Target Marketing Process:
Linking Customer Needs to Marketing Action
Market segmentation links market needs to an
organization’s marketing program
Segmentation
• process of dividing a larger market into
smaller pieces based on one or more
meaningful, shared characteristics and that
will respond similarly to a marketing action
• Segmentation variables are used to divide the
market into smaller slices: demographics,
psychographics, behavior, etc.
Why Segment Markets?
– One Product and Multiple Market Segments
– Multiple Products and Multiple Market
Segments
– Segments of One: Mass Customization
– The Segmentation Trade Off: CRM versus
synergies
Demographic Dimensions
•
•
•
•
•
•
Age
Gender
Family structure
Income and social class
Race and ethnicity
Geography
Age
•
•
•
•
•
Children
Teens
Generation X, Y
Baby Boomers
Elderly
Psychographics
• Psychographic segments market in terms of shared
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)
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
Segmenting Industrial
Markets
• Organizational demographics
–
–
–
–
–
firm size
number of facilities
domestic or multi-national
type of business
production technology utilized
• NAICS characteristics
Criteria for Forming Segments
•
•
•
•
•
Potential for increased profit and ROI
Similarity of needs of potential buyers in a segment
Difference of needs of buyers among segments
Feasibility of a marketing action reaching segment
Simplicity and cost of assigning buyers to markets
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?
Targeting
• Evaluating Market Segments
• Developing Segment Profiles
• Choosing a Targeting Strategy
Targeting Strategies
•
•
•
•
Undifferentiated Marketing
Differentiated Marketing
Concentrated Marketing
Customized Marketing
Undifferentiated Marketing
• Appeals to a broad spectrum of people
• Efficient due to economies of scale
• Effective when most consumers have
similar needs
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
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
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
• Mass customization is a related approach 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 Form Products to Be Sold into Groups
Select Target Markets
– Criteria to Use in Picking the Target Segments
•
•
•
•
•
Market size
Expected growth
Competitive position
Cost of reaching the segment
Compatibility with objectives and resources
– Choose the Segments
Targeting
• Form Products to Be Sold into Groups
• Develop a Market-Product Grid and
Estimate Size of Markets
Market-product grid showing how different Reebok shoes
reach segments of customers with different needs
Comparison of various kinds of users and nonusers for Wendy’s,
Burger King, and McDonald’s restaurants
Positioning
• Developing a marketing strategy aimed at
influencing how a particular market
segment perceives a product in comparison
to the competition
• Strategy may also consider creating a
“barrier to entry” for competitors
Product Positioning
• Head-to-head
• Differentiation
Developing a Positioning
Statement
• 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)
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 Map
Customer Relationship Management
US companies spend about 75% of marketing $$
on existing customers
• 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
Characteristics of CRM
• Share of Customer
• Lifetime Value of the Customer
• A Greater Focus on High-Value Customers
Steps in the CRM Process
Identify customers
Differentiate customers
Interact with customers
Customize for your customers