Professional Documents
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TARGETING
It’s important to separate the act of segmenting the market from the act of targeting, which means choosing
which segment or segments to pursue actively: the former is where the marketing manager considers the
many possible ways to segment the market for the product, using both primary and secondary marketing
research to develop profiles of the customers, while in the second phase marketing managers actually chose
which segment to serve, using many different techniques. Given the myriad ways of segmenting markets, the
task of determining which segments are better than others, and consequently choose which to focus on
(selection of market targets) is very difficult and is one of the strategic aspects of marketing.
Often in the first phase (segmentation) researchers use qualitative variables, which are the best choice in
order to describe and differentiate segments; however, it’s crucial not to base the targeting choice on the
qualitative variable analysis, since it cannot provide any information on the proportions and size of the
segments: in order to properly estimate segment attractiveness, quantitative research is needed; having the
results and variables resulting from the qualitative analysis, we can divide variables in three categories:
Those related to customer dissatisfaction about the current product: if there’s dissatisfaction, then
there’s space for a new product to enter in the market.
Those related to customer’s behaviours and preferences, related to the product space.
Those related to the willingness to pay for product.
On this basis, we should analyse the size and the profit potential of each market segment, to check if its
substantial.
Then, a table is created highlighting the average score of each variable, for each segment; the most important
variables are willingness to pay and size of the market: if these are not positive, then the segment is not
interesting (multiply fee, or willingness to pay, by size of the segment to rank them). Once we’ve recognized
substantial segments, we need to consider response of each other segment to other variables; there are two
methods for this:
Horizontal analysis, to compare different response of each segment for one variable;
Vertical analysis, to compare responses to each variable in one group;
This process leads the researcher to discover the best 2/3 segments to target; choice on how many actually
targeting depends on resources and other strategies of the firm. One criterion that should always be applied is
parsimony; although having a large number of segments sounds appealing, it’s expensive and inefficient to
pursue too many segments, because all of them should receive different levels and types of marketing, and a
budget stretched over too many segments results in an insufficient concentration of resources in any one
segment.
The successive phase is product positioning, which implies identifying the core-value proposition of the firm
and occupying a distinct position relative to competing brands in the mind of consumers.
Another key issue of the analysis is determining determinance of the attribute k on which brands are
rated. Determinance of the attribute is related to two problems:
Importance of the attribute k for customers: if the attribute is not important for customers, it
won’t have any weight in influencing the decision-making process.
Common perception: if customers have more or less the same perception of all brands
relative to the attribute k, then the attribute is not able to differentiate brands, and not
meaningful in influencing the decision-making process. Therefore, it’s not relevant for our
analysis – in other words, not determinant.
Generally, determinance can be computed as
𝐷𝑒𝑡𝑒𝑟𝑚𝑖𝑛𝑎𝑛𝑐𝑒𝑘 = 𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑡𝑖𝑎𝑡𝑖𝑜𝑛 × 𝐼𝑚𝑝𝑜𝑟𝑡𝑎𝑛𝑐𝑒
Importance can be inferred from surveys and other tools already used in the previous step;
differentiation, instead, is how much customers’ perception of attribute k varies among different
brands, and can be determined by using standard deviation of attribute k.
4. Purchase and use of the product and Evaluation of consumption (post-purchase behaviour).
After the purchase is made, the buyer “consumes” the g/s; it’s important to note that the buyer’s
purchase experiences and evaluation of consumption of the product become part of the internal
memory search: this means that good experience create favourable memories, and enhances the
probability of future purchases, while bad experiences increase the probability that the product won’t
be re-purchased and the customer won’t give a positive word-of-mouth. The evaluation process is
strongly affected by expectations customers have prior to usage: during and after consumption, in
fact, customer will evaluate the product relative to these expectations (low exp, good perf good
evaluation, high exp, good perf ok, …). Generally, products that meet or exceed expectations
receive a favourable post-purchase evaluation and the opposite reaction results for those that do not
achieve expected levels.
PURCHASE INFLUENCES
There are some influences on customer behaviour external to those listed above; these include a variety of
interpersonal and social interactions that shape the way consumers make purchasing decisions. Such
influences can be divided in:
1. Group influences, including
Family and friends, and especially the family life cycle, where each stage brings with it a
different set of values and attitudes. Typical stages of family life cycle are: bachelor stage
newly married couples full nest 1,2,3 empty nest 1,2 solitary survivor. Obviously,
each of these phases imply different needs.
Social class, sometimes referred to as socioeconomic status, often highly correlated with
occupation. There are four groups: upper, middle, working, lower.
Culture. Culture values are transmitted by religious organizations, educational institutions, and
the family; culture is made of unique traditions and tastes, and marketers should offer products
that take into account these traditions and tastes.
Cultural differences are particularly important in a global marketing context: significant
differences in culture, in fact, can affect the way customers respond to the product and to the
marketing strategy of the brand. The main elements of culture are: language, religion, values
and attitudes, education, … As a general rule, sensitivity to cultural differences is necessary for
successful marketing of a product into a foreign country.
2. Product class influences, Problems associated with the marketing of technology-based products are
concentrated largely in the earliest stages of the product life-cycle: after the category is established,
most products (both high or low-tech) become well known, and are marketed in much the same way
as other kinds of products and services. Further analysis on this issue in the Rogers’ curve. Rogers,
moreover, defined 5 attributes to explain why customers adopt new technologies:
Relative advantage: customers will adopt a new product only if they consider it to be an
improvement over the current product being used to satisfy the same need; relative advantage
can be stated in many different terms (economic, psychological, utilitarian).
Compatibility of the innovation with existing systems, values and beliefs, or previously
introduced ideas. Higher compatibility leads to faster adoption of innovation, because it
implies lower costs (both mental and actual) of adoption for customers.
Complexity; perceived complexity of an innovation is negatively related to the success of the
innovation itself: simple innovations are clearly more likely to be adopted: simplicity and
immediate comprehension is what consumers want.
Trialability, which is the ability of potential users to try a product on a limited basis before
adopting it; this is particularly a problem for new technologies, where uncertainty about the
product is high, and for services, because of their inherent intangibility.
Observability, the degree to which an innovation and its results are visible to others.
Network externalities, even if not listed by Rogers. For many g/s, the value of owning them
increases as the number of owners increases (telephone, fax, …); thus, attractiveness of many
products is driven by how many others are on the network.
Another important concept linked to these factors is perceived risk, which is the uncertainty involved
with relative advantage, complexity, … Perceived risk can be defined as the “extent to which the
customer is uncertain about the consequences of an action”; therefore, the two components of
perceived risk are uncertainty (likelihood that certain outcome might occur) and consequences
(whether these outcomes will be positive or negative, and how severe); thus, the challenge for high-
tech marketing managers is to reduce the uncertainty or the severity of possible negative
consequences, which is often done by offering extensive employee training (b2b), generous warranty,
return policies, …
3. Situational influences, those that are unique to a particular time/space, including:
Physical surroundings, such as the weather.
Social surroundings, the people with you when you shop
Temporal factors, such as time pressure.
Task definition factors, such as buying something as a birthday present.
Antecedent states, such as mood or current financial situation.
One last thing to consider in purchase influences are buying roles; although purchasing decisions involving
multiple people are more common for b2b situations, the purchasing decisions for many consumer products
and services involve multiple people in the household. Different roles in a group buying decisions are the
initiator (recognizes the need), the influencers, decider, purchaser, users. These microsegments have
different needs and seek different benefits, so it’s important to decide on who to focus.