Target Marketing Process: Linking Customer Needs to Marketing Action

Market segmentation links market needs to an organization’s marketing program

Segmentation process of dividing a larger market into smaller pieces based on one or more meaningful, shared characteristics and that will respond similarly to a marketing action Segmentation variables are used to divide the market into smaller slices: demographics, psychographics, behavior, etc.

Why Segment Markets? One Product and Multiple Market Segments Multiple Products and Multiple Market Segments Segments of One: Mass Customization The Segmentation Trade Off: CRM versus synergies

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

Age Children Teens Generation X, Y Baby Boomers Elderly

Psychographics Psychographic segments market 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)

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 multi-national type of business production technology utilized NAICS characteristics

Criteria for Forming Segments Potential for increased profit and ROI Similarity of needs of potential buyers in a segment Difference of needs of buyers among segments Feasibility of a marketing action reaching segment Simplicity and cost of assigning buyers to markets

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?

Targeting Evaluating Market Segments Developing Segment Profiles Choosing a Targeting Strategy

Targeting Strategies Undifferentiated 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

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 Example: Levi’s Original Spin (custom) jeans, hair stylists Mass customization is a related approach in which a company modifies a basic good to meet the needs of an individual Example: Gateway computers, Proctor & Gamble’s products at Reflect.com Form Products to Be Sold into Groups

Select Target Markets Criteria to Use in Picking the Target Segments Market size Expected growth Competitive position Cost of reaching the segment Compatibility with objectives and resources Choose the Segments

Targeting Form Products to Be Sold into Groups Develop a Market-Product Grid and Estimate Size of Markets

Market-product grid showing how different Reebok shoes reach segments of customers with different needs

Comparison of various kinds of users and nonusers for Wendy’s, Burger King, and McDonald’s restaurants

Positioning Developing a marketing strategy aimed at influencing how a particular market segment perceives a product in comparison to the competition Strategy may also consider creating a “barrier to entry” for competitors

Product Positioning Head-to-head Differentiation

Developing a Positioning Statement 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 Map

Customer Relationship Management US companies spend about 75% of marketing $$ on existing customers 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 A Greater Focus on High-Value Customers

Steps in the CRM Process Identify customers Differentiate customers Interact with customers Customize for your customers