©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-0 Chapter 8 Sharpening The Focus: Target Marketing Strategies and Customer Relationship Management

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-1 Chapter Objectives_1  Understand the need for market segmentation in today’s business environment  Know the different dimensions marketers use to segment consumer and industrial markets  Explain how marketers evaluate and select potential market segments

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-2 Chapter Objectives _2  Explain how marketers develop a targeting strategy  Understand how a firm develops and implements a positioning strategy  Know how marketers practice customer relationship management to increase long-term success and profits

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-3 Segmentation  Segmentation is the process of dividing a larger market into smaller pieces based on one or more meaningful, shared characteristics  Segmentation variables are used to divide the market into smaller slices

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-4 Dimensions for Segmenting Consumer Markets  Demographics  Psychographics  Behavior

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-5 Demographic Dimensions  Age  Gender  Family structure  Income and social class  Race and ethnicity  Geography

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-6 Segmenting by Psychographics  Attitudes, interests, and opinions  Segments include demographic information such as age and income, but also includes richer descriptions  Some organizations develop their own psychographic segments for their consumers, but others utilize national systems (VALS by SRI International)

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-7 Segmenting by Behavior  Behavioral segmentation slices consumers on the basis of how they act toward, feel about, or use a product –Users versus nonusers –Heavy, moderate, light users –Usage occasions

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-8 Dimensions for Segmenting Industrial Markets  Organizational demographics –firm size –number of facilities –domestic or multi-national –type of business –production technology utilized  NAICS characteristics

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-9 Targeting  Evaluating Market Segments  Developing Segment Profiles  Choosing a Targeting Strategy

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-10 Evaluating Market Segments  Are members similar to each other but different from other segments?  Can marketers measure the segment?  Is the segment large enough to be profitable?  Can marketing communications reach the segment?  Can the marketer serve the segment’s needs?

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-11 Developing Segment Profiles  A profile is a description of the typical customer in that segment –RJ Reynolds’ Dakota Profile of the “Virile Female”: Her favorite pastimes are cruising, partying, going to hot-rod shows and tractor pulls with her boyfriend, and watching evening soap operas. Her chief aspiration is to get married in her early twenties.”

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-12 Choosing a Targeting Strategy  Undifferentiated Marketing  Differentiated Marketing  Concentrated Marketing  Customized Marketing

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-13 Undifferentiated Marketing  Appeals to a broad spectrum of people  Efficient due to economies of scale  Effective when most consumers have similar needs  Example: Walmart

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-14 Differentiated Marketing  Develops one or more products for each of several customer groups with different product needs  Appropriate when it is possible to identify one or more segments with distinct needs for different types of products  Example: L’Oreal (Elseve, L’Oreal, Lancome)

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-15 Concentrated Marketing  Entails focusing efforts on offering one or more products to a single segment  Useful for smaller firms that do not have the resources to serve all markets  Example: Hard Candy

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-16 Customized Marketing  Segments are so precisely defined that products are offered to exactly meet the needs of each individual –Example:Levi’s Original Spin (custom) jeans, hair stylists

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-17 Mass Customization  An approach, related to customized marketing, in which a company modifies a basic good to meet the needs of an individual –Example: Gateway computers, Proctor & Gamble’s products at Reflect.com

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-18 Positioning  Developing a marketing strategy aimed at influencing how a particular market segment perceives a product in comparison to the competition

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-19 The Brand Personality  A Positioning Strategy attempts to create a brand personality for a product - a distinctive image that captures its character and benefits  How do marketers determine where their products actually stand in the minds of consumers? –Perceptual mapping

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-20 Customer Relationship Management  A CRM strategy allows a company to identify its best customers, stay on top of their needs, and increase their satisfaction  CRM is about communicating with customers one on one  CRM views customers as partners

©2003 Prentice Hall, IncMarketing: Real People, Real Choices 3rd edition8-21 Characteristics of CRM  Share of Customer  Lifetime Value of the Customer  A Greater Focus on High-Value Customers