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Chapter 6

Chapter 6 - Target Marketing Strategies and Customer Relationship Management.docx

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Simon Fraser University
Business Administration
BUS 343
Jason Ho

Marketing Chapter 6: Target Marketing Strategies and Customer Relationship Management 1. Target Marketing Strategy: Process Overview Understanding peoples needs is an even more complex task today because technological and cultural advances in modern society create a condition of market fragmentation. Marketers must balance the efficiency of mass marketing, where they serve the same items to everyone, with the effectiveness that comes when they offer each individual exactly what he or she wants. - Instead of trying to sell something to everyone, marketers select a target marketing strategy. Identify and Select Market(s) One of the challenges in developing a target marketing strategy is determining what market you are in and what market you should be segmenting. - Marketers must also consider the geographic scope of the market. - The decision about how to define the markets marketers are competing in is typically done at the executive level of an organization. Criteria for Identifying Market Segments A viable segmentation approach should satisfy the requirements: - (1) Members of the segment must be similar to each other in their product needs and wants. - (2) Consumers in each segment should be sufficiently different from consumers in other segments. o Segment differences need to be actionable. o Without real differences in consumer needs and wants, firms might as well use a mass-marketing strategy. - (3) The segment must be large enough now and in the future to warrant targeting. - (4) The segment must represent a measurable market people in the segment have purchasing power: the authority, willingness and ability to make a purchase decision. - (5) The segment must be reachable. o Marketers must be able to identify consumers or organizational customers in the segment and communicate the product offer to them in a cost-effective manner. 2. Step 1: Segmentation Marketers identify the key groups in a market, choose which group(s) to focus on (target), decide how they want their brand to compete and be known by these consumers (positioning) and design marketing programs (make marketing mix decisions) to create product offers that uniquely appeal to the chose target groups. Segment Consumer Markets Several segmentation variables can be used to group consumers into actionable segments Segment by Behaviour Behavioural segmentation usually produces more actionable segments. Another common approach to behavioural segmentation is product usage segmentation. Many marketers abide by a rule of thumb called the 80/20 rule. - It makes more sense to focus on the smaller number of people who are heavy users of a product rather than on the larger number who are just casual users. - Companies can also make money by selling small amounts of items that only a few people want if they sell enough different items. Some marketers find it useful to divide the market into users and non-users of a good or service so that they can reward current users or try to win over new ones. - Non-users are often not clearly identifiable and reachable. - Current users may not be a very homogeneous group. Another way to segment a market based on behaviour is to look at usage occasions. - Being strongly associated with a particular occasion can be a mixed blessing for a product. o On one hand, sales can be almost guaranteed at that time and on the other hand, a product can become locked into an occasion. Segment by Psychographics Psychographics = consumers and customers often make purchase decisions that reflect or support their attitudes, values, interests, opinions, emotions, personality and lifestyles. - Grouping consumers by their psychological orientation to a purchase often results in a useful segmentation scheme that meets the criteria for effective segmentation approach since differences in these psychological considerations usually reflect differences in needs and wants and are precursors to purchase and consumption behaviour. - Lifestyles are a powerful segmentation variable because they capture a number of behavioural, psychographic and demographic characteristics that reflect how different groups of people live, what they care about and how they behave. Other marketers choose to subscribe to larger services that divide the population into segments and sell pieces of this information to clients for specific strategic applications. - The best known of these systems is VALS. o VALS divides the US population into eight groups according to what drives them psychologically as well as by their economic resources. o Three primary consumer motivations are key to the system: ideals, achievement and self-expression. o VALS help match products to particular types of people. - Canadian firms prefer to use the Canadian psychographic system, Environics. o These segments people on the basis of attitudes, values and lifestyles. Segment by Demographics Demographics are vital for identifying the best potential customers for a product or service. - They are extremely useful in the development of profiles or descriptions of market segments because demographic variables help identify people in segments so that they can be reached with a marketers communication strategy.- Demographic variables do not usually provide a main basis for segmentation because demographic-based segmentation schemes usually do not meet the criterion that the people within each group are similar enough that the same marketing programs would appeal to most members of that group. Segment by Demographics: Sex Physiological and socialization differences between men and women can result in different needs, wants and preferences. - However, men and women may also seek different benefits, features or attributes so in many cases, starting with benefit segmentation would result in a similar segmentation scheme as if starting with sex. Segment by Demographics: Age Consumers in different age groups have very different needs and wants with respect to product categories. - Members of a generation tend to share the same outlook and spending priorities and these outlooks and priorities change as people age. - Unless brands specifically reflect differences in product category needs and wants, age is less useful for identifying differences in brand preferences than for identifying differences in product category preferences. - The largest demographic segment in Canada, the baby boomers, accounts for about one-third of the Canadian population and is a segment of prime importance to many marketers. o Marketers need to remember one key characteristic of boomers; they inves
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