BUS 343 Chapter Notes - Chapter 7: Millennials, Customer Relationship Management, Shomi

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Published on 14 Mar 2017
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Chapter 7 Segmentation, Targeting, and Positioning
Companies
Need to identify the parts of the market that it can serve best and most profitably
Must design customer-driven marketing strategies that build right relationships with right customers
o Select customers to serve segmentation and targeting
o Decide on a value proposition differentiation and positioning
Segmentation dividing a market into distinct groups w/ distinct needs/characteristics/behaviors that might require
separate marketing strategies or mixes
1. Geographic segmentation: into geographical units (global/in-country regions, countries, provinces, cities)
a. Helps localize products, advertising, promotion and sales to fit needs of each unit
2. Demographic segmentation: based on age, gender, family size, life cycle, HHI, occupation, education, etc
a. Consumer needs/wants/usage vary closely with demographic variables
b. Demographic variables are also easier to measure
3. Psychographic segmentation: based on social class, lifestyle, or personality characteristics
a. Fit the lives of the consumers soccer moms, rebellious, adventurous, hipsters
4. Behavioral segmentation: based on consumer knowledge, attitudes, uses, or responses to a product
Demographic segmentation
Age and life-cycle segment. divide market into different age and life-cycle (family status) groups
Gender segment. divide based on gender
o Looks at who makes most shopping decisions, new trends for the genders, etc
Household income (HHI) segment. into different income segments, whether single, couple or w/ kids
o Yacht clubs $100,000+ households
o No Frills -> $30,000 or less households
Ethnic or cultural groups languages, relatable brand personalities
Behavioral segmentation
Occasion segment. according to occasions when buyers get the idea to buy, actually make their purchase, or
use the purchased item
o Seasonal products (Christmas, thanksgiving, etc) or routine products (e.g. drinking OJ)
Benefit segment. according to the different benefits that consumers seek from the product
o E.g. buying a bike for exercise, recreation or racing make 3 types of bikes: mountain, road, town.
User status segment based on non-users, potential users, first-time users, existing users, and regulars
o Want to retain regulars, re-invigorate ex-users and attract non-users
Usage rate light, medium and heavy product users can be differentiated based on lifestyle characteristics
o 80/20 rule 80% of the volume of a product is consumed by 20% of your consumers
Loyalty status complete/some-what/zero levels of loyalty to brands
Using multiple segmentation bases
There are business info services that provide multi-variable segmentation systems that merge the data to help
companies segment their markets down
E.g. The Nielse Copa’s PRI)M
Targeting the LGBT community involves this kind of segmentation because it is very diverse in all variables
Segmenting Business Markets
Using geographic, demographic, benefits, user status, usage rate, and loyalty status (like for consumers)
In addition operating characteristics, purchasing approaches, situational factors, personal characteristics
E.g. starbucks targets offices (i.e. businesses) to provide employees with starbucks coffee at work
o Give coffee, tea, paper products, equipment, training, marketing and merchandising support
Buying behavior and benefits provide the best basis of segmenting business markets
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Segmenting International Markets
Different countries vary in economic, cultural, and political makeup
Companies can segment international markets using the following variables
o Geographic location countries close to each other have common traits
o Economic factors ioe leel, populatio’s p/s eeds, deelopig eooies
o Political & legal factors type/stability of the govt., receptivity to foreign firms, monetary regulations,
and amount of bureaucracy
o Cultural factors - language, religion, values, attitudes, customs
Intermarket (cross-market) segment. into consumers who have similar needs/buying behaviors even though
they are located in different countries
To be effective, market segments should be
Measurable size, purchasing power and profiles of segments can be measured (but may be difficult)
Accessible can be effectively reached and served
Substantial large and profitable enough to serve largest homogenous group worth pursuing
Differentiable are conceptually distinguishable and respond differently to various marketing-mix elements
Actionable effective programs can be designed to attract/serve the segments
Targeting proess of ealuatig eah arket seget’s attratieess ad seletig oe or ore segets to eter
Evaluating Market Segments looks at 3 things (, consumers, competition and company)
1. Segment size and growth (relative to what segment is more profitable to your company)
2. Segment structural effectiveness
a. Executives analyze the five forces competitors, new entrants, substitute products, power of buyers,
power of suppliers
3. Company objectives and resources
Selecting Target Market Segments
Target market: set of buyers sharing common needs/characteristics that the company decides to serve
Can be done at several levels (undifferentiated, micro and differentiated)
Undifferentiated (mass) marketing: ignoring market segment differences & going after the whole market w/
one offer
o Focuses on what common needs the consumers have
Differentiated marketing: target several market segments and designs separate offers for each
o But this also increases the cost of doing business expensive to develop and produce varieties
Concentrated marketing: firm goes after a large share of one or a few segments or niches
o Greater knowledge of customer needs in niches and special reputation acquired
o Firms can fine-tune products, prices and programs to fit seget’s eeds
o Niche markets are smaller and may only attract one or two competitors
o Companies can focus limited resources of small groups that are overlooked by large competitors
Micromarketing: practice of tailoring products and marketing programs to the needs/wants of specific
individuals and local customer segments
o Where market segment is so small, it is contained in a small geographic area
o Local marketing small group of people who live in the same city/neighborhood or shop at same store
Can drive up manufacturing and marketing costs by reducing economies of scale
But helps market effectively in face of pronounced regional/local differences in demographics
o Individual marketing tailoring products and marketing programs to the needs/wants of individuals
A.k.a marketing customization
Like how it was historically done (tailor for your suit, cobbler for your shoes)
Technology used now
Computer databases, robotic production, flexible manufacturing, interactive communication
Companies are hyper-customizing (letting consumers design their products)
Benefit vs cost at individual customer level
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Document Summary

Divide market into different age and life-cycle (family status) groups: gender segment. Divide based on gender: looks at who makes most shopping decisions, new trends for the genders, etc, household income (hhi) segment. Into different income segments, whether single, couple or w/ kids: yacht clubs ,000+ households, no frills -> ,000 or less households, ethnic or cultural groups languages, relatable brand personalities. According to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item: seasonal products (christmas, thanksgiving, etc) or routine products (e. g. drinking oj, benefit segment. Loyalty status complete/some-what/zero levels of loyalty to brands. Using multiple segmentation bases: there are business info services that provide multi-variable segmentation systems that merge the data to help companies segment their markets down, e. g. The nielse(cid:374) co(cid:373)pa(cid:374)(cid:455)"s pri)m: targeting the lgbt community involves this kind of segmentation because it is very diverse in all variables.

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