Download Ch 7

Sharpen the Focus:
Target Marketing Strategies and
Customer Relationship Management
Chapter Seven
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Chapter Objectives
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Identify the steps in the target marketing
process
Understand the need for market
segmentation and the approaches available
to do it
Explain how marketers evaluate segments
and 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
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Real People, Real Choices:
Decision Time at PBS KIDS Sprout
 Which strategy should Jim select for
Sprout’s first ever consumer-oriented
brand campaign?
• Option 1: Target only Sprout viewers
with the marketing campaign
• Option 2: Produce a campaign that is
specifically designed for nonviewers
• Option 3: Target both those who view or
are aware of Sprout, as well as
nonviewers, with the same campaign
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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
 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
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Steps in the Target Marketing Process
Step 1: Segmentation
 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
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Steps in the Target Marketing Process
Step 1: Segmentation
 Segmentation variables include:
• Demographics—size, age, gender,
ethnic group, income, education,
occupation, and family structure
Generational
marketing
• Psychographics—psychological,
sociological, and anthropological
factors
• Behavioral characteristics
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Segmenting by Demographics:
Age and Generational Marketing
 Children
 Teens
 Tweens
 Generation Y:
born between
1977 and 1994
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 Generation X:
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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 straight, urban male who is keenly
interested in fashion, home design,
gourmet cooking, and personal care
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Segmenting by Demographics:
Other Variables
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Family life cycle:
• Family needs
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change over time
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Income:
• Strongly correlated
with buying power
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Social Class:
• Consumers buy
according to image
they wish to portray
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Race and ethnicity:
• African Americans
• Asian Americans
• Hispanic
Americans
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Place of residence:
• Geographic
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regions
Geodemography
Geocoding
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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
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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
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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
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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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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 or nonuser
of product
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Steps in the Target Marketing Process
Step 2: Targeting
 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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Evaluation of Market Segments
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A viable target segment should:
• Have members with similar product needs or
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wants who are different from members of
other segments
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
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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
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Choosing a Targeting Strategy
 Undifferentiated targeting strategy:
• Appeals to a broad spectrum of people
 Differentiated targeting strategy:
• Develops one or more products for
each of several customer groups
 Concentrated targeting strategy:
• Offers one or more products to a single
segment
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Choosing a Targeting Strategy
 Custom marketing strategy:
• Tailors specific products to individual
customers
• Common in personal and professional
services, and in industrial marketing
• Mass customization
Modifies a basic good or service to
meet the needs of an individual
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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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Steps in Positioning
 Analyze competitors’ positions
 Define your 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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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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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 or brands are “located”
in consumers’ minds relative to
competing brands
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Customer Relationship Management
(CRM): Toward a Segment of One
 Customer relationship management
• 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
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Four Steps in
One-to-One Marketing
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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, and find ways to
improve cost efficiency and the effectiveness
of the interaction
Customize some aspect of the products you
offer each customer
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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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.)
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Characteristics of CRM
 Share of customer
 Lifetime value of the customer
 Customer equity
 Focus on high-value customers
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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Real People, Real Choices:
Decision Made at NutriSystems, Inc.
 Jim chose option 3
• Why do you think Sprout chose to
target both current viewers and
nonviewers with the same brand
awareness campaign?
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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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 includes:
How to fit the new acai juice into the
current product line
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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written permission of the publisher. Printed in the United
States of America
© 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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