Sharpening the Focus: Target Marketing

Strategies and Customer Relationship Management

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Chapter Objectives

• need for market segmentation

• dimensions to segment B2C & B2B markets

• evaluating & selecting market segments

• targeting strategy

• positioning strategy

• customer relationship management

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Target Marketing Strategy: Selecting and Entering a Market

• Target marketing strategy:

• dividing the total market into different segments based on customer characteristics,

• selecting one or more segments, developing products to meet those segments’ needs.

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Target Marketing Strategy: Selecting and Entering a Market

• Market fragmentation:

• The creation of many consumer groups due to the diversity of their needs and wants.

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Figure 7.1: Steps in the Target Marketing Process

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Step 1: Segmentation

• The process of

• dividing a larger market

• into smaller pieces

• based on

• One/more meaningful

• shared characteristics

segmentation

Step one

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Step 1: Segmentation

• Segmentation variables: • dimensions that divide the total market

• into fairly homogeneous groups,

• each with different needs and preferences

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Segmenting Consumer Markets

• Segmentation variables can slice up the marketDemographic, psychological, behavioral differences

VANS.COM

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Segmenting by Demographics Age: Generational Marketing

• Children

• Teens/tweens • Generation Y:

born between 1977 and 1994

• Generation X: born between 1965 and 1976

• Baby boomers: born between 1946 and 1964

• Older consumers

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Segmenting by Demographics Gender

• Many products appeal to one sex or the other

• Metrosexual: a man who is heterosexual, sensitive, educated, and an urban dweller in touch with his feminine side

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Segmenting by Demographics

• Family Structure • Income• Social Class• Race and Ethnicity

African AmericansAsian AmericansHispanic Americans

MINORITEAM ON ADULT SWIM

VOSS WATER

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Segmenting by Geography

• Geodemography: combines geography with demographics

• Geocoding:

• Customizes Web advertising

• so people who log on in different places

• see ad banners for local businesses

CLARITAS.COM

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Segmenting by Psychographics

• Psychographics:

• The use of psychological, sociological and anthropological factors to construct market segments.

• AIOs: Psychographics segments consumers in terms of shared activities, interests, and opinions.

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Figure 7.2: VALS

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Segmenting by Behavior

• based on how they act toward, feel about, or use a product

• 80/20 rule: 20 % of purchasers account for 80 % of a product’s sales

• Heavy, medium, and light users and nonusers of a product

• Usage occasions AMAZON.COM

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Segmenting B2B Markets

• By organizational demographics• By production technology used• By whether customer is a

user/nonuser of product• By North American Industry

Classification System (NAICS)

TARGETING

STEP TWO

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Step 2: Targeting

• Marketers evaluate the attractiveness of each potential segment

• decide in which they will invest resources to try to turn them into customers

• Target market: customer group(s) selected

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Evaluation of Market Segments

• A viable target segment should:members with similar product needs/wants Be measurable

• in size and purchasing power

Be large enough to be profitable Be reachable by marketing communicationsneeds marketer can adequately serve

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Developing Segment Profiles

• describe “typical” customer in segment.

• Segment profile might include:

• demographics,

• location,

• lifestyle,

• product-usage frequency.

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Figure 7.3: Choosing a Target Marketing Strategy

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Choosing a Targeting Strategy

• Undifferentiated targeting: • appeals to broad spectrum of people• Differentiated targeting: • develop one/more products for

each customer groups

• Concentrated targeting: • offering one/more products

to a single segment

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Choosing a Targeting Strategy

• Custom marketing: tailoring specific products to individual customers

• Mass customization: modifying a basic good or service to meet the needs of an individual

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Step 3: Positioning

• marketing strategy • aimed at influencing • how a particular market segment

perceives a good/service

• in comparison to the competition

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Steps in Developing a Positioning Strategy

1. Analyze competitors’ positions.2. Offer a good/service with

competitive advantage.3. Match elements of marketing mix

1. to the selected segment.

4. Evaluate target market’s responses

1. and modify strategies if needed.

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Positioning (cont’d)

• Repositioning: • redoing a product’s position

• to respond to marketplace changes.

• Retro brand: • a revival of a once-popular brand

to experience a popular comeback, often by riding a wave of nostalgia.

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The Brand Personality

• A distinctive image captures brand’s character and benefits

• Perceptual map: where products/brands are “located” in consumers’ minds

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Figure 7.4: Perceptual Map

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Customer Relationship Management (CRM)

• building long-term relationships with customers

• to keep them satisfied and coming back.

•

• CRM facilitates one-to-one marketing.

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Four Steps in One-to-One Marketing

• Identify customers; know them in as much detail as possible.

• Differentiate customers by their needs and value to the company.

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Four Steps in One-to-One Marketing

•Interact with customers; find ways to improve interaction.

•Customize productsyou offer each customer.

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CRM: A New Perspective on an Old Problem

•CRM systems

• uses computers, software, databases, and the Internet

• captures information at each touch point between customers and companies,

• to allow better customer care.

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CRM: A New Perspective on an Old Problem

• customers are relationship partners,

• with each partner learning

• from the other

• every time they interact.

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Characteristics of CRM

• Share of customer (vs. share of market)

• Lifetime value of the customer

• Customer equity

• Focus on high-value customers

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The End

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Discussion

• Do you see any problems with a firm’s focusing on share of market rather than share of customer?

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Real People, Real Choices

• Reebok (Que Gaskins)• How to capture the pulse of youth culture

in the long run?Option 1: mimic Nike’s moves with Michael JordanOption 2: build on Reebok’s success with Iverson,

while separating the brand from other performance sneaker brands like Nike

Option 3: maintain the Iverson emphasis and increase efforts to build credibility as a shoe for soccer and track

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Real People, Real Choices

• Reebok (Que Gaskins)• Que chose option 2: build on

Reebok’s success with Iverson, while separating the brand from other performance sneaker brands like Nike Reebok created a new category called

Rbk that fuses sports with youth lifestyle and entertainment

RBK.COM

Reebok Video

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Marketing Plan Exercise

• Visit the Web site for a company that manufactures products you like and are familiar with.

• Select one product and answer the following:What market segmentation approaches are most

relevant for the product?Describe the top three target markets for the product.

What makes them so attractive?

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Marketing Plan Exercise (cont’d)

Write a positioning statement of a few sentences for the product. Start with “Product X is positioned as…”

How could CRM help the company successfully target and position the product?

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Marketing in Action Case:You Make the Call

1. What is the decision facing Oracle?

2. What factors are important in understanding this decision situation?

3. What are the alternatives?

4. What decision(s) do you recommend?

5. What are some ways to implement your recommendation?

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Keeping It Real: Fast Forward to Next Class Decision Time at Black & Decker

• Meet Eleni Rossides, a senior manager in the Black & Decker Consumer Group.

• ScumBuster users had recommended product improvements.

• The decision: What changes, if any, to make in the ScumBuster.

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Individual Activity

• Pick a store at which you shop frequently… If the store were a

person, how would describe its personality?

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Group Activity

• You’re account executives for a marketing consulting firm, and your newest client is a university – your university.

• You’ve been asked to develop a positioning strategy for the university. Develop an outline of your ideas, including : Who are your competitors? What are your competitors’ positions? What target markets are most attractive to you? How will you position the university for those segments relative

to the competition?

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Group Activity

Your company is planning to enter the consumer market for videogames. You’ve considered mass-marketing, concentrated marketing, differentiated marketing, and custom marketing strategies.Pick a strategy for your firm. Explain

why you chose it and how you will implement it.

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Discussion

• Critics of marketing suggest that market segmentation and target marketing lead to an unnecessary increase in product choices that wastes valuable resources.Are the results of segmentation and target marketing

harmful or beneficial to society as a whole?Should firms be concerned about these criticisms?

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Discussion

• Alcohol and tobacco-product manufacturers have been criticized for targeting unwholesome products to certain segments of the market – the young, the aged, ethnic minorities, the disabled, and others. Do you view this as a problem? Should a firm use different criteria in targeting such groups? Should the government oversee and control such marketing

activities?

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Discussion

• How large should a segment be?• How do you think a firm should determine

whether a segment is profitable?• Have technological advances made it possible

for smaller segments to be profitable?• Do firms have a moral or ethical obligation to

develop products for small, unprofitable segments?