Chapter 7 Segmentation, Target Marketing, And Positioning - WordPress

218 PA RT TW O DE T E R M I N E T HE VAL U E P R OPO SI TI O N S D I F F EREN T C U STO M ERS WA N T Chapter 7 Margaret considered her Options 1 2 3 Promote content creation from a top-down approach. Issue a directive from senior management for everyone across the firm to contribute content. This option would make firmwide participation mandatory. For example, all team members across practice areas would be expected to develop a blog or a SlideShare presentation every month. By simply defining this activity as a part of each Option employee’s job description, a steady flow of content would begin almost immediately. Still, Margaret wasn’t sure if such a directive would drive long-term results. The ultimate goal was to win the hearts and minds of colleagues across the firm by showing them the power of content marketing. The marketing team didn’t want to merely dictate and use the power of authority to affect change. They might be assured of quantity but not quality. Nominate senior directors to lead content-creation initiatives. The marketing team would designate specific senior executives across the firm’s global offices to act as drivers of the content strategy. This process would empower the leaders to be role models, and their actions would filter down through all levels of the firm. For example, the company would mandate that Option each senior leader develop a blog post or byline every week. Hopefully, others who reported to these top-level people would see the value of doing this as well. However, this option runs the risk of missing a lot of talent in the firm. Not everyone would be motivated to emulate what their managers were required to do if it weren’t required of them as well. And subject matter expertise is not always directly correlated to seniority. For example, a designer may not be senior in rank but could be deep in expertise. Recruit champions across all levels to contribute. An all-inclusive strategy would recruit advocates across all levels and practice areas. It would provide them with training to produce content that strengthens not only their individual profile but also the firm’s. Siegel Gale would reward employees at all levels by publicly recognizing their efforts every week. If it was successful, Option this approach eventually would develop a broad base of contributors and thus build the “organizational muscle” in content creation across practice areas. Employees up and down the firm hierarchy would be able to see the value of participating, and the pathway to get themselves involved would be clear since some of their peers already were on board with the process. However, this option was very ambitious because it would take a lot of time and effort to develop this “grassroots” network. Margaret knew that some employees wouldn’t respond well to a voluntary addition to their job responsibilities. In addition, this more informal approach would require a lot more hand-holding from her team in terms of individualized training and marketing resources to identify champions and encourage their colleagues to get on the train. Now, put yourself in Margaret’s shoes. Which option would you choose, and why? 1 OBJECTIVE content marketing The strategy of establishing thought leadership in the form of bylines, blogs, commenting opportunities, videos, sharable social images, and infographics. market fragmentation The creation of many consumer groups due to a diversity of distinct needs and wants in modern society. Target Marketing: Select and Enter a Market In the opening vignette on Margaret Malloy at Siegel1Gale you saw that content marketing refers to the strategy of establishing thought leadthe target marketing ership in the form of bylines, blogs, commenting opportunities, videos, process. sharable social images, and infographics. Content marketing is but one (pp. 218–219) way to differentiate and position a brand against its defined target markets. Way back in Chapter 1, we defined a market as all the customers and potential customers who share a common need that can be satisfied by a specific product, who have the resources to exchange for it, who are willing to make the exchange, and who have the authority to make the exchange. And at this point in your study of marketing, you know that key goals of the marketer are to create value, build customer relationships, and satisfy needs. But in our modern, complex society, it’s naive to assume that everyone’s needs are the same. Today, it’s a complex task to understand people’s differing needs because technological and cultural advances create a condition of market fragmentation. This means that people’s diverse interests and backgrounds naturally divide them into numerous groups with distinct needs and wants. Because of this diversity, the same good or service will not appeal to everyone. Consider, for example, the effects of fragmentation in higher education. Before you faced the big decision of which classes to register for, including this one, you had the even bigger task of deciding on which one of the numerous types of colleges or universities you would attend. Not only did you have the more traditional schools to choose from— Identify the steps in

C H AP T E R 7 1. Segmentation Identify and describe market segments SEG M EN TATI O N , TA RG ET M A RKETI N G , A N D PO SI TIONING 2. Targeting Evaluate segments and decide which to go after 219 3. Positioning Develop a marketing mix that will create a competitive advantage in the minds of the selected target market Figure 7.1 Process Steps in the Target Marketing Process community or technical colleges and public or private four-year schools—but you also had newer schools, such as the for-profit University of Phoenix or Kaplan University, and several online-only schools, such as Western Governors University. Each of these institutions of higher learning serves a different market need, and what may meet your needs currently might not meet your needs in the future. Fortunately, there are plenty of options to choose from, depending on your abilities, background, and of course the old checkbook! 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. Mass marketing certainly costs much less—when we offer one product to everyone, we eliminate the need for separate advertising campaigns and distinctive packages for each item. However, consumers see things differently. From their perspective the best strategy would be to offer the perfect product just for them. Unfortunately, that’s often not realistic. For 40 years, Burger King’s motto was “Have It Your Way,” but in 2014 it scrapped that iconic theme for an updated version of the slogan: “Be Your Way.” BK says that the new motto is intended to remind people that “they can and should live how they want anytime. It’s ok to not be perfect. . . . Self-expression is most important and it’s our differences that make us individuals instead of robots.”1 This change is convenient for BK because the huge chain could deliver on the old promise only to a point: “Having” it your way is fine as long as you stay within the confines of familiar condiments, such as mustard or ketchup. Don’t dream of topping your burger with blue cheese, mango sauce, or some other “exotic” ingredient. So, instead of trying to sell the same thing to everyone, marketers select a target marketing strategy in which they divide the total market into different segments based on customer characteristics, select one or more segments, and develop products to meet the needs of those specific segments. Figure 7.1 illustrates the three-step process of segmentation, targeting, and positioning, and it’s what we’re going to check out in this chapter. Let’s start with the first step—segmentation. 2 OBJECTIVE Understand the need for market segmentation and the approaches available to do it. (pp. 219–231) Target marketing strategy consists of three separate steps. Marketers first divide the market into segments based on customer characteristics, then select one or more segments, and finally develop products to meet the needs of those specific segments. target marketing strategy Dividing the total market into different segments on the basis of customer characteristics, selecting one or more segments, and developing products to meet the needs of those specific segments. Step 1: Segmentation Segmentation is the process of dividing a larger market into smaller pieces based on one or more meaningful, shared characteristics. This process is a way of life for almost all marketers in both consumer and business-to-business markets. The truth is that you can’t please all the people all the time, so you need to take your best shot. Just how do marketers segment a population? How do they divide the whole pie into smaller slices they can “digest”? The marketer must decide on one or more useful segmentation variables—that is, segmentation The process of dividing a larger market into smaller pieces based on one or more meaningfully shared characteristics. segmentation variables Dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences.

220 PA RT TW O APPLYING DE T E R M I N E T HE VAL U E P R OPO SI TI O N S D I F F EREN T C U STO M ERS WA N T Segmentation As CMO at Siegel1Gale, Margaret understood the value of segmenting a market into different customer groups. She also knew that there were many different segments of employees across the firm. Using that philosophy, she considered segmenting Siegel1Gale employees in her content marketing program. dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences. In this section, we’ll take a look at this process, beginning with the types of segmentation variables that marketers use to divide up end-user consumers. Then we’ll move on to business-to-business segmentation. Segment Consumer Markets At one time, it was sufficient to divide the sports shoe market into athletes and nonathletes. But take a walk through any sporting goods store today and you’ll quickly see that the athlete market has fragmented in many directions. Shoes designed for jogging, basketball, tennis, cycling, cross training, and even skateboarding beckon us from the aisles. Nike, a brand already popular among many different types of athletes and enthusiasts, was in good shape to address this new fragmentation, especially when it came to targeting Generation Y the extreme or “action” sports (think skateboarding or BMX) that are popular with GeneraThe group of consumers born between 1979 tion Y—people born between 1979 and 1994.2 But Nike had to be careful in targeting this and 1994. market, which doesn’t like to be “sold” to. Instead, as part of its new “Chosen” campaign, Nike got directly involved with the athletes to help them showcase their sports and even allowed to athletes to “wear” other sponsors. The lyrics of their new ads, which include “I’ve got a thing, you’ve got a thing . . . everybody’s got a thing,” (translation: “We’re not coming into your world to change you.”) resonated well with this independent market.3 We need several segmentation variables if we want to slice up the market for all the shoe variations available today. First, not everyone is willing or able to drop a few Benjamins on the latest sneakers, so marketers consider income (Note: A pair of Air Jordan Friends and Family edition kicks will run you a cool 6,000).4 Second, men may be more interested in basketball shoes for shooting hoops with the guys, while women snap up the latest Pilates styles, so marketers also consider gender. Because not all age-groups are equally interested in buying specialized athletic shoes, we slice the larger consumer “pie” into smaller pieces in a number of ways, including demographic, psychographic, and behavioral differences. In the case of demographic segmentation, there are several key subcategories of demographics: age (including generational differences), gender, family life cycle, income and social class, ethnicity, and place of residence, sometimes referred to separately as geographic segmentation. Figure 7.2 summarizes the dominant approaches to segmenting consumer markets. In the sections that follow, we’ll consider each of these segmentation approaches in turn, but first a note of caution. When it comes to marketing to some groups—in particular, lower-income individuals, the poorly educated, nonnative-language speakers, and children—it is Figure 7.2 Snapshot Segmenting Consumer Markets incumbent on marketers to exercise the utmost care Consumer markets can be segmented by demographic, psychographic, not to take undue advantage of their circumstances. or behavioral criteria. In Chapter 2, we introduced a global segment called Segmenting the bottom of the pyramid, (BOP), which is the collecConsumer tive name for the group of over 4 billion consumers Markets throughout the world who live on less than 2 a day. Ethical marketers must be sensitive to the different conditions in which people find themselves and proDemographics Psychographics Behavior actively work to uphold a high level of honesty and trust with all segments of the public. Doing so is nothing short of marketing’s social responsibility. Age One other caveat is needed before we jump into Gender Family life cycle our discussion of different market segments. Identify Income and social class ing segments is not, repeat not, intended by market Ethnicity Place of residence ers as a form of stereotyping. The idea of segmenting (geography) markets is to identify groups of consumers with similar needs so that marketing to them can be done more

C H AP T E R 7 SEG M EN TATI O N , TA RG ET M A RKETI N G , A N D PO SI TIONING 221 efficiently and effectively versus a mass-market approach. That doesn’t necessarily mean that we want to pigeonhole a group of people because they happen to share an important characteristic such as gender or place of residence. Segment by Demographics: Age demographics Statistics that measure observable aspects of a population, including size, age, gender, ethnic group, income, education, occupation, and family structure. generational marketing Marketing to members of a generation, who tend to share the same outlook and priorities. Millennials or Generation Z The group of consumers born after 1994. Generation X The group of consumers born between 1965 and 1978. AFP/Getty Images As we stated in Chapter 2, demographics are statistics that measure observable aspects of a population, including size, age, gender, ethnic group, income, education, occupation, and family structure. These descriptors are vital to identify the best potential customers for a good or service. Because they represent objective characteristics, they usually are easy to identify, and then it’s just a matter of tailoring messages and products to relevant age-groups. Consumers of different age-groups have different needs and wants. Members of a generation tend to share the same outlook, values, and priorities. We call such a focus generational marketing. For example, children are an attractive age segment for many marketers. Although kids obviously have a lot to say about purchases of toys and games, they influence other family purchases as well (just watch them at work in the grocery store!). By one estimate, American children aged 4 to 12 have a say in family-related purchases of more than 1.2 trillion a year.5 The popularity of shows such as Nickelodeon’s Sam & Cat, which brings together stars from its iCarly and Victorious series, is helping to propel star Ariana Grande into a successful singing career. The younger-girl market segment loves the idea of being a pop star, and the girls live their dream vicariously through Grande as well as shows like American Idol and The Voice. Teens are also an attractive market segment. The 12- to 17-year-old age-group is growing nearly twice as fast as the general population—and teens and tweens (kids between the ages of 8 and 14) spend an average of 5,000 per year.6 Much of this money goes toward “feel-good” products: music, video games, cosmetics, and fast food—with the occasional tattoo or hookah pen thrown in as well. Because they are so interested in many different products and have the resources to obtain them, many marketers avidly court the teen market.7 Macy’s, for example, caters to tween girls with its Material Girl collection for juniors (represented by Madonna’s daughter, Lourdes) as well as the older members of this generation with its mystylelab and Impulse departments.8 Marketers refer to individuals born after 1994 as Millennials or Generation Z although the term “Millennials” is also sometimes (mistakenly) attached to the Generation Y period (confusing, eh?). As mentioned earlier, Generation Y consists of people born between the years 1979 and 1994. Sometimes also called Echo Boomers, this age segment is the first generation to grow up online, and it is more ethnically diverse than earlier generations. Generation Y is an attractive market for a host of consumer products because of its size (approximately 27 percent of the population) and free-spending nature—as a group, it spends about 1.3 trillion annually.9 But Generation Y consumers are also hard to reach because they resist reading and increasingly turn off the TV to opt instead for streaming video and digital video recordings. As a result, many marketers have had to develop other ways to reach this generation “where they live,” which is in large measure through their smart phones and tablets, using social media and related technology. We’ll talk more about the shift to new-age marketing communications techniques later in this book. We already know that Gen Yers are technology savvy, but what else defines them as a generation? A Pew Research study shows that Millennials are less inclined to associate themselves with a political party (50 percent are politically independent) or a religion (29 percent have no religious affiliation). They are unmarried (only 26 percent are married). And they are a racially diverse generation—43 percent of Gen Yers are nonwhite.10 The group of consumers born between 1965 and 1978 consists of 46 million Americans known as Generation X, who unfortunately and undeservedly came to be called slackers, or busters (for the “baby bust” that followed the “baby boom”). Many of these The Apple iPhone enables teens to be content creators and empowers them to be masters of their own music world.

222 PA RT TW O DE T E R M I N E T HE VAL U E P R OPO SI TI O N S D I F F EREN T C U STO M ERS WA N T The Cutting Edge Chipotle Targets Socially Conscious Gen Y How do you reach a generation of consumers who shun TV, distrust big-brand advertising, and are highly

Segmentation, Target Marketing, and Positioning 1. Identify the steps in the target marketing process pp. 218-219 TARGET MARKETING: SELECT AND ENTER A MARKET p. 218 2. Understand the need for market segmentation and the approaches available to do it pp. 219-231 STEP 1: SEGMENTATION p. 219 3. Explain how marketers evalu-ate segments and choose a