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Publishing as Prentice Hall 7-1

Ch. 7 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
Also known as STP (segmentation, targeting, and
positioning)
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Figure 7.1
Steps in the Target Marketing Process: STP
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Goals of Segmentation
(in class)

Why?
Effectiveness
Efficiency
What makes a good segmentation outcome?
p. 213, Without real differences in consumer needs,
firms might as well use a mass-marketing strategy.
Differentiate groups based on what and why
consumer buy
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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 (bases):
Dimensions that divide the total market into fairly
homogeneous groups, each with different needs and
preferences
Segmentation variables include:
Demographicssize, age, gender, ethnic group, income,
education, occupation, family structure
Psychographicspsychological, values and lifestyles, and
AIO factors
Behavior-based variables usage rate, usage occasion,
product benefits
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Demographic Dimensions
Age
Gender
Occupation
Family structure
Income and social class
Race and ethnicity
Geography
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Segmenting by Demographics:
Age: Generational Marketing
Children
Tweens
Teens
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
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Segmenting by
Demographics (contd)
Family Structure
Income
Social Class
Race and Ethnicity
African Americans
Asian Americans
Hispanic Americans

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Segmenting by Geography
Geodemography:
combines Geography with demographics
(*and psychographics*)
www.claritas.com

Geocoding:
Customizes Web advertising so people who
log on in different places see ad banners for
local businesses
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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
Learn more about PRYSM
Visit ReachLocal.com
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Missoula, MT 59802's
most common PRIZM NE Segments are:
47City Startups
56Crossroads Villagers
53Mobility Blues
44New Beginnings
60Park Bench Seniors
http://www.claritas.com/MyBestSegments/D
efault.jsp?ID=20&id1=1027&id3=59802
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Segmenting by Psychographics
Psychographics:
Segments formed on the basis of values and
lifestyles (VALs) and shared activities,
interests, and opinions (AIOs).
www.sric-bi.com
Lohas
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Segmenting by Behavior
Segments consumers based on how
they act toward, feel about, or use a
specific product category
80/20 rule: 20 percent of purchasers account
for 80 percent of a products sales
Heavy, medium, and light users and nonusers
of a product
(versus *BOP and long tail markets)
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80/20 rule versus:
Long tail concept:
Firms CAN make money selling small
amounts of items IF they sell enough different
items
Base-of-pyramid markets*
20/80 rule?
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World Resources Institute
Billion
2 Billion
4 Billion
Mature Markets
> $20,000 *
Emerging Markets
$3,260 $20,000
Survival Markets <$3,260
(population)
*Individual
annual income
Source: WRI
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Segmenting by Behavior (Cont.)
User status:
Heavy, medium, and light users and nonusers of a
product
Usage occasions
Segments on the basis of different occasions when
customers buy or use various products
Shoes, watches
Benefit segmentation (not explicit in text)
Segments on the basis of the specific benefits different
customers desire when purchasing in a product
category:
OJ example, p. 211: added vitamins/calcium vs. pulp vs.
no sugar

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Segmenting Business-to-
Business Markets
North American Industry Classification
System (NAICS)
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Steps in the Target Marketing Process
Step 2: Targeting
Targeting:
Marketers evaluate the attractiveness of each
potential segment and decide in which
segment(s) 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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Developing Segment Profiles
A profile is a description of the
typical customer in a segment.
Might include information on demographics,
location, lifestyle, and product-usage
frequency
Why is it important?
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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
Be one that the marketers company has the
strengths and capabilities to adequately
serve well
Also consider:
* growth rates by segment
* competition by segment
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Figure 7.3 Select a Target Marketing Strategy
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Choosing a Targeting Strategy
Undifferentiated targeting strategy
Appealing to the total market without regard to
specific segments
Mass marketing
Commodities, often non-profit/social marketing
causes, small marketing budget, little research
Differentiated targeting strategy
Developing one or more products for each of several
customer groups
Developing different advertising strategies
(message/media) for different customer groups (but
offering the same product)
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Choosing a Targeting Strategy
Concentrated (niche) target marketing
strategy
Offering one or more products to a single segment
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 that is mass produced
to meet the specific needs of an individual
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Step 3: Positioning
What is positioning?
Developing the (a) image of the product (b) in the
mind of the customer (c) relative to competition on
(d) important attributes (either objective or subjective)
Brand personality
A distinctive image that captures the brands
character and benefits
Reposition:
Create a different market position to respond to
marketplace changes
Retro brands
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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 markets responses
and modify strategies as needed
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Positioning Tool: Perceptual map*
A research technique marketers use to
identify where products/brands are
located in consumers minds
Statistical method:
multi-dimensional scaling
Pair-wise similarity judgments
A 2-dimensional product space
the dimensions are attributes of the product
objective or subjective
Products are the evoked set
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Customer Relationship Management
Customer relationship management (CRM):
A systematic tracking of consumers preferences and behaviors
over time in order to tailor the value proposition as closely as
possible to each individuals unique wants and needs
Views customers as relationship partners, with each
partner learning from the other every time they
interact
Sees marketing as a process of building long-term
relationships with customers
to keep them satisfied and coming back.
CRM facilitates one-to-one marketing
Philadelphia 76ers Video
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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.)

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Characteristics of CRM
Share of customer (vs. share of
market): focus on retention and loyalty
(vs. acquisition of new customers)
Lifetime value of the customer-
Customer equity
Focus on high-value customers
Tiers/categories
Personalize/customize
one-to-one marketing.