Sharpening the Focus:
Target Marketing
Strategies and Customer
Relationship Management
Chapter Objectives
• need for market segmentation
• dimensions to segment B2C & B2B
markets
• evaluating & selecting market segments
• targeting strategy
• positioning strategy
• customer relationship management
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Target Marketing Strategy:
Selecting and Entering a Market
• Target marketing strategy:
• dividing the total market
 into different segments
 based on customer characteristics,
• selecting one or more segments,
 developing products
 to meet those segments’ needs.
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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.
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Figure 7.1: Steps in the Target
Marketing Process
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Step 1: Segmentation
• The process of
• dividing a larger market
• into smaller pieces
• based on
• One/more meaningful
• shared characteristics
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segmentation
Step one
Step 1: Segmentation
• Segmentation variables:
• dimensions that divide the total market
• into fairly homogeneous groups,
• each with different needs and preferences
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Segmenting Consumer Markets
• Segmentation
variables can slice
up the market
VANS.COM
Demographic,
psychological,
behavioral differences
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Segmenting by Demographics
Age: 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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Segmenting by Demographics Gender
• Many products appeal to
one sex or the other
• Metrosexual: a man
who is heterosexual,
sensitive, educated, and
an urban dweller in
touch with his feminine
side
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Segmenting by Demographics
• Family Structure
• Income
• Social Class
• Race and Ethnicity
VOSS WATER
African Americans
Asian Americans
Hispanic Americans
MINORITEAM ON ADULT SWIM
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Segmenting by Geography
• Geodemography: combines geography
with demographics
•
•
•
•
Geocoding:
Customizes Web advertising
so people who log on in different places
see ad banners for local businesses
CLARITAS.COM
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Segmenting by Psychographics
• Psychographics:
• The use of psychological, sociological and
anthropological factors to construct market
segments.
• AIOs: Psychographics segments consumers
in terms of shared activities, interests, and
opinions.
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Figure 7.2:
VALS
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Segmenting by Behavior
• 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
• Heavy, medium, and light users and
nonusers of a product
AMAZON.COM
• Usage occasions
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Segmenting B2B Markets
• By organizational demographics
• By production technology used
• By whether customer is a
user/nonuser of product
• By North American Industry
Classification System (NAICS)
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TARGETING
STEP TWO
Step 2: Targeting
• Marketers evaluate the attractiveness
 of each potential segment
• decide in which they will invest
resources
 to try to turn them into customers
• Target market:
 customer group(s) selected
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Evaluation of Market Segments
• A viable target segment should:
members with similar product needs/wants
Be measurable
• in size and purchasing power
Be large enough to be profitable
Be reachable by marketing communications
needs marketer can adequately serve
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Developing Segment Profiles
•
•
•
•
•
•
describe “typical” customer in segment.
Segment profile might include:
demographics,
location,
lifestyle,
product-usage frequency.
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Figure 7.3:
Choosing a Target Marketing Strategy
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Choosing a Targeting Strategy
•
•
•
•
Undifferentiated targeting:
appeals to broad spectrum of people
Differentiated targeting:
develop one/more products for
 each customer groups
• Concentrated targeting:
• offering one/more products
 to a single segment
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Choosing a Targeting Strategy
• Custom marketing:
 tailoring specific products
 to individual customers
• Mass customization:
 modifying a basic good or service
 to meet the needs of an individual
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Step 3: Positioning
• marketing strategy
• aimed at influencing
• how a particular market segment
 perceives a good/service
• in comparison to the competition
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Steps in Developing a
Positioning Strategy
1. Analyze competitors’ positions.
2. Offer a good/service with
competitive advantage.
3. Match elements of marketing
mix
1. to the selected segment.
4. Evaluate target market’s
responses
1. and modify strategies if needed.
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Positioning (cont’d)
•
•
•
•
•
Repositioning:
redoing a product’s position
to respond to marketplace changes.
Retro brand:
a revival of a once-popular brand
 to experience a popular comeback,
 often by riding a wave of nostalgia.
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The Brand Personality
• A distinctive image
 captures brand’s character and benefits
• Perceptual map:
 where products/brands are “located”
 in consumers’ minds
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Figure 7.4: Perceptual Map
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Customer Relationship Management
(CRM)
• building long-term relationships
 with customers
• to keep them satisfied and coming back.
•
• CRM facilitates one-to-one marketing.
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Four Steps in One-to-One Marketing
• Identify customers;
 know them in as much detail as possible.
• Differentiate customers
 by their needs and value to the company.
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Four Steps in One-to-One Marketing
• Interact with customers;
find ways to improve interaction.
• Customize products
you offer each customer.
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CRM: A New Perspective
on an Old Problem
• CRM systems
• uses computers, software, databases, and
the Internet
• captures information at each touch point
 between customers and companies,
• to allow better customer care.
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CRM: A New Perspective
on an Old Problem
•
•
•
•
customers are relationship partners,
with each partner learning
from the other
every time they interact.
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Characteristics of CRM
• Share of customer
 (vs. share of market)
• Lifetime value of the customer
• Customer equity
• Focus on high-value customers
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The End
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Discussion
• Do you see any problems with a firm’s focusing
on share of market rather than share of
customer?
37
Real People, Real Choices
• Reebok (Que Gaskins)
• How to capture the pulse of youth culture
in the long run?
 Option 1: mimic Nike’s moves with Michael Jordan
 Option 2: build on Reebok’s success with Iverson,
while separating the brand from other performance
sneaker brands like Nike
 Option 3: maintain the Iverson emphasis and increase
efforts to build credibility as a shoe for soccer and
track
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Real People, Real Choices
• Reebok (Que Gaskins)
• Que chose option 2: build on
Reebok’s success with Iverson,
while separating the brand from
other performance sneaker
brands like Nike
 Reebok created a new category called
Rbk that fuses sports with youth
lifestyle and entertainment
RBK.COM
Reebok Video
39
Marketing Plan Exercise
• Visit the Web site for a company that
manufactures products you like and are
familiar with.
• Select one product and answer the
following:
 What market segmentation approaches are most
relevant for the product?
 Describe the top three target markets for the product.
What makes them so attractive?
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Marketing Plan Exercise (cont’d)
Write a positioning statement of a few sentences
for the product. Start with “Product X is positioned
as…”
How could CRM help the company successfully
target and position the product?
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Marketing in Action Case:
You Make the Call
1. What is the decision facing Oracle?
2. What factors are important in
understanding this decision situation?
3. What are the alternatives?
4. What decision(s) do you recommend?
5. What are some ways to implement your
recommendation?
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Keeping It Real: Fast Forward to Next
Class Decision Time at Black & Decker
• Meet Eleni Rossides, a senior manager in
the Black & Decker Consumer Group.
• ScumBuster users had recommended
product improvements.
• The decision: What changes, if any, to
make in the ScumBuster.
43
Individual Activity
• Pick a store at
which you shop
frequently…
 If the store were a
person, how would
describe its
personality?
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Group Activity
• You’re account executives for a marketing
consulting firm, and your newest client is a
university – your university.
• You’ve been asked to develop a positioning
strategy for the university. Develop an outline of
your ideas, including :




Who are your competitors?
What are your competitors’ positions?
What target markets are most attractive to you?
How will you position the university for those segments relative
to the competition?
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Group Activity
Your company is planning to
enter the consumer market
for videogames. You’ve
considered mass-marketing,
concentrated marketing,
differentiated marketing, and
custom marketing strategies.
Pick a strategy for your firm. Explain
why you chose it and how you will
implement it.
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Discussion
• Critics of marketing suggest that market
segmentation and target marketing lead to
an unnecessary increase in product
choices that wastes valuable resources.
 Are the results of segmentation and target marketing
harmful or beneficial to society as a whole?
 Should firms be concerned about these criticisms?
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Discussion
• Alcohol and tobacco-product manufacturers
have been criticized for targeting unwholesome
products to certain segments of the market – the
young, the aged, ethnic minorities, the disabled,
and others.
 Do you view this as a problem?
 Should a firm use different criteria in targeting such groups?
 Should the government oversee and control such marketing
activities?
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Discussion
• How large should a segment be?
• How do you think a firm should determine
whether a segment is profitable?
• Have technological advances made it possible
for smaller segments to be profitable?
• Do firms have a moral or ethical obligation to
develop products for small, unprofitable
segments?
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