1. Chapter 7
Sharpen the Focus: Target Marketing Strategies and Customer Relationship Management

2. Chapter Objectives Identify the steps in the target marketing process
Understand the need for market segmentation and the segmentation approaches available
Explain how marketers evaluate segments and how to choose a targeting strategy
Understand how marketers develop and implement a positioning strategy
Explain how marketers increase long-term success and profits by practicing customer relationship management
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

3. Real People, Real Choices: Decision Time at NutriSystem, Inc.
Which strategy should NutriSystem implement:
Option 1: Air testimonial ads from men who tried the 28-day weight loss program on cable
Option 2: Don’t enter the men’s market
Option 3: Develop a men’s program and launch it with a big splash on national television
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

4. 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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

5. 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:
Dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

6. Steps in the Target Marketing Process Step 1: Segmentation
Segmentation variables include:
Demographics—size, age, gender, ethnic group, income, education, occupation, family structure
Generational marketing
Psychographics—psychological, sociological, and anthropological factors
Behavioral characteristics
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7. Segmenting by Demographics: Age and Generational Marketing
Children
Teens
Tweens
Generation Y: born between 1977 and 1994
Generation X: born between 1965 and 1976
Baby boomers: born between 1946 and 1964
Older consumers
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8. Segmenting by Demographics: Gender
Many products appeal to one sex or the other
Metrosexual: A straight, urban male who is keenly interested in fashion, home design, gourmet cooking, and personal care
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

9. Segmenting by Demographics: Other Variables
Family life cycle:
Family needs change over time
Income
Strongly correlated with buying power
Social Class
Consumers buy according to image they wish to portray
Race and ethnicity
African Americans
Asian Americans
Hispanic Americans
Place of residence
Geographic regions
Geodemography
Geocoding
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10. Segmenting by Place of Residence
Geodemography:
Combines geography with demographics
Geocoding:
Customizes Web advertising so people who log on in different places see ad banners for local businesses
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

11. Segmenting by Psychographics
Psychographics: The use of psychological, sociological, and anthropological factors to construct market segments
Members of psychographic segments typically share activities, interests, and opinions, or AIOS
The VALS2 system segments U.S. consumers into eight unique groups
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

12. Segmenting by Behavior
Behavioral segmentation:
Segments consumers based on how they act toward, feel about, or use a product
80/20 rule:
20% of purchasers account for 80% of a product’s sales
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

13. Segmenting by Behavior
Long tail concept:
Firms CAN make money selling small amounts of items IF they sell enough different items
User status:
Heavy, medium, and light users and nonusers of a product
Usage occasions
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14. Segmenting B2B Markets
Segmentation helps B2B firms understand the needs and characteristics of potential customers
Firms can be segmented by:
Organizational demographics
Production technology used
Whether customer is a user/nonuser of product
North American Industry Classification System (NAICS)
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15. Steps in the Target Marketing Process Step 2: Targeting
A strategy in which marketers evaluate the attractiveness of each potential segment and decide in which segment they will invest resources to try to turn them into customers
The customer group(s) selected are referred to as the target market
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16. Evaluation of Market Segments
A viable target segment should:
Have members with similar product needs/wants
Be measurable in size and purchasing power
Be large enough to be profitable
Be reachable by marketing communications
Have needs the marketer can adequately serve
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

17. Developing Segment Profiles
After segments are identified, profiles or descriptions of the “typical” customer in a segment are developed
Segment profiles might include demographics, location, lifestyle, and product-usage characteristics
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

18. Choosing a Targeting Strategy
Undifferentiated targeting strategy
Appealing to a broad spectrum of people
Differentiated targeting strategy
Developing one or more products for each of several customer groups
Concentrated targeting strategy
Offering one or more products to a single segment
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19. Choosing a Targeting Strategy
Custom marketing strategy
Tailoring specific products to individual customers
Common in personal and professional services, and in industrial marketing
Mass customization
Modifying a basic good or service to meet the needs of an individual
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20. Steps in the Target Marketing Process Step 3: Positioning
Positioning: Developing a marketing strategy to influence how a particular market segment perceives a good/service in comparison to the competition
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21. Steps in Developing a Positioning Strategy
Analyze competitors’ positions
Offer a good or service with a competitive advantage
Finalize the marketing mix by matching mix elements to the selected segment
Evaluate target market’s responses and modify strategies as needed
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22. Modifying Positioning Strategies
Repositioning is commonly used to change the brand image
Requires redoing a product’s position in response to marketplace changes
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
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23. The Brand Personality
Brand personality: A distinctive image that captures the brand’s character and benefits
Perceptual map:
A technique used to visually describe where products/brands are “located” in consumers’ minds relative to competing brands
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24. Customer Relationship Management (CRM)
A systematic tracking of consumers’ preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individual’s unique wants and needs
CRM facilitates one-to-one marketing
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

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.)
CRM proposes that customers are relationship partners, with each partner learning from the other every time they interact
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

27. CRM vs. CEM Customer Relationship Management (CRM) Characteristics:
Share of customer (vs. share of market)
Lifetime value of the customer
Customer equity
Focus on high-value customers
Customer Experience Management (CEM):
Concept of holistically aligning a firm’s people, processes, systems and strategies to maximize the customer’s experience with all aspects of your firm and its brands
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

28. Real People, Real Choices: Decision Made at NutriSystems, Inc.
Tom chose option 1
No one felt that marketing weight loss to men would result in a successful campaign, so the firm minimized marketing costs by limiting the campaign to cable ads featuring testimonials
Implementation: Ads were run on Bravo, Discovery, FX, National Geographic, Outdoor Life, Spike TV, Sci-Fi, and Speed channels
Measuring success: Media acquisition cost and length of stay per customer
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

29. Keeping It Real: Fast-Forward to Next Class Decision Time at Bossa Nova Beverage Company
Meet Palo Hawken, co-founder and VP of research and innovation at Bossa Nova Beverage Company
Firm markets premium guarana flavored carbonated energy drinks
The decision to be made: How to fit the new açai juice into the current product line
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

30. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright © 2009 Pearson Education, Inc.  
Publishing as Prentice Hall
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall