Chapter 3 Flashcards
mass marketing
ignore customer needs and treat everyone the same
- only one offer available
listing fees
pay to put products on shelves, very expensive for small players
Glide
- shred proof dental floss
- struggled to find channel
- chose dentists and had success, eventually being bought by P&G
Dangers of Not Segmenting
- Ignore Needs and Treat the Same
- Waste Resources (health clinic pamphlets)
- Try to be All things to All people
- No Direction for Sales Force
Ritz-Carlton
caters to upmarket travellers
- demand the best and are willing to pay for it
- trains staff to accommodate any need of customer (personalize experience; allergies, tennis)
- create value for the customer
Principles of Marketing Segmentation
- A Business exists to be profitablele
- All Customers are not created equal (needs, cost to serve, appreciation and willingness to pay)
- We cannot be all things to all customers
How to segment: The Wrong Way
- by geography and demographic (age, income, gender)
- psychographic segmentation
- do not tell what markets to enter or what products to introduce or price
How to Segment: The Right Way
- customer needs
- cost to serve
- customer willingness to pay
- customer strategic fit
- potential for revenue growth
- profit potential
The ideal segmentation method takes into account customer needs and the attractiveness of the customer to the business.
How to Segment: On the Internet
- demographics and psychographics are bad
- usage segmentation groups customers by individual behaviour at a point in time
“occasionalization” = what people do online during diff. occasions - recognizes that customers have different moods
psychographic segmentation
- VALS program (Values and Lifestyles), classify individuals based on personality, interests, attitudes and lifestyle.
- not driver of buying behaviour (builds emotional connection only)
Premium Customers
- price-insensitive
- want highest quality
- will pay price premiums
- value relationship, will not switch
Performance Customers
- price sensitive
- want adequate performance
- will pay price-premium if case can be made
- generally loyal, can switch
Value Customers
- price sensitive
- want basic product
- will not pay premium
- will do business with cheapest offer
Over-Segmenting
too many segments, hard to satisfy
- burdens company resources
Segmenting by product, not Market
- does not allow cross-selling, doesn’t take into account customer needs
Pitfalls of Segmenting
a. targeting too many with one offer
b. rely on easiest methods
c. rely on complex approaches
d. segment by product, not by market
e. use same segmentation as competitor
f. over segmenting
g. only target largest segment
h. forgetting that segment change
i. always using the same approach
j. not investing in emerging segments
Examples of Successful Segmenting
Body Shop = ethics
Starbucks = segmented based on how coffee was consumed and viewed
Dell = segmented based on where computers were bought (direct-consumer)
Cirque du Soleil = removed what customers don’t like about circus and what they want in entertainment
Apple
serve the needs of the consumer who wanted the computer to be fun and easy to use - not like PC - not as big as a segment
Segmentation Checklist
+ starting now
+ based on customer needs and attractiveness
+ simple
+ actionable
+ give competitive advantage
+ mechanisms to evolve segmentation overtime
+ enable better business operations
MasterCard
targeted a customer that feels like companies treat them as numbers (feels alienated)
- small business owner clientele, access many resources
Arbol [PT.3]
- initially domestic vs. export
- split domestic into home builder (guaranteed deliver, engineered wood), industrial, repair/remodelling
- further split repair/remodelling into DIY (the Total Kit) and contractor
