Identifying Target Customers

Core Marketing Principle: The marketing strategy begins with the customer.
Criteria for Success: A marketing strategy achieves success when it accomplishes two core objectives:
- Identifying which specific customers to target.
- Reaching those target customers in a cost-effective manner.

Segmentation:
- Definition: The process of dividing the broader market into distinct groups of customers based on shared characteristics.
- Market Segment Definition: A market segment consists of consumers who respond in a similar way to a given set of marketing efforts.
Targeting:
- Definition: The process of identifying and selecting the specific market segments that the company wants to pursue.
Positioning:
- Definition: The process of creating a clear, distinctive idea of what the company represents in the consumers' minds relative to competing offerings.

Geographic Segmentation:
- Continent Level: North America, Asia, Europe, Africa.
- Within the U.S.: Pacific, mountain, central, south, mid-Atlantic, northeast.
Demographic Segmentation:
- Key Variables: Age, gender, income.
Psychographic Segmentation:
- Key Variables: Lifestyle, self-concept, self-values.
Benefits Segmentation:
- Key Variables: Convenience, economy, prestige.
Behavioral Segmentation:
- Key Variables: Occasion, loyalty.

Necessity of Targeting: Without targeting, a firm is forced to adopt one of two extreme options, both of which are fundamentally flawed:
- Option 1: Create a single offering for all customers ("One-for-all" strategy):
- Ineffective because an "average" customer might not actually exist in reality.
- Ineffective because competitors will customize their offerings to fit the distinct needs of each market segment better.
- Option 2: Create customized offerings for each customer ("One-for-each" strategy):
- Ineffective because companies generally do not possess the required resources to create customized value for every single customer.
- Ineffective because not all customers are capable of generating sufficient value back to the company to justify individual customization.

Strategic Targeting:
- Focus: Identifies the specific customer need(s) that the company aims to fulfill with its offering.
- Tradeoffs: Inherently involves strategic tradeoffs; choosing to target specific customer groups explicitly means choosing to ignore others.
- Core Evaluation Criteria:
- Target Compatibility: The company's ability to create superior customer value for the segment.
- Target Attractiveness: The ability of a given segment to create superior value for the company.
Tactical Targeting:
- Focus: Identifies effective and cost-efficient ways to communicate and deliver an offering to the strategically viable customers.
- Strategic Role: Without tactical targeting, a company is forced to communicate and deliver its offering to the entire market, incurring massive inefficiency.

Key Elements of Tactical Targeting:
- Defining customer profiles.
- Creating customer personas.
Customer Persona Definition & Utility:
- Definition: A fictional representation of the prototypical target customer (e.g., "Bob").
- Function: Enables managers to treat target customers as real human beings for whom they aim to create value.
- Key Attributes captured in a Persona:
- Needs
- Demographics
- Behavior

Pitfalls and Limitations of Profile-Only Targeting:
- Relying exclusively on demographic profiles is problematic because customer segments with identical demographic profiles can have drastically different needs and vary significantly in their ability to create value for the firm.

Illustration 1: Identical Profile, Different Needs and Values:
- Target Profile: Age $25 - 30$ years old, urban location, annual income of $\\text{S}50\text{K} - \\text{S}75\text{K}$ ( $50,000 - 75,000$ USD).
- Divergent Customer Values & Chosen Products:
  - Value = Practicality $\rightarrow$ Product: Nissan Cube
  - Value = Fun $\rightarrow$ Product: Mazda MX-5 Miata
  - Value = Prestige $\rightarrow$ Product: Maserati

Illustration 2: Identical Value, Different Profiles:
- Customer Value: Fun (Product: Mazda MX-5 Miata)
- Profile Group A: Age $18 - 30$ years old, urban, annual income of $\\text{S}35\text{K} - \\text{S}50\text{K}$ ( $35,000 - 50,000$ USD), Adventure-seeking.
- Profile Group B: Age $45 - 65$ years old, urban, annual income of $\\text{S}60\text{K} - \\text{S}80\text{K}$ ( $60,000 - 80,000$ USD), Adventure-seeking.

Strategic Evaluation Questions:
- What is the offering?
- What customer needs are they trying to fulfill?
- What customers are they ignoring with their offering?
Tactical Evaluation Questions:
- How are they delivering the offering effectively?
- How are they communicating the offering?

Mass Marketing:
- Strategy: "One size fits all".
- Limitation: Fails to recognize or address the diversity of underlying customer needs.
Segmentation:
- Strategy: Designs offerings specifically tailored to satisfy the differing needs of distinct customer groups.
- Tradeoff: Results in higher operational and marketing costs.
One-to-One Marketing:
- Strategy: Fully customized approach individual by individual.
- Key Driver: Advances in internet technology allow for cost-effective implementation at scale.

Video Resource: Gillette case analysis (https://www.youtube.com/watch?v=zObGb8eX3vw&t=136s)
Key Discussion Questions:
- Evolution of the Razor Consumer: How has the consumer in the razor industry changed over time, and what specific factors led to these changes?
- Market Research & Customer Persona: What did Gillette's market research reveal regarding the consumer? How did they describe the customer persona?
- Strategic Growth Recommendations: Given the characteristics and preferences of today's razor and razor blade consumer, what growth strategies should Gillette implement to maintain long-term success?