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Foreign Market Entry Podcast As you are likely aware, your internship brand doesn’t just do business in the U.S. So, in this interactivity, we’re going to research their past entry into a foreign market. But rather than writing about it, we’re going to talk about it — by creating a short podcast. Guided Response: 1. Identify a specific country to analyze your brand's entry into o o First identify the countries your mentor marketer does business in. Or did. Check out the corporate website. Or the latest annual report. Then search your brand in business periodicals such as Forbes in conjunction with country names or terms like “foreign” or “international.” See which markets have been written about and select one. 2. Research your chosen market to answer these questions: o o o o When did your mentor marketer enter this foreign market? What specific challenges did entering this market present? (e.g., cultural norms, language barriers, local competition, government regulations, economic conditions, etc.). Identify at least three. What changes were made to the marketing formula in entering this market? What other changes were needed? Cite at least three examples, linking each one to a marketing "p." You can repeat "Ps" more than once. How successful was the entry into this market? Is the brand still in the market? 3. Identify and create proper APA citations for 3+ different sources. o o Try to explore different types of sources (periodicals, videos, annual report, etc.). Tap the Forbes archive and other Ashford University resources as needed. As you will be creating a podcast, in-line citations are not required, but you will need to document your sources. 4. Script (or at least outline) for your podcast. o Be sure to introduce yourself and identify your mentor marketer and the relevant market before answering the questions above. 5. Record your podcast with SoundCloud. o o SoundCloud provides the means to record and share a link for free. Consult our step-by-step Creating Your Soundcloud Recording tutorial. 6. Post your podcast link and APA formatted sources to forum below. Creating a SoundCloud Recording How to record and share a file (and create an account) on SoundCloud 1. Create a soundcloud account (if you don't have one) Visit and click "create account" 1 Creating a SoundCloud Recording 2. Initiate File Recording Process Once you’ve created an account, click “upload”on the main menu bar. 3. Start Recording When ready hit the “record” button. 2 Creating a SoundCloud Recording 4. Enable your microphone Allow the service to access your microphone as needed. 5. Record your script Use your script to tell your foreign market entry story. Don’t sweat minor mistakes. When done, hit the red record button again to stop recording. 3 Creating a SoundCloud Recording 6. Play back and upload your recording Do this by pressing the red button which now will bear a play symbol. If satisfied, click "upload your recording." Otherwise click “start over” to re-record. Remember imperfection is fine. 4 Creating a SoundCloud Recording 7. Title your recording After clicking "upload your recording", you will be brought to this page. Edit your title. 8. Change recording to private Scroll down from the title area to the settings area and click the private radio button. 5 Creating a SoundCloud Recording 9. Save your recording Scroll further down to the bottom of the page and click "save" 6 Creating a SoundCloud Recording 10. Find your track and prepare to share You’ll be brought to a page with your track. Under the track click on the share icon. 7 Creating a SoundCloud Recording 11. Copy the private link And that's it! Because we made this a private recording, it will not publicly appear on your profile. 8 7 Science Faction/Corbis Target Markets Learning Objectives After studying this chapter, you should be able to: • Describe consumers’ Purchase Decision Process and summarize the three categories of factors influencing it. • Explain why marketers need an understanding of consumers’ emotions and motivations. • Recall nine criteria an effective segmentation strategy must meet. • Give an example of a marketing strategy driven by insights from the CRM approach. • Describe three levels that buyer-seller relationships pass through as they deepen. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 213 4/8/16 10:39 AM Section 7.1 Consumer Purchasing Behavior CHAPTER 7 Introduction I n the first chapter of this book, you began building insights into consumer buying behavior. In that chapter your view was framed by the concept of consumers’ search for value, expressed as the Customer Value Equation. In the second chapter you built on that knowledge as you learned about the marketing process. You learned that insights into consumer behavior are necessary inputs to several steps in that process. Consumer behavior was never far from the discussion as you progressed through chapters on each of the marketing mix decisions (the four p’s). Now, you’ve come full circle. Consumer buying behavior is again the focus of study. This time, instead of framing the discussion of consumers in terms of their search for value, we’ll discuss how the innate aspects of consumer behavior interact with marketing practice. We’ll also look at how marketers leverage knowledge about consumers to generate profitable transactions and long-term relationships. 7.1 Consumer Purchasing Behavior C onsumers—the individuals who buy goods and services for personal or household consumption—create a mind-boggling market opportunity. More than 7 billion people inhabit the planet, and all of them consume. In the United States alone, there are over 112 million consumer households with a median 2009 income of $50,221 (U.S. Census Quick-Facts, 2010). That’s a lot of purchasing power. With so many consumer dollars on the move, it’s not hard to see why marketers study purchasing behavior. Data on what consumers buy, as well as where and how much, are relatively easy to find in a company’s own sales transaction records. But what about the “why” behind the buy? What drives consumers’ actions? Given the diversity of the population, there is no one answer to that question. Various environmental, cultural, group, and individual characteristics influence consumer behavior. Marketers would like to figure out how consumers respond to various marketing efforts— stimuli that produce responses, in the language of social scientists. Some of those stimuli are under marketers’ control, produced by marketing mix strategies regarding the four p’s of Place, Price, Product, and Promotion. Marketers must also take into account the stimuli they cannot influence, just as sailors must factor in the direction and force of winds they cannot control. Sociocultural factors influencing purchasing behavior are summarized in Table 7.1. A closer look at each of the four categories follows. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 214 4/8/16 10:39 AM CHAPTER 7 Section 7.1 Consumer Purchasing Behavior Table 7.1: Sociocultural factors influencing purchasing behavior Environment Culture/Subculture Group Individual Technology Race/ethnicity Membership Occupation Ecology Social class Reference Income/wealth Economy Cohort Aspiration Education Politics Geographic region Family Beliefs and attitudes Legal issues Lifestyle Role/status Age/life stage Psychology Marketers cannot control or even exert influence on most factors influencing purchase behavior, but they need to understand the role these factors play in consumers’ purchase behavior. Environmental factors include economic, political, and technological forces that influence consumer behavior; these will be explored in Chapter 8. Cultural factors exert their influence from an early age, shaping wants and motivations. Culture consists of learned values, perceptions, needs, and behaviors. Marketers focus on cultural shifts that may bring to light new marketing opportunities. Subcultures are groups of people within the larger culture who share life experiences, situations, and values. Most culture shifts emerge from subcultures. These can be defined by traits such as race or ethnicity, by generational cohort, by geographic region, or by social class. A cohort is a group whose members share a significant experience or have similar characteristics. For example, people born in the same span of years belong to a generational cohort. Women who smoke belong to a cohort within the subculture of smokers. Even lifestyles can be a strong enough organizing principle to produce a subculture, such as homeschoolers or single parents. When a cultural group is large enough to have significant spending power, it often becomes the basis for target marketing. Group factors influence individual behavior through the desire to belong or conform. One may be an official member of a group, aspire to be a member, or simply be influenced by a dominant group. Reference groups share attitudes, behavior, beliefs, opinions, preferences, and values that an individual uses as the basis for judgment. Members of a college fraternity, for example, might form a reference group for an arriving freshman. That individual need not be (or even want to be) a member of a reference group to be influenced by it. Likewise, one’s family group has a strong influence on purchase behavior. Even young children have a role in family buying decisions. One’s role and status within a group adds an element of influence, as people seek the general esteem of the society around them. People’s purchases often reflect the groups they belong to, take cues from, or aspire to join. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 215 4/8/16 10:39 AM CHAPTER 7 Section 7.1 Consumer Purchasing Behavior Individual factors influence buying behavior in terms of the goods and services sought. These change with shifts in occupation, income or wealth, education, age/life stage, and psychology (motivations, perceptions, beliefs, and attitudes). A closer look at the psychological factors of emotion and motivation follows in Section 7.2. But first, let us consider how this framework for understanding the factors that influence purchase behavior is evolving as today’s consumer changes. Consumers Are Changing Today’s consumers are active participants in the marketing process. They influence each other by sharing opinions and experiences. They expect to have input into customizing products and developing marketing messages. They are increasingly anxious about environmental pressures ranging from the economy to globalization. A creative class is emerging, consisting of professionals and artisans with an increasing desire for meaning in their lives. All of these factors are affecting contemporary consumers’ purchase behavior. Consumers across the United States suffered when the recession began in late 2007 (Isadore, 2008). Consumers’ perception of the Customer Value Equation may have been fundamentally altered by this experience; an economic recovery may not bring consumers back to previous behavioral patterns. In switching to lower-priced consumer goods at the recession’s outset, they discovered that the quality of the lower-priced brand was higher than expected (Bohlen et al., 2009). Consumers in a financially constrained but humanity-centric world may demonstrate different purchasing behavior. Consumers’ interest in environmentally sound products illustrates the dilemma. Sales of environmentally sound products illustrate the dilemma consumers face in a financially constrained but humanitycentric world; green products generally cost more due to more expensive components and smaller sales volume. PR Newswire A relatively modest number of American consumers adopted an environmental stewardship ethos in the 1960s or 1970s, waxing and waning since then under various forces, including the political climate, the economy, and social trends. After Al Gore’s movie “An Inconvenient Truth” was released in 2006, consumer demand for environmentally sound products grew sharply, resulting in a “green” movement that sent marketers into a frenzy of developing new products for eco-conscious consumers (Lash, 2012). Suddenly green products, from recycled toilet paper to cleaning supplies, were flying off store shelves. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 216 4/8/16 10:39 AM Section 7.1 Consumer Purchasing Behavior CHAPTER 7 But these products generally came at a higher cost. This was due in part to more expensive components but also to smaller volume sales. What consumers considered a good value when the economy was booming suddenly changed when the economy turned sharply downward in 2008. With reduced incomes and greater uncertainty about their future, many consumers were no longer willing to pay more for the added value of a form/function that promised to be kinder to the planet. Consumers still wanted to help the environment but felt they could not afford the extra cost. Fewer consumers purchased green products. Many waited for sales that would set the Customer Value Equation back to a balance they could afford (Clifford & Martin, 2011). Whether the financial constraints on consumers ameliorate over time or not, a new “normal” for purchase behavior will likely emerge. What can we assume about these fundamentally different consumers? It’s clear that they seek engagement. The Internet has greatly expanded individuals’ ability to find people with whom they share common interests. They connect with ideas that feel meaningful to them—even if they’re just discussing their favorite celebrity’s latest gaffe. Marketers have been quick to respond to the demand for dialogue and engagement—for example, by using technology to extend invitations to join a community around a specific product or brand. The QR (quick-response) bar codes in print ads that lead to a product’s website when photographed with a smartphone are just one example. Consumers’ changing behavior reflects the change in the macro-environment around them. Shifts in any factor influencing purchasing behavior will cause consumers to continue to change over time. The Purchase Decision Process The behavior of individuals as they move through mental tasks from recognizing a need to making a purchase follows a predictable process. Each step triggers a new set of thoughts and feelings. To design effective strategies, marketers need awareness of each psychological task consumers face as they move from step to step, as illustrated in Table 7.2 and Figure 7.1. Table 7.2: Purchase decision process Step Description 1. Needs Recognition Triggered by a stimulus, an individual recognizes a need or desire. 2. Information Search Motivated to find out more, the individual pays attention to information including relevant marketing messages, developing purchase criteria that reflect his or her expectations and beliefs about what will satisfy the need. 3. Alternative Evaluation Newly armed with information, the individual develops a consideration set made up of acceptable alternatives. (continued) © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 217 4/8/16 10:39 AM CHAPTER 7 Section 7.1 Consumer Purchasing Behavior Table 7.2: Purchase decision process (continued) Step Description 4. Purchase Decision Having considered each alternative, the individual (knowingly or not) assigns each a value in terms of its Customer Value Equation, and thus decides which to buy. 5. Postpurchase Behavior The individual experiences either satisfaction or dissatisfaction, based on whether expectations of the purchase were met. Post-purchase behavior might take the form of a future repurchase or new purchase decision process, as well as positive or negative buzz. Figure 7.1: Purchase decision process illustrated Needs recognition Information search Alternative evaluation Purchase design Postpurchase behavior Theoretical process Situational influences The purchase decision process carries an individual from one step to the next, with pauses and backtracks caused by situational influences. Source: From Kotler et al., Principles of Marketing, 11th ed. Copyright © 2006. Printed and Electronically reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey. Individuals’ purchase decision process is seldom completely linear, and each step may require a different amount of time. New information may cause a shopper to backtrack. Individuals frequently pause at a stage—perhaps the purchase is not urgent, or the shopping process itself is pleasurable. In some situations the individual never reaches the step of purchasing at all, because other needs or desires arise and cut the process short. Many major purchases, because of the complexity of purchase criteria to be met, leave the consumer with some degree of dissatisfaction. Some trade-off will have taken place, leaving an opening for the cognitive dissonance known as buyer’s remorse. Since customer © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 218 4/8/16 10:39 AM Section 7.1 Consumer Purchasing Behavior CHAPTER 7 satisfaction is essential to building long-term relationships, marketers need to manage their consumers’ post-purchase emotions with supportive information such as testimonials, warranties, and after-sales service. Is the purchase decision process different for businesses buying from other businesses? Yes and no. The process is similar in that influences on decision-makers come from environmental factors. These include organizational factors such as policies, procedures, and systems and interpersonal factors such as authority, status, control of rewards, and persuasiveness. All the individual factors influencing consumer purchases described previously also influence business buying decision processes, since people don’t stop being who they are when they get to work each day. The business buying decision process differs from the consumer buying process in that businesses often require significant time to identify requirements, put out requests for proposals, and/or engage in extensive negotiations. In addition, most business purchases are based on derived demand and the buyers themselves are less often involved in the actual consumption of the product or service than in consumer buying processes. When buyers in business-to-business situations need to make purchases, they may be looking for a: • • • Straight rebuy (a routine reorder, requiring little thought or process), Modified rebuy (in which the situation is complicated by the need for a new consideration set to meet changes sought in specifications, prices, terms, or suppliers), or a New task (in which the full purchase decision process will take place, virtually identical to the consumer process described previously). A business buying process may include additional steps of assigning responsibility for the purchase decision, identifying selection criteria per the needs of those who will actually use the purchased product or service, and establishing a selection procedure that includes a team made up of users, influencers, and the actual individual(s) with buying authority. Degree of Involvement The degree of involvement a consumer feels affects the consumer’s purchase decision process. Some buying decisions require a high level of involvement. If the purchase reflects a high level of personal, social, or economic significance, a consumer is likely to feel deeply invested in the outcome and will put a good deal of energy and thought into making a choice. The information search step will take longer than for lowerinvolvement purchases, and the potential for buyer’s remorse is higher. Think about buying a loaf of bread and buying a car. The cost and the lifespan (and therefore the frequency of purchase) are quite different between the two. The buyer’s degree of involvement is quite different as well. Consumers’ degree of involvement can be judged by considering the category a purchase falls in (previously introduced in Chapter 3): 1. Convenience products call for routine problem solving. These purchases are typically a matter of habit, reflecting a low degree of involvement in the outcome. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 219 4/8/16 10:39 AM Section 7.1 Consumer Purchasing Behavior CHAPTER 7 Consumers have little concern whether a convenience offering is likely to meet their expectations of value. 2. Shopping products call for limited problem solving. Several brands might be evaluated, depending on the time and effort the consumer has to spend, but the outcome does not carry enough risk to require greater effort. 3. Specialty products call for extended problem solving. Purchases in this category require high consumer involvement to differentiate a long list of features and attributes, with far-reaching consequences to the decision, such as when a person shops for a car or a computer. 4. Unsought products may call for routine, limited, or extended problem-solving depending on the offering—but only after consumers have become aware of them and recognize a need or desire. Purchasing $25 in wrapping paper to support a local cause would call for a low degree of involvement. Getting a vision screening might call for limited problem solving to choose an optometrist. Choosing a charity to name as beneficiary in one’s will would call for extended problem solving. Exceptions to these categories exist, of course. Sometimes people choose different brands just for the variety, like trying a new brand of pizza because it’s on sale or new to the market, or trying frozen yogurt just to see if it tastes as good as higher-calorie ice cream. Sometimes the situation is such that consumers must take what’s offered. The person who drops into a convenience store for cough drops is not likely to agonize like the purchaser of a car or computer—or even ice cream or pizza. When the purchase is a gift for someone else, that too affects the decision process in subtle ways. These categories merely offer a framework on which fuller understanding of consumer behavior can be built. Influences on the Purchase Decision Process We have discussed sociocultural influences and the level of involvement the consumer brings to the task of making the decision. But more is going on here. The situational influences surrounding the purchase decision process include: • • • • • • Marketing mix: The strategies regarding Product, Price, Promotion, and Place that marketers have chosen to make the offering appeal to the consumer. Customer Value Equation: The buyer’s own beliefs about which benefits constitute a “good enough” or—better yet—a “great” value at a given price. The purchase task: Specifics of the level of involvement, number of brands, sellers, product attributes, and information sources required to make a purchase decision. Social surroundings: Presence of others can alter how a purchase decision is made. Physical surroundings: The retail environment affects what is purchased; merchandise assortments, traffic flow, displays, and perceptual cues (such as sale signs) all matter. State of mind: The buyer brings to the purchase decision certain attitudes and beliefs. Hunger, fatigue, or a recent glance at bank balances can positively or negatively influence willingness to spend. Add to what you have learned about sociocultural and situational influences the discussion coming up of psychological influences—motivation—and you will have a complete, © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 220 4/8/16 10:39 AM Section 7.2 “It’s All In Their Minds”—Emotions and Motivations CHAPTER 7 360-degree view of the influences on the consumer purchase decision process. How these will evolve as an increasingly diverse population of consumers changes is not yet known. Field Trip 7.1: Changing Consumer Demand As you study this chapter, what is the current temperament of the typical consumer, caught between a desire for meaningful engagement and a household budget that may yet be pinched by recession? Environmentally sound products function as an indicator of consumers’ relative optimism. Enter the phrase “consumer demand for environmental products” in your favorite search engine to find recent articles that may shed light on the changing consumer. In summary, the three types of factors influencing the purchase decision process (sociocultural influences, degree of involvement, and situational influences) come to bear as consumers complete the five tasks in the purchase decision process. Consumers are changing, but as a means to understand them, study of the factors influencing buying behavior will remain useful. Questions to Consider Consider a recent purchase you made that would qualify as a “shopping” experience requiring limited problem solving, or a “specialty” experience requiring extended problem solving. Describe your own behavior as you completed each task of the Purchase Decision Process. Describe the situational and other influences affecting you as you faced each task. 7.2 “It’s All In Their Minds”—Emotions and Motivations U nderlying all consumer behavior are individual factors driven by human psychology—the perceptions, beliefs, and attitudes that influence personal behavior. Individuals have always experienced wants and needs, many of them strong enough to demand satisfaction. That inner drive is called motivation. Multiple frameworks exist for understanding motivation, emerging since the growth of psychology in the early twentieth century. Today’s marketers study the psychology of motivation to stimulate purchasing a specific product, supporting a cause, or expressing loyalty to a brand. One of the most prominent psychologists to develop a theory of human motivation was Abraham Maslow, whose concept of the Hierarchy of Needs suggested that, once basic physiological needs are met, people will seek fulfillment of higher-level needs, including safety, belonging, esteem, and eventually reaching (if they are lucky) the level of seeking self-actualization, where finding meaning in life becomes their priority. Maslow’s Hierarchy of Needs laid the groundwork for our contemporary understanding of the drives that propel consumers. Subsequent research takes that groundwork in new directions relevant for marketers. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 221 4/8/16 10:39 AM Section 7.2 “It’s All In Their Minds”—Emotions and Motivations CHAPTER 7 Today’s theories of motivation recognize that purchasing behavior includes both cognitive and emotional components. Needs may be utilitarian needs or hedonic needs. To understand the difference, consider how you feel about two purchases: a washing machine and concert tickets. The former fills a need, but it isn’t likely to move you aesthetically or help you express yourself the way the latter will. Utilitarian needs derive from a practical service the purchase will perform. Utilitarian needs trigger little emotional response, so advertising for utilitarian products and services focuses on facts that help the consumer evaluating service utility. Hedonic needs reflect a desire to achieve pleasure, not just service, from the offering. Hedonic needs open the door to aesthetic appreciation, self-expression, fantasy, and adventure. Marketing messages for offerings that fill hedonic needs usually play on the emotions. More Influences on Motivation: Self-Expression, Brand Loyalty In a consumer society individuals show each other who they are by what they have. The behavior starts early, as children experiment with forming identities, either copying the style of individuals they admire or inventing their own. Children quickly learn which brand names confer status. As children grow into adults they become more sophisticated at using their purchasing power for self-expression. Almost everyone enjoys purchasing the props that project specific identities, whether that means camping gear, runway fashion, or the latest personal technology. Virginia Postrel in her book The Substance of Style makes the case that “The more choices we have, the more responsibility we face—whether or not we want it—to define ourselves aesthetically. Because others make similar selections, for similar reasons, I like this becomes I’m like this.” Postrel is talking about the power of brands to confer status (2003). A line of clothing based on a video game illustrates Postrel’s point. Konami, the company that makes Metal Gear Solid, introduced the clothing line to allow Metal Gear Solid fans to incorporate the brand into their lifestyles (Newman, 2011). A clothing line based on the video game Metal Gear Solid reflects that consumers define themselves aesthetically through purchases, making a connection between “I like this” and “I am this.” Associated Press © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 222 4/8/16 10:39 AM Section 7.2 “It’s All In Their Minds”—Emotions and Motivations CHAPTER 7 Why would a person want to wear clothing that takes its design cues from characters in a video game? The reason could be to draw on the strength of its hero, like a shaman who wears a bearskin to take on the attributes of the bear. It could be to display membership in the Metal Gear Solid community. Or one could choose the jacket just to feel the connection between “I like this” and “I am this.” When purchases allow us to feel affiliated with others—part of a tribe—they meet social needs. When purchases make us feel confident and strong, they meet self-esteem needs. The wants and needs of individuals making their way up Maslow’s Hierarchy of Needs can be seen as drivers of humanity-centric Marketing 3.0 consumer behavior, accepting the responsibility to define oneself aesthetically as described by Virginia Postrel. More recently, researchers have begun to tie people’s use of consumption for self-expression to brand loyalty. Consumers may develop brand loyalty motivated by a desire to conform to a reference group. Following fashion trends illustrates the use of brands to fulfill a hedonic need to belong. Alternatively, consumers’ hedonic motivation to break away from the present environment can translate to loyalty to the brands that represent freedom from conforming to the constraints of a mass-market society. The Harley-Davidson brand community, whose members integrate the brand into multiple facets of their lives from community events to fashion statements, illustrate consumption of a brand as a sanctuary in which the consumer experiences “a transcendental escape from the mundane” (Labreque et al., 2011). Either hedonic need—conformity or escapism—can have a positive influence on brand loyalty. This is good news for marketers who want to use psychological principles to stimulate and direct consumer purchase behavior. The Role of Emotions One more aspect of consumer behavior deserves attention: the role of emotions. Motivations can be experienced as either positive or negative emotions. Emotions produce feelings that trigger the urge to act. People act on positive motivations to achieve desires; they act on negative motivations to avoid worry and uncertainty. Purchasing a motorcycle fulfills a desire to satisfy a positive emotion. Purchasing life insurance fulfills a desire to avoid a negative emotion. Not only do emotions move a person to make a purchase; emotions can influence that consumer’s decision about whether the purchase is a good value. Pleasant emotional experiences often lead to customer loyalty, while unpleasant emotional experiences lead to negative word-of-mouth. Provoking a favorable emotional response through engagement with potential consumers is a fundamental task of advertising and marketing. Emotions can lead directly to consumer purchases, through the process shown in Figure 7.2. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 223 4/8/16 10:39 AM Section 7.2 “It’s All In Their Minds”—Emotions and Motivations CHAPTER 7 Figure 7.2: Consumer emotions influence on purchase decisions Emotion creates consumer need. Consumer develops conscious awareness of need. Consumer motivated to satisfy need. Consumer makes purchase. Emotions lead to motivation that influences purchase decisions. Source: Laura Lake, Consumer Behavior for Dummies, p. 77. Reprinted by permission of John Wiley & Sons, Inc. Marketers make use of this insight to trigger consumers’ motivation to purchase by positioning their offerings on emotional benefits. The benefit may promise a positive emotion, such as increased happiness or greater energy, or a promise of reduced negative emotion, such as stress relief. Follow Field Trip 7.2 to practice using what you have learned in this chapter about consumer motivation. Field Trip 7.2: E-readers Consider the growing popularity of e-readers, with features such as size and screen composition, that deliver benefits such as portability and comfortable reading. Visit websites advertising e-readers, such as: What type of need does an e-reader fill? Does purchasing an e-reader constitute consumption as self-expression, as Virginia Postrel describes? Is purchasing an e-reader more likely to satisfy a desire for conformity or for escapism? What emotions might be involved in choosing an e-reader? © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 224 4/8/16 10:39 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 In conclusion: Marketers study consumer behavior, motivation, and emotions because they need to understand how consumers shop and decide what to buy. Marketers need to understand how buyers see the world: what stimulates them to feel a need, what triggers them to act, what purchase criteria matter to them, and what mental and emotional processes they go through to decide which item gets rung up as a sale. Knowing enough about consumer psychology to recognize “where prospective buyers are coming from” is important for any marketer. But as you’re about to learn, all of that pales in usefulness compared to the insights possible from tracking and analyzing hard data about consumer purchases. Behavioral profiling yields more marketing insight than psychology. And so, we move on to the data-driven strategy of segmentation, targeting, and positioning. Questions to Consider How might you apply your knowledge of consumer psychology to develop marketing tactics? Recall what you learned about the four p’s in previous chapters. Suggest how insights into consumer motivations and emotions might be applied to each of the four areas of the marketing mix: Product, Place, Price, and Promotion. 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning The STP fuel additive was designed to increase engine performance and fuel efficiency. “STP” for marketing performs a similar feat—increasing marketing campaign performance while making fuel (money) go further in terms of results (as measured by return on investment, or ROI). The approach is simple: Companies segment their market to identify clusters of potential customers, and then target those customers for specific marketing communications, which are designed to position the company’s offering and brand to stand out from competitors. The STP approach works because it leverages the fundamental insight of market segmentation: Not everybody will buy a company’s goods and services. Some are more likely to buy than others, and for different reasons. When marketers use their understanding of buying behavior to divide the total market into smaller, relatively homogeneous groups, they can deliver greater value to customers, more efficiently and cost-effectively. No More “One Size Fits All” A market segment consists of a group of people who share a similar set of needs and wants, usually because they share other traits, such as geography, age, income, and/or lifestyle. Because of their commonalities, people within a segment are likely to share perceptions of the specific Customer Value Equation for a particular offering. For example, mothers are likely to value Avon Skin So Soft for its usefulness as a bath oil safe for children’s tender skin, while outdoor enthusiasts value the same product for its effectiveness as a nontoxic insect repellent. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 225 4/8/16 10:39 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 Marketers use the insight that some segments are more likely to buy than others to concentrate resources on the probable buyers. Once a segment has been identified as potentially profitable, marketers focus on identifying the behaviors and motivations that affect the segment’s buying decisions. Only with a clear understanding of those factors can marketers develop marketing mix strategies that deliver value to that segment. Marketers may conduct primary research or purchase secondary research (defined in Chapter 2) to understand market segments. This may result in positioning an existing offering differently or developing a product extension or even a new product innovation to meet an unfilled need that has come to light. People within a segment are likely to value a product for the same reason. Can you think of another product like Avon’s Skin So Soft oil that has such disparate market segments? Associated Press Information about market segments can be purchased from outside firms, or derived from customer transactions in a company’s database or customer relationship management (CRM) system. CRM is a strategy for tracking a company’s interactions with customers and prospects and organizing information from sales, marketing, and customer service activities. CRM software functions as a central location for all data about customers and prospects. Later in this chapter CRM is covered in more detail. STP is not the only approach to reaching customers. Marketers have at their disposal the undifferentiated strategy, in which all consumers are treated the same. When the offering is a commodity—all competitors’ offerings are about the same in terms of features and price—segmentation may offer little additional profit potential to offset the cost of more complex marketing strategies. Segmentation strategies call for tough choices. The number of variables that differentiate consumers within any given product category can be bewildering. Marketers need criteria to narrow down the possible approaches to those most likely to be both productive and cost-effective. Selecting Market Segments to Target Target marketing focuses marketing resources on those groups of potential customers who are likely to have greater demand for a product or service. Target marketing requires © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 226 4/8/16 10:40 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 choosing a specific market segment, with the intent of developing a product offering and promoting a specific value proposition that will motivate that group of people to act. A segment must meet certain criteria to qualify as a target worthy of its own marketing strategy. A target segment must be: • • • Available in the marketplace in sufficient numbers to merit the expense, Readily identifiable, and Able to be profitably served. If a target segment fails to meet any of these three conditions, the company should not pursue it. All segments meeting these conditions are theoretically worthy of targeting, but there are other considerations. In addition to the target segment being large enough to merit investment, readily identifiable, and potentially profitable, consider the following criteria: • • • How well is this segment being served by competitors? Is this segment expected to grow? Is this segment a good fit with the company’s brand image and market position? If a segment is already targeted and well-served by competitors, there may not be an opening for a new company to create meaningful positioning. It will be too late to market on a message strategy of being “first” or “best.” Finding another position on which successful marketing messages can be built may be difficult. And even if a workable basis for differentiation can be found, it may not be one that fits well with the company’s existing brand image. A company known for low prices or quality will have difficulty creating a new strategy around a contradictory position. If a segment fails to meet these criteria, it’s a weak choice. Consider three more measures of a target market’s suitability for segmentation strategy: • • • Do individuals in the segment share common needs? Are they likely to respond similarly to a marketing action? Is the segment reachable? (Are message channels available?) These three criteria help marketers estimate the likelihood that effective campaigns can be designed for this market segment. Individuals who share common needs will tend to appreciate the same benefits, making persuasive marketing messages possible. However, if no message channel exists that reaches the segment cost-effectively, that can be a dealbreaker. A marketer may desire to offer left-handed office supplies to that sizeable group (10 percent of the population) but lack mailing lists or magazines through which to reach lefties. In that case, the left-handed niche is best given a pass. Table 7.3 summarizes the nine criteria segments must meet to justify use of a segmentation strategy. Only market segments meeting these criteria for effective segmentation should be considered further. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 227 4/8/16 10:40 AM CHAPTER 7 Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning Table 7.3: Nine criteria for effective segmentation Is a market segment a suitable target for segmentation strategy? Consider. . . 1. Do enough individuals meet the segment description to merit the expense? 2. Is membership in the market segment readily identifiable? 3. Can members of the segment be profitably served? 4. How well is this segment being served by competitors? 5. Is this segment expected to grow? 6. Is this segment a good fit for the company’s brand image and market position? 7. Do individuals in the segment share common needs? 8. Are they likely to respond similarly to a marketing action? 9. Is the segment reachable? (Are message channels available?) Market segments must meet nine criteria to qualify as promising for a target marketing strategy. Segmentation Variables The first criterion indicating whether a market niche is suitable for a segmentation strategy is the size of the population meeting the segment description. This raises the question: what description? Variables used to identify segments have gone through several stages. Initially, market researchers relied on demographic segmentation, because of the availability of information collected by the U.S. Census Bureau about education, income, and occupation, as well as physical attributes such as gender, race, and age. These variables proved reliable predictors for different consumption patterns and thus a workable basis for segmentation strategies (Kotler, 2005). Segmenting on a single variable, such as ethnic group, gender, or age, can be quite effective. Marketing to racial/ethnic groups Marketers now recognize the rise in spending power among minority demographics. In 2010 Hennessy unveiled a limited edition bottle in the United States to commemorate the 200th anniversary of Mexican independence. AP Images for Hennessy © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 228 4/8/16 10:40 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 has grown in recent years as marketers have recognized the rapidly rising spending power among Hispanics, African Americans, and Asian Americans. Marketing to women has increased dramatically as research revealed that female consumers influence the purchase of 85 percent of all products and services (Quinlan, 2003). Young people (8 to 24) have been called the next “Big Spenders.” A large percentage of children and teens make their own buying decisions, particularly on clothing and entertainment. Plus, with more time, skill, and interest in online product comparison, they exert considerable influence over their parents’ purchases (Gioia, 2011). Segmenting markets by age groups became popular in the 1990s to leverage the sociological concept known as the cohort effect—the tendency of members of a generation to be influenced by significant events occurring during their formative years (Smith & Clurman, 1998). Terms like “Generation X” and “Baby Boomer” identify specific generational cohorts. A shared influence—be it Pearl Harbor or Pearl Jam—can have a lasting effect on a segment’s buying habits and response to marketing stimuli. Marketers have also used geographic segmentation, based on where consumers live or work, to find groups with common needs and desires. As researchers grew more sophisticated about segmentation, these two techniques blended into geodemographic segmentation. This added variables such as consumers’ location relative to city center, suburb, or rural area, and type of homes, reflecting the fact that people in similar areas tended to exhibit similar consumption patterns. Geodemographic segmentation worked, but it left a wealth of useful information still unexplored, leading researchers to develop behavioral segmentation. In this approach, marketers classify people according to their motivations and attitudes, including reasons for purchases and quantities consumed. Studying a company’s own transaction records generates a description of a foundation segment already in the customer base. Augmenting that description with data from the Consumer Expenditure Survey on the buying habits of U.S. consumers (discussed in Chapter 2) can lead to more sophisticated and effective use of specific variables to define market segments. Using combinations of these three approaches, marketers have based successful segmentation strategies on variables such as demographics, geography, and behavior including features/benefits sought, usage rate, and degree of loyalty. But many companies lack the resources to build their own sophisticated segmentation system around the demographics, geography, and behaviors of their customers and prospects. Service providers developed psychographic segmentation systems available for purchase that accomplished fine-grained targeting by weaving together demographics, geography, and life stage/lifestyle descriptors. These systems assign households to specific clusters based on predictions about their behaviors, needs, and lifestyles. Companies could now purchase data sets based on clusters of households that “look like” their own best customers and fold those prospective customers into their data warehouses. Segmentation helps marketers understand potential customers in order to focus on those whose needs they can ultimately satisfy. It’s not uncommon to mix and match segmentation approaches. For instance, marketers might combine geodemographic segmentation with segmentation on benefits sought, to design effective strategies. Figure 7.3 lists the steps in the process of executing a segmentation strategy. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 229 4/8/16 10:40 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 Figure 7.3: The segmentation process Step 1 • Group potential buyers into target market segments (using one or more of the approaches discussed in this section: demographic; geographic; geodemographic; behavioral; psychographic) Step 2 • Group products to be sold into categories potential buyers can relate to. Step 3 • Estimate potential for return on investment from the segmentation strategy by analyzing the fit of the target segment to the product groupings. Step 4 • Select target markets according to the nine criteria discussed earlier (see Table 7.3). Step 5 • Develop and deploy marketing actions to reach the selected target market. To execute a segmentation strategy, marketers must perform these five steps. Segmenting business markets can be accomplished using the same process. B2B segmentation approaches can be geographic or demographic based on characteristics of the businesses targeted; this is sometimes referred to as firmographics. Size in sales or number of employees, customer business model, and industry are all useful variables on which to segment. The North American Industry Classification System (NAICS) maintained by the U.S. Census Bureau is the standard used for classifying businesses and the source from which firmographic data can be retrieved, sorted, and aggregated for purposes of target marketing. Field Trip 7.3: Segmentation and the BSB Buyer Business markets can be segmented by firmographic variables. But within those companies, individuals still make purchase decisions on behalf of their companies, so marketers must understand those potential customers. Follow this link to read about how consumer behavior transfers to business buying situations. The Role of Emotions and Goals in B2B Buying Decisions -decisions-01239685#VxXxilv6J3uyxIRU.97 © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 230 4/8/16 10:40 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 Behavioral segmentation, based on factors like motivations or usage rates, end-use application, product specifications, or stage in the customer relationship (newly acquired, existing, satisfied, or at-risk), is widely used in B2B marketing. Psychographic segmentation has not proven as useful in B2B marketing. The more complex makeup of the buying team (as opposed to an individual consumer), as well as the idiosyncrasies of specific industries, make the psychographic approach less useful in selling to businesses (Barry & Weinstein, 2009). Positioning: The STP Approach’s Final Step Marketers, having a segmentation strategy to execute and a target market segment to address, face one more strategic task. They must now decide how to position the offering. As you’ve learned from earlier chapters, positioning is the practice of creating an identity in the minds of prospective customers that allows one offering to stand out among many. The concept of positioning was discussed in Chapter 6. In the 1960s to 1980s, the period in which the STP approach emerged, it was not uncommon for marketers to go head-to-head in pursuit of a target market. They positioned offerings directly against competitors with similar product attributes. An often-used example from that era is the marketing of the rental car companies Avis and Hertz. Avis’s “we try harder” campaign positioned the company as the alternative with greater customer service spirit. During this era the rapid increase in goods and services available led to more emphasis on competitive differentiation, as marketers sought to stand out in smaller, lesscompetitive market niches. Developing positioning strategy is part of the creative work of the campaign development step of the marketing process. Marketers write positioning statements that identify the target market and the need/desire that creates demand. The positioning statement describes how the offering delivers a solution that is unlike any competitor’s. The positioning statement is usually part of the creative brief, developed for use within the marketing department. SnackWell’s, Nabisco’s line of nonfat and low-fat snacks, reached $490 million in sales when introduced but lost its lead as Kraft aggressively marketed its 100-calorie packs. To fight back, SnackWell’s developed a new product line that emphasized portion control (head-to-head positioning against Kraft) but with a twist. The positioning statement for the new offering might have read, “To health-conscious consumers left unsatisfied by 100-calorie snack packs, SnackWell’s chocolate and vanilla brownies in 150-calorie packs let the consumer be bad and still be good.” Some variation on that positioning statement often ends up in the resulting advertising campaign, as with SnackWell’s “Be bad. Snack well.” slogan that debuted in 2011 (Newman, 2011). © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 231 4/8/16 10:40 AM Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning CHAPTER 7 Positioning strategy reflects three components: 1. The target market’s perception of the Customer Value Equation for products in the consideration set, 2. The product offering’s Unique Selling Proposition (the promised benefit so compelling it motivates action), and 3. Assessment of competitors’ positioning strategies. The problems, needs, and desires of the target market are fundamental to selection of a positioning strategy. But just as important, the position must be one the company can authentically claim, and one its competitors have not chosen to emphasize. To find an opening for a successful positioning strategy, marketers will typically plot competitors or products on dimensions of competition that are important to targeted consumers. Such dimensions might include perceived quality and price or style and product assortment. One example of these diagrams, called perceptual maps, is shown in Figure 7.4. This technique can also be used to compare companies with multiple brands or product lines. A version of the positioning statement from the creative brief can end up in the resulting advertising campaign, as with Altoids’ “Tune Out” app. PR Newswire © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 232 4/8/16 10:40 AM CHAPTER 7 Section 7.3 The “STP” Approach: Segmentation, Targeting, and Positioning Figure 7.4: Perceptual map Calories 160 Quaker Apple Cinnamon Instant Oatmeal Low Sugar 150 140 Barnum’s Animal Crackers Yoplait Blueberry Greek Yogurt Swiss Miss Dark Chocolate Sensation Instant Cocoa Mix Snackwell’s Fudge Drizzled Caramel Popcorn 130 0 2 4 6 8 10 Skinny Cow Heavenly Crisp Bar 120 12 Curves Granola Bar 16 18 Taste Appeal 20 110 Nabisco Nutter Butter Granola Bar Sargento Light String Cheese Snacks 14 Vitamuffin Vita Top Snackwell’s Fudge Pretzels 90 Starbucks Tall Skinny Vanilla Latte 80 Perceptual maps allow marketers to assess competitors’ positioning strategies to find an unclaimed position. B2B marketers position products just as carefully as consumer marketers do, using the same tools. A marketer might aim to sell a product or service to both business and consumer markets, positioning the same offering for different uses. For instance, a combined printer/scanner sold as a business tool might be adapted by its manufacturer for home use, transforming it into a consumer product. As you’ve learned, the STP approach is widely used by today’s marketers. Application of the nine criteria for effective segmentation keeps the approach profitable and productive of long-term customer relationships. Analyzing the cost versus benefit of a segmentation approach is critical to its success. The value of the customers gained must be sufficient to warrant the increased cost of segmentation strategy over the cost of an undifferentiated strategy. Some marketers ask: Does it make sense to weigh some of the criteria more heavily than others? For example, can one succeed by targeting “easy” prospects who are readily identifiable, share common needs, and can be reached through available message channels, but who show little potential to be profitably served? Or is it better to target the “harder” prospects who, if attracted, might spend more and thus yield more profit over time? The answer can come only from estimating the potential for return on investment from such a strategy. No step in the segmentation process can be omitted without weakening the strategy. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 233 4/8/16 10:40 AM Section 7.4 Driving Better Strategies With Customer Data CHAPTER 7 Questions to Consider Managing the STP approach seems straightforward when one considers a company with one product. But companies following the product line expansion strategy develop products to fulfill unmet needs and soon are managing many products. Micromarketing creates even more complexity with its focus on one-to-one marketing communications. What issues do you foresee related to managing increasing complexity when applying the STP approach? Not all differences between offerings are meaningful to the consumer. When it comes to positioning, how do marketers decide which differences to promote? What could marketers do to ensure that the differences they’ve elected to emphasize in a positioning strategy will resonate with consumers? 7.4 Driving Better Strategies With Customer Data Marketing practices increasingly rely on customer data, reflecting the shift described in Chapter 1 from the Marketing Era to the Relationship Era, with its objective of developing long-term relationships with customers. Customer Relationship Management: A Philosophy The marketing practice known as Customer Relationship Management (CRM) emerged from contact management software developed to serve B2B sales management in the 1980s. The first simple systems were designed to replace Rolodexes but quickly expanded with features designed to automate routine sales and customer service tasks, such as quote management (Muhney, 2011). CRM was sold as a technology solution that would manage detailed information about individual customers and thus drive greater precision in identifying the most desirable prospective customers. As technology, it was little more than a database harnessed for marketing purposes. But CRM is more than a technology. It’s more than a customer service support system or a customer-acquisition marketing program—it’s an entire philosophy of customer-centrality. Living by the CRM philosophy calls for breaking down silos that separate customer data collected by a company from sales, marketing, and customer service activities. It means bringing the data together into a centralized warehouse. Some practitioners separate the terms used for the data warehouse from the CRM system itself, referring to the database as the Marketing Customer Information File (MCIF). Data from the warehouse can be analyzed in depth and the resulting knowledge applied to marketing actions that build stronger customer relationships. Another tool closely linked to CRM is a Marketing Information System (MIS), designed to support managers’ decision-making by distributing access to timely, accurate information about customers, market trends, and more. Whatever the system is called that supports the CRM philosophy, its strength lies in its potential for data mining. Analyzing the collected data reveals significant trends, patterns, and relationships. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 234 4/8/16 10:40 AM Section 7.4 Driving Better Strategies With Customer Data CHAPTER 7 Computing power, communication, and Internet technologies expanded exponentially in the 1990s and 2000s. The potential for improved marketing results led to rapid growth in the number of companies using CRM. But not every company benefits from attempting to adopt CRM. Tracking every purchase, sales contact, service encounter, website visit, and payment transaction for every individual in the system demands a lot of resources. Expertise in data analytics also comes at a high cost. For some companies, the workflow required to manage customer information on such a fine-grained level is simply too expensive and labor-intensive. CRM has proved to be most effective in industries that are already generating reams of data and serving large customer markets, such as financial services, telecommunications, and large-scale retailers. Two questions face any company considering adopting the CRM philosophy: 1. Are we committed to the customer-centrality CRM requires? and 2. Will revenue resulting from CRM be sufficient to cover the higher costs of collecting, maintaining, and mining the reams of data required? If the answer to both questions is “yes,” companies that adopt CRM are likely to move from “drowning in data” to a position in which that resource is a competitive advantage. Stocking the Data Warehouse Customer information originates in various systems across an organization. A financial institution, for example, maintains files on loans and deposits, plus records from credit cards, online banking, and investments. Those records stock the data warehouse. Routine upkeep of the warehouse requires data cleansing: detecting and correcting (or removing) corrupt or inaccurate records, followed by basic analytics that combine accounts at identical addresses into households. These are referred to as relationships, the basic building block of CRM. The data warehouse is typically augmented with demographic information purchased from third-party suppliers. This makes the data set even more useful. Financial institutions typically maintain a large CRM database combining files on customers’ loans, deposits, credit cards, online banking, and investments. AFP/Getty Images © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 235 4/8/16 10:40 AM Section 7.4 Driving Better Strategies With Customer Data CHAPTER 7 Analytic routines performed on these augmented data produce reports that answer marketers’ questions and suggest campaign strategies. Mining customer data can produce reports such as: • • • • • • Lifestage segmentation: Grouping customer records by geodemographic and behavioral variables to develop target market segments. Firmographic segmentation: Developing target market segments for B2B marketing. Customer metrics: Measuring customer satisfaction, engagement, loyalty, risk for attrition, etc. Customer Lifetime Value: Estimating of the dollar value based on total profit (or loss) likely to result from a customer over the life of the relationship. RFM analysis: Combining recency, frequency, and monetary value (RFM) of customer transactions to quantify value of the relationship as a basis for segmentation. CPA analysis: Calculating cost per acquisition (CPA) against marketing campaign ROI. These insights from CRM lead to stronger relationships and better marketing strategy development. Information relevant to segmenting, targeting, and positioning can be drawn from the data warehouse, including: • • • Descriptive information, such as demographics and media habits; Product usage information, including buying behavior, consumption patterns, and loyalty to specific brands; and Customer perception information, such as likes and dislikes, perceptions of a product or service’s features, and whether those features deliver benefits valued by consumers. Customer transaction data can also be brought to business planners. Information flowing from the CRM system can be used to guide market research and strategic planning. Making Marketing Information Useful For customer data to be useful to a company, much more is needed than names, addresses, and contact/transaction history. Each campaign addressed to each relationship should be tracked. If a particular household received a “New Movers” promotion triggered by a change of address and a “Thank You” promotion triggered by a first purchase, that information is extremely useful to marketers planning subsequent promotions to that household. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 236 4/8/16 10:40 AM Section 7.4 Driving Better Strategies With Customer Data CHAPTER 7 The information in the data warehouse is useful for more than planning targeted and one-to-one marketing campaigns. That information leads to more successful marketing strategies through the use of predictive models. Predictive models are analytic routines that attempt to guess the probability of an outcome given a set of input data. Predictive modeling produces relationship-level models that describe the likelihood that a customer will take a particular action. Predictive modeling helps marketers answer questions like: • • • • Will my customer switch to a competitor? When? Which customer relationships could be saved with marketing action? Who will buy which of our products? Which product will the customer buy next? When? Where should we locate our next store? With predictive models in hand, marketers develop plans for marketing actions to stimulate desirable outcomes or forestall undesirable ones (SAS, 2011). Predictive models can, for example, drive trigger marketing, a technique in which actions by consumers automatically “trigger” a marketing action. Consider the case of a hypothetical cell phone service provider, Calluniverse. Its marketers recognize a need to reduce churn (attrition of customers) and set a goal of increasing contract renewals. Calluniverse data analysts draw on their data warehouse to define market segments with high churn and high customer lifetime value scores. Analysis reveals three distinct clusters of users across two dimensions—usage revenue and access revenue share: 1. Users with high-usage revenue share (earned from per-minute charges), 2. Users with high balances, and 3. Users with high-access revenue share (earned from rate plans). Each segment is then targeted with distinct offers to encourage contract renewal. Based on the analysis, Calluniverse marketers decide to offer the high-usage revenue cluster a free phone upgrade, the high-balance cluster free text-messaging, and the high-access revenue cluster a 15 percent discount on their first month’s fee after contract renewal. Because each offer targets the specific usage pattern of a distinct segment, it generates higher responses. Thus, it not only increases revenue but also accomplishes the ultimate campaign goal— reduced churn. Figure 7.5 shows the distribution of the three target segments by usage revenue share and access revenue share. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 237 4/8/16 10:40 AM CHAPTER 7 Section 7.4 Driving Better Strategies With Customer Data Figure 7.5: Predictive modeling: Segment analysis 70% High-usage revenue share Usage revenue share 60% 50% 40% 30% High-access revenue share High balances 20% 10% 0% –100% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Access revenue share Dimension of the circle defines the share of subscribers per cluster. Analysis of customer data provides insight for better targeting of offers. Source: Reprinted by permission of the SAS Institute Inc. Clearly, the sophisticated analytics possible in a company that has adopted the CRM philosophy are useful tools to marketers. But that information has no value unless it is available to the managers and others who make marketing decisions, and to the sales and customer service staff members who deal with individual customers each day. Companies practicing cutting-edge CRM use software that allows individuals to navigate through the data in an immediate and user-friendly fashion. A marketing dashboard presents the most critical diagnostic and predictive metrics graphically, making timely information widely available. Field Trip 7.4: Database Marketing and CRM Visit Target Marketing magazine’s website section on database marketing and CRM to view articles addressing marketers’ concerns about these powerful techniques. In summary, CRM supports the orientation toward customer relationships required to succeed in the Marketing 3.0 paradigm, having emerged from business-to-business marketing practices as technology for data management progressed. Adoption of the approach by consumer marketers has been most successful where both the customer-centrality required and the availability of vast transaction data have come together to yield sufficient additional revenue to cover CRM’s higher cost. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 238 4/8/16 10:40 AM Section 7.5 Emphasis on the Relationship CHAPTER 7 The CRM philosophy aligns a company around its customers, bringing together and enhancing the data collected at all its touchpoints. Drawing on that deep supply of customer information, data mining produces insights that optimize results as marketers execute the STP approach, based on predictive models. The practice by “Calluniverse” of segmenting its customers on revenue and access share is one example of CRM applied to improve marketing results. Questions to Consider “Calluniverse” segmented its customers on revenue and access share and improved marketing results. Can you describe other scenarios for marketing action based on customer analytics? Do you think the CRM philosophy can be successfully applied in developing countries, where demographic, transaction, and behavioral data are not as readily available? Why or why not? What factors could increase the success of CRM in global markets? 7.5 Emphasis on the Relationship In Chapter 1 the Relationship Era in marketing that began about 1990 was introduced— the era in which companies shifted their marketing focus to establishing relationships with customers that could endure over time and result in a predictable, ongoing share of a customer’s purchases. Recognizing that consumers could easily compare similar offerings with product information readily available through company websites and social media, marketers began relying on positioning strategies to make their offerings distinct and placing value on relationships to earn customers’ loyalty. Philip Kotler’s paradigm of Marketing 1.0, 2.0, and 3.0 similarly characterized the shift in marketers’ view from customers as passive targets to customers as collaborative partners—again, placing the greatest value on the relationship between a company and its customers. Relationship marketing has come into its own as marketers have recognized that in the marketing of services, the repeated contact between service providers and customers causes relationships to form organically. Viewed through the lens of service-dominant logic, all firms are service firms, and thus are able to deepen relationships through repeated contact. When marketers focus on long-term relationships, they gain a deeper understanding of customers’ needs. This in turn leads to improvements in all aspects of marketing mix strategies and the value they ultimately deliver. As a result, marketers reduce the need for expensive new-customer-acquisition programs and instead enjoy greater marketing ROI through serving a loyal customer base. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 239 4/8/16 10:40 AM CHAPTER 7 Section 7.5 Emphasis on the Relationship The Goal: Customers for Life Long-lasting relationships seldom develop overnight. Instead, trust builds slowly over time. In the first stage, relationship marketing relies primarily on pricing incentives to encourage new customers to begin a relationship with a company. But competing on price leaves a company vulnerable to competitors’ moves. Marketers seeking lasting relationships must offer more than a price advantage. To create a deeper bond, marketers leverage the reality that service encounters are also social encounters. In the second stage marketers encourage personalization and customization of the offering, or at least the relationship, to move buyers and sellers toward a social bond. Customer appreciation events, educational seminars, and such lead to a friendship that prompts customers to be more tolerant of the occasional failure and more resistant to competitors’ moves. In the third stage sellers find a way to solve important customer problems, achieving an even deeper level of relationship by bringing buyers and sellers into a partnership that offers benefits difficult to find elsewhere. This creates true loyalty. Membership programs, such as those airlines offer, are an example of this third, deepest, stage in the relationship (Berry, 1995). Table 7.4 summarizes the deepening levels of the buyer–seller relationship. Table 7.4: Three levels of the buyer–seller relationship Stage Characteristics Example 1 Relies on pricing incentives to encourage new relationships to form Discount coupon on package 2 Encourages personalization and customization to kindle social bonds Customer appreciation events 3 Offers problem-solving that makes relationship difficult to replace Concierge service Relationships deepen over time. Each level calls for its own marketing strategies. Marketing programs that encourages multiple transactions, known as frequency marketing programs, move customers toward that deep sense of loyalty, as do affinity marketing programs that leverage customers’ ties to institutions and concepts they hold dear (Kurtz 2010). Hotels and airlines exploit the power of frequency marketing, while colleges and sports teams frequently use affinity marketing to build relationships. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 240 4/8/16 10:40 AM CHAPTER 7 Section 7.5 Emphasis on the Relationship The data warehouses fundamental to CRM provide the depth of knowledge on which a satisfying relationship can be built. The ideal relationship between buyer and seller would be built on faceto-face interactions over time. Outside of B2B models (where personal selling dominates), however, that one-to-one conversation more typically takes place through individual messaging via outbound variable-printed direct mail, or variable-content email. Monitoring of the consumers’ response (either directly through inquiries and/or orders or indirectly through social media) completes the interaction. A Marriott Rewards VISA is intended to move customers toward a deeper sense of loyalty to the hospitality provider through earned savings on hotel stays, airline miles, and guest services. PR Newswire The Prize: Recommendations The best thing about building long-term relationships is that a company gains not only access to the Lifetime Customer Value of each but also more customers from each relationship’s circle of influence, through the message channel known as buzz, or word of mouth. Individuals’ willingness to recommend a company or brand is a powerful metric that can be easily obtained simply by asking customers. People’s willingness to recommend a product or service to others is a useful barometer for both their advocacy and loyalty. People take their own advice—those who recommend a brand are also more likely to repurchase it (Samson, 2006). Buzz marketing is an increasingly popular message channel among marketers. They hope for positive word of mouth but must also prepare for the opposite. Negative experiences with a brand have even greater impact on loyalty and recommendations than positive experiences; bad buzz persists longer and reaches more people. Practicing CRM, marketers work on reducing negative customer experience before it turns into bad buzz. Enhancing customer satisfaction is the key. Marketers carefully monitor what matters to customers and what might affect satisfaction with any aspect of the product, brand, or company. To obtain customer feedback, companies make themselves accessible through their toll-free phone numbers and websites. To monitor word of mouth, they follow social media and blogs and hire mystery shoppers to appraise customer experiences. Proactive methods such as customer satisfaction surveys also help companies evaluate how well they’re serving customers and if they are earning the ultimate prize of relationshipbuilding: recommendations. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 241 4/8/16 10:40 AM CHAPTER 7 Section 7.5 Emphasis on the Relationship Marketing campaigns designed to generate buzz have at their core the desire to build relationships that generate recommendations. Jarritos, a Mexican soft drink popular with Latinos in the United States, rolled out an advertising campaign aimed specifically at trend-setting young men to influence the group around them. The campaign included murals, the handing out of samples of the soda in certain neighborhoods in the Los Angeles area, and a website featuring videos designed to appeal to the target audience (Levere, 2010). Jarritos, a Mexican soft drink popular with Latinos in the United States, advertised to generate buzz among trend-setting young men who influence their friends. Associated Press The Walt Disney Company began offering free Disney “Cuddly Bodysuits” (one-piece infant sleepwear) using in-hospital demonstrations to new mothers. Disney’s intent was to draw them into the company’s vast offering of products and experiences, beginning a household’s lifetime of customer loyalty while baby is just a few days old (Barnes, 2011). The strategy is likely to result in both loyalty and word of mouth as young moms share their reactions to Disney’s gifts. Whether that buzz is positive or negative will depend on whether individuals find the promotion overly commercial. Field Trip 7.5: Relationship Marketing “Reading Room” Visit WPP’s “Reading Room” for resources on relationship marketing by following this link: WPP is one of the world’s largest marketing communication agencies, with locations around the world. To review: In the current Relationship or Marketing 3.0 era, companies place great value on relationships with customers. Over time these relationships pass through three stages: price-focused at the start, leading to social bonds through repeated interactions, and hopefully coming to a stage of partnership based on solving important customer problems. Each relationship thus built brings not only lifetime share of customers’ purchases but also new recommendations through word of mouth, which marketers work to make positive rather than negative by delivering customer satisfaction and monitoring what matters to customers. The operational result is costs constrained through reduced need for new-customer acquisition programs, and satisfied customers retained leading to greater return on marketing investment. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 242 4/8/16 10:40 AM Case Study: RC Willey Home Furnishing CHAPTER 7 Questions to Consider This discussion of relationships is grounded in research and experience from the North American marketplace. What challenges to relationship development might exist for companies attempting to build customer relationships in global markets? Case Study: RC Willey Home Furnishing RC Willey Home Furnishings ( celebrated its 80th year in business in 2011. The Salt Lake City–based company operates over a dozen stores in Utah, Nevada, California, and Idaho. The chain positions itself in a competitive, price-conscious field on its deep inventory across five lines (appliances, furniture, electronics, sleep products, and flooring), superior delivery, and financing options that include a popular store-brand credit card. RC Willey’s marketing strategies focus on targeted direct mail augmented by frequent promotions and contests. Traditional advertising has increasingly lost its share of RC Willey’s marketing budget to database-driven tactics and digital media. Brenda Hoskins holds the title of digital media buyer and direct marketing, which makes her responsible for the company’s database marketing. Hoskins expressed her enthusiasm for data-driven marketing’s contribution to RC Willey’s bottom line. “It’s a phenomenal sales tool. It’s like having two or three extra weeks of sales in every year” (Hoskins, 2011). Hoskins uses highly targeted trigger marketing campaigns to achieve goals in customer acquisition, retention, and reactivation. RC Willey has made a commitment to data-driven marketing and supported it with investment in data warehouse management. The data warehouse approached 3 million records in late 2011. Hoskins’s data team has analyzed those customer data, assigning each household an RFM score based on recency, frequency, and monetary value of past purchases. The data team is constantly reviewing the data by different measures—for example, sales by category, by cluster, or by age—looking for opportunities. Hoskins provides updated point-of-sale data to her analytics service provider weekly. “Behavior dictates what we want to buy and when we’re going to buy it,” Hoskins observed. “A marriage, the birth of a new baby, empty nesting—our products are lifestylebased.” In 2011 Hoskins began using trigger marketing based on past behavior to reach households at high-opportunity moments with targeted offers matched to recipients’ market niches. The first triggers Hoskins deployed included: • • • • New to File; One purchase, 90 days elapsed without activity; Two purchases, 90 days elapsed without activity; and New Mover. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 243 4/8/16 10:40 AM CHAPTER 7 Case Study: RC Willey Home Furnishing Based on the success of those triggers, Hoskins put in place additional triggers driven by a predictive model based on regressive analysis performed on seven years of point-of-sale data. The model suggests the next likely product consumers will buy. For example, people who bought carpeting and motion furniture are likely to buy a television next. The additional triggers promoted specific product lines, including: • • • • • Bedroom, Living Room, Motion Furniture (recliners, etc.), Carpet, and Televisions. To constrain the program’s budget, Hoskins mailed to only 5,000 households a month. Three specific offers were used, randomly assorted across the mail pieces within product lines. Hoskins used the response to calculate which offers were most compelling, always fine-tuning her messages and offers. The vehicle for direct mail to the New to File group was “marriage mail,” so termed because multiple advertisers’ offers are “married” in one package for delivery. Using marriage mail provider Valassis allowed Hoskins to reach new prospects at a cost of 4 or 5 cents each with a full-color advertising flyer. By using Valassis’s data models to target the marriage mail to households most like current customers, Hoskins said, “I know I’m looking for the right customer in the right place.” Subsequent trigger mailings used the more expensive technique of solo mail pieces personalized with variable data printing. The addressing of the subsequent trigger mails—which households should receive them and which offers each household should receive—is where the sophistication of RC Willey’s data-driven marketing program really shines. Customer Analytics, the service provider responsible for RC Willey’s data models, used its proprietary lifestyle/lifestage segmentation system to append cluster identifiers to RC Willey’s customer database to achieve an extremely rich understanding of customers, and then matched the resulting clusters to the five RC Willey product lines. “We have identified who our customers are, and then who their lookalikes are,” RC Willey is getting data-driven marketing down to a science. Here, two shoppers compare refrigerators at a store in Orem, Utah. Bloomberg/Getty Images © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 244 4/8/16 10:40 AM Case Study: RC Willey Home Furnishing CHAPTER 7 Hoskins explained. Armed with that information, “We sifted our total market and flagged every potential customer who had never shopped with us and sent them a very aggressive offer.” Hoskins uses the lookalike profile to fine-tune mailing list purchases beyond the ZIP code level typically used, buying instead at the even finer carrier route level. “In a ZIP code with maybe 10,000 households, I know that to sell furniture, I only need to reach certain specific carrier routes—so instead of 10,000 households I might mail to only 2,000 or 3,000,” Hoskins explained. Every campaign is marked as a specific “event” so that at any given time results by customer, by store, by dollars spent, or by RFM score can be calculated. At the time of the interview, RC Willey’s data team had tracked responses and sales from the trigger campaigns executed in the first 10 months of 2011. Across all 11 triggers used, 331,077 total pieces were mailed. Of those, 7.8 households responded; 13.5 percent made purchases. “Very interesting to me was the discovery that 2,144 customers shopped 3,319 times,” Hoskins said. The total cost of the campaign was 3.4 percent of the sales generated. Based on the success of the initial trigger marketing campaigns, Hoskins planned to double her investment in that program in the coming year. In addition to the trigger campaigns, Hoskins is focusing on using contests to build an opt-in database of customers and prospects who have agreed to receive emails from RC Willey. Customer events are another technique used to engage customers. “We held a Sushi Night in our store,” Hoskins said. “I mailed out 85,000 invites to three specific clusters. I blocked out the latest two events to ensure I’m talking to a rotating customer base.” Using data-driven marketing, RC Willey can engage its customers at least four or five times a year in some major store event. And Hoskins can prove the results of her campaigns by a variety of measures—RFM code, cluster, sales. “We know exactly how much the campaign cost, who responded, and the sales result.” RC Willey Home Furnishings is applying leading-edge analytics to the STP approach of segmentation, targeting, and positioning. This example of data-driven marketing illustrates marketing strategy driven by insights from a CRM approach. Challenge Question Can you use the knowledge about consumer behavior and marketers’ use of target marketing to create a hypothetical case study? In Chapter 1 you were asked to pick a product that interests you, or use the examples of quinoa or craft beer. You described that product by analyzing the Customer Value Equation it offers in terms of the four utilities of customer value: form/function, time, place, and ease of possession. In Chapter 2, you were asked to consider how the marketing process might be applied to promotion of that product. You should be able to describe how you would develop, execute, and measure a campaign. Now that you have gained knowledge about the four p’s of the marketing mix and marketer’s STP approach aimed at motivating consumers to action, it’s time to try your hand at marketing. Describe how you would apply the STP approach to market the product you selected in Chapters 1 and 2, and how you might incorporate CRM philosophy into your marketing program. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 245 4/8/16 10:40 AM Post-Assessment CHAPTER 7 Post-Assessment 1. Which step in the purchase decision is represented by the following statement? Based on how their expectations have been met, a consumer might make positive or negative comments in social media. a. b. c. d. Information search Needs recognition Post-purchase behavior Alternative evaluation 2. Fulfillment of what type of need is more likely to have a positive influence on brand loyalty? a. b. c. d. Hedonic Physiological Utilitarian Cognitive 3. Which term defines the segmentation technique that is based on information collected by the U.S. Census Bureau? a. b. c. d. Geospatial Psychographic Demographic Behavioral 4. Which of the following is NOT reflected in a company’s positioning strategy? a. An assessment of competitors’ positioning strategies b. The life stage/lifestyle profile of the target market c. A target market’s perception of the Customer Value Equation for similar offerings d. The product offering’s Unique Selling Proposition 5. Which of the following is NOT a stage in the buyer–seller relationship? a. b. c. d. Making a relationship difficult to replace Encouraging new relationships to form Rewarding loyalty with incentives Stimulating interpersonal social bonds Answers 1. c. Post-purchase behavior. The answer can be found in Section 7.1. 2. a. Hedonic. The answer can be found in Section 7.2. 3. c. Demographic. The answer can be found in Section 7.3. 4. b. The life stage/lifestyle profile of the target market. The answer can be found in Section 7.3. 5. b. Rewarding loyalty with incentives. The answer can be found in Section 7.5. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 246 4/8/16 10:40 AM Critical Thinking Questions CHAPTER 7 Key Ideas to Remember • • • • • Sociocultural influences, degree of involvement, and situational influences are three types of factors influencing the consumers’ purchase decision process. These factors apply as consumers complete six tasks in the purchase decision process. As consumers change, the nuances of this process may change. Awareness of the factors influencing buying behavior will always be demanded of marketers. Marketers study consumer behavior, motivation, and emotions to understand how buyers see the world, how they make selections, and how to position offerings effectively. The STP approach is widely used by marketers, requiring familiarity with and application of the nine criteria for effective segmentation discussed in Section 7.3. The CRM philosophy brings together data collected across an organization to align a company around customers. Insights from those data help marketers execute the STP approach effectively, as the example of “Calluniverse” segmenting its customers on revenue and access share demonstrated. Buyer–seller relationships pass through three stages, beginning with a focus on price, progressing to social bonds through interactions, and evolving into a valued partnership based on solving problems. Each relationship brings a share of customers’ purchases over time and, if all goes well, new relationships through recommendations. Critical Thinking Questions 1. Choose a reference group that influences your individual behavior. Are you a member, or would you like to be a member of this group? Why or why not? If not, why do the group’s attitudes, behaviors, beliefs, opinions, preferences, or values exert influence on you? 2. Consider a recent major purchase you or someone in your family has made. Describe it in terms of the five steps in the consumer purchase decision process. What was the decision-maker’s degree of involvement? Why? 3. How does Maslow’s Hierarchy of Needs relate to the STP approach? Describe the effect of Maslow’s theory (and more recent interpretations) on marketing practice in terms of segmentation, targeting, and positioning. 4. Describe yourself as part of a market segment. Include your demographic, geographic, and psychographic traits. 5. Appraise the market segment to which you belong as a target niche for a marketer of high-end kitchen appliances. Use the nine criteria for effective segmentation (see Table 7.3). 6. Choose a water park or other vacation destination. Describe a hypothetical marketing campaign that uses what you’ve learned about the CRM approach. 7. Continuing with the vacation destination, describe how you might apply insights about developing long-lasting relationships with customers to retain or reactivate past visitors. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 247 4/8/16 10:40 AM CHAPTER 7 Key Terms to Remember Key Terms to Remember affinity marketing Programs that leverage customers’ ties to institutions and concepts they hold dear, designed to move customers toward that deep sense of loyalty. demographic segmentation Market segmentation based on differences in demographic factors of different groups of consumers. behavioral segmentation Market segmentation based on differences in motivations and attitudes, including reasons for purchases and quantities consumed, of different groups of consumers. foundation segment Market segmentation based on customer/transaction records already in a company’s database. buyer’s remorse A feeling of guilt associated with doubts about the wisdom of a purchase decision experienced after making an expensive purchase or one requiring extended problem solving. churn Attrition or turnover of customers of a business or users of a service. cognitive dissonance Psychological tension produced by incompatibility among a person’s attitudes, behavior, and/or beliefs, or when a choice has to be made between equally attractive or repulsive alternatives. cohort A group whose members share a significant experience at a certain period of time or have similar characteristics. Customer Relationship Management (CRM) A management philosophy centered on identification and satisfaction of customers’ needs and wants, supported by a data warehouse and analytic processes for identifying, targeting, acquiring, and retaining the best mix of customers. data cleansing The act of detecting and correcting (or removing) corrupt or inaccurate records from a record set. frequency marketing A program that encourages multiple transactions, designed to move customers toward that deep sense of loyalty. geodemographic segmentation Market segmentation based on combining data about demographic and location-based factors of different groups of consumers. geographic segmentation Market segmentation based on differences in location-based factors of different groups of consumers. hedonic needs Motivation toward purchase activity that requires the consumer achieves pleasure from the purchase; often associated with emotions or fantasies relating to consuming a product. See also utilitarian needs. market segment A subdivision of a market or population sharing a similar set of needs and wants, usually because they share other traits, such as geography, age, income, and/or lifestyle. Marketing Customer Information File (MCIF) A synonym for data warehouse; a computerized file storing all pertinent information about an organization’s customers. © 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution. whi80045_07_c07_213-250.indd 248 4/8/16 10:40 AM CHAPTER 7 Key Terms to Remember marketing dashboard A software interface that presents the most critical diagnostic and predictive metrics, organized in a way that facilitates recognition of significant patterns, like a car’s instrument panel. Marketing Information System (MIS) A software tool designed to gather, store, analyze, and distribute access to timely, accurate information to support managers’ decision-making. predictive models Analytic routines that attempt to guess the probability of an outcome given a set of input data. psychographic segmentation Market segmentation based on analysis of consumer lifestyles to create a detailed customer profile. RFM score Abbreviation of Recency, Frequency, and Monetary Volume; a means to quantify the value of a customer relationship; useful as a basis for segmentation. modified rebuy A business-to-business purchase decisions process involving goods or services purchased previously by the firm, but which requires a new consideration set to meet changes sought in specifications, prices, terms, or suppliers. reference groups Groups of individuals whose attitudes, behavior, beliefs, opinions, preferences, and values an individual uses as the basis for judgment. motivation The inner drive that moves consumers toward fulfillment of a perceived desire or need. straight rebuy Business-to-business purchase decisions process involving a routine reorder, requiring little thought or process. new task Business-to-business (B2B) purchase decisions process involving a full purchase decision process. trigger marketing A one-to-one communication technique in which action by a consumer automatically triggers a marketing action. North American Industry Classification System (NAICS) A system grouping industries into 20 broad sectors identified by a 6-digit code based on the type of the establishment. Developed jointly by NAFTA member countries Canada, Mexico, and the United States to replace the obsolete Standard Industrial Classification (SIC) code. perceptual maps A marketing research technique in which consumers’ views about a product are traced or plotted (mapped) on a chart, typically in two dimensions. undifferentiated strategy Sales-growth strategy that ignores market segment differences a...
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