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

1
CHAPTER 7Sharpening the FocusTarget Marketing
Strategies and Customer Relationship Management
M A R K E T I N G
Real People, Real Choices Fourth Edition
2
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
• Identifying homogeneity in a sea of heterogeneity

3
STP Marketing

• Constant trade-off between efficiencies of mass
  marketing and productivity of customized
  marketing
• Consumer
• Distinctive wants
• Increasingly demand customization
• E.g. selling cars then and now
• Why do marketers segment markets?

4
Why do we segment markets

• Maximize the probability of sale
• Focus our energies and resources
• Meet segment needs more completely
• At the extreme segment of one

5
Segmenting Consumer Markets

• Consider the market for athletic shoes. How many
  different ways can you identify for segmenting
  this market?
• Demographics
• Psychographics
• Behavior

6
Demographic Dimensions

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

7
Age

• Children
• Ages 4 to 12 influence 130 billion worth of
  purchases annually
• Teens
• Ages 13 17 spend 3000 annually on feel good
  products (cosmetics, fast food, music, etc.)
• E.g. Avon targets young teen girls
• Generation Y
• Born between 1977 and 1994, young adults
• 26 of the population
• Spend 200 billion dollars annually

8
Age

• Generation X
• Born between 1965 and 1976
• 46 million
• Cynical attitude to marketing
• Responsible for 70 of startup businesses
• Save regularly, want stability and settle down

9
Age

• Baby Boomers
• Born between 1946 and 1964
• Wealthiest segment
• they never age
• Elderly
• 35 million age 65 and older
• Active lifestyles, good health and plenty of free
  time.

10
Gender

• Intrinsic appeal to one or the other group
• Marketers choose one group over the other (e.g.
  The best a man can get)
• The Metrosexual

11
Income

• Important variable as it determines who has the
  buying power
• Easy credit has weakened its effect somewhat
• Brands aimed at high net worth individuals? Mass
  market?

12
Ethnicity

• National origin strongly influences preferences
  for products, magazines, TV shows, food etc.
• By 2050 Caucasians will make up 50 of the US
  population (74 in 1995)
• African Americans 12 of population
• Rasheed the Bacon Whopper
• Asian Americans 20 million by 2020

13
The Hispanic Market Segment

• Largest minority segment
• Brand loyalty
• Highly concentrated by national origin
• Youthful (median age is 23.6)
• 3.5 people in average household
• Receptive to relationship building
• Got Milk to And you, have you given them
  enough milk today?

14
Geography

• Location in the country
• Consumers like to patronize local / regional
  products
• Heileman Distilleries sells Lone Star beer in
  Texas and Samuel Adams beer in Boston
• Geodemographics combine location with other
  demographic variables
• Birds of a feather flock together

15
PRIZM clusters

• Widely used geodemographic system developed by
  Claritas
• Divides all US zip codes into one of 62 clusters
  based on demographic and lifestyle variables
• E.g. Urban Gold Coast are elite urban singles,
  45-64 yrs, average incomes 73500 dollars. Live
  in Marina Del Ray, CA, Lincoln Park, IL and Upper
  east side, NY, etc.

16
Psychographics

• Segments markets in terms of shared attitudes,
  interests, and opinions (e.g. HOGs are thrill
  seekers and counter cultural)
• Segments include demographic information such as
  age and income, but also includes richer
  descriptions
• E.g. do you prefer a perfume because it makes you
  feel sexy or athletic?
• Proprietary segments
• National systems (VALS)

17
VALS by SRI Consulting Business Intelligence

• Values, Attitudes and Lifestyles
• Find your VALS type on their website
• Three primary motivators
• ideals motivated are guided by knowledge and
  principles
• Achievement motivated want products which exhibit
  their success
• Self-expression motivated want products which
  facilitate self-expression
• 12 of American adults are experiencers and tend
  to be thrill seekers
• What should marketers do to sell successfully to
  specific VALS types?

18
Taxonomy of Porsche Buyers
4
19
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
• E.g. Cereal Bars eaten at breakfast, anytime
  snack, alternative to a meal, midnight snack, etc.

20
Benefit Segmentation of the Snack-Food Market
4
21
Segmenting Industrial Markets

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

22
Step 2 Targeting

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

23
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?

24
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.

25
Segment profiles

• Profile of the Marlboro smoker
• Loves the outdoors, likes to be mobile, is a bit
  of a loner, strong, silent type, wears jeans, not
  used to taking orders, aggressive when provoked,
  considers women need to be protected and looked
  after, does not easily accept women as an equal
  partner.

26
Choosing a Targeting Strategy

• Undifferentiated Marketing
• Differentiated Marketing
• Concentrated Marketing
• Customized Marketing

27
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

28
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
• E.g. Nike shoes

29
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 sells its funky nail polishes
  and other cosmetics to only 20 something women.

30
Customized Marketing

• Segments are so precisely defined that products
  are offered to exactly meet the needs of each
  individual
• Mass customization is a related approach in which
  a company modifies a basic good to meet the needs
  of an individual
• E.g. Dell computers

31
Developing a Positioning Strategy

• Analyze the competitors positions in the
  marketplace. How do you do it?
• Perceptual Mapping
• Look for gaps in the perceptual map
• Position your product in the best gap available
• Your product must have the feature the dimensions
  suggest
• Evaluate the target markets response so
  modifications to the positioning strategy can be
  made (repositioning)

32
Perceptual Mapping

• A representation of the consumers mind space
  along at least two dimensions and the position of
  brands along these dimensions.
• When considering more than two dimensions
  Multi-Dimensional Scaling a statistical
  procedure for determining clusters of similar
  brands.

33
The Perceptual Map Cars functional benefit
based
safety
volvo
mercedes
ferrari
Ford festiva
savings
prestige
Corolla Civic
Camry Accord
mercedes
Rolls
Riding comfort
34
(No Transcript)
35
Information from the map

• Which brands compete with each other (Tylenol
  Motrin Anacin Excedrin)
• Positioned close to each other
• Greater brand switching between them
• Strategy implications
• Differentiate better

36
Information from the map

• How is every brand perceived on each attribute
  the current positioning
• Tylenol most gentle
• Excedrin most effective
• Strategy implications
• Reinforce positioning

37
Information from the map

• Length of attribute line how well does the
  attribute differentiate between brands
• Gentle and Effective differentiate the brands
  best
• Consumers have a harder time differentiating the
  brands on other attributes.
• Strategy implications
• Explore repositioning on best differentiators

38
Information from the map

• Angle between lines
• Smaller angles attributes are closely related
• Larger angles attributes are unrelated
• Long lasting and Effective are seen to be
  closely related
• Strategy implications
• Exploit small angle relationships

39
Information from the map

• Brand located close to the center (origin) e.g.
  Panadol
• No real positioning seen to be mediocre

40
Perceptual mapping worked for

• Chrysler first spotted the dimension where a car
  can comfortably move a larger family and carry
  stuff the minivan
• Liz Claiborne the dimension of comfortable yet
  formal clothing for working women
• ICICI in India the dimension of customers and
  bankers as being partners in business

41
Brand Personality

• The attempt to give the brand a human dimension
• Often achieved through the use of endorsers e.g.
  Jason Alexander KFC Cindy Crawford and Pepsi
• Also achieved through the use of animated or
  fictional characters (e.g. Pillsbury doughboy,
  Betty Crocker, Keebler elves, Mr. Clean, Mr.
  Peanut, California Raisins, etc.)

42
Exercise

• What is the brand personality of
• Polo
• Levis
• Pepsi
• Apple
• Toyota

43
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

44
Characteristics of CRM

• Share of Customer not share of market
• Focus on supplying different products to the same
  customer
• Lifetime Value of the Customer
• The amount the customer would spend buying from
  the firm over his/her lifetime
• Customer Equity
• The lifetime value of the customer
• A Greater Focus on High-Value Customers