Ch. 7 Target Marketing Strategy: Selecting and Entering a Market

1. 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)

2. Steps in the Target Marketing Process: STP

3. 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

4. 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

5. Demographic Dimensions Age Gender Occupation Family structure Income and social class Race and ethnicity Geography

6. 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 6

7. 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 7

8. 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 8

9. 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

10. Segmenting by Psychographics Psychographics: Segments formed on the basis of values and lifestyles (VALs) and shared activities, interests, and opinions (AIOs). 10

11. 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 11

12. 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

13. Segmenting Business-to- Business Markets North American Industry Classification System (NAICS) 13

14. Steps in the Target Marketing ProcessStep 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

15. 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? 15

16. 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

17. Select a Target Marketing Strategy

18. 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)

19. 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

20. 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 20

21. 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

22. Positioning Tool: Perceptual Map* 22 • 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

23. 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

24. 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

25. 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.)

26. 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 26