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1 Chapter 06
2 Segmentation, Target Marketing, Positioning and CRM
1.1 ETHICAL DIMENSION 6
Ethical Perspective
1. Video Game Developers: They are meeting the needs of a target market by developing video
games that appeal to that market. Is that a problem? What responsibility do they bear for the
potential negative effects on young people?
2. Parents: If parents are aware of the violence, how should they handle the purchase and use of
video games by their children?
1.2 KEY TERMS
market segmentation Dividing a market into meaningful smaller markets or submarkets based
on common characteristics.
target marketing Evaluating market segments and making a decision about which among them
shows the most promise for development.
positioning The communication of sources of value to customers so they can easily make the
connection between their needs and wants and what the product has to offer.
differentiation Communicating and delivering value in different ways to different customer
groups.
geographic segmentation Dividing consumer groups based on physical location.
demographic segmentation Dividing consumer groups based on a variety of readily measurable
descriptive factors about the group.
family life cycle The changes in life stage that transform an individual’s buying habits.race and
ethnicity segmentation.
psychographic segmentation Dividing consumer groups based on variables such as personality
and AIOs: activities, interests, and opinions.
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VALS™ (Values and Lifestyles) A psychographic instrument developed by SRI Consulting that
divides U.S. adults into groups based on their primary motivation and resources.
behavioral segmentation Dividing consumer groups based on similarities in benefits sought or
product usage patterns.
primary target markets Market segments that clearly have the best chance of meeting ROI
goals and the other attractiveness factors.
secondary target markets Market segments that have reasonable potential but for one reason or
another are not best suited for development immediately.
tertiary target markets Market segments that may develop emerging attractiveness for
investment in the future but that do not appear attractive at present.
undifferentiated target marketing The broadest approach to target marketing that involves
offering a product or service that can be perceived as valuable to a very generalized group of
consumers.
differentiated target marketing The target marketing approach that involves developing
different value offerings for different targeted segments.
concentrated target marketing The target marketing approach that involves targeting a large
portion of a small market.
customized (one-to-one) marketing A marketing strategy that involves directing energy and
resources into establishing a learning relationship with each customer to increase the firm’s
customer knowledge.
perceptual maps A visual tool used in positioning that allows for comparing attributes to gauge
consumer perceptions of each competitor’s delivery against those attributes.
repositioning Using the marketing mix approach to change present consumer perceptions of a
firm’s product or service.
customer relationship management (CRM) A comprehensive business model for increasing
revenues and profits by focusing on customers.
customer satisfaction The level of liking an individual harbors for an offering.
customer loyalty A customers commitment to a company and its products and brands for the
long run.
lifetime value of a customer The measurement of important business success factors related to
long-term relationships with customers.
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return on customer investment (ROCI) A calculation that estimates the projected financial
returns from a customer. It is a useful strategic tool for deciding which customers deserve what
levels of investment of various resources.
firing a customer The shifting of investment of resources from less attractive customers to more
profitable ones.
customer touchpoints The intersection of a selling firm with a customer via a media channel.
data warehouse A compilation of customer data generated through touchpoints that can be
transformed into useful information for marketing management decision making and marketing
planning.
data mining A sophisticated analytical approach to using the massive amounts of data
accumulated through a firm’s CRM system to develop segments and microsegments of
customers either for purposes of market research or development of market segmentation
strategies.
database marketing -Direct marketing involving the utilization of the data generated through
CRM practices to create lists of customer prospects who are then contacted individually by
various means of marketing communication.
organizational learning The analysis and refinement phase of the CRM process that is based on
customer response to the firm’s implementation strategies and programs.
formalization The formal establishment of a firm’s structure, processes and tools, and
managerial knowledge and commitment to support its culture.
customer mind-set An individual’s belief that understanding and satisfying customers, whether
internal or external to the organization, is central to the proper execution of his or her job.
1.3 APPLICATION QUESTIONS
1 Go to the Nielsen/Claritas web site ( www.claritas.com/MyBestSegments/Default. jsp# ) and
click on “ZIP Code Look-Up” on the top bar. There you will find a demo that allows you to
type in a zip code of your choice and find out what PRIZM clusters predominate in that
geographic area..
a. What do the findings tell you about the overall composition of potential customers within
that zip code?
b. Based on the array of clusters represented, what kinds of start-up businesses might
flourish within the geographic area? Why do you believe those businesses in particular
would be successful?
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3. Go to the Strategic Business Insights website ( www.strategicbusinessinsights.com ) and
click through to the section on VALS TM . Find the VALS TM survey and complete the
questionnaire.
a. Are the results surprising? Why or why not? Do you see yourself as part of the
identified VALSTM segment?
b. If you are comfortable doing so, share your results with a few other people in the class
and ask if they mind sharing their results with you. What is the consensus among the
group about whether the survey actually captured a relevant profile about yourself and
your classmates?
c. How might each of these brands benefit from the use of VALSTM as a psychographic
segmentation tool:
4. Assume for a moment that you are in marketing for Staples (the office supply company) and
that the clients you are responsible for are business users (not end-user consumers). What
five business market segmentation variables do think will be most useful to consider as you
move toward honing in on the Staples’ business target markets with the best ROI? Justify
your choice of each.
5. Consider each of the brands below. Review the list of potential sources of differential
competitive advantage (differentiation) highlighted in the chapter. For each: (a) indicate
which one differentiation source you believe is most important to them currently and (b)
indicate which other differentiation sources you believe might hold promise for development
for them in the near future and why.
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a. Norwegian Cruise Lines
b. Sears Craftsman Tools
c. Avon
d. Lowe’s Home Improvement Stores
e. The Salvation Army
6. McDonald’s is interested in your opinion of how they would stack up on a perceptual map
against Burger King, Wendy’s, Taco Bell, and Chick-fil-A on the attributes of convenience
and product quality. Create the map by putting convenience as the vertical axis (high at the
top and low at the bottom) and product quality as the horizontal axis (low on the left and high
on the right). Then, indicate your perceptions of the five brands on these attributes by
placing a dot for each in the spot that indicates your view (see chapter Exhibit 6.16 for
examples).
a. What does the result reveal about McDonald’s current positioning on these attributes,
based strictly from your perception?
b. If possible, compare notes with others in your class. Do you find consistency?
c. In general, what opportunities for repositioning do you see for any of the brands to take
advantage of current perceptions revealed on the perceptual map? What would they have
to do to accomplish this repositioning?
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brand’s parent firm, what specific actions can marketing managers take in each case to ensure
high satisfaction and loyalty among the most profitable customers?
MANAGEMENT DECISION CASE: Hotel Choices and their Appeal to Different Markets
Questions for Consideration:
1. Go to Marriott’s website (www.marriott.com) and peruse the different types of lodging
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brands offered. Select any three and based on the discussion of differentiation in the chapter,
identify the relevant sources of differentiation offered by each.
2. Even with all of Marriott’s brands they still do not have any hotel properties in the truly
“budget” category of lodging. That’s a category occupied by properties such as Days Inn and
Budgetel. Why do you think Marriott does not have a brand in this category of lodging? Do
you think Marriott should enter this market segment, and if so provide an idea of what a
budget Marriott brand might be like.
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3. With 19 different lodging or extended stay brands under the Marriott corporate umbrella, is
Marriott at risk of making any positioning errors discussed in the chapter? That is, do they
have too many choices? Justify your answer.
1.4 SUGGESTED VIDEO
New Balance: Targeting Multiple Segments (4:25 minutes)
Description: New Balance is the third largest athletic shoe company in the U.S. Their reputation
for creating innovative performance footwear available in multiple widths has helped them
achieve a loyal customer base. Segmentation and targeting is at the center of their marketing plan
to expand and grow. Their product line is divided into 7 segments.
1. By segmenting their product line into 7 segments, has New Balance selecting the optimal
amount of segments?
Best Buy: Using Customer Centricity to Connect with Customers (7:53 minutes)
Description: Most of Best Buy's success is understanding Consumer Behavior. Company has
adopted a theory called 'customer centricity' - listening to customer and putting them at the
forefront of the store. Best Buys has researched its consumer to understand fully what the
consumer is looking for.
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1. What are the advantages and disadvantages of Best Buy’s customer centricity strategy?
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