Chapter Four The Fundamental Marcom Decisions: Targeting, Positioning, Objective Setting, and Budgeting  2007 Thomson South-Western

Chapter Four Objectives Discuss the importance of targeting marketing communications to specific consumer groups and realize that the targeting decision is the initial and most fundamental of all marcom decisions. Understand the role of behaviorgraphics in targeting consumer groups.

Chapter Four Objectives Describe the nature of psychographic targeting and the VALS system. Appreciate major demographic developments such as changes in the age structure of the population and ethnic population growth.

Chapter Four Objectives Explain the meaning of geodemographics and understand the role for this form of targeting. Recognize that any single characteristic of consumers—whether their age, ethnicity, or income level—likely is not a sufficient basis alone for sophisticated marcom targeting.

Targeting Customers and Prospects Targeting specific audiences can be considered the starting point for all marcom decisions. Targeting allows marketing communicators to more precisely deliver their messages and prevent wasted coverage to people falling outside the targeted market.

Consumer Characteristics Behaviorgraphics Psychographics Demographics Geodemographics Characteristics that singularly or in combination influence what people consume and how they respond to marketing communications.

Classification of Four General Targeting Characteristics

Behaviorgraphic Targeting Based on how people behave (with respect to a particular product category or class of related products) – e.g. past purchase behavior; online search activity; etc. The best predictor of one’s future behavior is his or her past behavior.

Online Behavioral Targeting “Audience Management Systems” track Internet users’ surfing behavior in order to target them with specific advertisements. Issues: Privacy Concerns

Behavioral Targeting for Tambrands Basis: Resistance to using tampons Regular users: US, UK and Australia – well informed about tampons Light users: France, Israel and South Africa – some women concerned that tampons result in loss of virginity Non-users: Brazil, China and Russia – virginity concerns and very little knowledge and experience using tampons

Psychographic Targeting Captures aspects of consumers’ psychological make-ups and lifestyles including their attitudes, values, and motivations as they relate to buying behavior in a particular product category.

Psychographic Segments Porsche example Top Guns (27%): Ambition, power, control Elitists (24%): Old money, car is just a car Proud Patrons (23%): Car is reward for hard work Bon Vivants (17%): Car is for excitement, adventure Fantasists (9%): Car is form of escape

Psychographic Segmentation The Euroconsumer: Successful Idealist – Comprises from 5% to 20% of the population., consists of persons who have achieved professional and material success while maintaining commitment to abstract or socially responsible ideals Affluent Materialist – Status-conscious ‘up-and-comers’ – many of whom are business professionals – use conspicuous consumption to communicate their success to others

Psychographic Segmentation The Euroconsumer: Comfortable Belongers – Comprising from 25% to 50% of a country’s population, they are conservative and most comfortable with the familiar. They are content with the comfort of home, family, friends, and community Disaffected Survivors – Lacking power and affluence, this segment harbors little hope for upward mobility and tends to be either resentful or resigned. They are concentrated in high-crime urban inner city neighborhoods. Despite a lack of social status, their attitudes nevertheless tend to affect the rest of society

Illustrative Statements Used in a Banking-Related Psychographic Study

Four Psychographic Segments of Banking Behaviors “Worried Traditionalists” “Bank Loyalists” Ask the Class: How can a regional bank communicate and market differently to each group based on their psychographic profile? “Secured Investors” “Thrifty Bankers”

Yankelovich MindBase Segments: 8 general segments and 32 specific subsegments

The VALS™ Framework

Motivated by ideals, achievement, and self-expression VALS™ Innovators Motivated by ideals, achievement, and self-expression Possess both high income and self-esteem Change leaders most receptive to new ideas and technologies. Active consumers: buy upscale products and services.

VALS™ Thinkers Motivated by Ideals Mature, satisfied, comfortable, and reflective. Well-educated and informed. Moderate respect for the status quo, but will consider new ideas. Practical consumers: look for durability, function, and value.

VALS™ Believers Motivated by Ideals Conservative, conventional people with concrete beliefs. Deeply rooted moral codes. Follow established routines organized around home and community. Favor American products and are loyal customers.

Motivated by their desire for achievement VALS™ Achievers Motivated by their desire for achievement Goal-oriented lifestyles and deep commitment to career and family. Live conventional lives, respect authority and the status quo. Image is important and they value established, prestige products that demonstrate their success.

Motivated by achievement VALS™ Strivers Motivated by achievement Trendy and fun loving. Concerned about the opinions of others. Money defines success. Active consumers who are as impulsive as their financial circumstances will allow.

Motivated by self-expression VALS™ Experiencers Motivated by self-expression Young, enthusiastic, compulsive consumers Seek variety, excitement, and new opportunities. Avid consumers who spend a comparatively high proportion of their income on fashion, entertainment, and socializing.

Motivated by self-expression VALS™ Makers Motivated by self-expression Express themselves and experience the world by working on it. Practical people who have constructive skills and value self sufficiency. Buy basic products and prefer value to luxury.

No strong primary motivation VALS™ Survivors No strong primary motivation Few resources Primarily concerned with safety and security Cautious consumers Loyal to favorite brands, especially if they can purchase at a discount.

What VALS type are you? Take the survey at: http://www.sric-bi.com/VALS/presurvey.shtml Which VALS type should the Rock Hill Galleria target? Which Yankelovich mindbase segment should the Rock Hill galleria target?

Geodemographic Targeting Based on the premise that consumers who reside within geographic clusters such as zip codes or neighborhoods also share demographic and lifestyle similarities.

Geodemographic Targeting Several companies delineate geographical areas into common groups including: CACI(ACORN) Donnelly Marketing (Cluster Plus) National Decision Systems (Vision) Experian (MOSAIC) Claritas (PRIZM ) NE

Claritas PRIZMNE Suburban Pioneers Bohemian Mix Big Fish, Small Pond PRIZM=Potential Rating Index by Zip Markets and NE=New Evolution of their original system. (Total 66 clusters) Suburban Pioneers Bohemian Mix White Picket Fences Big Fish, Small Pond

Claritas PRIZMNE Suburban Pioneers Bohemian Mix White Picket Fences : a collection of young urbanites who represent the nation’s most liberal lifestyles. Blend of young singles and couples, students and professionals and many racial backgrounds. disproportionately quick to attend the latest movie, frequent the newest nightclub or adopt the latest laptop. White Picket Fences : represents those households at the middle of the U.S. socioeconomic ladder. Predominantly young, middle-class, and married with children. Suburban Pioneers : eclectic lifestyles, including a mix of young singles, recently divorced and single parents who have moved to older, inner-ring suburbs.

You are where you live What PRIZM cluster do you belong to? http://www.claritas.com/MyBestSegments/Default.jsp?ID=20

Demographic Targeting Marcom practitioners are mainly concerned with: the age structure of the population the changing household composition of the U.S. ethnic population developments

World Population Expected to grow to approximately 8 billion people by the year 2025 and 9 billion by 2050. Both China and India’s populations dramatically exceed that of the United States.

World’s 25 Largest Countries as of 2004

Aspects of the U.S. Population 293 million estimated population Ancestral diversity, with just over 7% referring to themselves as “Americans,” up from 5% in 1990. Relentless aging of the population

Largest Ancestral Group of U.S. Residents

The Changing Age Structure The U.S. population is aging relentlessly. Median Age: 28 30 33 36 1970 1980 1990 2000

Effects of the Baby Boom The original baby boomers created a mini baby boom as they reached childbearing age. Due to a low birthrate from the mid 1960s through the 1970s, there are now fewer young adults (ages 20 to 34) than in prior generations. The number of middle-agers (35-54) has increased dramatically, totaling 85 million in 2005.

Marketing to Children and Teenagers Group of Americans aged 19 and under has fallen dramatically from 40 percent of the population in 1965 to 28 percent of the population in 2005. 80 million occupants aged 19 and younger. “Kids” defined as ages 4 to 12. Spending for this age group totals more than $24 billion per year.

Preschoolers Preschool age children, age 5 or younger More babies were born in the U.S. in 1990 (4.2 million) than at any time since the baby boom of 1957. Toys, furniture items, and other products and services appealing to the family have increased substantially in recent years.

Demographic Targeting: Marketing to Preschoolers

Elementary School Age Children Ages 6 to 11 Children directly influence parents’ choice of clothing and toys, and even brands of toothpaste and food products.

Tweens Children between the ages of 8 and 12: a category defined as not quite kids and not yet teenagers. Average annual income of $22.68, or $23 billion annually.

Teenagers Over 25 million 13 to 19-year olds in the United States Generation Y 1982 to 1994: in 2005, 50 million Americans between 11 and 23. Group spends over $150 billion annually. Highly conformist, narcissistic, and fickle consumers. It is said that teenagers don’t like being “marketed to.” Use the Internet heavily.

Generation Y / Millenials / Net Generation About 70 million in numbers Age not yet 30 – those generally born between 1977 and 2002 (Gen X – 1965 – 1976) Some put them as age 16 – 27 (1978 – 1989) High performance and high maintenance Speak your mind philosophy – question everything – willing and unafraid to challenge the status quo Very independent and tech-savvy

Generation Y / Millenials / Net Generation Possess financial smarts Work-Life balance is not just a buzz word Change, change, change – skeptical of employee loyalty – multi taskers – don’t like to stay too long on one assignment High self-worth Cool brands – Mudd, Vitro, Cement. Paris Blues Uncool brands – Levis, Nike, Converse, Pepsi

Generation Y / Millenials / Net Generation One in three is not a Caucasian One in four lives in a single parent household Three in four have working mothers Very practical / pragmatic group “stumble on to the brand in unexpected places” Strong sense of entitlement Want the best and feel they deserve it Ambitious with high expectations

Generation Y / Millenials / Net Generation Gen Yers respond to humor, irony, and the (apparently) unvarnished truth. Sprite has scored with ads that parody celebrity endorsers and carry the tagline ''Image is nothing. Obey your thirst.'' J.C. Penney & Co.'s (JCP) hugely successful Arizona Jeans brand has a new campaign showing teens mocking ads that attempt to speak their language. The tagline? ''Just show me the jeans.''

Demographic Targeting: Marketing to Teenagers

Young Adults 2005: over 50 million Americans in the age category from 24 to 40. Generation X defined as people born between 1965 and 1981. Group also referred to as baby busters and twentysomethings. Often defined by clichés like slackers, cynics, whiners, and hopeless.

Young Adults Drifters Playboys (16%) (19%) Yup & Comers (28%) Bystanders (37%) Playboys (19%) Drifters (16%) Yup & Comers (28%) Yup & Comers: The highest levels of education and income, focus on intangible rewards and confident about themselves Bystanders: Predominantly female African-Americans and Hispanics, disposable income is low but love fashion and shopping Playboys: “Pleasure before duty” lifestyle, self-absorbed, fun-loving and impulsive Drifters: Frustrated with their lives, the least educated, and choose brands that offer a sense of belonging and self-esteem

Middle-Aged Middle-Aged 85 million Americans between the ages of 35 and 54 Baby Boomers: Born between 1946 and 1964: affluent category targeted for luxury goods and obsessed with youth. Do not represent a monolithic group for marketing purposes.

Demographic Targeting: Marketing to Middle Aged Consumers

Mature Consumers (Seniors) In 2005, approximately 66 million citizens aged 55 or older, representing about 23% of the U.S. population. Wealthier and more willing to spend than ever before—control nearly 70% of the net worth of all U.S. households. People aged 65 and older have the highest discretionary income of any age group. Spend more time (700 minutes per month) online than any other demographic.

Mature Lifestyle Groups 13% 38% 15% 34%

The Ever-Changing American Household The average American household is shrinking in size and changing in character. Traditional married couple with children families represent less than one-fourth of all households Singles are a viable market.

Ethnic Population Developments % of population as of 2000

African-Americans African Americans: 40.5 million as of 2010, or 13% of the U.S. population African Americans are attractive consumers because: The average age of black Americans is considerably younger than that for Whites African-Americans are geographically concentrated, with ¾ of all blacks living in just 16 states African-Americans tend to purchase prestige and name-brand products in greater proportion than do whites.

Hispanic Americans (Latinos) Grew from 4 million in 1950 to an expected population of nearly 48 million in 2010. Hispanic Americans: 25% of the U.S. population by 2010, currently nearly 40 million U.S. residents. A key in designing effective advertising for Hispanics is to advertise to them in their dominant language. Interethnic differences in Cubans, Mexicans, and Puerto Ricans as well as differences within each grouping mean there is no one market.

Asian-Americans As of 2000, approximately 10.7 million Asians in the U.S. By 2010, the number will increase to 14 million and more than 33 million by 2050. Asian-Americans on average are better educated, have higher incomes, and hold more prestigious jobs than any other segment of society. No single market. Some success with customizing marketing programs to Asian values.