MARKETING
Real People, Real Choices
Fourth Edition
CHAPTER 7
Sharpening the Focus:
Target Marketing Strategies and
Customer Relationship Management
Michael R. Solomon
Greg W. Marshall
Elnora W. Stuart
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
7-2
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
7-3
Step 1: 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
7-4
Segmenting Consumer Markets
• Demographics
• Psychographics
• Behavior
7-5
Demographic Dimensions
•
•
•
•
•
•
Age
Gender
Family structure
Income and social class
Race and ethnicity
Geography
7-6
Age
•
•
•
•
•
Children
Teens
Generation X
Baby Boomers
Elderly
7-7
The Hispanic Market Segment
•
•
•
•
•
Brand loyalty
Highly concentrated by national origin
Youthful (median age is 23.6)
3.5 people in average household
Receptive to relationship building
7-8
Psychographics
• Segments markets in terms of shared
attitudes, interests, and opinions
• Segments include demographic
information such as age and income,
but also includes richer descriptions
• Proprietary segments
• National systems (VALS)
7-9
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
7-10
Segmenting Industrial Markets
• Organizational demographics
– firm size
– number of facilities
– domestic or multinational
– type of business
– production technology utilized
• NAICS characteristics
7-11
Step 2: Targeting
• Evaluating Market Segments
• Developing Segment Profiles
• Choosing a Targeting Strategy
7-12
Evaluating Market Segments
• A viable target segment should satisfy these
requirements:
– Are members of the segment 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?
7-13
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.”
7-14
Choosing a Targeting Strategy
•
•
•
•
Undifferentiated Marketing
Differentiated Marketing
Concentrated Marketing
Customized Marketing
7-15
Undifferentiated Marketing
• Appeals to a broad spectrum of people
• Efficient due to economies of scale
• Effective when most consumers have
similar needs
• Example: Wal-Mart
7-16
Differentiated Marketing
• Develops one or more products for each
of several customer groups with
different product needs
• Appropriate when consumers are
choosing among well-known brands
with distinctive images and it is possible
to identify one or more segments with
distinct needs for different types of
products
7-17
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
7-18
Customized Marketing
• Segments are so precisely defined that
products are offered to exactly meet the
needs of each individual
• Mass customization is a related
approach in which a company modifies
a basic good to meet the needs of an
individual
7-19
Developing a Positioning Strategy
• Analyze the competitors’ positions in the
marketplace
• Offer a product with a competitive
advantage
• Finalize the marketing mix
• Evaluate the target market’s response
so modifications to the positioning
strategy can be made (repositioning)
7-20
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
7-21
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
7-22
Characteristics of CRM
•
•
•
•
Share of Customer
Lifetime Value of the Customer
Customer Equity
A Greater Focus on High-Value
Customers
7-23
Issues for Discussion_1
• Are the results of segmentation and target
marketing harmful or beneficial to society as
a whole?
• How large should a segment be? Do firms
ever have an ethical obligation to develop
products for small, unprofitable segments?
• Some firms are criticized for targeting
unwholesome products to certain segments
like the elderly. What groups deserve special
concern? Should the government oversee
such marketing activities?
7-24
Issues for Discussion_2
• What problems might arise with
replacing earlier concepts such as
share of market with new concepts like
share of customer, lifetime value of the
customer, customer equity, and highvalue customers?
7-25