Segmentation, Targeting & Consumer Behavior

MKTG 5604September 22, 2021

Tonight’s Plan

6:00p Welcome, Agenda, & Learning Goals

6:05p Announcements & Questions

6:15p Case Assignments

6:35p Segmentation & Targeting

7:15p Break

7:30p Project Breakout: Identifying Your Target Segment

8:00p Assessing What Customer’s Value

8:30p Project Activity: Defining Value

8:55p Conclude

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Our learning goals center on customer segmentation.

• Articulate the role that segmentation plays in marketing strategy

• Utilize the primary segmentation variables used in both consumer and business market segmentation

• Evaluate what constitutes good (and not-so-good) segmentation

• Make informed targeting decisions

• Use both market segmentation & buyer personas to make marketing decisions.

• Evaluate the buying process & how a customer makes a purchase decision

• Identify how a customer derives value from a product / service.

Let’s catch-up on the Team Project.

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● What parts of the process have been the best?

● What has been the most challenging?

● Are you stuck anywhere?

● What questions do you have about my feedback, next steps, requirements?

Notes on the upcoming assignment.

Segmentation & Targeting | Due October 20, 2021

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Case Assignment Discussion

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Your first assignments are in!

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As your colleagues present their submissions, prepare a question related to their work.

We’ll spend time discussing the case after its presented.

Segmentation & Targeting

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Group customers with similar needs into segments—determine characteristics in each.

Segmentation

Group customers based on similar needs

Profile each segment

Targeting

Assess attractiveness of each segment

Select segments to target

Positioning

Define value proposition for target segments

Develop an action plan

Variable Description

Geographic Country, City, Region, Urban vs Rural, Climate

Demographic Age, Income, Gender, Generation, Marital Status, Family Size, Occupation

Psychographic Lifestyle, Personality, Activities, Interests, Opinions,

Behavioral Usage Rate, Loyalty, Product Knowledge, Involvement, Decision, Purchase Occasion

Benefits Sought Convenience, Value, Safety, Status

There are common segmentation variables for consumer markets.

The ultimate goal is to group customers with similar needs and preferences.

WHO Who are the customers?Demographics, media habits, lifestyle

WHAT What have the customers done?Usage, loyalty, profitability

WHY Why do customers make the decisions they do?Needs, preferences, decision-processes

Ask,“Is this a useful segmentation?”

IdentifiableDoes the segment have unique characteristics & behaviors?SubstantialAre there enough people in this segment? What is the size of the market?AccessibleIs the segment reachable? Is it easy or difficult to reach?StableIs there longevity in the segment?DifferentiableIs the segment distinct from other groups?ActionableCan you meet the segment’s needs?

TargetMarket

Selection

To select a segment, ask: “Which offers the best opportunity for our organization?”

COMPETITIONCompetitor’s StrengthsCompetitor’s ResourcesCompetitor’s Intensity

SEGMENT CHARACTERISTICSSegment Size Segment Growth RateSegment Profitability

COMPANY FITObjectives CompetenciesResources

Variable Description

Geographic Country, City, Region, Urban vs Rural, Climate

Firmographic Industry, Firm Size, Global/Regional, Ownership Structure

Buying Approach

Centralized / Decentralized, Purchase policies, Involvement of Decision Makers

Behavioral Volume, Loyalty, Attitude toward risk, Purchase frequency, Urgency

Benefits Sought Price, Product quality, Customer service, Relationship

There are similarities in B2B segmentation.

In B2B, you may manage multiple “WHYs.”

Key Customers Prime Customers

Primary Decision Maker Nurse Administrator

Purchase Drivers Patient satisfactionPhysician requirementsReturn on investment

NecessityLow maintenanceLow risk, low liability

Deciding factors PerformancePatient outcomes & safetyCaregiver safety

ReliabilityEase of usePrice

Building Buyer Personas

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Personify your target with buyer personas.

STRATEGIC OPPORTUNITY STRATEGIC IMPLEMENTATION

Segment Buyer Personas

GOAL: Is this a customer segment that we can target profitably?• What’s the size of this market? • What’s the $ opportunity in this market?• What’s the future of this market?• Are our competitors serving this market?• If we serve this market, how might competitors

respond?

GOAL: How can I meet this customer’s needs?• What are the unique characteristics that

distinguish a typical customer? • What are this customer’s unmet needs?• How does this customer find information about my

service / product?• Who influences this customer?• How does this customer make decisions?

An Example: Global Investment Company

Strategic Issue: Are there opportunities to build relationships with prospective customers earlier in their lives?

Context: Traditional financial institutions capture college students with introductory products like checking accounts, savings accounts, and student loan options. Investment firms connect with customers through employer-sponsored benefit plans or when those customers start considering retirement.

COLLEGE STUDENT PERSONA 1: THE SKEPTICAL INVESTOR

(1) Personal Interviews (2) College-Educated Millennials: An Overview of Their Personal Finances(3) College Students are put to the Test

Checking Account Savings Account Current Investments Financial Knowledge Motivation to Invest

Yes Maybe None Minimal None

Description

Wants• Financial Stability

Needs• Financial Education

Pain Points• Lack of Trust

“I have savings, but I have no plan to invest any time soon.”

– College Student, Stony Brook University, 19

“Investment and retirement will become concerns when I graduate; until then, I’ll focus on studying”

Checking Account Savings Account Current Investments Financial Knowledge Motivation to Invest

Yes Yes None Moderate Medium

– C.K., Lehigh University, 23

DescriptionGoals• Save for “long-term” needs (in

this case 5 – 10 years)

Needs• Usable online interface• Low Cost • Interpersonal interaction

Pain Points• Investments are for people who

are older

COLLEGE STUDENT PERSONA 2: THE POTENTIAL INVESTOR

“I invest with Northwestern Mutual because my friend works there.”

– Member of the Military, 24

Checking Account Savings Account Current Investments Financial Knowledge Motivation to Invest

Yes Yes Minimal to Extensive High High

Description

Goals• Begin investing as soon as income

allows

Needs• Investment Plan/Timeline

Pain Points• Perceived lack of Investible Income

COLLEGE STUDENT PERSONA 3: THE CURRENT INVESTOR

Segmentation & Targeting Activity

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OPTION 1Map a segmentation strategy for the business travel industry.

Broadly-speaking, how does the travel industry segment the market? What are general segments in the travel industry?

Focus on business travelers. How would you segment the market to capture value for your business? Why would you choose that segmentation approach?

How would you ensure product offerings & marketing messaging are aligned with those who are traveling?

https://deloitte.wsj.com/articles/adopting-a-framework-to-prioritize-post-pandemic-travel-01631645092?page=1

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OPTION 2Is there a stable market segment for cryptocurrencies?.

Background: SEC Chair Gary Gensler believes that the crypto market is the Wild West of finance and headed towards a downturn that resembles the 2008 crisis. The article posits that speculators are entering the space, but that there’s not a long-term market here.

What do you think? How would you segment the crypto market? Who a current target buyer? Is this a stable segment? Why or why not? If not, what type of customer would help stabilize this industry?

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OPTION 3Do eCigarette companies market to underage consumers?

Background: Juul and other eCigarette manufacturers have come under fire for marketing practices that potentially targeted teen consumers. The Truth Initiative launched a campaign promoting a fake product called “Depression Sticks” - to highlight damaging effects of vaping, particular for teens.

What do you think? Do eCigarette manufacturers intentionally target marketing to teens? Look at the company products offerings, messaging, channels selected. Use these as clues to the segmentation strategy the firms use.

Break

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Project Activity: Segmentation & Targeting

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Project Activity: Who are my customers?

Consider the potential market for your new firm’s AI application. Brainstorm potential market segments, using the content from today’s lecture & the “Segmentation & Targeting” reading.

• Which segmentation variables are most relevant to your segmentation strategy? How will you define distinct market segments?

• Evaluate the “Who, What, Why” to refine prospective segments & what motivates them. When doing this, consider that your new firm is selling B2B, so your team will need to evaluate your prospective client’s customers and how your AR solution will help your clients better serve their customers. Also, consider the buying approach for the prospective segments.

• Discuss which of the segment(s) your new firm will target and why.

• Finally, discuss which marketing intelligence / market research sources you’ll use to test & support your segmentation.

• Email me your notes following class, rzinn@temple.edu.

Let’s debrief

● What challenges did you face while completing this activity?

● Did you find a need for further information? How will your team gather that information?

● What did you learn about segmentation & targeting?

● Why is effective segmentation & targeting a critical component of marketing strategy?

Consumer Behavior & Value

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The purchase funnel outlines distinct stages in the buying process.

Multiple people participate in the purchase decision (DMU).

Who influences the family vacation destination?

In B2B, sell to the interests of each person in the organizational buying center (OBC).

Customers have distinct questions at each stage.

Need arises (trigger)

Search options

Evaluate alternatives

Develop a choice set

Pre-Purchase

Where to buy

When to buy

How to pay

Purchase

Evaluate satisfaction

Share experience with friends, family, & beyond

Decide whether to repurchase

Post-Purchase

What consumers truly value, however, can be difficult to pin down and psychologically complicated.

- Elements of Value Reading

4 categories of value

Functional Emotional Life Changing Social Impact

Finding Value:A Nonprofit Example

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An Example: An Internationally-Recognized Children’s HospitalStrategic Issue: Can we better connect with individual donors through social media to increase overall giving & donor retention?

Context: The hospital generates multi-million dollar gifts from high net worth donors. It effectively administers campaigns for capital projects. However, it sees an opportunity to better capture donors who connect through events, fundraisers sponsored by individuals, and other non-capital projects.

Ashleigh ChaseAge: 28Education: CollegeProfession: TeacherIncome: $35,000Interests: Education, Children’s HealthInvolvement with HOSPITAL: Participates in Daisy Days, but does not giveComments: Little expendable income, involved with brands and causes online.

Sara MartinAge: 34Education: College, CertificationProfession: NurseIncome: $65,000Interests: Children’s Health, Healthy Lifestyle, ExerciseInvolvement with HOSPITAL: Ran at a 5k eventComments: Wants something in return for donating (5k, gala, etc.)

Source: [Hospital] Facebook Insights

Source: “Where Men and Women Give,” Women’s Philanthropy Institute

CUSTOMER JOURNEY CASE STUDY:

Project Activity: What do your customers value?

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Project Activity: What do my customers value?

Consider the potential market for your new firm’s AI application. Brainstorm potential market segments, using the content from today’s lecture & the “Segmentation & Targeting” reading.

• Define the OBC for your target segment. Who will help make decisions?

• Outline a few notes on your target customers’ customers. Who are the customers? How does your client/customer provide value to them?

• How can your AI solution help your prospective client provide more, better, faster value to their customers?

• Use the 30 elements outlined in the Elements of Value to identify elements that most apply to your target segment.

• NOTE: All work completed in class should be substantiated & tested through research before presenting your final project.