1. Ch. 7 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
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
Also known as STP (segmentation, targeting, and positioning)

2. Steps in the Target Marketing Process: STP

3. Goals of Segmentation Why? What makes a good segmentation outcome?
Effectiveness
Efficiency
Better meets consumer needs
What makes a good segmentation outcome?
p. 213, “Without real differences in consumer needs, firms might as well use a mass-marketing strategy.”
Differentiate groups based on what and why they buy
Exercise: Bicycles

4. Steps in the Target Marketing Process Step 1: Segmentation
The process of dividing a larger market into smaller pieces based on one or more meaningful shared characteristics
Segmentation variables (“bases”):
Dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences
Segmentation variables include:
Demographics—size, age, gender, ethnic group, income, education, occupation, family structure
Psychographics—psychological, values and lifestyles, and AIO factors
Behavior-based variables – usage rate, usage occasion, product benefits

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

6. Segmenting by Demographics: Age: Generational Marketing
Children
Tweens
Teens
Generation Y: born between 1977 – ? (also referred to as Millennials)
Generation X: born between
Baby Boomers: born between
Older consumers 6

7. Segmenting by Demographics: Gender & Other
Many products appeal solely or more to one gender than the other
Family Structure
Income
Social Class
Race and Ethnicity
African Americans
Asian Americans
Hispanic Americans 7

8. Segmenting by Geography
Geodemography:
combines Geography with demographics (*and psychographics*)
Claritas, PRIZM, etc.
Example: Children’s World prospect targeting
Geocoding:
Customizes web advertising so people who log on in different places see ad banners for local businesses 8 8

9. Missoula, MT 59802's Most common PRIZM NE Segments are:
47 City Startups
56 Crossroads Villagers
53 Mobility Blues
44 New Beginnings
60 Park Bench Seniors
Potential Issues: Mistargeting
Karen’s experience in Denver

10. Segmenting by Psychographics
Segments formed on the basis of values and lifestyles (VALs) and shared activities, interests, and opinions (AIOs). 10 10

11. Segmenting by Behavior
Segments consumers based on how they act toward, feel about, or use a specific product category
80/20 rule: 20 percent of purchasers account for 80 percent of a product’s sales
Heavy, medium, light users & nonusers of a product 11 11

12. Segmenting by Behavior (Cont.)
User status:
Heavy, medium, and light users and nonusers of a product
Usage occasions
Segments on the basis of different occasions when customers buy or use various products
Shoes, watches
Benefit segmentation (not explicit in text)
Segments on the basis of the specific benefits different customers desire when purchasing in a product category:
OJ example p. 211: added vitamins/calcium vs. pulp vs. no sugar

13. Segmenting Business-to- Business Markets
North American Industry Classification System (NAICS)
Issues with accuracy
Inaccuracy example: candles categorized as part of petroleum, oil, and gas industry 13 13

14. Steps in the Target Marketing Process Step 2: Targeting
Marketers evaluate the attractiveness of each potential segment and decide in which segment(s) they will invest resources toward om attempt to convert them into customers
The customer group(s) selected are referred to as the target market

15. Developing Segment Profiles
A profile is a description of the “typical” customer in a segment.
Might include information on demographics, location, lifestyle, and product-usage frequency
Some creatives (creative team in ad agency or internal agency) create a “person” that represents the target market and write ads as if writing to that person specifically 15 15

16. Evaluation of Market Segments
A viable target segment should:
Have members with similar product needs and wants
Be measurable in size and purchasing power
Be large enough to be profitable
Be reachable by marketing communications
Be one that the marketer’s company has the strengths and capabilities to adequately serve well
Also consider:
* growth rates by segment
* competition by segment

17. Select a Target Marketing Strategy

18. Choosing a Targeting Strategy
Undifferentiated targeting strategy
Appealing to the total market without regard to specific segments
“Mass marketing”
Commodities, often non-profit / “social” marketing causes, limited marketing budget, lack or knowledge
Differentiated targeting strategy
Developing one or more products for each of several customer groups
Example: Honda (or any major automaker)
Developing different advertising strategies (message/media) for different customer groups (but offering the same product)
Example: Johnson’s Baby Shampoo

19. Choosing a Targeting Strategy
Concentrated (“niche) target marketing strategy
Offering one or more products to a single segment
Example: niche automaker like Rolls Royce or Ferrari
Custom marketing strategy
Tailoring specific products to individual customers
Example: custom tailored suits
Common in personal and professional services
Example: dentistry, website design
Mass customization
Modifying a basic good or service that is “mass produced” to
meet the specific needs of an individual
Example: Vistaprint
Students may ask whether or not services can be mass-customized. The answer is yes, and a visit to the Capital One Credit Lab may help to prove the point ( Customers can customize their credit level and interest rate, reward program, and the picture on the card itself.

20. Step 3: Positioning What is positioning? Brand personality
Developing the (a) image of the product (b) in the mind of the customer (c) relative to competition on (d) important attributes (either objective or subjective)
Brand personality
A distinctive image that captures the brand’s character and benefits
Repositioning
Create a new position to respond to market changes
Example: Revitaling 40 year old brand, Old Spice, with the “Smell Like a Man” campaign 20 20

21. Steps in Developing a Positioning Strategy
Analyze competitors’ positions
Offer a good or service with a competitive advantage (also called point of differentiation)
Finalize the marketing mix by matching mix elements to the selected segment
Evaluate target market’s responses and modify strategies as needed
Positioning is a strategic level decision that is critical in directing the marketing communication efforts for the brand. Competitive advantages ideally should be sustainable, but rarely are for the long haul. In fact, lack of sustainability is the biggest difficulty faced by those who position themselves as the “low cost” alternative.
Using competitive advantages, or “points of difference” in the positioning strategy will only be effective if the competitive advantage chosen is meaningful enough to the consumer to influence his or her brand selection. However, consumers can surprise marketers with what they find to be meaningful. Apple’s sales soared when they began offering their computers in different colors—a feature totally unrelated to the functional benefits of the brand, but one that helped the users express their individuality and personality.
In many product categories, it simply isn’t possible to develop a truly meaningful “real” competitive advantage, based on actual benefit-related differences. When products are fairly homogenous (cola soft drinks), marketers turn to image considerations and use these as the basis for positioning.
In terms of finalizing the marketing mix, there are several implementation issues. Advertising slogans offer one method of expressing the brand’s position succinctly. Examples: Bounty is the “Quicker, Picker-Upper”; L’Oreal “Costs More, But I’m Worth It.” Distribution decisions can also influence perceptions of the brand’s quality or other attributes. (It would be inconsistent with the desired position to distribute a luxury good through mass merchandise stores.) And of course price and quality perceptions are strongly intertwined.

22. Positioning Tool: Perceptual Map*
A research technique marketers use to identify where products/brands are “located” in consumers’ minds (i.e. how they are perceived)
Statistical method:
multi-dimensional scaling
pair-wise similarity judgments
A 2-dimensional “product” space
the dimensions are attributes of the product
objective or subjective
products are the evoked set 22

23. Example of Perceptual Map - 123

24. Example of Perceptual Map - 224

25. Four Steps in One-to-One Marketing
Identify customers and get to know them in as much detail as possible
Differentiate customers by their needs and value to the company
Interact with customers; find ways to improve cost efficiency and the effectiveness of the interaction
Customize some aspect of the products you offer each customer

26. CRM: A New Perspective on an Old Problem
CRM systems use computers, software, databases, and the Internet to capture information at each touchpoint
Touchpoints are any direct interface between customers and a company (online, by phone, in person, etc.)

27. Characteristics of CRM
Share of customer (vs. share of market): focus on retention and loyalty (vs. acquisition of new customers)
7 to 10 times more expensive to acquire a new customer and retain an existing one
Lifetime value of the customer – aka customer equity
Focus on high-value customers
tiers/categories
Personalize/customize
one-to-one marketing 27