumers 7-10

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Segmenting by Demographics: Gender Many products appeal to one sex or the other Metrosexual: A straight, urban male who is keenly interested in fashion, home design, gourmet cooking, and personal care 7-11

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Segmenting by Demographics: Other Variables Family life cycle: Family needs change over time Different product categories ascend or descend in importance over the life cycle Income Strongly correlated with buying power Social Class Consumers buy according to image they wish to portray rather than where they fall in the framework 7-12

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Segmenting by Demographics: Race and Ethnicity Race and ethnicity African Americans Asian Americans Hispanic Americans Cultural diversity is increasing 7-13

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Segmenting by Demographics: Place of Residence Geodemography: Combines geography with demographics PRIZM website - http://www.zillow.com/ PRIZM website http://www.zillow.com/ Geocoding: Customizes Web advertising so people who log on in different places see ad banners for local businesses Search engine marketing example: Google Google 7-14

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Segmenting by Psychographics Psychographics use psychological, sociological, and anthropological factors to segment a market 7-15 http://www.youtube.com/watch?v=Mig7E5FtaAI

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7-16 Figure 7.3 VALS TM Framework (Values & Lifestyles) Learn more about each segment by visiting Strategic Business Insights (VALS types)VALS types VALS TM survey by visiting Take the VALS TM survey by visiting Strategic Business Insights (survey link)survey link

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Segmenting by Psychographics Niche markets may be defined by a single characteristic Psychographic segmentation can be industry specific Situations, such as a bad economy, can create opportunities for psychographic segmentation 7-17

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Segmenting by Behavior Behavioral segmentation: Segments consumers based on how they act toward, feel about or use a product User status 80/20 rule and segmentation by usage status Long tail concept Usage occasions 7-18

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Segmenting B2B Markets Segmentation helps B2B firms understand the needs and characteristics of potential customers Firms can be segmented by: Organizational demographics Production technology used Whether targeted business firm is a user/nonuser of product 7-19

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2012 Pearson Education, Inc. publishing as Prentice-Hall.7-20 Figure 7.4 Step 2-Phases of Targeting a. b. c.

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a.-Evaluation of Market Segments A viable target segment should: Have members with similar product needs/wants who are different from members of other segments Be measurable in size and purchasing power Be large enough to be profitable Be reachable by marketing communications Have needs the marketer can adequately serve 7-21

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b.-Developing Segment Profiles After segments are identified, profiles or descriptions of the typical customer in a segment are developed Segment profiles might include demographics, location, lifestyle, and product-usage characteristics 7-22

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2012 Pearson Education, Inc. publishing as Prentice-Hall.7-23 Figure 7.5 c.-Choose a Target Marketing Strategy

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Choosing a Targeting Strategy Undifferentiated Strategy- The marketer assumes that people have similar needs, and an attempt is made to appeal to a broad spectrum of people. (one size fits all) Efficiency occurs because of economies of scale. (Walmart) Differentiated Strategy - The firm develops one or more products (and strategies) for each of several customer groups. This strategy might involve marketing a single product differently to different segments, by changing marketing to appeal to each targeted group. (Toyota) Firms that focus their efforts on a single segment follow a Concentrated targeting strategy. One or more products may be promoted to the segment. (Niche marketing) 7-24

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Choosing a Targeting Strategy (cont) Customized 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 to meet the needs of an individual 7-25

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Step 3-In the Marketing Process Positioning Positioning: Developing a marketing strategy to influence how a particular market segment perceives a good/service in comparison to the competition Also: Developing a specific marketing mix to influence potential customers overall perception of a brand, product line, or organization in general. Position: The place a product or group of products occupies in the consumers minds relative to competing offerings. 7-26

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7-27 Figure 7.6 Stages in a Positioning Decision

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Modifying Positioning Strategies Repositioning is commonly used to change the brand image Requires redoing a products position in response to marketplace changes Repositioning may breathe life into Retro brands A once-popular brand that has been revived to experience a popularity comeback, often by riding a wave of nostalgia (Lava Lamps, Hula Hoops, etc.) Can you name any others? 7-28

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2012 Pearson Education, Inc. publishing as Prentice-Hall.7-29 Targeting and Positioning Strategies Must Complement Each Other Sobes XTC targets 18-35 year olds who want a New Age beverage that offers an energy boost without unhealthy additives. SoBe was inspired by herbal ecstasy cocktails made popular in the 1990s, but positioned as less risky.

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The Brand Personality Brand personality: A distinctive image that captures the brands character and benefits Personality dimensions: Sincerity Example? Excitement Example? Competence Example? Sophistication Example? Ruggedness Example? 7-30

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7-31 Figure 7.7 Perceptual Map

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CRM-Customer Relationship Management Toward a Segment of One Customer relationship management: 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 7-32

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CRM: A New Perspective on an Old Problem CRM systems capture information Touch-points interface customers and businesses CRM systems include: Order and delivery tracking websites Call centers Automatic reminder systems Sales contact management software 7-33

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CRM: Bottom Line Customer Relationships are important Lifetime value of a customer Focus on high value customers Cheaper to retain old customers than get new ones 7-34