CHAPTER 6:SEGMENTATION, TARGET MARKETING, POSITIONING, AND CRM

Part 2: Use Information to Drive Marketing DecisionsMcGraw-Hill Education

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LEARNING OBJECTIVES

Explain the criteria for effective segmentation

Identify the various approaches to market segmentation

Describe the steps in target marketing

Define positioning and link it to the use of the marketing mix

Use and interpret perceptual maps

Identify sources of differentiation

Avoid potential positioning errors

Define CRM and articulate its objectives and capabilities

Understand the concept of customer touchpoints and why they are critical in CRM

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FULFILLING CONSUMER NEEDS AND WANTS

Market SegmentationTarget MarketingPositioning

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MARKET SEGMENTATION, TARGET MARKETING, AND POSITIONING

EXHIBIT 6.1

Market SegmentationDividing a market into meaningful smaller markets or submarkets based on common characteristics.

Target MarketingEvaluating the market segments, then making decisions about which among them is most worthy of investment for development.

PositioningCommunicating one or more sources of value to customers in ways that connect needs and wants to what the product has to offer. Positioning strategies are executed through the development of unique combinations of the marketing mix variables.

WHAT IS SEGMENTATION?

Segmentation seeks to find one or more factors about members of a heterogeneous market that allow for dividing of the market into smaller, more homogeneous subgroups.

The purpose is to develop different marketing strategies to best meet the segments’ distinct needs and wants.

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What is Segmentation?

Not all customers are alike. Subgroups of customers can be

identified on some basis of similarity. The subgroups will be smaller and more

homogeneous than the overall market. Needs and wants of a subgroup are more

efficiently and effectively addressed than would be possible within the heterogeneous full market.

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Criteria for Effective Segmentation

1. Is the segment of sufficient size? 2. Is the segment readily identifiable and

can it be measured? 3. Is the segment clearly differentiated on

one or more important dimensions? 4. Can the segment be reached in order

to deliver the value of the product?

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Geographic Segmentation

Geographic Segmentati

on

By region

By density

of populati

on

By size of

population

By growth

in populati

on

By climate

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Demographic Segmentation

Demographic

Segmentation

Age

Generational Group

Gender

Family and Household

Race and Ethnicity

Income

Occupation

Education

Social Class

Geodemographics

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Geodemographics

Hybrid of geographic and demographic PRIZM-NE database profiles every zip code

in the U.S. by demographic and psychographic methods

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Winner’s Circle Wealthy Suburban lifestyle35-54 yr. old couplesLarge families$100,000 median incomeArea with parks, golf coursesNear upscale mallsThey travel, shop, ski, eat out

Photo

Psychographic Segmentation

Personality, Lifestyle, and Values AIO Attitudes, Interests, and Opinions VALS data based on level of resources and

primary motivation

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VALS™ FRAMEWORKEXHIBIT

6.11

Reprinted with permission from VALSTM Program, SRI Consulting Business Intelligence (SRIC-BI); www.sric-bi.com/VALS.

9-12

Behavioral Segmentation Behavioral Segmentation

Benefits Sought looks to identify the crucial value-adding properties of an offering. Key starting place for segmentation

Usage Patterns Light, medium, or heavy users 80/20 rule

Loyalty programs build on satisfying heaviest users

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SEGMENTING CONSUMER MARKETS Firms use Multiple Segmentation

Approaches Simultaneously Firms develop a profile of a

segment that might include aspects of any or all of the segmentation approaches.

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Target Marketing

 Analyze market segments.

Develop profiles of each potential target market.

Select a target marketing approach.

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SEGMENTING BUSINESS MARKETS Demographic

Industry Company size Location

Operating Variables Technology User Status Customer

capabilities

Purchasing Approaches Purchasing Function

organization Power Structure Nature of existing

relationships General purchasing

policies Purchasing criteria

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9-16

SEGMENTING BUSINESS MARKETS Situational

Factors Urgency Specific

application Size of order

Personal characteristics Buyer-seller

similarity Attitudes towards

risk Loyalty

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TARGET MARKETING

Analyze Market Segments

Segment Size and Growth Potential

Competitive Forces related to

the segment

Strategic Fit of the Segment

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TARGET MARKETING

Develop Profiles of Each Potential Target Market

Primary Target Markets

Secondary Target Markets

Tertiary Target Markets

Target markets to abandon for future development

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CONTINUUM OF TARGET MARKETING APPROACHESEXHIBIT

6.15

VeryBroad

VeryNarro

w

Undifferentiatedtarget marketing

Differentiatedtarget marketing

Concentratedtarget marketing

Customizedtarget marketing

TARGET MARKETING

Select a Target Marketing ApproachDifferentiated Target Marketing

Customized (One-to-One) Marketing

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POSITIONING

The firm must turn its attention to creating, communicating, and delivering the value offering to the target markets.

Positioning the product so that consumers understand its ability to fulfill their needs and wants.

Positioning is not what the company does to the product. It’s what the company does to the mind of the customer.

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Positioning and Research Positioning studies often starts with

focus groups that develop set of attributes.

Next, surveys are developed that have respondents rate the attributes of the firm and of its competitors.

Finally, gap analysis is used to determine gaps of by attribute in importance vs. delivery and vs. competitors.

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EXAMPLES OF PERCEPTUAL MAPS USED IN POSITIONING DECISIONS

EXHIBIT 6.16

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EXAMPLES OF PERCEPTUAL MAPS USED IN POSITIONING DECISIONS

EXHIBIT 616

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EXAMPLES OF PERCEPTUAL MAPS USED IN POSITIONING DECISIONS

EXHIBIT 6.16

Sources of Differential Competitive Advantage

Price Leadership

Innovative Leadership

Service Leadership

Product Leadership

Personnel Leadership

Convenience

Leadership

Image Leadership

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Positioning Errors

Underpositioning

Overpositioning

Confused Positioning

Doubtful Positioning

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Customer Relationship Management--CRM A comprehensive business model for

increasing revenues and profits by focusing on customers.

Manages the most valuable customers relationships

Identifies customer touchpoints Must have the support of senior

management Cuts across the entire organization but

most used by marketing, sales, and customer service

Drives the firm to be customer-centric

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Objectives of CRM30

Customer

Acquisition

Customer

Retention

Customer Profitability

Customer Satisfaction and Loyalty Customer Satisfaction means that the

offering meets or exceeds the customer’s expectations.

Customer Loyalty implies repeat purchases. High satisfaction High level of perceived value Strong relationship with the brand

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CRM Metrics

Lifetime Value of a Customer Relationships pay off in terms of cost

savings, revenue growth, profits, referrals

Can be calculated as: CLV($)=Margin ($) x (Retention Rate

[%]÷1 + Discount Rate[%]-Retention Rate[%] (from Ch. 16)

Return on Customer Investment can be calculated to determine if the fire should fire a customer.

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Process Cycle for CRM33

Phase 1: Knowledge Discovery Customer touchpoints: point-of-sale

systems, call-center files, Internet access, direct selling contacts, other customer contact

A Data Warehouse contains all information about touchpoints.

Data mining uses massive amounts of data collected through CRM to develop segments and micro-segments

Database marketing is the creation of lists to reach segments.

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CRM Phases 2-4

Marketing Planning phase uses the key use of the output from the knowledge discovery phase. Develops the marketing mix strategy.

Customer interaction phase is the implementation of the customer strategies and programs. Includes personal selling and other customer-directed interactions aimed at touchpoints.

Analysis and Refinement is where organizational learning takes place.

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Customer Touchpoints

Interactive touchpoints are two-way and have direct interface between customers and the sales force, telemarketer, customer service rep, or interactive website.

Noninteractive touchpoints are static such as direct mail or website data entry form.

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Customer Touchpoints

Where are all potential touchpoints? What are specific objectives for

information collected at each touchpoint?

How will information be collected and integrated into customer database?

What kind of policies will govern how the information will be accessed and used?

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Customer-centric Culture

Relationship that promotes mutually shared rewards and risk management

Focus selling on customer business consultation and solutions

Educate customers about value chain opportunities through crating relationships

Focus on continuous improvement principles stressing customer satisfaction and loyalty

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Firms with a Customer Orientation Place the customer at the core of all

aspects of the firm Instill a firm-wide focus on

understanding customer requirements Make sure that all employees

understand the customer marketplace Align system capabilities internally so

that the firm offers innovative, competively differentiated, satisfying products and services

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Customer Mind-set

All employees believe that understanding customers, external or internal, is central to doing a good job.

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Photo Credits

Slide 6-3: Eyewire Retail Collection Slide 6-10: Realistic Reflections Slide 6-11: UpperCut Images, John

Smith Slide 6-15 Ariel Skellay/Blend Images Slide 6-40: Purestock

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