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when people's diverse interest and backgrounds divide them into numerous groups with distinct needs and wants
ex: health and fitness industry; different ways of dieting now
- serving the same items to everyone, with the effectiveness of offering each individual exactly what she wants.
- most efficient because eliminates the need for separate advertising campaigns and distinctive packages for each item
target marketing strategy
divide the total market into different segments based on customer characteristics, select one or more segments and develop product to meet the needs of those specific segments
Step 1 to Target Marketing Strategy
- the process of dividing a larger market into smaller pieces based on one or more meaningful shared characteristics
- necessary in both consumer and B2B
- Segmentation variables:
- Segment Consumer Markets
- Segment by Demographics:
- Family Life Cycle
- Income and Social Class
- Place of Residence
- Segment by Psychographics:Segment by Behavior:
dimensions that divide the total market into fairly homogeneous groups, each with difference needs and preferences
Segment by Demographics: Age
- generational marketing: marketing to members of a generation who tend to share the same outlook and priorities.
- ex: Coke and Pepsi war
- Generation Y: people born between 1979-1994 "optimistic rebels"
- Generation X: slackers or busters born between 1965-1978 cynical look towards marketing. Entrepreneurial group
- Baby Boomers: born after WWII
Segment by Demographic: Gender
metrosexual: a straight, urban male who is keenly interested in fashion home design, gourmet cooking, and personal care
- Measure observable aspects of a population, including size, gender, ethnic group, income education, occupation, and family structure.
- Vital to identify the best potential customers for a good service
Segment by Demographics: Family Life Cycle
- consumers in different life cycle segments are unlikely to need the same products, or at least they may not need the same quantities
- move into new life stages, different product categories ascend and descend in importance.
Segment by demographics: Income and Social Class
- distribution of wealth is of great interest to marketers because it determines which groups have the greatest buying power (high income consumers)
- many consumers buy according to the image they wish to portray
Segment by demographics: Ethnicity
- consumers' national origin is often a strong indicator of his preferences.
- African Americans: 12% Growing Media
- opportunities that await those who develop specialized products to connect with segments of consumers who share an ethic or racial identity
- Asian Americans: fastest growing minority in the US
- Hispanic American: largest minority group
- 1. brand loyal, products made in their country of origin
- 2. highly concentrated by national origin, easier to finetune the marketing mix
- 3. segment is young , great potential for youth oriented products
- 4. average household contains 3.5 people = spend 15%-20% more than of their disposable income on groceries
- 5. receptive to relationship building approaches to marketing and selling
- a management practice that actively seeks to include people of different sexes, races, ethnic groups, and religions in an organization's employees, customers, suppliers, and distribution channel
- employing people from of all kinds benefits the firm by having different backgrounds, experiences, and points of view that help the firm develop strategies for its brands
Segment by demographics: Place of Residence
- Use geodemography to segment regional markets even more precisely which combines geography with demographics
- geocoding: customizing Web advertising so that people who log on in different places will see ad banners for local businesses.
- Young Digerati: tech-savvy and live in fashionable neighborhoods on the urban fringe (affluent, highly educated, ethnically mixed)
- Kids & Cul de Sacs: upper middles, suburban, married couples with children ( high rate hispanic/ asian americans)
- Shotguns & Pickups: young working class couples with large families
Segments by Psychographics
- segments consumers in terms of psychological, and behavioral similarities such as shared activities, interests, and opinions or AOIs
- VALS2 (Values and Lifestyles): system which divides the entire US Population into 8 segments
- 3 Ideal consumer motivations:
- 1. Ideals- knowledge and principles
- 2. Achievement- goods and services the demonstrate success to peers
- 3. Self-Expression- desire social or physical activity, variety, and risk
Segment by Behavior
- slices consumer segments on the basis of how they act toward, feel about, or use a product
- 1. divide market into users and nonusers
- 2. segment current customers into heavy, moderate, and light users (80/20)
- long tail: new approach to segmentation based on the idea that companies can make money by selling small amounts of items that only a few people want, provided they sell enough different items (amazon vs barnes)
- usage occasions: indicator used based on when consumers use a product most
Segmenting B2B Markets
- Organizational demographics:
- 1. size of firms either in total sales or number of employees
- 2. # of facilities
- 3. domestic/ multinational company
- 4. Purchasing policies
- 5. type of business
Step 2: Targeting
- a strategy in which marketers evaluate the attractiveness of each potential segment and decide in which of these groups they will invest resources to try to turn them into customers
- target market: an organization focuses its marketing plan and toward which it directs its marketing efforts
- Evaluate Market Segments
- Develop Segment Profiles
- Choose a Targeting Strategy
Evaluate Market Segments
- 1. Members of the segment similar to each other with product needs and wants different from other consumers in other segments?
- 2. Can marketers measure the segment
- 3. Segment large enough to be profitable now and future?
- 4. Marketing commutations reach the segment?
- 5. Can the marketer adequately serve the needs of the segment?
Develop Segment Profiles
- A description of the "typical" customer in a segment
- might include demographics, location lifestyle information, and description on how often customer buys
Choose Targeting Strategy
- Undifferentiated target strategy: appeals to a broad spectrum of people. Efficient; production, research, and promotion costs benefit economies of scale
- Differential targeting strategy: develops one or more products for each of several customer groups with different product needs (L'oreal)
- Can also involve connecting one product with different segments by communicating differently to appeal those segments
- Concentrated targeting strategy: focusing a firm's efforts on offering one or more products to a single segment.
- Custom marketing strategy: approach that tailors specific products and messages about them to individual customers.
- (doctors, lawyers, hairstylists, industrial context where a manufacturer often works with one or a few large clients and develops products that only these clients use.
- mass customization: modifies a basic good or service to meet the needs of an individual
modifies a basic good or service to meet the needs of an individual
Custom marketing strategy
approach that tailors specific products and messages about them to individual customers.(doctors, lawyers, hairstylists, industrial context where a manufacturer often works with one or a few large clients and develops products that only these clients use.
Differential targeting strategy:
develops one or more products for each of several customer groups with different product needs (L'oreal)Can also involve connecting one product with different segments by communicating differently to appeal those segments
Undifferentiated target strategy
appeals to a broad spectrum of people. Efficient; production, research, and promotion costs benefit economies of scale
Concentrated targeting strategy
focusing a firm's efforts on offering one or more products to a single segment.
Step 3 Positioning
- developing a marketing strategy to influence how a particular market segment perceives a good or service in comparison to the competition
- 1. Analyze Competitors' Positions
- 2. Offer a Good or Service with a Competitive Advantage
- 3. Finalize the Marketing Mix
- 4. Evaluate responses and Modify as Needed
1. Analyze Competitors's Positions
- marketers must understand the current lay of the land. What competitors are out there? and how does the target market perceive them?goods or services that provide similar benefits?
- indirect competition can be more important the the direct (McDonald's has to serve up a wider variety of adult friendly food McDonalds vs. supermarket delis& frozen food
2 offer a Good or Service with a Competitive Advantage
- this will provide a reason why consumers will perceive the product as better than the competition
- superior image
- unique product feature
- better service
- better qualified people
- lower price
3 Finalize the Marketing Mix
- marketing mix must match the selected segment (must add value and satisfy customer needs)
- Good or service must deliver benefits that the segments values, such as convenience or status
- 1. price this offering at a level these consumers will pay
- 2. make offering available at places consumers are likely to go
- 3. correctly communicate the offering's benefits in locations where consumers are likely to take notice
Evaluate Responses and Modify as Needed
- repositioning: redoing a product's positioning to respond to marketplace changes; modify its brand image to keep up with changing times
- retro-brands: once popular brand that has been revived to experience a popularity comeback, often riding a wave of nostalgia
The Brand Personality
- a distinctive image that captures its character and benefits
- developing an identity for the product that the target market will prefer over competing brands
- perceptual map: a vivid way to construct picture of where, products or brands are "located" in consumers' minds.
Customer Relationship Management (CRM) -> one to one marketing
- 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.
- Allows firms to talk to individual customers and to adjust elements of their marketing programs in light of how each customer reacts
- new way to look at how to effectively compete in the marketplace. Customers = partners
4 Steps in One-to-One Marketing
- 1. Identify customers and get to know them in as much detail as possible
- 2. Differentiate among customers in terms of both needs and value to the company
- 3. interact with customers and ind ways to improve cost efficiency and the effectiveness of the interaction
- 4. Customize some aspect of the goods or services that you offer to each customer
Characteristics of CRM
- Share of customers: percentage of an individual customer's purchase of a product that is a single brand
- Lifetime value of a customer: potential profit a single customer's purchase of a firm's products generates over the customer's lifetime
- customer equity: financial value of a customer relationship throughout the lifetime of the relationship. (compare investments they make to acquire customers and then retain them to the financial return theyll get on those investments
- Focus on High Value Customers:
Costumer Experience Management (CEM)
- 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
- focuses every aspect of the firm on all touchpoints between it and its customers-> enhance experience
CRM vs CEM
- CRM: tends to be more about building and using customer data for decision making and marketing
- CEM more about aligning internal resources so that all encounters between the customer and the company are consistently favorable