Chapter Four The Fundamental Marcom Decisions: Targeting, Positioning, Objective Setting, and Budgeting  2007 Thomson South-Western

Chapter Four Objectives Discuss the importance of targeting marketing communications to specific consumer groups and realize that the targeting decision is the initial and most fundamental of all marcom decisions. Understand the role of behaviorgraphics in targeting consumer groups.

Chapter Four Objectives Describe the nature of psychographic targeting and the VALS system. Appreciate major demographic developments such as changes in the age structure of the population and ethnic population growth.

Chapter Four Objectives Explain the meaning of geodemographics and understand the role for this form of targeting. Recognize that any single characteristic of consumers—whether their age, ethnicity, or income level—likely is not a sufficient basis alone for sophisticated marcom targeting.

Targeting Customers and Prospects Targeting specific audiences can be considered the starting point for all marcom decisions. Targeting allows marketing communicators to more precisely deliver their messages and prevent wasted coverage to people falling outside the targeted market.

Consumer Characteristics Behaviorgraphics Psychographics Demographics Geodemographics Characteristics that singularly or in combination influence what people consume and how they respond to marketing communications.

Behaviorgraphic Targeting Based on how people behave (with respect to a particular product category or class of related products) rather than in terms of their attitude and lifestyles, their age, income, or ethnicity, or where they live. The best predictor of one’s future behavior is his or her past behavior.

Online Behavioral Targeting “Audience Management Systems” track Internet users’ surfing behavior in order to target them with specific advertisements. Issues: Privacy Concerns

Psychographic Targeting Captures aspects of consumers’ psychological make-ups and lifestyles including their attitudes, values, and motivations as they relate to buying behavior in a particular product category.

Four Psychographic Segments of Banking Behaviors “Worried Traditionalists” “Bank Loyalists” Ask the Class: How can a regional bank communicate and market differently to each group based on their psychographic profile? “Secured Investors” “Thrifty Bankers”

Geodemographic Targeting Based on the premise that consumers who reside within geographic clusters such as zip codes or neighborhoods also share demographic and lifestyle similarities.

Demographic Targeting Marcom practitioners are mainly concerned with: the age structure of the population the changing household composition of the U.S. ethnic population developments

World Population Expected to grow to approximately 8 billion people by the year 2025 and 9 billion by 2050. Both China and India’s populations dramatically exceed that of the United States.

Aspects of the U.S. Population 293 million estimated population Ancestral diversity, with just over 7% referring to themselves as “Americans,” up from 5% in 1990. Relentless aging of the population

The Changing Age Structure The U.S. population is aging relentlessly. Median Age: 28 30 33 36 1970 1980 1990 2000

Effects of the Baby Boom The original baby boomers created a mini baby boom as they reached childbearing age. Due to a low birthrate from the mid 1960s through the 1970s, there are now fewer young adults (ages 20 to 34) than in prior generations. The number of middle-agers (35-54) has increased dramatically, totaling 85 million in 2005.

Marketing to Children and Teenagers Group of Americans aged 19 and under has fallen dramatically from 40 percent of the population in 1965 to 28 percent of the population in 2005. 80 million occupants aged 19 and younger. “Kids” defined as ages 4 to 12. Spending for this age group totals more than $24 billion per year.

Preschoolers Preschool age children, age 5 or younger More babies were born in the U.S. in 1990 (4.2 million) than at any time since the baby boom of 1957. Toys, furniture items, and other products and services appealing to the family have increased substantially in recent years.

Elementary School Age Children Ages 6 to 11 Children directly influence parents’ choice of clothing and toys, and even brands of toothpaste and food products.

Tweens Children between the ages of 8 and 12: a category defined as not quite kids and not yet teenagers. Average annual income of $22.68, or $23 billion annually.

Teenagers Over 25 million 13 to 19-year olds in the United States Generation Y 1982 to 1994: in 2005, 50 million Americans between 11 and 23. Group spends over $150 billion annually. Highly conformist, narcissistic, and fickle consumers. It is said that teenagers don’t like being “marketed to.” Use the Internet heavily.

Young Adults 2005: over 50 million Americans in the age category from 24 to 40. Generation X defined as people born between 1965 and 1981. Group also referred to as baby busters and twentysomethings. Often defined by clichés like slackers, cynics, whiners, and hopeless.

Young Adults Drifters Playboys (16%) (19%) Yup & Comers (28%) Bystanders (37%) Playboys (19%) Drifters (16%) Yup & Comers (28%) Yup & Comers: The highest levels of education and income, focus on intangible rewards and confident about themselves Bystanders: Predominantly female African-Americans and Hispanics, disposable income is low but love fashion and shopping Playboys: “Pleasure before duty” lifestyle, self-absorbed, fun-loving and impulsive Drifters: Frustrated with their lives, the least educated, and choose brands that offer a sense of belonging and self-esteem

Middle-Aged Middle-Aged 85 million Americans between the ages of 35 and 54 Baby Boomers: Born between 1946 and 1964: affluent category targeted for luxury goods and obsessed with youth. Do not represent a monolithic group for marketing purposes.

Mature Consumers (Seniors) In 2005, approximately 66 million citizens aged 55 or older, representing about 23% of the U.S. population. Wealthier and more willing to spend than ever before—control nearly 70% of the net worth of all U.S. households. People aged 65 and older have the highest discretionary income of any age group. Spend more time (700 minutes per month) online than any other demographic.

Mature Lifestyle Groups 13% 38% 15% 34%

The Ever-Changing American Household The average American household is shrinking in size and changing in character. Traditional married couple with children families represent less than one-fourth of all households Singles are a viable market.

African-Americans African Americans: 40.5 million as of 2010, or 13% of the U.S. population African Americans are attractive consumers because: The average age of black Americans is considerably younger than that for Whites African-Americans are geographically concentrated, with ¾ of all blacks living in just 16 states African-Americans tend to purchase prestige and name-brand products in greater proportion than do whites.

Hispanic Americans (Latinos) Grew from 4 million in 1950 to an expected population of nearly 48 million in 2010. Hispanic Americans: 25% of the U.S. population by 2010, currently nearly 40 million U.S. residents. A key in designing effective advertising for Hispanics is to advertise to them in their dominant language. Interethnic differences in Cubans, Mexicans, and Puerto Ricans as well as differences within each grouping mean there is no one market.

Asian-Americans As of 2000, approximately 10.7 million Asians in the U.S. By 2010, the number will increase to 14 million and more than 33 million by 2050. Asian-Americans on average are better educated, have higher incomes, and hold more prestigious jobs than any other segment of society. No single market. Some success with customizing marketing programs to Asian values.