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

Chapter Objectives_1 Understand the need for market segmentation in today’s business environment Know the different dimensions marketers use to segment consumer and industrial markets Explain how marketers evaluate and select potential market segments

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

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

Segmenting Consumer Markets Demographics Psychographics Behavior

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

Age Children Teens Generation X Baby Boomers Elderly

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

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 Proprietary segments National systems (VALS)

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

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

Step 2: Targeting Evaluating Market Segments Developing Segment Profiles Choosing a Targeting Strategy

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 segment’s needs?

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.”

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

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

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

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

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

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 market’s response so modifications to the positioning strategy can be made (repositioning)

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

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

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

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?

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?