Chapter 7 Target Marketing Strategies and Customer Relationship Management Course Title Introduction to Marketing Exam 2 Study Guide Chapters 7 8 9 11 Goal of the marketer o Create value o Build customer relationships o Satisfy needs Market fragmentation o People s diverse interests background divide them into numerous groups with distinct needs and wants Same good service will not apply to everyone Ex Diet plans today o Balance the efficiency of mass marketing with effectiveness that comes when they offer each individual exactly what he wants Mass marketing lower costs Target marketing strategy o Divide the total market into different segments based on customer characteristic o Select 1 segments o Develop products to meet the needs of those specific segments Steps in the target marketing process Identify and describe market segments Evaluate segments and decide which to go after 1 Segmentation 2 Targeting 3 Positioning target market Step 1 Segmentation Develop a marketing mix that will create a competitive advantage in the minds of the selected Process of dividing a larger market into smaller pieces based on 1 shared characteristics Segmentation variables o Dimensions that divide the total market into fairly homogenous groups each with different needs preferences Segment consumer markets o Demographics Ex Generation Y consumers born between 1979 1994 Converse Statistics that measure observable aspects of a population Vital to identify the best potential customers for a G S Age Consumers of different age groups have different needs wants Members of a generation tend to share the same outlook priorities Page 1 of 27 o Generational marketing Generation Y o First generation to grow up online o More ethically diverse than earlier generations o Hard to reach Resist reading and turn off the TV Have to look for where they live Ex Social Networks o Born between 1965 1978 o Cynical attitude toward marketing o Entrepreneurial group o Is really about settling down homes families Generation X Baby Boomers o Born between 1946 1964 o They never age Invest time money into maintaining youthful image Gender Develop parallel products to appeal to each sex Metrosexual o Straight urban male who is keenly interested in fashion home design gourmet Family life cycle cooking and personal care Family needs expenditures change over time Different product categories ascends and descend in importance Income social class Distribution of wealth helps determine which groups have the greatest buying power o Ex Voss water vs Costco Boomers are cautious about spending their present income o Hit hardest by the recession Buy according to the image they wish to portray o Not where a consumer actually falls in the upper middle lower class segment Ethnicity Consumer s national origin can be a strong indicator of his preferences for specific magazines TV shows foods apparel etc Largest ethnic groups in the US o African Americas o Asian Americas Growing consumer power fueled by the hip hop and urban scene Fastest growing minority group o Hispanic Americans Largest minority group Command over 400 billion in purchasing power Page 2 of 27 Brand loyal especially to product made in their country of origin Highly concentrated by national origin Easy to fine tune the marketing mix Segment is young potential for youth orientated product Ex Cosmetics music Larger average household Spend more disposable income on groceries household products Cultural diversity o Management practice that actively seeks to include people of different sexes races ethnic groups and religion Place of residence geography Geodemography o Combine geography with demographic to segment regional markets more precisely o People who live near each other share similar characteristics o Companies can customize web advertising so that people who log on in different places will see add banners for local business Ex Groupon weather channel links Geocoding PRIZM o Widely used geodemographic system o Large database developed by Nielsen Claritas o Classifies the U S population into 66 segments based on various socioeconomic data Income age race occupation education lifestyle attributes where they vacation what they drive favorite brands o Psychographic Segments consumers in terms of psychological and behavior similarities Use psychological sociological and anthropological factors to construct market segments Ex Shared activities interests and opinions AIOs VALS Values and Lifestyles Based on psychological traits that correlate with consumer behavior 3 primary consumer motivation key to the system 1 Ideals Guided by knowledge and principles Thinkers believers 2 Achievements Look for G S that demonstrate success to their peers Achievers Strivers 3 Self expression Desire social or physical activity variety risk Experiencers Makers Page 3 of 27 4 distinct segments as consumers emerge from the bad economy Severely affected by the recession 1 Steadfast Frugalists 2 Involuntary Penny Pinchers 3 Pragmatic Spenders 4 Apathetic Materialists Higher spending power Least changed by the recession o Behavioral difference Divides consumers into segments on the basis of how they act toward feel about or use a G S What they actually do with a product Divide the market in users and non users of a product May attempt to reward current users or try to win over new ones Describe current users as light moderate or heavy o 80 20 Rule 20 of purchasers account for 80 of the product s sales Focus on the smaller number of people who are really into a product than on the larger number who are just casual users Long tail o Companies can make money by selling small amount of items that only a few people want provided they sell enough different items Ex Books on Amazon Usage Occasions o When consumers use the product most o Divide up the market according to when and how they offerings are in demand Segment Business to Business Markets o Organizational demographics Understand the needs characteristics of its potential customers Size of the firm of facilities purchasing policies etc Step 2 Targeting Marketers evaluate the attractiveness of each potential segment and decide which of these groups they will invest resources to try to turn them into customers target market 3 phases of targeting 1 Evaluate market segments 2 Develop segment profiles 3 Choose a targeting strategy Evaluate market segments consumers in other segments o Are members of the segment similar to each other in their product needs