Marketing chapter 5

Learning Objectives

1. Describe the factors that make some markets more attractive targets than others. 2. Describe the different market-segmenting strategies companies pursue and why. 3. Outline the market-segmentation strategies used in global markets.

Learning Objectives

1. Distinguish between targeted marketing and mass marketing and explain what led to the rise of each. 2. Describe how targeted marketing can benefit firms. 3. Explain why companies differentiate among their customers.

Steps in One-to-One Marketing

1. Establish short-term measures to evaluate your efforts.--- Determine how you will measure your effort. Will you use higher customer satisfaction ratings, increased revenues earned per customer, number of products sold to customers, transaction costs, or another measure? 2. Identify your customers.----- Gather all the information you can about your current customers, including their buying patterns, likes, and dislikes. When conducting business with them, include an "opt in" question that allows you to legally gather and use their phone numbers and e-mail addresses so you can remain in contact with them. 3. Differentiate among your customers.----- Determine who your best customers are in terms of what they spend and will spend in the future (their customer lifetime value), and how easy or difficult they are to serve. Identify and target customers that spend only small amounts with you but large amounts with your competitors. 4. Interact with your customers, targeting your best ones.-------ones. Find ways and media in which to talk to customers about topics they're interested in and enjoy. Spend the bulk of your resources interacting with your best (high-value) customers. Minimize the time and money you spend on low-value customers with low growth potential. 5. Customize your products and marketing messages to meet their needs.-------Try to customize your marketing messages and products in order to give your customers exactly what they want—whether it's the product itself, its packaging, delivery, or the services associated with it (Harler, 2008; Peppers & Rogers, 1999; Peppers, et. al., 1999).

Learning Objectives

1. Explain why positioning is an important element when it comes to targeting consumers. 2. Describe how a product can be positioned and mapped. 3. Explain what repositioning is designed is to do.

Why might it be advantageous to create low-cost products for developing countries and then sell them in nations such as the United States? Do you see any disadvantages of doing so?

Low-cost products capture large markets in developing countries

tagline

Many companies use taglines in their advertising to try to position their products in the minds of the buyer—where they want them, of course.

Using the shotgun and rifle analogy, how do mass marketing, targeted marketing, and one-to-one marketing compare with one another?

Mass Marketing: Shotgun Approach: blast out as many marketing messages as possible on every medium available as often as you can afford. Targeted Marketing: Rifle Approach: take careful aim at one type of customer with your message One-to-One Marketing: Rifle Approach: have the advantage of a scope

gender and segmentation (MARKETING PLAN)

Men and women have different needs and also shop differently. Consequently, the two groups are often, but not always, segmented and targeted differently. Marketing professionals don't stop there, though. For example, because women make many of the purchases for their households, market researchers sometimes try to further divide them into subsegments. (Men are also often subsegmented.) For women, those segments might include stay-at-home housewives, plan-to-work housewives, just-a-job working women, and career-oriented working women. Research has found that women who are solely homemakers tend to spend more money, perhaps because they have more time.

Positioning

Positioning is how consumers perceive a product relative to the competition. Companies want to have a distinctive image and offering that stands out from the competition in the minds of consumers.

Psychographic segmentation

can help fill in some of the blanks. Psychographic information is frequently gathered via extensive surveys that ask people about their activities, interests, opinion, attitudes, values, and lifestyles.

Subsegmenting the markets could potentially help you. (Marketing Plan)

have nexus be in Spanish as well Just moved in'rs. Recent arrivals, Spanish dependent, struggling but optimistic. • FOBrs (fashionistas on a budget). Spanish dominant, traditional, but striving for trendy. • Accidental explorers. Spanish preferred, not in a rush to embrace U.S. culture. 139 Principles of Marketing • The englightened. Bilingual, technology savvy, driven, educated, modern. • Doubting Tomáses. Bilingual, independent, skeptical, inactive, shopping uninvolved. • Latin flavored. English preferred, reconnecting with Hispanic traditions. • SYLrs (single, young latinos). English dominant, free thinkers, multicultural.

segmentation bases

Criteria used to classify and divide buyers into different groups

different segments B2B

• A price-focused segment is composed of small companies that have low profit margins and regard the good or service being sold as not being strategically important to their operations. • A quality and brand-focused segment is composed of firms that want the best possible products and are prepared to pay for them. • A service-focused segment is composed of firms that demand high-quality products and have top- notch delivery and service requirements. • A partnership-focused segment is composed of firms that seek trust and reliability on the part of their suppliers and see them as strategic partners (Harrison, et. al., 2010).

Most firms tailor their offerings in one way or another to meet the needs of different segments of customers. Because these organizations don't have all their eggs in one basket, they are less vulnerable to competition. Marriott International is an example of a company that operates in multiple market segments. (multiple target segments example)

• Marriott Courtyard. Targeted at over-the-road travelers. • Ritz-Carlton Hotels. Targeted at luxury travelers. • Marriott Conference Centers. Targeted at businesses hosting small- and midsized meetings. • Marriott ExecuStay. Targeted at executives needing month-long accommodations. • Marriott Vacation Clubs. Targeted at travelers seeking to buy timeshares.

characteristics of an attractive market

• It is sizeable (large) enough to be profitable given your operating cost. Only a tiny fraction of the consumers in China can afford to buy cars. However, because the country's population is so large (nearly 1.5 billion people), more cars are sold in China than in Europe (and in the United States, depending on the month). Three billion people in the world own cell phones. But that still leaves three billion who don't (Corbett, 2008). • It is growing. The middle class of India is growing rapidly, making it a very attractive market for consumer products companies. People under thirty make up the majority of the Indian population, fueling the demand for "Bollywood" (Indian-made) films. • It is not already swamped by competitors, or you have found a way to stand out in a crowd. IBM used to make PCs. However, after the marketplace became crowded with competitors, IBM sold the product line to a Chinese company called Lenovo. • Either it is accessible or you can find a way to reach it. Accessibility, or the lack of it, could include geographic accessibility, political and legal barriers, technological barriers, or social barriers. For example, to overcome geographic barriers, the consumer products company Unilever hires women in third-world countries to distribute the company's products to rural consumers who lack access to stores. • The company has the resources to compete in it. You might have a great idea to compete in the wind-power market. However, it is a business that is capital intensive. What this means is that you will either need a lot of money or must be able to raise it. You might also have to compete with the likes of T. Boone Pickens, an oil tycoon who is attempting to develop and profit from the wind-power market. Does your organization have the resources to do this? • It "fits in" with your firm's mission and objectives. Consider TerraCycle, which has made its mark by selling organic products in recycled packages. Fertilizer made from worm excrement and sold in discarded plastic beverage bottles is just one of its products. It wouldn't be a good idea for TerraCycle to open up a polluting, coal-fired power plant, no matter how profitable the market for the service might be.

Learning Objectives

1. Understand and outline the ways in which markets are segmented. 2. Explain why marketers use some segmentation bases versus others.

Why do firms often use more than one segmentation base?

A firm will often use multiple segmentation bases, or criteria to classify buyers, to get a fuller picture of its customers and create real value for them. Each variable adds a layer of information.

Key Takeaway (each segement talked about is linked through eachother. the fiirst one said being the largest.

A market worth targeting has the following characteristics: (1) It's sizeable enough to be profitable, given your operating costs; (2) it's growing; (3) it's not already swamped by competitors, or you have found a way to stand out in the crowd; (4) it's accessible, or you can find a way to reach it; (5) you have the resources to compete in it; and (6) it "fits in" with your firm's mission and objectives. Most firms tailor their offerings in one way or another to meet the needs of different segments of customers. A multisegment marketing strategy can allow a company to respond to demographic and other changes in markets, including economic downturns. Concentrated marketing involves targeting a very select group of customers. Niche marketing involves targeting an even more select group of consumers. Microtargeting, or narrowcasting, is a new, effort to "super target" consumers by gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive. Firms that compete in the global marketplace can use any combination of these segmenting strategies or none at all. Sellers are increasingly targeting consumers in China, Russia, India, and Brazil because of their fast-growing middle classes. Firms are creating low-cost products to capture large markets in developing countries such as these and then selling the products in developed countries. Other strategies for targeting markets abroad include acquiring foreign companies or forming partnerships with them.

tagline example

A tagline is a catchphrase designed to sum up the essence of a product. You perhaps have heard Wendy's tagline "It's better than fast food." The tagline is designed to set Wendy's apart from restaurants like McDonald's and Burger King—to plant the idea in consumers' heads that Wendy's offerings are less "fast foodish," given the bad rap fast food gets these days.

Advergames

Advergames are likewise being used to appeal to the two demographic groups. Advergames are electronic games sellers create to promote a product or service.

some of the different types of buyer characteristics used to segment markets.

Behavioral segmentation. What benefits do customers want, and how do they use our product? Demographic segmentation. How do the ages, races, and ethnic backgrounds of our customers affect what they buy? Geographic segmentation. Where are our customers located, and how can we reach them? What products do they buy based on their locations? Psychographic segmentation. What do our customers think about and value? How do they live their lives?

Which of the segmenting strategies discussed in this section is the broadest? Which is the narrowest?

Broadest: Multisegment MarketingConcentrated Marketing Narrowest: Niche Marketing

Key Takeaway

Choosing select groups of people to sell to is called target marketing, or differentiated marketing. Mass marketing, or undifferentiated marketing, involves selling the same product to everyone. The trend today is toward more precise, targeted marketing. Finding and attracting new customers is generally far more difficult than retaining one's current customers, which is why organizations try to interact with and form relationships with their current customers. The goal of firms is to do as much business with their best customers as possible. Forming close, personal relationships with customers and giving them exactly what they want is a process called one-to-one marketing. It is the opposite of mass marketing.

population density (Marketing Plan)

City size and population density (the number of people per square mile) are also used for segmentation purposes. Have you ever noticed that in rural towns, McDonald's restaurants are hard to find, but Dairy Queens (DQ) are usually easy to locate? McDonald's generally won't put a store in a town of fewer than five thousand people. However, this is prime turf for the "DQ"— because it doesn't have to compete with bigger franchises like McDonald's.

geodemographics

Combining both demographic and geographic information is referred to as geodemographics or neighborhood geography. The idea is that housing areas in different zip codes typically attract certain types of buyers with certain income levels.

Marketing Plan

Companies have to develop new products designed to appeal to Generations X and Y and also find new ways to reach them. People in these generations not only tend to ignore traditional advertising but also are downright annoyed by it. To market to Scion drivers, who are generally younger, Toyota created Scion Speak, a social networking site where they can communicate, socialize, and view cool new models of the car. Online events such as the fashion shows broadcast over the Web are also getting the attention of younger consumers, as are text, e-mail, and Twitter messages they can sign up to receive so as to get coupons, cash, and free merchandise.

Key Takeaway

If a product faces competition, its producer will need to think about how to "position" it in the marketplace relative to competing products. Positioning is how consumers view a product relative to the competition. A perceptual map is a two-dimensional graph that visually shows where a product stands, or should stand, relative to its competitors, based on criteria important to buyers. Sometimes firms find it advantageous to reposition their products. Repositioning is an effort to "move" a product to a different place in the minds of consumers.

What two types of information do market researchers gather to develop consumer insight?

In conducting your market research, you will gather two types of data: primary and secondary. Primary research is information that comes directly from the source--that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods. Secondary research involves gathering statistics, reports, studies and other data from organizations such as government agencies, trade associations and your local chamber of commerce.

income and segmentation

Income is used as a segmentation variable because it indicates a group's buying power and may partially reflect their education levels, occupation, and social classes. Higher education levels usually result in higher paying jobs and greater social status.

Explain what a tagline is designed to do.

It is designed to sum up the essence of your product to attract customers to buy it

What factors does a firm need to examine before deciding to target a market?

It is sizeable (large) enough to be profitable given your operating cost. • It is not already swamped by competitors, or you have found a way to stand out in a crowd. • The company has the resources to compete in it. You might have a great idea to compete in the wind-power market. However, it is a business that is capital intensive. What this means is that you will either need a lot of money or must be able to raise it. You might also have to compete with the likes of It "fits in" with your firm's mission and objectives.

Repositioning

Repositioning is an effort to "move" a product to a different place in the minds of consumers. Sometimes firms find it advantageous to reposition their products—especially if they want the product to begin appealing to different market segments.

Key Takeaway

Segmentation bases are criteria used to classify buyers. The main types of buyer characteristics used to segment consumer markets are behavioral, demographic, geographic, and psychographic. Behavioral segmentation divides people and organization into groups according to how they behave with or toward products. Segmenting buyers by personal characteristics such as their age, income, ethnicity, family size, and so forth is called demographic segmentation. Geographic segmentation involves segmenting buyers based on where they live. Psychographic segmentation seeks to differentiate buyers based on their activities, interests, opinions, attitudes, values, and lifestyles. Oftentimes a firm uses multiple bases to get a fuller picture of its customers and create value for them. Marketing professionals develop consumer insight when they gather both quantitative and qualitative information about their customers. Many of the same bases used to segment consumer markets are used to segment business-to-business (B2B) markets. However, there are generally fewer behavioral-based segments in B2B markets.

demographic segmentation.

Segmenting buyers by personal characteristics such as age, income, ethnicity and nationality, education, occupation, religion, social class, and family size

Marketing plan

Sellers are increasingly targeting consumers in China, Russia, India, and Brazil because of their fast-growing middle classes. Firms are creating low-cost products to capture large markets in developing countries such as these and then selling the products in developed countries. Other strategies for targeting markets abroad include acquiring foreign companies or forming partnerships with them.

Why do companies position products?

So their products stand out from the competition so that consumers will want to buy it

one-to-one marketing

Steps companies take to target their best customers, form close, personal relationships with them, and give them what they want—a process called one-to-one marketing—are outlined in "Steps in One-to-One Marketing." In terms of our shotgun versus rifle approach, you can think of one-to-one marketing as a rifle approach, but with an added advantage: now you have a scope on your rifle.

What buyer characteristics do companies look at when they segment markets?

The main types of buyer characteristics used to segment consumer markets are behavior, demographic, geographic, and psychographic.

target market.

The segment(s) or group(s) of people and organizations you decide to sell to. Targeted marketing, or differentiated marketing, means that you may differentiate some aspect of marketing (offering, promotion, price) for different groups of customers selected. It is a relatively new phenomenon.

Why might an organization reposition a product?

To maintain value to the existing market and expanding to include other buyers that previously would not have considered buying the product

MARKETING PLAN

Tweens might appear to be a very attractive market when you consider they will be buying products for years to come. But would you change your mind if you knew that baby boomers account for 50 percent of all consumer spending in the United States? Americans over sixty-five now control nearly three-quarters of the net worth of U.S. households; this group spends $200 billion a year on major "discretionary" (optional) purchases such as luxury cars, alcohol, vacations, and financial products (Reisenwitz, 2007).

perceptual map

a two- dimensional graph that visually shows where your product stands, or should stand, relative to your competitors, based on criteria important to buyers. The criteria can involve any number of characteristics—price, quality, level of customer service associated with the product, and so on.

Behavioral segmentation

divides people and organization into groups according to how they behave with or act toward products. Benefits segmentation—segmenting buyers by the benefits they want from products—is very common. Take toothpaste, for example. Which benefit is most important to you when you buy a toothpaste: The toothpaste's price, ability to whiten your teeth, fight tooth decay, freshen your breath, or something else? Perhaps it's a combination of two or more benefits. If marketing professionals know what those benefits are, they can then tailor different toothpaste offerings to you (and other people like you). For example, Colgate 2-in-1 Toothpaste & Mouthwash, Whitening Icy Blast is aimed at people who want the benefits of both fresher breath and whiter teeth.

Geographic segmentation

divides the market into areas based on location and explains why the checkout clerks at stores sometimes ask for your zip code. It's also why businesses print codes on coupons that correspond to zip codes. When the coupons are redeemed, the store can find out where its customers are located—or not located.

Concentrated marketing NEXUS -Some firms—especially smaller ones with limited resources—engage in concentrated marketing.

involves targeting a very select group of customers. Concentrated marketing can be a risky strategy because companies really do have all their eggs in one basket.

Geocoding-

is a process that takes data such as this and plots it on a map. Geocoding can help businesses see where prospective customers might be clustered and target them with various ad campaigns, including direct mail. One of the most popular geocoding software programs is PRIZM NE, which is produced by a company called Claritas.

Proximity marketing

is an interesting new technology firms are using to segment and target buyers geographically within a few hundred feet of their businesses using wireless technology. In some areas, you can switch your mobile phone to a "discoverable mode" while you're shopping and, if you want, get ads and deals from stores as you pass by them, which is often less expensive than hiring people to hand you a flier as you walk by

Consumer insight

is what results when you use both types of information. You want to be able to answer the following questions: • Am I looking at the consumers the way they see themselves? • Am I looking at life from their point of view?

Retro brands

old brands or products that companies "bring back" for a period of time—were aimed at baby boomers during the recent economic downturn. Pepsi Throwback and Mountain Dew Throwback, which are made with cane sugar—like they were "back in the good old days"—instead of corn syrup, are examples (Schlacter, 2009). Marketing professionals believe they appealed to baby boomers because they reminded them of better times—times when they didn't have to worry about being laid off, about losing their homes, or about their retirement funds and pensions drying up.

Microtargeting,

or narrowcasting, is a new effort to isolate markets and target them. It was originally used to segment voters during elections, including the 2008 U.S. presidential election. Microtargeting involves gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive. One company that compiles information such as this is Acxiom. For a fee, Acxiom can provide you with a list of Hispanic consumers who own two pets, have caller ID, drive a sedan, buy certain personal care products, subscribe to certain television cable channels, read specified magazines, and have income and education levels within a given range (Schiffman & Kanuk, 2010). Clearly, microtargeting has ethical implications and privacy issues.

Mass marketing,

or undifferentiated marketing, came first. It evolved along with mass production and involves selling the same product to everybody. You can think of mass marketing as a shotgun approach: you blast out as many marketing messages as possible on every medium available as often as you can afford (Spellings, 2009). By contrast, targeted marketing is more like shooting a rifle; you take careful aim at one type of customer with your message.

After you segment buyers and develop a measure of consumer insight about them, you can begin to see those that have more potential.

potential. Now you are hunting with a rifle instead of a shotgun. The question is, do you want to spend all day hunting squirrels or ten-point bucks? An attractive market has the following characteristics:

Family life cycle

refers to the stages families go through over time and how it affects people's buying behavior. For example, if you have no children, your demand for pediatric services (medical care for children) is likely to be slim to none, but if you have children, your demand might be very high because children frequently get sick. You may be part of the target market not only for pediatric services but also for a host of other products, such 137 Principles of Marketing as diapers, daycare, children's clothing, entertainment services, and educational products. A secondary segment of interested consumers might be grandparents who are likely to spend less on day-to-day childcare items but more on special-occasion gifts for children. Many markets are segmented based on the special events in people's lives. Think about brides (and want-to-be brides) and all the products targeted at them, including Web sites and television shows such as Say Yes to the Dress, My Fair Wedding, Platinum Weddings, and Bridezillas.

multisegment marketing

strategy can allow firms to respond to demographic changes and other trends in markets. For example, the growing number of people too old to travel have the option of moving into one of Marriott's "Senior Living Services" facilities, which cater to retirees who need certain types of care.

B2B

theorized that there are fewer behavioral and needs-based segments in B2B markets than in business-to-consumer (B2C) markets for two reasons: (1) business markets are made up of a few hundred customers whereas consumer markets can be made up of hundreds of thousands of customers, and (2) businesses aren't as fickle as consumers. Unlike consumers, they aren't concerned about their social standing or influenced by their families and peers. Instead, businesses are concerned solely with buying products that will ultimately increase their profits.