Differentiated marketing
Specific
marketing mixes can be developed to appeal to all or some of the
segments when market segmentation reveals several potential targets.
This is called differentiated
marketing. Walters
and Knee, for example, showed how differentiated marketing was
applied by Arcadia, formerly the Burton Group (see Exhibit 5.3).
Segmentation of the fashion market revealed distinct customer groups
for which specific marketing mixes (including shop name, style of
clothing, decor and ambience of the shop) were developed- for
example, the style market (Principles), the young women's market
(Dorothy Perkins) and the larger women's market (Evans). Similarly,
as part of its turnaround strategy, Marks 8c Spencer sought to move
away from one brand (St Michael) with wide market appeal to a range
of sub-brands such as Autograph (an upmarket brand) and Per Una,
which is aimed at fashion-conscious women up to the age of 35. A
differentiated target marketing strategy exploits the differences
between marketing segments by designing a specific marketing mix
for each segment. One potential disadvantage of a differentiated
compared to a undifferentiated marketing strategy is the loss of cost
economies. However, the use of f
lexible
manufacturing systems can minimize such problems.
Exhibit 5.3 Arcadia pic owns several retailing brands, each catering for a different segment of the marketplace
Focused marketing
Just because a company has identified several segments in a market, does not mean that it should serve them all. Some may be unattractive or out of step with business strengths. Perhaps the most sensible route would be to serve just one of the market segments. When a company develops a single marketing mix aimed at one target (niche) market it is practicing focused marketing. This strategy is particularly appropriate for companies with limited resources. Small companies may stretch their resources too far by competing in more than one segment. Focused marketing allows research and development expenditure to be concentrated on meeting the needs of one set of customers, and managerial activities can thus be devoted to understanding and catering for those needs. Large organizations may not be interested in serving the needs of this one segment, or their energies may be so dissipated across the whole market that they pay insufficient attention to their requirements. An example of a firm pursuing a focused marketing approach is Bang & Olufsen, the Danish audio electronics firm; it targets its stylish music systems at upmarket consumers who value self-development, pleasure and open-mindedness. Anders Kwitsen, the company's chief executive, describes its positioning as 'high quality, but we are not Rolls-Royce-more BMW. Focused targeting and cost control mean that B&O defies the conventional wisdom that a small manufacturer could not make a profit by marketing consumer electronics in Denmark.
Customized marketing
The requirements of individual customers in Mime markets are unique, and their purchasing power sufficient to make viable the design of a discrete marketing mix for each customer. Segmentation at this disaggregated level leads to the use of customized marketing. Many service providers, such as advertising and marketing research agencies, architects and solicitors, vary their offerings on a customer-by-customer basis. They will discuss face to face with each customer their requirements, and tailor their services accordingly. Customized marketing is also found within organizational markets because of the high value of orders and the special needs of customers. Locomotive manufacturers will design and build products according to specifications given to them by individual rail transport providers. Customized marketing is often associated with close relationships between suppliers and customers in these circumstances because the value of the order justifies a large marketing and sales effort being focused on each buyer.
One of the most fascinating developments in marketing in recent years has been the introduction of mass customization in consumer markets. This practice was initially pioneered by Japanese companies, which exploited their strengths in production systems and logistics to deliver customized products such as men's suits, bicycles and golf clubs to private consumers. So when a Japanese man went to buy a suit he wasn't faced with a rack of ready-made suits, but rather a range of materials and colours from which he could choose. His measurements were then taken and a tailor-made suit was available for him within a week, but at a price that compared favourably with that of mass-produced garments. More and more products are now being customized to the needs of particular individuals. For example, at the Mercedes Sindelfingen plant near Stuttgart, every model passing through the plant has a pre-assigned customer, many of whom configure their cars using the Internet. Furthermore, many customers take delivery of their cars at the plant rather than from a dealer as has traditionally been the case.
The increasing interest in the possibilities presented by customized marketing has given rise to a new industry known as customer relationship management (CRM). CRM companies offer a variety of IT-based services such as call centres, salesforce automation, data analysis and website management, which are all designed to enhance the way in which a company deals with its customers. In 2000, the CRM industry was estimated to be worth US$23 billion. The basic principle behind CRM is that company personnel have what has been described as a single-customer view of each client. Therefore, irrespective of how a customer contacts the company, whether by telephone, the Internet or calling in, frontline staff have instant access to his / her details and past purchases on a computer screen or hand-held device. The objective of CRM is that companies attract, serve and retain their 'best'- that is, most profitable- customers. Doing so requires the ongoing collection of customer information, the warehousing and interrogation of this information and the distribution of information to relevant staff. Therefore in order to be successful, CRM initiatives and investments must be seen as an integral part of the company's marketing strategy. The American Airlines example in e-Marketing 5.3 demonstrates the possibilities offered by the CRM approach.
5.3 e-Marketing