Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management

1. Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management

2. Chapter Objectives • need for market segmentation • dimensions to segment B2C & B2B markets • evaluating & selecting market segments • targeting strategy • positioning strategy • customer relationship management

3. 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.

4. 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.

5. Figure 7.1: Steps in the Target Marketing Process

6. Step 1: Segmentation • The process of • dividing a larger market • into smaller pieces • based on • One/more meaningful • shared characteristics

7. segmentation Step one

8. Step 1: Segmentation • Segmentation variables: • dimensions that divide the total market • into fairly homogeneous groups, • each with different needs and preferences

9. VANS.COM Segmenting Consumer Markets • Segmentation variables can slice up the market • Demographic, • psychological, • behavioral differences

10. Segmenting by DemographicsAge: 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

11. 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

12. MINORITEAM ON ADULT SWIM VOSS WATER Segmenting by Demographics • Family Structure • Income • Social Class • Race and Ethnicity • African Americans • Asian Americans • Hispanic Americans

13. CLARITAS.COM 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

14. 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.

15. Figure 7.2: VALS

16. AMAZON.COM 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 • Usage occasions

17. 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)

18. TARGETING STEP TWO

19. 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

20. 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

21. Developing Segment Profiles • describe “typical” customer in segment. • Segment profile might include: • demographics, • location, • lifestyle, • product-usage frequency.

22. Figure 7.3: Choosing a Target Marketing Strategy

23. 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

24. 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

25. Step 3: Positioning • marketing strategy • aimed at influencing • how a particular market segment • perceives a good/service • in comparison to the competition

26. Steps in Developing a Positioning Strategy • Analyze competitors’ positions. • Offer a good/service with competitive advantage. • Match elements of marketing mix • to the selected segment. • Evaluate target market’s responses • and modify strategies if needed.

27. 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.

28. The Brand Personality • A distinctive image • captures brand’s character and benefits • Perceptual map: • where products/brands are “located” • in consumers’ minds

29. Figure 7.4: Perceptual Map

30. Customer Relationship Management (CRM) • building long-term relationships • with customers • to keep them satisfied and coming back. • CRM facilitates one-to-one marketing.

31. 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.

32. Four Steps in One-to-One Marketing • Interact with customers; • find ways to improve interaction. • Customize products • you offer each customer.

33. CRM: A New Perspectiveon 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.

34. CRM: A New Perspectiveon an Old Problem • customers are relationship partners, • with each partner learning • from the other • every time they interact.

35. Characteristics of CRM • Share of customer • (vs. share of market) • Lifetime value of the customer • Customer equity • Focus on high-value customers

36. The End

37. Discussion • Do you see any problems with a firm’s focusing on share of market rather than share of customer?

38. 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

39. RBK.COM 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 Reebok Video

40. 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?

41. 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?

42. Marketing in Action Case:You Make the Call • What is the decision facing Oracle? • What factors are important in understanding this decision situation? • What are the alternatives? • What decision(s) do you recommend? • What are some ways to implement your recommendation?

43. 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.

44. Individual Activity • Pick a store at which you shop frequently… • If the store were a person, how would describe its personality?

45. 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?

46. 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.

47. 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?

48. 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?

49. 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?