Sharpen the Focus:

Target Marketing Strategies and

Customer Relationship
Management

Chapter Seven

Chapter Objectives
1. Identify the steps in the target marketing
2.
3.
4.
5.

process
Understand the need for market
segmentation and the approaches
available to do it
Explain how marketers evaluate
segments and choose a targeting
strategy
Understand how marketers develop and
implement a positioning strategy
Explain how marketers increase long-term
success and profits by practicing
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customer relationship management

Market Segmentation
Market
Market

People
Peopleor
ororganizations
organizationswith
withneeds
needsor
or
wants
wantsand
andthe
theability
abilityand
andwillingness
willingnessto
tobuy.
buy.

Market
Market
Segment
Segment

AAsubgroup
subgroupof
ofpeople
peopleor
ororganizations
organizations
sharing
sharingone
oneor
ormore
morecharacteristics
characteristicsthat
that
cause
causethem
themto
tohave
havesimilar
similarproduct
productneeds.
needs.

Market
Market
Segmentation
Segmentation

The
Theprocess
processof
ofdividing
dividingaamarket
marketinto
into
meaningful,
meaningful,relatively
relativelysimilar,
similar,identifiable
identifiable
segments
segmentsor
orgroups.
groups.

The Importance of Market

Segmentation
Markets have a variety of

product needs and preferences

Marketers can better define

customer needs
Decision makers can define

objectives and allocate

resources more accurately
2
7-4

Why Market
Segmentation?
Marketers can identify

customers with similar needs

Marketers can design marketing

mixes matched to a specific

segment
Segmentation is consistent with

the marketing concepts of

satisfying customer needs and
wants

2
7-5

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
Because of
diversity, the same
goods/services will
not appeal to
everyone

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Figure 7.1

Three Steps in the Target Marketing

Process

2012 Pearson Education, Inc. publishing as

Prentice-Hall.

7-7

Figure 7.2

Step 1-Segmenting Consumers

Markets

Remember factors influencing

consumer decision making?

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Segmenting by Demographics:

Age and Generational Marketing

Children
Teens
Tweens
Generation Y: born

between 1979 and 1994

Why do marketers engage

in generational marketing?
Because different age
groups have different
needs and wants
Members of a generation

Segmenting by Demographics:

Age and Generational Marketing

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:
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
Different product categories ascend or

descend in importance over the life cycle

Income
Strongly correlated with buying power
Social Class
Consumers buy according to image they
wish to portray rather than where they fall
in the framework
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Segmenting by Demographics:

Race and Ethnicity

Race and ethnicity
African Americans
Asian Americans
Hispanic

Americans
Cultural diversity is
increasing

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Segmenting by Demographics:

Place of Residence
Geodemography:
Combines geography with demographics

PRIZM website - http://www.zillow.com/

Geocoding:
Customizes Web advertising so people who

log on in different places see ad banners for

local businesses
Search engine marketing example: Google
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Segmenting by Psychographics

http://www.youtube.com/watch?v=Mig7E5FtaAI

Psychographics use psychological, sociological, and

anthropological factors to segment a market

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Figure 7.3

VALS Framework (Values &

Lifestyles)
TM

Learn more
about each
segment by
visiting
Strategic
Business
Insights (
VALS types)

Take the
VALSTM
survey by
visiting
Strategic
Business
Insights (
survey link)

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Segmenting by Psychographics
Niche markets may

be defined by a
single characteristic
Psychographic
segmentation can
be industry specific
Situations, such as
a bad economy, can
create opportunities
for psychographic
segmentation
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Segmenting by Behavior
Behavioral segmentation:
Segments consumers based
on how they act toward, feel about
or use a product
User status
80/20 rule and

segmentation by
usage status
Long tail concept
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:
Organizational demographics
Production technology used
Whether targeted business firm is a
user/nonuser of product

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Figure 7.4

Step 2-Phases of Targeting

a.

b.

c.

2012 Pearson Education, Inc. publishing as

Prentice-Hall.

7-20

a.-Evaluation of Market Segments

A viable target segment should:
Have members with similar product
needs/wants who are different from
members of other segments
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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b.-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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Figure 7.5

c.-Choose a Target Marketing Strategy

2012 Pearson Education, Inc. publishing as

Prentice-Hall.

7-23

Choosing a Targeting Strategy

Undifferentiated Strategy- The marketer

assumes that people have similar needs, and an

attempt is made to appeal to a broad spectrum of
people. (one size fits all) Efficiency occurs
because of economies of scale. (Walmart)
Differentiated Strategy - The firm develops one
or more products (and strategies) for each of
several customer groups. This strategy might
involve marketing a single product differently to
different segments, by changing marketing to
appeal to each targeted group. (Toyota)
Firms that focus their efforts on a single segment
follow a Concentrated targeting strategy. One

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Choosing a Targeting Strategy

(cont)
Customized 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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Step 3-In the Marketing Process

Positioning
Positioning: Developing a marketing strategy to
influence how a particular market segment
perceives a good/service in comparison to the
competition
Also: Developing a specific marketing mix to
influence potential customers overall perception
of a brand, product line, or organization in general.
Position: The place a product or group of products
occupies in the consumers minds relative to
competing offerings.
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Figure 7.6

Stages in a Positioning Decision

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Modifying Positioning Strategies

Repositioning is commonly used to change

the brand image

Requires redoing a products 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 (Lava Lamps, Hula
Hoops, etc.)
Can you name any others?

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Targeting and Positioning Strategies

Must Complement Each Other
Sobes XTC targets 18-35
year olds who want a
New Age beverage that
offers an energy boost
without unhealthy
additives.
SoBe was inspired by
herbal ecstasy
cocktails made popular
in the 1990s, but
positioned as less risky.
2012 Pearson Education, Inc. publishing as
Prentice-Hall.

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The Brand Personality

Brand personality:

A distinctive image that captures the brands

character and benefits
Personality dimensions:
Sincerity

Example?
Excitement Example?
Competence
Example?
Sophistication Example?
Ruggedness
Example?

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Figure 7.7
Perceptual Map

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CRM-Customer Relationship
Management
Toward a Segment of One
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
individuals unique
wants and needs

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CRM: A New Perspective on an Old

Problem
CRM systems capture information
Touch-points interface customers and

businesses
CRM systems include:
Order and delivery tracking websites
Call centers
Automatic reminder systems
Sales contact management software

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CRM: Bottom Line

Customer Relationships are important
Lifetime value of a customer
Focus on high value customers
Cheaper to retain old customers

than get new ones

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