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Chapter 7
Sharpen the Focus:
Target Marketing Strategies and
Customer Relationship Management
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
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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
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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, family
structure
• Generational marketing
– Psychographics—psychological, sociological,
and anthropological factors
– Behavioral characteristics
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Segmenting by Demographics:
Age and Generational Marketing




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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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall
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
 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
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 Race and ethnicity
– African Americans
– Asian Americans
– Hispanic Americans
 Place of residence
– Geographic 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:
–
–
–
–
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Organizational demographics
Production technology used
Whether customer is a user/nonuser of product
North American Industry Classification System
(NAICS)
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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
 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
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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
– 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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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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Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall
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 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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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/brands are “located” in consumers’
minds relative to competing brands
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Customer Relationship
Management (CRM)
 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
 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
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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.)
 CRM proposes that customers are
relationship partners, with each partner
learning from the other every time they
interact
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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
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 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
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
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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:
How to fit the new açai juice into the
current product line
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Publishing as Prentice Hall
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