Marketing Chapter 6: Target Marketing Strategies and Customer Relationship
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
- Instead of trying to sell something to everyone, marketers select a target marketing
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
- (2) Consumers in each segment should be sufficiently different from consumers in
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
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
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
- 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
- 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
o Marketers need to remember one key characteristic of boomers; they inves