Marketing Theory, Evidence, Practice - (EXPANDED CONTENTS)

WHIT
WHIT
CHILDREN’S
MINT
WHITENING
24 HOURS 24 HOURS
CHILDREN’S
MINT MINT
Customer
WHITENING
Segmentation 24 HOURS
and Targeting
CHILDREN’S
MINT
RACHEL KENNEDY,
WHITENING
WHITENING
BYRON SHARP AND

NICK DANENBERG
24 HOURS
CHILDREN’S
Copyright © 2017. Oxford University Press. All rights reserved.
MINT
WHITENING
24 HOURS 24 HO
CHILDREN’S
MINT
MINT
WHITENING
Sharp, B. (2017). Marketing : Theory, evidence, practice. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank')
href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a>
Created from unisa on 2020-10-21 03:01:24.
24 HOURS
OURS
06_SHA_M2E_90296_TXT_SI.indd 244 17/08/2017 10:30 AM
MINT
INTRODUCTION CASE
4 HOURS
The burger battle: Hungry Jack’s/Burger
King versus McDonald’s
CHILDREN’S
The burgers may be better at one of the outlets, but which has the better marketing strategy?
Both Hungry Jack’s and McDonald’s primarily market burgers, chicken products, fries,
breakfast items, drinks and desserts, and they look remarkably similar. However, they have
adopted quite different strategic approaches, with one brand focused on reach and broad
appeal, the other on targeting their offers and communications to an ‘appealing’ segment.
This case introduces these competing routes, which are then discussed in detail throughout
WHITENING
the chapter.
CHILDREN’S
WHITENING
24 HOURS
MINT
McDonald’s feeds nearly 68 million customers daily (Lubin, 2012), which they put down
24 HOURS to a strategic focus on menu choice, quality and value (Street, 2015). Clearly these things
are important, but McDonald’s also has a strategy of consciously appealing broadly to
different kinds of audiences, catering to different occasions. Their McCafés, drive-throughs,
playgrounds, family meals, kids meals and local menu variations—along with promotion of
some healthier alternatives such as salads and wraps—all aim to appeal to a broad range
of consumers who vary in their needs and preferences at least on some of the occasions
MINT they buy.
WHITENING

WHIT
WHIT
CHILDREN’S
MINT
WHITENING
This approach has differed from that of Hungry Jack’s, the exclusive Australian master
franchisee of the Burger King Corporation. Burger King began in a similar way to McDonald’s,
24 with
HOURS
its menu consisting predominantly of hamburgers, fries, soft drinks and desserts. In 1957, 24 HOURS
they added their signature item: the ‘Whopper’. This quarter-pound hamburger was created
as a way to differentiate Burger King from other burger outlets (see Weblinks). The Burger
CHILDREN’S
King speciality sandwich line was introduced in 1979. It was an attempt to specifically target a
distinct demographic: 18 to 34-year-olds. Such targeting is thought by some marketers to be
an efficient way to maximise the returns from marketing spend—by avoiding wastage through
MINT avoiding talking to lighter and non-buyers of the brand. It was believed that this demographic MINT
would be willing to spend more on a higher quality product (see Weblinks).
Thus, the Burger King strategy has mostly been focused on key target segments or, in the
WHITENING
company’s lingo, courting ‘super fans’, the 18 to 34-year-olds, who account for half of all the
visits to Burger King. Their ‘I am Man’ campaign typifies their approach <www.youtube.com/
watch?v=vGLHlvb8skQ>. An article in The Wall Street Journal (Jargon, 2010) describes their
strategy: 24 HOURS
Some Burger King franchisees and industry analysts say the company’s marketing and advertising
focus on super fans alienated women, children and other customers … Six years ago, after years
CHILDREN’S
of slumping sales, Burger King decided to focus on the group that spends the most money at
its restaurants. These young men and women visit fast-food burger chains on average almost 10
times per month … Burger King tried to distinguish itself from rivals by addressing young men, in
MINT
particular, like ‘the cool uncle who tells you how it is,’ says John Schaufelberger, Burger King’s senior
vice president of global product marketing and innovation.
Burger King also moved away from mass advertising. In 2008, they spent US$327 million
on measured media in the United States, down to US$308 million in 2009 and US$301
WHITENING
WHITENING
million in 2010 (Bruell, 2010), even further down to US$235 million in 2014, then up to
US$255 million in 2015 (Advertising Age, 2017).
24 HOURS
In Australia, Hungry Jack’s has been influenced by this move away from mass advertising,
but the brand appears to be in some turmoil. In 2011, it was announced that Hungry Jack's
would undergo a complete overhaul of its menus, restaurants, staff uniforms and advertising.
CHILDREN’S
Changes included new Asian-style meals, vegetables as a side dish, and organic beef options
added to the menu (see Weblinks); this is consistent with a brand copying its competitors’
sales-effective attributes. Hungry Jack’s ‘The Burgers are Better at Hungry Jack’s’ slogan was
MINT
replaced with ’Hungry Jack’s makes it better’ (Klein, 2011). By 2013, they were reinstating
their ‘Burgers are better’ slogan. This was despite the chain’s national marketing director, Jim
Wilson, saying at the time that ‘the burgers are better’ tagline had become a limitation for the
WHITENING
brand.
In 2016 Hungry Jack’s again promoted the Whopper—this time asking for people to vote
24 as
the Whopper HOURS
Australian Prime Minister <https://youtu.be/H7hC7Z7H_gU> (Campaign 24 HO
Brief, 2016). Pete Cerny, executive creative director, Channel T said: ‘We were tasked to make
Whopper relevant again, and nothing is more relevant than the 2016 Election. And it’s about
CHILDREN’S
time Australia had the chance to vote in Australia’s first ever burger Prime Minister.’ (Campaign
Brief, 2016).
Clearly, even quite similar competing brands can have quite different strategies that they
can put their efforts and resourcing behind. MINT
MINT
WHITENING
24 HOURS
OURS
CHAPTER 6 CUSTOMER SEGMENTATION AND TARGETING
Introduction
This chapter introduces some key ideas that have dominated marketing strategy for decades,
specifically these core traditional concepts:
1 Segmenting a market into groups of buyers with similar traits.
2 Targeting those different groups with different offerings.
We then critique and distinguish this from offering different options into a market to cater
to heterogeneity in demand without particularly targeting specific groups of people, in order
to gain broader reach.
Marketing textbooks—and some practitioners—tend to make two mistakes concerning

segmentation and targeting:
1 Believing that it is wrong to aim for the entire market, and that instead, narrower targeting
is always better.
2 Assuming that complex techniques that identify subtle (hidden) segments are the basis of
effective targeting and, hence, more efficient marketing.
In this chapter we explore and debunk these assumptions.
LEARNING OBJECTIVES
After reading this chapter you should be able to:
✚ understand segmentation-based targeting and how it differs from sophisticated
mass marketing
✚ discuss the measurement and return on investment implications of segmentation-
based targeting and mass-market approaches
✚ implement smart targeting.
CHAPTER OUTLINE
Introduction Targeting the whole Database-driven

Segmentation-based market with product targeting: A common
targeting variants trap
Who really is your Targeting does not Smart targeting in

target? necessarily maximise practice
returns Conclusion
The logic and appeal of
narrow targeting Talking to everyone is
possible
Brand user profiles
seldom differ
247

MARKETING: THEORY, EVIDENCE, PRACTICE
KEY TERMS
brand user profiles positioning stock-keeping units

market partitions RFM (recency, (SKUs)
market segmentation frequency, monetary) targeting
Segmentation-based targeting
Buyers differ from one another in their buying behaviour, and a buyer’s individual
behaviour varies depending on their situation or mood and changes over time.
Marketers can choose to cater for some or many of these differences. How they
choose to do so will depend on the capabilities of their company, the money to be
made, and what competitors are doing. Sometimes, differences in buyer behaviour
will correspond with particular types of people or organisations (e.g. owners of larger
cars tend to have larger families), but such differences do not tend to explain choices
between brands (e.g. Myer shoppers are, on average, not very different to those who
shop at other department stores).
✱ market Market segmentation is the process of dividing up the market into distinct sub-
segmentation: Analysing groups (called target segments) of buying behaviours (i.e. the way that buyers react to
the differences and different marketing mixes). It is a way of describing—hopefully in a practical way—
commonalities in buyer
the differences and similarities between different buyers.
behaviour in order to
identify target segments. It is useful if the differences between segments relate to identifiable characteristics
in people (see ‘Customer profile metrics’ in Chapter 3), because that allows a marketer
to target particular people (segment members). For example, men and women have
different body shapes, and so require different designs of most clothing. Also, there
are usually cultural conventions that dictate that men and women wear different
items of clothing—women have adopted trousers, but it seems unlikely that men
will ever adopt the bikini. Men and women tend to read different magazines and, to
some extent, watch different programs. Such obvious differences mean that clothing
marketers typically segment the market by gender. Children are smaller, and so they
✱ targeting: Adjusting are also treated as a segment. A common way to segment a market is to do so based
the marketing mix to on geography, because people who live or buy in different regions need different
cater for a particular distributions of goods and services and advertising.
target segment; includes
choosing not to serve Targeting is the practice of creating a different marketing mix (or mixes) to
some segments. cater uniquely for one or more different segments, which usually effectively means
choosing not to serve some segments.This can include developing a brand image that
✱ positioning: Developing a may or may not appeal to a particular segment—which is often called positioning.
brand image (e.g. premium
For example, Peroni Beer is positioned as Italian, even though in Australia it is brewed
or youth brand) to make
the brand stand out, or
locally with Australian ingredients and, unlike pizza, there is nothing particularly
to differentiate it from Italian about its taste (in 2016 it won a gold medal for ‘Best German Style Pilsner’ at
competitors to appeal to a the Australian International Beer Awards)—needless to say, outside of Italy most of its
particular target segment. consumers are not Italian.
248

How might a marketer choose to segment the market? There are many ways in
which an entire market could be broken down—that is, segmented—into smaller
sub-markets (or target segments).Tables 6.1 and 6.2 outline some of the typical bases
in consumer and industrial segmentation studies, respectively.
These segmentation criteria can be combined, so a marketer could, if they
wished, target a grouping such as women aged 25 to 39 who are fashion-conscious,
earn more than $40,000 and regularly watch the television show The Bachelor.
TABLE 6.1 Typical bases used in consumer segmentation studies
Segmentation base/variable Examples

Demographics Age, gender, income, occupation, education, family size,
geography
Psychographics Attitudes, opinions, activities, personality, lifestyle,
interests, values
Behavioural Usage rate, main brand, media used
Other Occasion/situation, benefits sought, media habits
TABLE 6.2 Typical bases used in B2B / Industrial segmentation studies
Segmentation base/variable Examples

Demographics Industry, location, number of employees, public or
privately owned
Strategy Distribution channels used, growth ambitions, local or
export marketing
CRITICAL REFLECTION
It has been suggested that the following segments can be found across a number of
categories (Haley, 1984: 35).
Segment Attributes
Status seeker Very much concerned with the prestige of the brands purchased
Swinger Tries to be modern and up to date in all activities
Brand choices reflect this orientation
Conservative Prefers to stick to large successful companies, and popular brands
Rational Looks for benefits such as economy, value, durability, and so on
Inner-directed Especially concerned with self-concept
Considers themselves to have a sense of humour, and to be
independent and honest
Hedonist Concerned primarily with sensory benefits
249

1 Select some very different categories from which you have made purchases; for instance,
cheese, coffee, hire cars or banking. Which segment would you describe yourself as
belonging to? Would that be stable over time and across all the purchases you make in
each category? What about other categories?
2 Is this a useful categorisation? In what way could you use it? Do you think it makes
sense to think of people as belonging to a particular segment? Can you see any gaps or
problems with this approach? Consider Yankelovich’s (1964: 90) observation: ‘we must
understand we are not dealing with different types of people, but differences in people’s
values. A woman who buys a refrigerator because it is the cheapest available may want
to buy the most expensive towels. A man who pays extra for his beer may own a cheap
watch.’
It sounds as if market segmentation can be very complicated, as Professors

Timothy Bock and Mark Uncles explain:
In empirical studies, almost every consumer behaviour variable has been
proposed for segmenting markets (Wind, 1978)—from social class (Martineau,
1958) to astrological sign (Mitchell & Haggett, 1997) … For managers and
analysts, this array of segmentation variables can be quite daunting. The
salutary tale of one healthcare company that commissioned 18 segmentation
studies over a five-year period without implementing any of them serves to
highlight the problem (Weinstein, 1993).
But it need not be so complicated.
Of course, there are millions of ways that customers vary from one another. The
key is to concentrate on differences that affect their buying behaviour—or, rather, that
affect their demands enough that we could gain commercial advantage in catering
for these demands. It must also be possible to efficiently reach these people. Here’s a
trivial example: people have different sized feet. This difference does not affect their
demand, in any meaningful way, for most products and services. But it does for
their buying of shoes. There probably isn’t a shoe brand in the world that doesn’t
cater for differences in shoe size by offering different sizes of shoe.

But there is more to this example than it first appears, because some brands cater
for more foot-size variance than other brands. Big brands may offer a wider range
of shoe sizes because, with their greater physical and mental availability, they can still
earn a decent return on sales on, say, extra-extra-large sized shoes, while other brands
would be lucky to sell a single pair of such shoes and so can’t justify making and
stocking them in stores.
Children are real outliers when it comes to shoe size demands—that is, they
have small feet. Some brands simply do not cater for child-sized feet. Which at
first seems a little odd—given that they make lots of other sizes, there seems no
technological reason why they don’t. However, very few children are going to buy—
well, be bought—Jimmy Choo brand stilettos. This is because children’s feet aren’t
just smaller; they are also attached to children. Children don’t buy such expensive
shoes, they wear their shoes in different ways, for different activities and have different
250

perceptions of what is fashionable. So, while Converse makes shoes in adult and
children’s sizes, Jimmy Choo shoes are for adults only. And the reverse is also true—
some brands make shoes only for children.
So, foot sizes matter to marketers of shoes, as does gender and whether the
consumer is a child or adult—but after that, age differences don’t matter so much.
Geography—where people live—does matter, especially for product distribution.
Wealth matters somewhat, especially for very cheap and very expensive brands. Type
of job may matter, steel-capped boots have value on a building site but not in the
office; however, all types of workers and the unemployed may be seen in ugg boots
on a cold winter night. But many other differences between consumers (such as hair
colour, household size, ethnicity) just don’t matter that much—they don’t affect shoe
buying enough.
For segmentation of any market to be useful to the marketer, the segmentation
characteristic must be measurable—ideally cheaply and easily. If the marketer (or
market researcher) cannot measure the presence or level of the characteristic, then
the marketer will be unable to use that characteristic as a segmentation base. Many
esoteric segmentations that are based on consumers’ attitudes, values or personality
traits fail on this criterion. It isn’t possible to measure these variables without
surveying every consumer, and even once this is done it is seldom possible to target
using such variables.
A first step is to know the number of members in a segment (the size of the
segment), then how to reach them. Broadly, marketers need to be able to answer
the following ‘who’, ‘how’, ‘where’, and ‘what’ questions in relation to the segment:
■ Who are the buyers?
■ How can we reach them? (And through what media?)
■ Where are they located? Where do they purchase?
■ What are their interests and behaviours? What do they buy or like?
A wide variety of approaches to market segmentation has long been discussed and
practised.Texts that give a good overview of these are listed in the ‘Further Reading’
section at the end of this chapter. Briefly, alternative approaches have included:
■ The ‘Q’ technique of factor analysis, multi-dimensional scaling, and other
distance measures (Haley, 1968)
■ AID (Assael, 1970)
■ CHAID (Babinec, 1990)
■ Conjoint (Green & Krieger, 1991)
■ Canonical correlation analysis (Bologlu, Weaver & McCleary, 1998)
■ Heuristic identification of noisy variables (HINoV) (Carmone Jr, Kara &
Maxwell, 1999).
There are many different approaches, made even more complicated by different
names being given to similar techniques. However, all statistical segmentation
techniques relate the behaviour or choices of each respondent to those of other
251

respondents, and then seek clusters of individuals with similar response patterns
(Haley, 1984). Clusters are identified as groups of people who had similar responses
to each other and different responses to respondents in other groupings. Whatever
the statistical approach that is selected, the end result of analysis is a small, manageable
number of segments—usually less than seven—the number of which can be specified
beforehand by the analyst.
It is easy to get technical, but really there is no need. Most segmentation
analyses that are valuable to marketers produce very obvious, intuitive segments,
such as geographic segments (where buyers live), gender segments, child versus
adult segments, no frills versus premium segments. Segments that are non-intuitive,
complicated or mysterious are unlikely to be of practical value. Surprisingly, large
firms do sometimes spend large amounts of money developing segmentation schemes
that fail this practical test. These are typically psychographic profiles where different
groups are given exciting names, such as ‘urbane, financially savvy hipster accountants’
and ‘time-poor, health seeking mums’. Few of these segmentation schemes appear to
be used for very long before they are dropped or changed substantially.
To be able to be used, segments must be targetable, marketers must be able to
reach members of the segment cost effectively, and the target customers should be
expected to respond fairly similarly to offers.There is typically little point developing
segments based on differences in attitudes (say, towards animal testing of cosmetics) if
we cannot buy advertising that will sell products to people with those attitudes.
Importantly, the segments worthy of being targeted must be of a certain size and
value—not so small that the costs of targeting and reaching them would wipe out any
incremental profit from serving them. So while about 10 per cent of the population is
left handed, and that may matter if you are selling scissors, there is little in the way of
media that left-handed people uniquely read or watch—it is mostly not a big enough
issue in their lives that it affects their entertainment and news choices. Supplying left-
handed scissors via online sites that target lefties (e.g. <www.leftys.com.au> may be
important, but it is unlikely that a scissor manufacturer would be able to compete just
playing in this part of the market.

One problem with a company using the results of a particular segmentation
study with a fixed set of segments is that this segmentation won’t be relevant for all
marketing decisions. Ideally, segmentation should be flexible; for example, geographic
segments may be relevant when planning distribution, while wealth-based segments
may be more relevant when considering pricing, and so on.
In summary, segments need a number of fairly obvious traits in order to be
useful. Marketers should look for easily identifiable characteristics of buyers with
high intra-group commonality that relate to substantial inter-group differences in
buying, such that there is likely to be value in creating and targeting customised
marketing mixes to these different segments. Segmentation can be useful, but there
are dangers that the marketer should be aware of. Segmentation encourages managers
to think of differences rather than look for the bigger commonalities or look at
252

ways to be inclusive. This is anti-scale and potentially anti-growth, and could reduce
competitiveness. It may instead be better for the company (and better for consumers)
to treat two different groups as one.
Segmentation-based targeting is illustrated in Figure 6.1.
CRITICAL REFLECTION
As a class, assign individuals to groups so that there is as much likeness within the groups
and as much difference between groups as possible. Discuss whether everyone agrees on:
■ the characteristics used (e.g. physical attributes, personal attitudes, knowledge, age or
intelligence)
■ the number of groups
■ the membership of groups.
Would someone else doing the same task come up with the same solution?
How could you evaluate if you have a good solution?
How different are the groups from one another?
How do the differences within another group compare to the differences between them?
Investigate the buying behaviour and desires of the group members for a common
product category of your choosing. Now investigate the media consumption choices of the
group members.
How different are these consumption patterns between—and also within—each group?
What issues does this exercise highlight for segmentation solutions?
FIGURE 6.1 Segmentation-based targeting process
An entire market comprises of distinct, heterogeneous needs—typically

with groups of individuals sharing more homogenous needs.
Segments are identified in the market based on characteristics that are observable,
measurable and stable. They are mutually exclusive and describe all the buyers
in the category.
A target segment is selected. It must be large enough to be profitably served

by a given marketing mix. Individuals in it must be reachable and
respond in a similar way.
A brand offering must exist or be created with a targeted marketing mix

to reach and appeal to the segment (with minimal wastage to those
outside the segment).
253

Application to business-to-business marketing

Common characteristics or dimensions used for segmenting business markets were
introduced earlier in this chapter (see Table 6.2). Here we demonstrate how the concepts
covered within the chapter apply to business-to-business marketing and bring them to
life using the example of Landmark, a large agribusiness company that has been part of
rural Australia for 150 years (Landmark, 2016).
Landmark’s client base of some 100,000 farmers is extremely varied—from
stations with thousands of kilometres of land to individuals running small farms.
Their portfolio is similarly complex—either pop into one of the 400 locations or
browse their website <www.landmark.com.au> to get a feel for their range of
agribusiness products and services, including merchandise, fertiliser, farm services,
wool, livestock, finance, insurance and real estate. Simply put, they cover the range
of things needed by potentially any of the farming businesses that make up their
market.
Demographics are likely to matter to Landmark management—along with
much other information—as they plan for the future. Tracking key variables
helps them determine what products and services to offer, and who to talk to
about which offers—which depends on where the businesses are located, and
when. Some possible ways they may segment and target are likely to include the
following:
■ Industry sector—given that their agronomists specialise in crop, pasture or
horticultural agronomy, Landmark need to know which industry sectors are
growing or declining, and which are profitable or willing to spend on such services
and the like. Sector idiosyncrasies will impact a range of demands, such as the
need for different agricultural chemical products, different sorts of fencing gear,
and the timing and type of seeds required, among many other demands. Knowing
these sector-based differences will feed into what they send to their different
outlets, and when and what offers they promote.
■ Location—as geographic regions are often suited to specific types of farming (e.g.
sugar and cotton, sheep and alpacas, wheat and other grains and legumes, grapes
and citrus or stonefruits, and so on), many have distinctly different seasonal cycles
with predictable needs for some goods and services. Furthermore, geographic
locations will be hit with occurrences like flood or droughts that impact many
farming businesses at the same time and bring demand for all sorts of things, from
financing, to the need to buy or sell cattle and sheep, to weed, disease and insect
identification and control measures.
■ Size or number of employees—may matter for profitability of offers related
to farm or motor insurance (e.g. discounts for fleets of vehicles for large farming
businesses), and knowing what are cost-effective ways of reaching and talking to
the farming businesses.
254

■ Ownership—might impact what real estate services are offered, from land to
lease in the area and offers to sell, among other things.
Many other variables likely matter to Landmark. For example, knowing the business’s
growth ambitions, if they are just in the local market or require help with exporting; do
they purchase supplies online, prefer an on-farm sales visit or like the trip into town to
pick up supplies?
While some products and services in the Landmark range may have a broad appeal
across the diverse farming customer base (e.g. hardwearing footwear, general banking
and insurance), there is typically not a good business case to promote, tailor or service
specialist offers for all farmers.
Knowing who buys (what and why) is an important part of marketing, as is
working out how to efficiently deliver the right offers at scale or for maximum profit.
Isolating the groups with similar needs (e.g. industry segments) can be useful where
there is real variation in needs and benefits to efficiency or effectiveness by tailoring
the offers.
In line with this, Landmark marketers will use broad media (e.g. the likes of The
Stock Journal and Farm Weekly, as well as regional newspapers and radio networks)
to reach farmers with messages or offers that many farmers are interested in; they
also use more tailored approaches where a more specialist need is identified for
an identified segment (e.g. sponsoring local or industry events, direct mail, farm
visits). Sensibly, Landmark make it easy for anyone who might need their products
and services to buy from them, through having an online presence as well as a large
distribution network.
255

Who really is your target?

It is normal to think of a brand’s target as being people who will have a high
likelihood of purchasing your product—your customers. But there is often an
important distinction between customers (those who buy the product) and
consumers (those who consume, or use the product). For example, customers of
Lucky Charms breakfast cereal are parents, while the consumers are children—see
Figures 6.2 and 6.3. And then there is also a difference between those people who are
influencers on the purchase decision. Such people may have different profiles from
actual buyers or consumers. For example, for undergraduate university courses, the
consumers—primarily people in their late teens—are different from those who are
often equally important to reach, because of the influence they have on the purchase
decision: parents, teachers, and career guidance counsellors; for wine and spirits
brands, bartenders and sommeliers may also act as barriers or influencers to choice.
Future customers may also be influencers: children increasingly influence parents’
choices, but they will also become buyers themselves in the future. The implication
being that your market may be larger and much more diverse than you realise.
FIGURE 6.2 Lucky Charms cereal box tailored FIGURE 6.3 Lucky Charms cereal box side panel
to intended consumers (children) tailored to intended customers (parents)
256

CASE STUDY
Toothpaste: Sophisticated mass marketing is

alive and well
The example of toothpastes is proposed by Kotler and colleagues (2007) as a shining
example of target marketing. The authors claim that the brand Colgate provides numerous
toothpaste varieties to the market, each successfully targeting and meeting the needs of a
unique segment of buyers. Along with ‘normal’ toothpaste, these include toothpastes for
children and for those with sensitive teeth, variants such as gel toothpaste, toothpastes
for teeth whitening and tartar control, and toothpaste with extra strong fluoride.
From the toothpaste packs, we may infer some of the segments to which these
offerings appeal, as outlined in Table 6.3.
TABLE 6.3 Colgate product offerings and relevant segment
Product offering Segment of users

My First Colgate Children, one to six years
Colgate Sensitive People with sensitive teeth
Colgate Advanced Whitening People seeking to whiten their teeth
Colgate Cavity Protection People seeking to avoid cavities
FIGURE 6.4 Hypothetical perceptual map of toothpastes
Colgate Tartar Control
Tartar
Colgate Max Fresh

Models Damaged teeth

Baking soda
Teenage girls
Colgate Whitening Fillings
Macleans Whitening
Colgate Total Colgate Cavity
Clean teeth
Mint Protection Macleans Family
Macleans Sensitive
Protection
Children
Macleans Junior Jaws

Dentist
Fun toothbrushes
Cinnamon flavour
257

Perceptual maps such as Figure 6.4 are read like road maps. Items that are close
together on the map are said to be similar, for example, Colgate Cavity Protection is a
good fit with children; and things that are a long distance from each other are seen as
different, for example cinnamon flavour is not perceived as associated with Colgate
Max Fresh nor with any of the brand offerings shown. Attributes in the centre of the
map define the category, for example, ‘mint’ and ‘clean teeth’. Traditionally, marketers
will look for gaps along relevant attributes as potential openings for new offerings or
for attempted repositionings. This assumes that it is possible to reposition a brand
and that having a unique positioning is a good thing. For example, although cinnamon
flavour has a unique positioning, it is not clear that this would be a valuable gap in the
market to fill. In fact, many successful profitable brands just reflect the category along
core, shared attributes.
Despite this, every brand needs to stand out and be noticed. Each brand needs
to have its own look and feel—through the use of colours, characters, shapes, and so
on—that are consistently used, so that it always looks like itself, avoiding confusion
with competitors. Brands need distinctive assets irrespective of whether or not they
are seen as different or differentiated, uniquely positioned or not. This is discussed
further in Chapters 7 and 11.
QUESTIONS
1 Evaluate the toothpaste segments against the necessary criteria for segments.
Consider any other brands or offerings that exist in this market as well.
2 What information does the toothpaste segmentation add that differs to the simple
list of product offerings? How would this information change marketing practice?
3 Why is a ‘normal’ toothpaste on offer, when there are products more tailored to
people’s specific needs?
4 Is Colgate a target marketer, or are they still trying to sell to all toothpaste buyers?
The logic and appeal of narrow

targeting
Some businesses only target a defined segment and appear to be successful with
pursuing such a strategy. Examples include insurance providers that only target over-
50s (APIA or Australian Seniors Insurance Agency) or specialist car enthusiasts (e.g.
Shannons). It also applies to women-only gyms (e.g. Contours or Curves). Far more
common are firms who target a particular geographic area (e.g. West Croydon Car
258

Repairs), usually from the simple necessity that they are a small firm and cannot
service clients further afield. Quite often targeted offerings are also owned by bigger
players who have a portfolio of brands that they manage in order to service the whole
market (e.g. Suncorp owns APIA and Shannons, as well as AAMI and a range of other
insurance brands in Australia).
A brand that only sells to a limited segment of the market is unlikely to become a
big player, but there can be some opportunities when existing players are not fulfilling
all of the market’s needs. The burkini (see Figure 6.5) is a great example of a small
player that saw an unfilled market need and launched a product to a clearly defined,
specialist target audience. They promoted a female swimsuit that covers the whole
body except the face, the hands and the feet, while being light enough for swimming.
The design was intended to accord with Islamic traditions of modest dress, reflected
in its name burkini (or burqini, a blend of burqa and bikini, though qualifying as neither
of these garments). That said, 40 per cent of the customer base of the burkini brand
has turned out to be non-Muslim (Zanetti, 2016). The brand has sold to Jews,
Hindus, Christians and Mormons. They have had men asking for burkinis, too (see
Weblinks). Notable wearers have included Nigella Lawson, who wears a burkini not
out of religious observance but to protect her skin (Bunting, 2011). A special yellow
and red design was even created for female lifeguards. Such examples accord with our
advice that brands should always think about inclusion first, rather than exclusion,
when developing their marketing strategies.
But how targeted should most brands try to be? Is it wrong to try to sell to all
category buyers?
FIGURE 6.5 The burkini

259

The traditional textbook view of target marketing is that trying to sell to the
entire market is wrong and inefficient, and that modern marketers have moved
beyond this.The typical view is that marketing has passed through three stages.
1 Mass marketing—when firms mass produce, mass distribute, and mass promote
their single product to buyers.
2 Product-variety marketing—when firms produce two or more products that have
different features, styles, quality, sizes, and so on; for example, Coca-Cola pro-
ducing several soft drinks packaged in different sizes and in different flavours,
designed to offer variety to buyers rather than to appeal to different segments, as
consumers have different tastes in different situations as well as seeking variety
and change.
3 Target marketing—when firms identify market segments, select one or more of
them, and develop products and marketing mixes tailored to the people in each.
For example, Coca-Cola now produces soft drinks for the sugared-cola segment,
the diet segment, and the non-cola segment.
The unsupported argument is that the third approach works better. Certainly this
sort of argument has influenced marketing practice, but real-world evidence does
not support the idea (nor its fuzzy logic) that it is the best approach, especially for
brands that wish to be large. For instance, it is unclear in what ways the examples
of ‘target marketing’ differ from the less sophisticated ‘product-variety marketing’.
Coca-Cola now markets more than 400 brands of drink—yet 78 per cent of its
volume sales come from one brand. How is Coca-Cola’s strategy of offering non–
cola soft drinks to fulfil the needs of some ‘non–cola segment’ materially different
FIGURE 6.6 The target audience: Marketers versus salespeople

260

from product-variety marketing? It’s doubtful that many people would say that
Coca-Cola is not a sophisticated modern marketer, but if we are to believe this
proposed typology of marketing sophistication then we would have to believe that
Coca-Cola’s multi-brand portfolio approach is sub-optimal. Does Coca-Cola, in fact,
really market different brands to satisfy the distinct needs of particular groups of
buyers (different products to different people), or does Coca-Cola merely sell the
different products to satisfy customers’ demands for variety (selling different products
to the same individuals across time)? So perhaps then we should judge the success
of Coca-Cola’s target marketing efforts through examining the extent to which
Coca-Cola sales are unique to a specific segment of consumers.
To answer this question, we’ll look at whether or not Coca-Cola’s brands sell to
different people from other brands. Do Fanta drinkers drink Coke and vice versa?
Table 6.4 shows the proportion of various soft drinks’ customer bases who also bought
a Coca-Cola on impulse during the period. It demonstrates that a high proportion
of each (and every) brand’s buyers also bought Coca-Cola, and this proportion varies
little between the different brands—it’s always about 70 per cent. Indeed, several of
the brands are marketed by Coca-Cola.
TABLE 6.4 Buying of Coca-Cola by buyers of competing brands
Sharing of customers
Buyers of Percentage of competitive brand buyers who
also bought (regular) Coca-Cola
Diet Coke 65
Fanta 70
Lift 67
Pepsi 72
Source: UK TNS ‘Impulse Panel’
This is direct evidence that these brands do not sell to distinct segments of people.
It is clear that Coca-Cola’s other products are not manifestly targeting the non–cola
drinkers, as most Fanta drinkers are also Coke drinkers. This pattern of switching—
the ‘duplication of purchase’ law—is widespread and normal for most product
categories (see Chapter 8).The implication here is that brands—especially those that
are interested in growth—should not adopt narrow targeting: they all sell to a broad
base of category buyers.
Another example, promulgated early on by Kotler in 1967 as being a stellar
example of target marketing, is that of Volkswagen, which ‘has concentrated on
the segment of the auto market which wants compactness, good engineering and
economy’. Putting to one side that it’s not very likely that there is a portion of the
market for automobiles who do not want good engineering, the broader point is
this: to what extent has Volkswagen’s success as an automaker—claimed in 2016 to
be the world’s largest automobile maker (Beckwith, 2016)—been as a result of it
261

pursuing a target market strategy? It’s difficult to substantiate that claim now, since a large
part of Volkswagen’s success and growth comes from its mergers and acquisitions of
other marques—Audi, Porsche, Lamborghini, Bentley, Bugatti, Seat, and Skoda, among
others—and even within just the Volkswagen marque, the vast proliferation of models.
Even in 1967 when Kotler wrote aboutVolkswagen’s successful segmentation strategy of
the Beetle,Volkswagen was already pursuing a product-variety strategy, marketing several
other models than just the ‘Type I’ Beetle, including the Karmann Ghia Sports Model
and various models of commercial vehicle based on the ‘Type II’ model, including a van,
a pickup and a camper! Even this old classic example looks more like sophisticated mass
marketing than an example of concentrating on a single segment.
Catering to a diverse range of customers’ needs and tastes through offering a
✱ stock-keeping unit portfolio of brands, marques, models, variants or stock-keeping units (SKUs) need
(SKU): Each different not rely on any segmentation or targeting to be successful. And certainly not in the
item stocked by a store;
orthodox sense of identifying stable heterogeneous groups of customers who all share
different brands, and
different pack sizes or
homogeneous needs, socio-demographic characteristics, or media consumption
flavours of each brand. behaviours, and then responding with a tailored marketing mix crafted to exclusively
reach them and meet their needs.
Brand user profiles seldom differ

A number of researchers have empirically tested whether or not competing brands
have different sorts of customer bases—something that would be a logical outcome
of segmentation and targeting strategy.
As far back as 1959, Evans found little difference in the personality of buyers
of rival car brands (Evans, 1959); a finding greeted with disbelief by the marketing
community but then replicated by Westfall (1962). More recently, researchers have
demonstrated that the profiles of users of competing brands seldom differ (on a whole
host of different demographic and psychographic characteristics), and when they do
vary, it is typically not by much or the differences are obvious (Hammond, Ehrenberg
& Goodhardt, 1996; Kennedy, Ehrenberg & Long, 2000; Kennedy & Ehrenberg,
2001; Uncles, Kennedy, Nenycz-Thiel, Singh & Kwok, 2012).The consistent finding
is that there is no distinctive ‘Coke buyer’ or ‘Pepsi buyer’, but rather that there are
‘soft drink buyers’, and their characteristics are similarly reflected in each soft drink
brand’s customer base.
Exceptions do exist, but they are mostly obvious; for example, banks skew to their
home market.
This research into whether competing brands have different customer bases was
carried out in a wide number of diverse product categories using standard industry
data; the sort of data that would often be used to conduct segmentation studies. The
variables included extensive information on users’ attitudes, lifestyles, demographics
and media exposures.The results demonstrate that brand-specific segments generally
262

do not exist—rival brands usually compete as perfectly interchangeable options in

what for them is a single, unsegmented mass market.There is no support for the idea
that competing brands each appeal to a unique sub-set of users that look different
from the customer bases of competitors. This is particularly so for big brands that
consistently appeal to a broad audience and which typically have brand user ✱ brand user profile:
profiles that closely reflect the composition of the buyers of the category. A description of the
customer base of a
Unfortunately, few marketers are aware of this fact. Many hold the notion that brand, i.e. who buys it—in
rival brands sell to different segments in the market, when this is wrong or at least an terms of demographics,
exaggeration. For example, in 2004 ‘low carb’ or ‘dry’ beer was introduced to Australia. attitudes, and other
Pure Blonde was one of the first brands—and certainly one of the most popular. Other relevant traits.
popular brands include Carlton Dry, Hahn Super Dry and Coopers Clear.The Sydney
Morning Herald said they are advertised as more healthy and low calorie/kilojoule
options, and it’s not unreasonable to think they would sell more to calorie-conscious
women, or older men battling ‘middle-aged spread’ (Frith & Watson, 2008). However,
the empirical evidence doesn’t fit the theory, as a 2015 Roy Morgan Research report
shows. Only one-quarter of low-carb beer drinkers are women (about average for beer
drinking in general), and men aged under 35 years easily outnumber those aged 50
and over (33 per cent versus 21 per cent of total low-carb beer drinkers respectively).
What’s more, low-carb beer drinkers are actually less concerned about their
waistline than the average Australian. For example, they are:
■ 25 per cent less likely to agree that ‘A low fat diet is a way of life for me’
■ 18 per cent less likely to agree that ‘I always think about the number of calories
in the food I’m eating’
■ 11 per cent less likely to agree that ‘I restrict how much I eat of fattening food’
■ 10 per cent less likely to agree that ‘I would like to be able to lose weight’.
In fact, men aged between 18 and 24—who are not generally a weight-conscious
bunch—are the most likely age group of either gender to drink low-carb beer—as
is the case with any sort of beer. The lesson here is that to be successful new brands
should be appealing to a broad range of potential category users and should target the
whole market rather than a small part of it.
Targeting the whole market

with product variants
Markets sometimes include sub-markets that are comprised of brands that compete ✱ market partitions:
Closely competing
a little more strongly with one another—and less with some other offers than
products within an overall
expected. These sub-markets are referred to as market partitions (Ehrenberg, market, e.g. children’s
Uncles & Goodhardt, 2004). They are usually due mostly to functional differences, cereal products among
rather than a result of the brands’ image positioning. Functionally different products all cereal products.
263

are those such as children’s versus adults’ cereal brands, butters versus margarines
versus health-oriented spreads, or diet versus full-fat or full-sugar offerings. Partitions
can be identified by looking at deviations from expected levels of sharing based on
behavioural data—that is, deviations from the duplication of purchase law.
In many cases, major brands will have ranges that operate across the partitions in
their category, including sub-brands or variants that cater to the different partitions.
For example, Kellogg’s will offer Frosted Flakes, which is bought more often by
families with children, as well as Kellogg’s All-Bran, which is consumed more often
by adults.
Partitions, or rather the brands within them, sometimes skew to slightly different
customer bases. For example, sweeter breakfast cereals will tend to sell more to
households with children and hence they tend to compete a little more closely with
one another than with the other brands in the market. A household that buys one
of these sweeter cereal brands is a little more likely to also have other sweeter cereal
brands in their repertoire than we would expect from their brand size alone. But it’s
vital to recognise that these skews are often less extreme than one might assume.
Colgate do not use different distribution channels for their tartar-control product
compared to their breath-freshening variety. Their various products are on the same
shelf, in the same stores, put there by the same merchandisers. The prices of these
products are typically close to one another, and while there might be different ads
for some products—although mostly there is brand-level advertising—they are
typically in the same (mass) media vehicles. Television in particular is known for its
wide, unsegmented reach. Any marketing mix that employs television for much of
its advertising will necessarily reach a mostly unsegmented audience. The difference
in the marketing mixes of these Colgate toothpaste sub-brands is almost exclusively
the difference that exists between the products themselves, and advertising that only
‘brings to public notice’ that different products exist and are available. This seems to
fit Kotler’s definition of product-variety marketing: selling different items to largely
the same people to cater to their desire for variety.
Returning to the example of McDonald’s from the start of this chapter, we can
see that their strategy over their history has largely been a quest to constantly expand
their offering to broaden their appeal to as many people (i.e. potential customers) as
possible.Their geographic expansion is probably the most visible and obvious sign of
this, but it is the management of their product offering that is equally impressive. Not
content to rest on their laurels, McDonald’s has constantly experimented with adding
new items to their menus and broadening their product offering to expand the
company’s appeal. These additions have catered to new dietary needs and occasions,
or have removed barriers to purchase, effectively giving people fewer reasons
to go elsewhere—and making it even easier for an increasingly broad number of
people to buy from a McDonald’s outlet. From the ‘drive-thru’ service, to providing
playgrounds for children; from kids’ meals and children’s birthday parties to family
meals; from chicken nuggets to chicken burgers and fish burgers; and from salads,
muesli, wraps and ‘loose change’ items, to café-style desserts and espresso coffee,
264

McDonald’s can clearly be seen as constantly striving to offer a broader range of

products that the market desires.
Catering to the heterogeneity of people’s diverse needs and requirements through
a broad range of offerings is particularly important and necessary to build reach and
scale in order to grow.
While it is important to have a broad range of product offerings that appeal
to and satisfy the needs of most category buyers, each offering must appeal to
enough of the market to enable it to have sufficient scale to be successful. These
offers should be promoted effectively, priced competitively, and distributed as
widely as possible. But, typically, these strategic decisions do not require a focus
on segmentation or the restricted targeting of a market in order to be successfully
implemented.
Sophisticated mass marketers can offer a great deal of customisation without
having to identify and target different buyers. For example, a great deal of
customisation to meet customers’ diverse range of needs occurs at the point of sale
without any segmentation or targeting of buyers. At the point of sale, buyers can
customise their purchases through making choices about:
■ payment options
■ delivery options
■ packaging options
■ volume of the order, and so on.
This sort of customisation is offered to all customers and is not based on
identifying particular types of people and targeting them.
Targeting does not necessarily

maximise returns
The process of segmentation and targeting does not guarantee the maximum return
from marketing expenditure. Even where the sales response for a given segment
would be maximised, this need not coincide with the most effective strategy that
would be most profitable for the company overall. A neat illustration of this is given
by Wright and Esslemont (1994: 15–16):
Suppose our segments are ‘old folks’ and ‘yuppies’. We might research the
old folks market, and find that the optimum advertisements showed happy
pensioners, sitting by their firesides, and that an extra $10,000 of advertising
spending on media that exclusively targets this group would lead to [an]
additional $100,000 of sales to pensioners. In the yuppy segment, research
might show the best advertisements to have youngsters racing their BMWs,
and that an extra $10,000 of advertising spent reaching yuppies would result
in the yuppies spending an extra $150,000.
265

Hypothetically, each of these approaches maximises the sales response within

each respective segment.Wright and Esslemont (1994: 16) continue:
The targeter would say that we should therefore target the yuppy segment,
since its advertising response is 50 per cent greater than the other segment,
and show advertisements with young motorists. But our success as a company
depends on total sales, not sales in a particular segment.What we should have
done is find out which advertisement would produce the best response from
the market as a whole. It is logically possible that the pensioner advertisement
would produce $70,000 of purchases from the yuppies, while the yuppy
advertisement could irritate the pensioners so much that they buy nothing.
In this case the targeter’s argument is false—we do not achieve the best result
by targeting the segment with the best response.
Table 6.5 demonstrates what Wright and Esslemont (1994: 16) point out—that
the best result is not achieved by targeting the segment with the best response.
TABLE 6.5 Response to $10,000 of advertising
Yuppy response ($) Pensioner response ($) Market response ($)

Yuppy mix 150,000 0 150,000
Pensioner mix 70,000 100,000 170,000
Source: Wright & Esslemont (1994: 16).
Here we are not suggesting that the segmentation targeting approach is always
inferior to mass marketing—simply that segmentation is not always superior to mass
marketing.There are and will always be conditions under which segmentation is not
the best, most profitable course of action.
Thus, despite the pensioner marketing mix delivering a smaller response among
the pensioner segment, the overall market response is higher. Wright and Esslemont
(1994) then show an example where the optimal marketing mix for targeting each
individual segment is quarantined from generating any response from any other
segment.They also show that since the focus is on total market response, it is possible for
a sub-optimal marketing mix at the individual segment level—say, a mass marketing
campaign—to be more successful overall.
TABLE 6.6 Response to $10,000 of advertising, with no ‘spillover’ to other

segments for segment-specific campaigns
Yuppy response ($) Pensioner response ($) Market response ($)

Yuppy mix 150,000 0 150,000
Pensioner mix 0 100,000 100,000
Sub-optimal mix 90,000 90,000 180,000
Source: Adapted from Wright & Esslemont (1994: 16).
266

In Table 6.6 we can see that it is possible that a marketing mix that is sub-optimal
within each segment can still give the greatest total market response and return on
investments.
A vital additional practical point is that unless the media habits of the segments
are almost completely different, reaching the specific segment without wastage will
generally not be possible.
Talking to everyone is possible

Earlier it was suggested that there are reasons why marketers may want to limit who
they talk to. Reasons include the expense involved in talking to everyone; difficulty
in appealing to all types of buyers in a market; and that different companies vary in
their abilities to serve different segments of the market.
But there is some counter-evidence to these ideas. While creating commercials
for high-reach media such as television can be expensive, such mass media is cheap
on a per-person basis—approximately two to three cents per person.This per-person
cost is very cheap compared to any other means of contact, such as direct mail or
salesperson calls. It is particularly cheap when we put in context that many marketers
do not know who exactly is in the market for their product this week, month or
quarter. Furthermore, while the likes of direct mail offers or programmatic buys
online appear to give high return on investment (ROI) numbers, they typically skew
to those who already buy the brand and are thus insufficient to underpin a strategy
of growth. So, for most marketers interested in growth, mass marketing is more cost-
effective than targeted approaches.
While it may be difficult to appeal to all buyers in a market, there are many
successful advertising agencies that do a very good job for their clients in creating
content that appeals to a very broad base of users. This is the case for brands such as
Apple, Sony, Nike and many more.The goal should be for brands to be as inclusive as
possible—rather than being too selective, which limits the possible size of the brand.
If being inclusive requires having an especially talented sort of advertising agency,
then that’s what a marketer should look for.
CASE STUDY
From the Model T to the Mini

Henry Ford is reputed to have said, ‘Any customer can have a car painted any colour
that he wants so long as it is black’. The Ford Model T is a fine—even if dated—example
of mass marketing: one car, appealing to all potential users. Within the same category,
we can head to the other end of the spectrum with the individual customisation
promoted by Mini.
267

On the Mini website <www.mini.com.au>, the ‘My Mini’ feature gives you the
option to ‘build your dream Mini—with well over 10 million possible combinations,
your Mini can be customised to your exact tastes’. It has been suggested that of
every 200,000 Minis produced, only two are the same. Customised paint jobs are also
offered, ensuring that a tailored product is a one-off; see <www.miniusa.com/content/
miniusa/en/tools/learning/build/build.html#/config/cooper/build/0/>.
But is this individual-level tailoring at the extreme, with each car truly unique for
its user? How different is the Mini from other car brands that offer buyers choices of
colours, trim, wheels, seat upholstery, air-conditioning and delivery times?
Clearly, it is not total tailoring, as all are variations on a small range of specific
features—at the end of the day, they all still look like a Mini. For companies to be
profitable, they typically need to have scale, or it is difficult to be profitable while also
being competitive and offering customers sufficient value. Tailoring to individuals or
even small groups of users comes at the price of scale. Take Takeoka Jidosha Kogei—the
Japanese car company that makes its cars from scratch. While clearly this would give
them scope for more tailoring, in a 2010 Sydney Morning Herald article, company head
Takeoka was asked whether there are plans to ramp up production from the current 100
vehicles a year. He exclaimed: ‘The company cannot build that many!’ (Poupee, 2010).
3D printing may offer new possibilities for tailoring in the future. With BMW well
underway into exploring this potential for car manufacturing (Grunewald, 2016), it
appears that the key benefits will be in improvements to the speed of manufacture of
components and assembly of cars, as well as increased flexibility with the design of
parts. It is unlikely the BMW brand would risk its reputation for reliable cars by allowing
customers to tweak to its tested engines and systems for their own tailored vehicle—
and legislators are also unlikely to allow it.
Great brands are all built on scale—BMW and other brands are likely to want to
protect their scale and brand through the reliability that scale manufacturing provides.
268

QUESTIONS
1 Do all car makes and all car manufacturers compete head on for the same
customers? For evidence to underpin your answer, you may wish to read Colombo,
Ehrenberg and Sabavala, 2000.
2 HSBC, with its 46 million customers worldwide (see www.hsbc.com/about-hsbc), is
just one example of the many brands that have overcome cultural hurdles to find
broad appeal. Can you think of any conditions where this is not possible?
3 When might individual-level targeting of advertising and individual tailored
manufacturing reach mass scale? What sort of brands are likely to thrive in these
conditions?
Database-driven
targeting: A common trap
A widespread practice in some industries is to use the recency, frequency, and
monetary value (RFM) of past behaviour to estimate each customer’s future response ✱ RFM (recency,
and to hence determine the priority segments to target. Industries such as banking, frequency, monetary
value): A tool that maps
insurance and the like, which hold large customer databases, are prime culprits. It is
a consumer’s recent
common in these situations to use a database to estimate the profitability for each purchases, frequency of
customer in order to segment the database based on that customer-level profitability. purchases and total spend
This practice seems sensible, even best practice, and to not do so would be a on purchases to determine
the value of that consumer
failure of one’s duty as a modern marketer. However, the truth is starkly counter
or consumer base.
to this view. While seemingly a paragon of high-tech marketing efficiency and
campaign ROI, the practice does little, if anything, to improve company ROI and is
counter to growth. In fact, RFM targeting usually means targeting those who would
have bought the brand anyway (i.e. those who regularly buy the brand, spend a lot
and are currently in the market, or who have bought recently). Resulting marketing
activities then often include targeting the likely high-response segment with costly
promotional offers. So, not only are those customers who are most likely to buy
anyway targeted, but they are also then given additional incentive to do what they are
most likely—compared to any other group—to do anyway and without incentive.
The reality is that a small, targeted campaign can only have a small effect on
overall sales—by virtue of its narrow reach and the limited ability of a company to
substantially increase the underlying demand within a segment. But such campaigns
can take up a lot of management time and resources that could have been invested
elsewhere. Focusing on any segment (e.g. past or heavy users) can lead you to neglect
other customers—especially light customers, who we know are important for growth
(as discussed in Chapter 3).
269

Also, the logic is wrong: marketing efforts should not be concentrated on the
heaviest, most profitable customers, but on those who collectively will have the
biggest differential reaction to the marketing efforts.These usually turn out to be the
lightest buyers of the brand, not its most loyal buyers who are already buying at high
rates and who therefore do not have much room to increase their purchasing.
It is easy to get a high response on a sales activity if you only approach people
who are likely to buy anyway (your heavy customers), especially if you are giving
them a special offer—which is reducing your margin. But this is not what brands
need to do if they want profitable growth. A high response is not what matters to
a company’s profitability. What actually matters is a high incremental response—the
response obtained above what would have occurred anyway, all else being equal. So,
merely selling to people who would be most likely to buy anyway, in the absence of
any such campaign, does very little in the way of improving incremental profitability.
RFM targeting does nothing whatsoever to grow the customer base of the brand.
Its focus is entirely on ‘mining’ the value contained within the company’s existing
customer base, and the heaviest buyers of these customers. However, growing a
brand’s customer base, recruiting new buyers and increasing its market penetration
is absolutely fundamental to brand growth. All brands lose a number of customers
with the passing of time—some move, some die, and some just forget about the
brand. Growing brands acquire more new customers than they lose (Riebe et al.,
2014). Thus, broad-reaching activity becomes a necessity for finding possible new
customers as well as for maintaining light and current customers.
FIGURE 6.7 ‘Heavy buyer’ targeting strategy

270

Smart targeting in practice

Unless there are compelling, data-driven reasons to do so, the default approach for
marketers is that the entire market—all people or companies that buy from the
category—should be the default target for communications and other marketing
activities.The aim should always be for inclusion rather than exclusion.
This doesn’t mean treating all customers the same. As we have discussed, marketers
usually offer much customisation, many different options.They understand that their
market contains many different sorts of people, and that people vary in their needs,
moods and situations.
But sophisticated mass marketers should look to profitably address such diversity,
looking for ways to standardise; to gain scale and cost efficiencies while ensuring they
deliver reputable offerings that protect the value of their brand. They aim to market
brands that look distinctive (more on that in Chapters 7 and 11), while making
the brand and its marketing as appealing as possible to as many category users as
possible. The word ‘sophisticated’ refers to the need to appreciate the differences
between buyers and the differences between buying situations and to address this
diversity and these differences when it makes sense to do so—but doing so without
sacrificing scale.
Sophisticated mass marketers take a number of steps to ensure they do not over-
target by focusing their marketing activities on brand growth.These steps include the
following:
1 Avoiding narrow descriptions of the brand’s target market, recognising there is a
wide variety of consumers.
2 Making sure they understand and document who buys the category, why, when,
and how the brand fits into their lives.
3 Always checking real numbers instead of relying only on indices. Indices can be
useful to highlight skews but they can also overinflate small differences. Focusing
on absolute numbers to underpin strategy, rather than ‘statistical’ differences.

4 Quantifying any skews (e.g. demographic skews) in brand sales and media.
5 Realising that adding a brand, SKU or focusing on a specific occasion is typically
about selling more to the same people (many of whom are light category users),
and that doing so will inevitably come with some cannibalisation of existing
sales.
6 Knowing that heavy buyers are not (by themselves) the key to growth.
7 Using overall profit contribution rather than campaign ROI to assess marketing
performance.
8 Looking to maximise overall sales and margins, not just response from the target
market or any single campaign.
9 Reaching all consumers of the brand’s service/product category, both with physical
distribution and marketing communication. Reaching across geographical space,
time and situations.
271

10 Avoiding narrow descriptions of the brand’s target market.

11 Always looking for ways to gain scale and efficiencies, to appeal to as many
category users as possible.
There are times when targeting may present a good business opportunity (e.g.
women’s only gyms). But unless the evidence is there to support it, such restrictive
targeting efforts should not be the default—as you are limiting your potential market
and therefore the scale of your opportunity from the start. Do the maths. Crunch the
numbers. Check that the overall returns from targeting will outweigh the costs and
are greater than the return you would get from reaching a larger group (even if they
might have a lower propensity to buy). Be thorough about calculating the costs, so
that you correctly calculate returns including fixed costs and overheads.Think about
who you are not reaching—what is the cost of you not selling to them or them
not being exposed to your brand’s marketing activities? For example, consider and
cost out the implications of light buyers not getting reinforcement of your offer, but
repeatedly seeing competitors’ ads or offers.
CRITICAL REFLECTION
It seems logical to target the heaviest, most valuable (i.e. highest customer lifetime value),
most loyal customers with extra advertising or greater service, discounts and other benefits.
But this is a marketing fallacy; what really matters is the incremental total profit from
customers reacting to any marketing intervention.
1 Can you think of reasons why targeting your heaviest customers might yield little
incremental return?
2 Is targeting always like salt in cooking—a little bit can do some good, but it needs to
be used with restraint—or can you identify conditions where targeting is core to brand
growth?
CASE STUDY
Sophisticated mass marketing and the

Model T Ford
There is a great deal of variety in markets: customers vary, and so do marketing
mixes. The idea that once upon a time there were companies that offered only a
single marketing mix is undoubtedly a myth. The most commonly cited example
of mass marketing a single product is the Model T Ford. And while it may have only
come in the colour black (see previous case), there were also delivery and payment
options, choice of dealers, and after-sales accessories. Between 1909 and 1927, 14
272

different body styles (such as four-door touring, or

two-door sedan) were offered. Separate chassis
were available for independent coach builders. On
top of this, Ford also sold models of car other than
the Model T.
Thus, we see that mass marketing has always
involved some product-variety marketing, as well
as some segmentation and targeting. This is still
true today. Smart marketers are sophisticated mass
marketers: they target all category buyers, working
out clever, profitable ways to cater for meaningful
differences in preference.
In 1914, Henry Ford chose to standardise the
colour black for his product. His decision appears
to have been justified, because the Model T went on to achieve a staggering 50 per
cent global market share. At that time, most consumers were more concerned with
price, durability and performance on the very poor roads of the time than with colour.
Only later, when other cars could match the Model T’s performance, quality and price
would colour become important to consumers. This example shows how marketers
have to make careful decisions about catering for variation in preferences, understand
what matters and what doesn’t, and formulate strategies of how to cater for that
heterogeneity profitably without losing sight of the real target—the market.
INDUSTRY INSIGHT
Salmon campaign strategy: Is

there something fishy going on?

Salmon is consumed almost equally by males and
females of all age groups, and the underlying driver of
seafood (and salmon) consumption is taste. Despite this,
the 2010–11 campaign for Tasmanian Salmon used the
slogan ‘Beauty Food’. This concept was developed in
response to insights into a particular segment, generated
from focus group discussions. The target consumer was
a single female aged between 20 and 25. This represents
less than 10 per cent of the potential market for salmon!
In order to reach this target segment, the campaign
media strategy was strongly weighted towards select
women’s fashion and beauty magazines.
273

QUESTIONS
1 Is this a good campaign approach?
2 What are the risks and opportunities?
3 Who should be included in research for campaign development?
4 As well as the advertising and media implications mentioned here, what other implications
is such a segmentation approach likely to have (e.g. in terms of distribution and pricing)?
5 Choose another campaign and critique it in terms of its target audience. Is it targeting a
specific audience or a broad audience? What works well or is risky?
Conclusion
An important lesson is that it is just as dangerous to focus narrowly on a particular
segment of buyers as it is to chase a market so broad that the firm is not capable of
competitively and profitably serving it. For a premium brand, this does not mean
dropping your price so that everyone feels they can afford to buy it, but it does
mean being as inclusive as possible (i.e. using broadly appealing communications and
being easy to buy) for those shoppers who might be nudged to make a purchase—
even just one for a special occasion. The art of marketing is to find ways of serving
a broad and heterogeneous market at scale and profitably—being mentally and
physically available to as broad a range of consumers as possible—without sacrificing
serving any segment. This requires a deep understanding of not just the differences
between people but, more importantly, the similarities.
274

Summary
✚ In terms of marketing strategy, marketers have a number of key options, including:
▲ segmenting a market into groups of buyers with similar traits, and targeting
those different groups (segments) with different offerings
▲ a mass market approach, including different product options to address
heterogeneity in demand, without particularly targeting specific groups of
people with unique marketing mixes.
✚ A focus on segmentation and targeting is popular, but there are some misplaced
assumptions and poor costing practices in the discipline. Marketers should be
cautious before heading down the segmentation-targeting path and deciding not
to focus on the entire market (or at least a very broad market).
✚ Targeting a defined segment can be sensible, such as targeting a geographic region,
but all segments must possess a number of traits in order to be useful, including
having easily identifiable characteristics of buyers that relate to substantial
differences in both buying and media consumption.
✚ While complex techniques are commonly used to identify segments, raw numbers
and total market response should underpin any decision making.
✚ Smart marketers ensure they do not over-target, by understanding who is buying
the category, as well as understanding the importance of light buyers to brand
growth.
REVISION QUESTIONS
1 What are the characteristics that segments must have to be useful?
2 List three very different car brands or models. What is the segment that each
appeals to? In each instance how would the car manufacturers target and reach
each group of users exclusively? What tactics do they attempt to use to position
the cars differently?

3 Think of an example where the users of a product are not the buyers themselves.
What are the implications for targeting?
4 What is smart targeting? How might it apply to the sale of women’s shoes?
5 It is not uncommon to hear a business claim something like, ‘the segment we’re
going to focus on is the “big-hearted team players”’. Is it actually possible to target
such a group? Is it likely to be a good business decision?
6 In this chapter we learned that ‘dry’ or ‘low carb’ beers did not sell particularly to
those people seeking to lose weight. Perhaps part of the reason is that all beer is
actually low in carbohydrate and these ‘low carb’ beers have pretty much the same
amount of calories as regular beer. Perhaps the marketers are fooling themselves
275

but not the market. But if they did succeed in convincing consumers that this type
of beer was healthier, might that harm the category in general? Discuss.
7 How is a segment different from a partition? What are the implications for
marketers in thinking about segments versus partitions?
8 If you could target precisely, would you want to? Identify the criteria you would have
for who you would want to specifically target. Give consideration to Ehrenberg’s
Law of Buying Frequencies (see Chapter 2 and Chapter 3) before finalising your
criteria. Remember, Ehrenberg’s Law of Buying Frequencies shows that a brand
has many light buyers but very few heavy buyers.
FURTHER READING
Anesbury, Z, Winchester, M & Kennedy R, (2017 working paper) ‘Brand user profiles
seldom change and seldom differ’.
Colombo, R, Ehrenberg, A, Sabavala, D (2000), ‘Diversity in analysing brand switching
tables: The car challenge; Canadian Journal of Marketing Research, vol. 19,
pp. 23–26.
Ephron, E (1993), ‘The ghost of network past: TV fragmentation doesn’t mean tighter
targeting,’ in Ephron on Media, retrieved 29 May 2012 from <www.ephrononmedia.
com> (note: log-in required).
Nelson-Field, K & Riebe, E (2010), ‘The impacts of media fragmentation on audience
targeting: An empirical generalisation approach’, Journal of Marketing
Communications, vol. 17, no. 1, pp. 51–67.
Riebe, E, Wright, M, Stern, P, Sharp, B (2014), ‘How to grow a brand: Retain or acquire
customers?’, Journal of Business Research, vol. 67, no. 5, pp. 990-997.
Sharp, B, Tolo, M, Giannopoulos, A (2001), ‘A differentiated brand should appeal to a
special segment of the market ... but it doesn’t!’ in S Chetty & B Collins (eds),
Bridging Marketing Theory & Practice, Australia and New Zealand Marketing
Academy, Massey University, New Zealand.

Sharp, B (2010), How Brands Grow, Melbourne: Oxford University Press.
Sharp, B & Romaniuk, J (2016), ‘How brands grow’, in How Brands Grow: Part 2,
J Romaniuk & B Sharp (eds), Melbourne: Oxford University Press.
Wind, Y (1978), ‘Issues and advances in segmentation research’, Journal of Marketing
Research, vol. 15 (August), pp. 317–37.
WEBLINKS AND REFERENCES

For case studies on brands and their varying strategies, see Warc:
www.warc.com
276

Key marketing journal:

Journal of Targeting, Measurement and Analysis for Marketing
Burger King:
https://en.wikipedia.org/wiki/Burger_King
Burger King and its ‘superfan’ strategy:
http://finance.yahoo.com/career-work/article/108728/burger-king-draws-critics
Hungry Jack’s:
https://en.wikipedia.org/wiki/Hungry_Jack's
Burkini:
https://en.wikipedia.org/wiki/Burkini
277

MAJOR CASE STUDY
My World My Way: Analysing the with his mates. Kev’s just about to finish school, and
is desperate for some independence. That’s where we
segmentation strategy
come in. Imagine that everywhere Kev goes, we are

BY ELIZABETH GUNNER
there saying “Hey, what about a gap year? Can’t you see
The board of directors for Australian travel guide yourself spending six months in Asia or South America?
company My World My Way are concerned about My World My Way guides are great for travelling on a
declining market share. Scared of losing their number budget.” Suddenly Kev’s got an idea. He starts buying
one position to Lonely Planet, they’ve hired a marketing guides and reading up. He asks mum and dad for a
consultant, who begins his first day with an inspiring My World My Way backpack for Christmas. He “likes” us
presentation: ‘Meet Kev,’ he says, gesturing towards a on Facebook and he talks about us with his friends …’
projected image of a male in his late teens, with scuffed ‘Kev is our future,’ concludes the consultant, ‘we
shoes. ‘Kev is 18. He has two siblings and his parents know what he likes, where he goes, and how to talk with
are reasonably well off. He’s pretty popular and spends him. If we get Kev now, we’ve got him for life—every
his weekends playing club footy and going to parties trip from his first to his last.’
278

QUESTIONS 4 You have been hired as a consultant for My World

My Way. The board hands you some survey results
1 The marketing consultant is suggesting a highly
showing that lots of My World My Way customers
targeted marketing strategy. What is the difference
are also buying other travel guides, even though
between a target marketing strategy and a mass
they said that My World My Way is ‘great value for
marketing strategy?
money’ and ‘an informative travel resource’.
2 Do you think a target marketing strategy is
a. a What can you tell the board about these
appropriate for My World My Way? What are the
results? Should they be concerned by these
advantages and disadvantages in this instance?
findings?
3 Imagine you are the Marketing Director for
b. b What marketing advice would you give?
Lonely Planet. What would you do in reaction to
My World My Way’s new strategy? What are the
opportunities and threats?
279

Sally Roscholler
Marketing Manager, Leader

Community News
Having completed a Bachelor of Business with Honours, I undertook voluntary work in the
marketing departments of Destination Melbourne and Intrepid Travel in 2002. During my time
at Intrepid Travel, I met an inspiring photojournalist who asked me to work with her on a new
adventure travel magazine entitled Get lost. I worked across marketing, design and editorial
in the first two years of the life of the magazine, which has just published its 51st issue. A key
benefit of small organisations is cross-departmental experience—and lots of it! In my second
year I was sent to Indonesia to write a story for the magazine about Lombok. Tough job, but
someone has to do it.
In early 2005, I joined The Herald & Weekly Times (HWT) as marketing assistant in the
media and marketing insights department (M&MI). HWT is owned by News Corporation, which
publishes brands such as the Herald Sun, Leader Community News, The Australian, taste.
com.au, GQ and Vogue.
In May 2006, I was promoted to the position of marketing analyst. In this role, I worked
predominately with the Victorian Herald Sun agency and the mX sales teams. Devising
strategic responses to briefs in limited time was commonplace. Clients want media firsts,
integrated opportunities and additional value. Adrenaline levels are high and it makes for an
exciting work environment—especially when you win business.
In February 2007, I was promoted to the position of senior marketing analyst, and given
responsibility for News Limited’s national sales team, NewsNet (now National Sales), which
manages national advertisers based in Melbourne.
In July 2008, I was promoted to the position of team leader and given responsibility for
the management of a team of marketing analysts. Management has been one of the most
280

rewarding roles of my 10-year career. As team leader, I published a regular eDM (electronic
direct marketing publication) entitled BiteSize to give advertisers an update on commercial
highlights and opportunities at the Herald Sun. I also worked on creative Herald Sun
advertising campaigns appearing in B&T, AdNews and Mumbrella. In 2009, I won ‘Supervisor
of the Year’ at the annual HWT advertising sales awards.
In July 2010, I was promoted to the position of Media & Marketing Insights Manager,
reporting to the Victorian advertising sales director. In August 2016 I took on a 12- month
secondment with Leader Community News as Marketing Manager. I’m now able to utilise my
research and trade marketing expertise while learning and applying marketing strategies in
the consumer space.
The rate of change for media platforms is unprecedented. It is an extremely challenging
and exciting time to be in the industry. News Corp Australia has transformed itself to embrace
the new and evolving media landscape. I thoroughly enjoy working for such a progressive
company and am excited about what the future holds.
281

Marketing Theory, Evidence, Practice - (EXPANDED CONTENTS)

Uploaded by

Copyright:

Available Formats

You might also like

Marketing Theory, Evidence, Practice - (EXPANDED CONTENTS)

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Marketing Theory, Evidence, Practice - (EXPANDED CONTENTS)

Uploaded by

Copyright:

Available Formats

WHIT

BYRON SHARP AND

06_SHA_M2E_90296_TXT_SI.indd 245 17/08/2017 10:30 AM

Marketing textbooks—and some practitioners—tend to make two mistakes concerning

Introduction Targeting the whole Database-driven

Who really is your Targeting does not Smart targeting in

06_SHA_M2E_90296_TXT_SI.indd 247 17/08/2017 10:30 AM

brand user profiles positioning stock-keeping units

market segmentation frequency, monetary) targeting

06_SHA_M2E_90296_TXT_SI.indd 248 17/08/2017 10:30 AM

TABLE 6.1 Typical bases used in consumer segmentation studies

Segmentation base/variable Examples

TABLE 6.2 Typical bases used in B2B / Industrial segmentation studies

Segmentation base/variable Examples

06_SHA_M2E_90296_TXT_SI.indd 249 17/08/2017 10:30 AM

It sounds as if market segmentation can be very complicated, as Professors

cater for differences in shoe size by offering different sizes of shoe.

06_SHA_M2E_90296_TXT_SI.indd 250 17/08/2017 10:30 AM

06_SHA_M2E_90296_TXT_SI.indd 251 17/08/2017 10:30 AM

playing in this part of the market.

06_SHA_M2E_90296_TXT_SI.indd 252 17/08/2017 10:30 AM

FIGURE 6.1 Segmentation-based targeting process

An entire market comprises of distinct, heterogeneous needs—typically

A target segment is selected. It must be large enough to be profitably served

A brand offering must exist or be created with a targeted marketing mix

06_SHA_M2E_90296_TXT_SI.indd 253 17/08/2017 10:30 AM

Application to business-to-business marketing

06_SHA_M2E_90296_TXT_SI.indd 254 17/08/2017 10:30 AM

06_SHA_M2E_90296_TXT_SI.indd 255 17/08/2017 10:30 AM

Who really is your target?

06_SHA_M2E_90296_TXT_SI.indd 256 17/08/2017 10:30 AM

Toothpaste: Sophisticated mass marketing is

TABLE 6.3 Colgate product offerings and relevant segment

Product offering Segment of users

FIGURE 6.4 Hypothetical perceptual map of toothpastes

Colgate Tartar Control

Colgate Max Fresh

Models Damaged teeth

Macleans Junior Jaws

06_SHA_M2E_90296_TXT_SI.indd 257 17/08/2017 10:30 AM

The logic and appeal of narrow

06_SHA_M2E_90296_TXT_SI.indd 258 17/08/2017 10:30 AM

FIGURE 6.5 The burkini

06_SHA_M2E_90296_TXT_SI.indd 259 17/08/2017 10:30 AM

FIGURE 6.6 The target audience: Marketers versus salespeople

06_SHA_M2E_90296_TXT_SI.indd 260 17/08/2017 10:30 AM

TABLE 6.4 Buying of Coca-Cola by buyers of competing brands

06_SHA_M2E_90296_TXT_SI.indd 261 17/08/2017 10:30 AM

Brand user profiles seldom differ

06_SHA_M2E_90296_TXT_SI.indd 262 17/08/2017 10:30 AM

do not exist—rival brands usually compete as perfectly interchangeable options in

whole market rather than a small part of it.

Targeting the whole market

06_SHA_M2E_90296_TXT_SI.indd 263 17/08/2017 10:30 AM

06_SHA_M2E_90296_TXT_SI.indd 264 17/08/2017 10:30 AM

McDonald’s can clearly be seen as constantly striving to offer a broader range of

Targeting does not necessarily