Chapter 7Chapter 7

Sharpen the Focus:Target Marketing Strategies and Customer Relationship

Management

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Chapter ObjectivesChapter Objectives

1. Identify the steps in the target marketing process2. Understand the need for market Segmentation and

the approaches available to do it3. Explain how marketers evaluate segments and

choose a Targeting strategy (there are 4 main ones)4. Understand how marketers develop and implement

a Positioning strategy

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Target Marketing Strategy: Target Marketing Strategy: Selecting Selecting and Entering a Marketand Entering a Market

Market fragmentation means… The existence of many consumer groups due

to the diversity of their needs and wants Target marketing strategy:

Dividing the total market into different segments based on customer characteristics, selecting one or more segments, and developing products to meet those segments’ needs

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Figure 7.1 Figure 7.1 Steps in the Target Marketing Steps in the Target Marketing

ProcessProcess

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Market SegmentationMarket Segmentation

Market SegmentationMarket Segmentation - - division of the total market into smaller, relatively homogeneous (similar) groups

Key Points – 1. There is often more than one viable target

market for a product.2. No single marketing mix can satisfy every target

market, therefore, different marketing mixes must be developed for different target markets.

3. You have to find ways to logically slice and dice society into viable target markets for each unique product.

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No Market SegmentationNo Market Segmentation

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Segmented by GenderSegmented by Gender

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Segmented by AgeSegmented by Age

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Criteria for Effective SegmentationCriteria for Effective Segmentation To be effective, segmentation must meet the

following basic requirements.1. The market segments must be measurable

in terms of both purchasing power and size.2. Marketers must be able to effectively reach

(promote to and serve) a market segment.3. Market segments must be sufficiently large

enough to be potentially profitable.4. The firm must be financially able to market

to the segments selected.

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Segmenting Consumer MarketsSegmenting Consumer Markets

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Segmenting Consumer MarketsSegmenting Consumer Markets

1. Geographic Segmentation:1. Geographic Segmentation: Dividing an overall market into groups on the basis of their locations (region, country, etc)

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Using Geographic SegmentationUsing Geographic Segmentation

Does not ensure that all consumers in a location will make the same buying decision, though helpful in identifying some general patterns.

Most major brands get 40-80 percent of their sales from what are called core regions

Climate is another important segmentation factorNorthern consumers, for example, eat more

soup than SouthernersSoutherners use more chlorine for their

swimming pools than Northern residents

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Segmenting Consumer MarketsSegmenting Consumer Markets

2. Demographic segmentation:2. Demographic segmentation: Dividing consumer groups according to characteristics such as gender, age, income, occupation, education, household size, and stage in the family life cycle

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Segmenting by GenderMarketers must ensure that traditional

assumptions are not falseSome products appeal to men in similar

ways to women and some products don’t

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Segmenting by age Segmenting by age Products are often

designed to meet the specific needs of certain age groups

Examples: baby food and denture cream.

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Segmenting by age – The Cohort EffectSegmenting by age – The Cohort EffectCohort effect is a tendency among

members of a generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age

Sociologists attribute different consumer needs and wants among various age groups to the cohort effect

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BoomersBoomers—People born from 1946 until 1964. About 40 percent of U.S. adults were born in this period. Values of this age group were influenced both by the Vietnam War and the career-driven era.

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Segmentation by Age, specifically Boomers. Young consumers tend to buy products to feel older, while older consumers tend to buy products to feel younger !

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Segmenting by Segmenting by Ethnic GroupEthnic Group

Census Bureau projects that by 2050, & possibly much sooner, nearly 1/2 of the US population will be nonwhite.

The 3 largest and fastest-growing racial/ethnic groups in the US are African Americans, Hispanics, and Asian Americans.

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Would this ad have run in the U.S 10 years ago? Why not?

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Segmenting by Segmenting by Family Life Cycle Family Life Cycle StagesStages

Life Cycle - Life Cycle - The process of family formation and dissolution.

The underlying theme is that life stage, not age per se, is the primary determinant of many consumer purchases.

One important trend - Women are having children at a later age.

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Segmenting Consumer Markets

3. Psychographic Segmentation 3. Psychographic Segmentation Divides a population into groups that have

similar psychological characteristics, values, and lifestyles

VALS (Values and Lifestyles) – a psychographic segmentation system

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Principle OrientedPrinciple Oriented Status Status OrientedOriented

FULFILLEDFULFILLED11%11%

BELIEVERSBELIEVERS16%16%

ACTUALIZERSACTUALIZERS8%8%

ACHIEVERSACHIEVERS13%13%

STRIVERSSTRIVERS13%13%

STRUGGLERSSTRUGGLERS12%12%

Abundant ResourcesAbundant Resources

Minimal ResourcesMinimal Resources

Action OrientedAction Oriented

EXPERIENCERSEXPERIENCERS12%12%

MAKERSMAKERS13%13%

VALS 2VALS 2

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Using Psychographic Segmentation Psychographic

profiles produce rich descriptions of potential target markets

The greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers

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Segmenting Consumer Markets

4. Product-related segmentation:4. Product-related segmentation: dividing a consumer population into homogeneous groups based on characteristics of their relationships to the product

Can take the form of segmenting based on:Benefits that people seek when they buyUsage rates for a product – 80/20 ruleConsumers’ brand loyalty toward a product

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Strategies for ReachingStrategies for ReachingTarget MarketsTarget Markets

Undifferentiated Marketing

Differentiated Marketing

Concentrated Marketing

Customized

Any of the 4 strategies may prove effective for a particular situation

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Undifferentiated marketing:Undifferentiated marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mixSometimes called mass marketingMuch more common in the past

Q. Can you think of an example?

Undifferentiated Marketing

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Differentiated marketing:Differentiated marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segmentsTends to raise costsFirms may be forced to practice differentiated

marketing to remain competitiveBest Example – Procter & Gamble:

www.pg.com

Differentiated Marketing

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Concentrated marketing:Concentrated marketing: When a firm commits a large percentage of its marketing resources to serve a single market segmentAttractive to small firms with limited resources

and to firms offering highly specialized goods and services

Q. Can you think of an example?

Concentrated Marketing

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Customized:Customized: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or even individual

Customized

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Figure 7.3 Figure 7.3 Choosing a Target Marketing StrategyChoosing a Target Marketing Strategy

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Segmenting B2B MarketsSegmenting B2B Markets

Segmentation helps B2B firms understand the needs and characteristics of potential customers

Firms can be segmented by: Organizational demographicsProduction technology usedWhether customer is a user/nonuser of productNorth American Industry Classification System

(NAICS)

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PositioningPositioning

*After segmenting the market, selecting target *After segmenting the market, selecting target markets, and choosing the strategy to reach the markets, and choosing the strategy to reach the target markets, the next step is Positioningtarget markets, the next step is Positioning

PositioningPositioning:: Striving to create a certain image in buyers’ minds which is differentiated from the competition.

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Steps in Developing a Positioning Steps in Developing a Positioning StrategyStrategy

1. Analyze competitors’ positions

2. Offer a good or service with a competitive advantage

3. Finalize the marketing mix by matching mix elements to the selected segment

4. Evaluate target market’s responses and modify strategies as needed

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Modifying Positioning StrategiesModifying Positioning Strategies

Repositioning is commonly used to change the brand image Requires redoing a product’s position in

response to marketplace changes. Ex: Domino’s

Repositioning may breathe life into Retro brands A once-popular brand that has been revived to

experience a popularity comeback, often by riding a wave of nostalgia. Ex: Old Spice

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Positioning Positioning mapmap:: Graphic illustration that shows differences in consumers’ perceptions of competing products

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Where would you position these automobiles on this Positioning Map?

Class Discussion

Expensive

Inexpensive

High QualityLow Quality

VW Bug Accord Corolla PriusBMW Conv