CHAPTER 7 Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management

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CHAPTER 7Sharpening the Focus Target Marketing
Strategies and Customer Relationship Management
M A R K E T I N G
Real People, Real Choices Fourth Edition
Michael R. Solomon Greg W. Marshall
Elnora W. Stuart
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Chapter Objectives_1

• Understand the need for market segmentation in
  todays business environment
• Know the different dimensions marketers use to
  segment consumer and industrial markets
• Explain how marketers evaluate and select
  potential market segments

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Chapter Objectives _2

• Explain how marketers develop a targeting
  strategy
• Understand how a firm develops and implements a
  positioning strategy
• Know how marketers practice customer relationship
  management to increase long-term success and
  profits

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Figure 7.1 Steps in the Target Marketing Process
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Step 1 Segmentation

• Segmentation is the process of dividing a larger
  market into smaller pieces based on one or more
  meaningful, shared characteristics
• Segmentation variables are used to divide the
  market into smaller slices

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Segmenting Consumer Markets
Demographics
Psychographics
Behavior
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Vans
Young shredders are a profitable target segment
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Demographic Dimensions

• Age
• Gender
• Family structure
• Income and social class
• Race and ethnicity
• Geography

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Age Groups
Children
Teens
Generation X
Baby Boomers
Elderly
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Avon Mark
Avon is targeting a younger consumer with its
mark brand
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Nip Tuck
The show Nip/Tuck shows how far some baby boomers
will go for a youthful appearance
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The Hispanic Market Segment

• Brand loyalty
• Highly concentrated by national origin
• Youthful (median age is 23.6)
• 3.5 people in average household
• Receptive to relationship building

Some companies appeal to Mexican Americans by
developing promotions celebrating Cinco de Mayo
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Products target Hispanics
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Psychographics

• Psychographics segments markets in terms of
  shared attitudes, interests, and opinions
• Segments include demographic information such as
  age and income, but also includes richer
  descriptions
• Some organizations develop their own
  psychographic segments for their consumers, but
  others utilize national systems (VALS by SRI
  International)

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Figure 7.2 VALS
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Metrosexual A New Segmentation Buzzword
This article on the Web site Salon.com discusses
the new buzzword
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Segmenting by Behavior

• Behavioral segmentation slices consumers on the
  basis of how they act toward, feel about, or use
  a product
• Users versus nonusers
• Heavy, moderate, light users
• Usage occasions

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Tropicana
Tropicana Essentials targets consumers who want
extra vitamins and no sodium
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Segmenting Industrial Markets

• Organizational demographics
• firm size
• number of facilities
• domestic or multinational
• type of business
• production technology utilized
• NAICS characteristics

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Hoovers Online
Hoovers Online provides marketing intelligence on
private and public companies
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Step 2 Targeting

• Evaluating Market Segments
• Developing Segment Profiles
• Choosing a Targeting Strategy

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Evaluating Market Segments

• A viable target segment should satisfy these
  requirements
• Are members of the segment similar to each other
  but different from other segments?
• Can marketers measure the segment?
• Is the segment large enough to be profitable?
• Can marketing communications reach the segment?
• Can the marketer serve the segments needs?

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Developing Segment Profiles

• A profile is a description of the typical
  customer in that segment
• RJ Reynolds Dakota Profile of the Virile
  Female Her favorite pastimes are cruising,
  partying, going to hot-rod shows and tractor
  pulls with her boyfriend, and watching evening
  soap operas. Her chief aspiration is to get
  married in her early twenties.

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Choosing a Targeting Strategy
Undifferentiated Marketing
Differentiated Marketing
Customized Marketing
Concentrated Marketing
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Undifferentiated Marketing

• Appeals to a broad spectrum of people
• Efficient due to economies of scale
• Effective when most consumers have similar needs
• Example Wal-Mart

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Differentiated Marketing

• Develops one or more products for each of several
  customer groups with different product needs
• Appropriate when consumers are choosing among
  well-known brands with distinctive images and it
  is possible to identify one or more segments with
  distinct needs for different types of products
• Example Elseve, LOreal, Lancome

Video Differentiated marketing at American
Express
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Concentrated Marketing

• Entails focusing efforts on offering one or more
  products to a single segment
• Useful for smaller firms that do not have the
  resources to serve all markets
• Example Hard Candy

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Hard Candy
Hard Candy uses a concentrated targeting
strategy to target twenty-something women
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Customized Marketing

• Segments are so precisely defined that products
  are offered to exactly meet the needs of each
  individual
• Example hair stylists
• Mass customization is a related approach in which
  a company modifies a basic good to meet the needs
  of an individual
• Example Proctor Gambles products at
  Reflect.com

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Custom Beauty Solutions
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Developing a Positioning Strategy

• Analyze the competitors positions in the
  marketplace
• Offer a product with a competitive advantage
• Finalize the marketing mix
• Evaluate the target markets response so
  modifications to the positioning strategy can be
  made (repositioning)

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BC Ethic
BC Ethic positioned itself as cool by giving
custom shirts to popular music groups and then
using the groups in its ads
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The Brand Personality

• A positioning strategy attempts to create a brand
  personality for a product - a distinctive image
  that captures its character and benefits
• How do marketers determine where their products
  actually stand in the minds of consumers?
• Perceptual mapping

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Maui
Brand personalities often are reflected in logos
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Figure 7.4 Perceptual Map
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Customer Relationship Management

• A CRM strategy allows a company to identify its
  best customers, stay on top of their needs, and
  increase their satisfaction
• CRM is about communicating with customers one on
  one
• CRM views customers as partners

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Table 7.2 Steps in the CRM Process
Identify customers
Differentiate customers
Interact with customers
Customize for your customers
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Characteristics of CRM

• Share of Customer
• Lifetime Value of the Customer
• Customer Equity
• A Greater Focus on High-Value Customers

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Siebel Systems
Siebels Web site is a great source of
information on CRM
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Issues for Discussion_1

• Are the results of segmentation and target
  marketing harmful or beneficial to society as a
  whole?
• How large should a segment be? Do firms ever have
  an ethical obligation to develop products for
  small, unprofitable segments?
• Some firms are criticized for targeting
  unwholesome products to certain segments like the
  elderly. What groups deserve special concern?
  Should the government oversee such marketing
  activities?

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Issues for Discussion_2

• What problems might arise with replacing earlier
  concepts such as share of market with new
  concepts like share of customer, lifetime value
  of the customer, customer equity, and high-value
  customers?