Market Segmentation and Targeting
Key Terms: undiferentiated marketing, market segmentation, market positioning, micromarketing, market niche strategies, concentrated marketing, family life cycle, psychographics, AIOs, geodemographic segmentation, benefit segmentation, resonance marketing, microniche, ethnic marketing.
Undifferentiated marketing is using one marketing strategy to go after an entire market, i.e., mass marketing. This does not usually work too well since it is unlikely that every individual will have the same needs. The shampoo that I desire (I am bald) is probably quite different than the shampoo a young woman with a full head of hair wishes to purchase. Do we all want to drive the same kind of car? Some of us prefer a sports car and others an SUV.
Steps in market segmentation:
Step 1: Market segmentation – divide the market into relatively homogeneous segments of customers; each of these groups, to be fully satisfied, needs its own marketing mix or product.
Step 2: Market targeting – In this step, a firm evaluates each of the segments in order to determine which one(s) to enter.
Step 3: Market positioning – A firm has to decide how it wants its brand perceived relative to other brands in the marketplace. This involves creating a distinct image for the brand relative to other brands. For instance, suppose you introduce a new kind of granola bar. You can position it as a good-tasting candy bar, a relatively healthy bar or, possibly, a low-fat ("lite") bar. Similarly, a new brand of cookie could be positioned using health, diet, or good taste. When a college refers to itself as the "poor man’s Harvard" it is also positioning itself.
Some reasons for segmentation:
a. Market segments are generally relatively large, but there is going to be more competition than with a subsegment, i.e., a niche. A relatively small firm should use market segmentation to find a niche in the marketplace. By concentrating its resources on one small segment that is not thoroughly satisfied with the available products, a firm might be able to succeed. It is obviously very difficult for a small firm to fight against a large firm. Imagine the difficulties in developing a new brand of cola and competing against Coke and Pepsi. This would be suicide. The way to succeed is to find a small niche in the marketplace, i.e., niche marketing. This is what Snapple did. Also, Tom’s of Maine toothpaste.
b. A large firm that desires to reach several different target markets and thereby dominate a market has to make sure that the different brands compete with competitors’ brands rather than each other (cannibalization). For instance, Procter and Gamble markets the following soaps: Ivory, Camay, Safeguard, Coast, Zest, and Oil of Olay. Each of these brands has a different target market.
Micromarketing includes individual marketing and local marketing.
Individual marketing, also known as one-to-one marketing, is an example of micromarketing. Today, it is possible for firms to customize products to order. Using computers and the Web, it is possible for firms to manufacture custom-made products. For instance, a company might allow customers to design the bookcase they desire on the Web, i.e., select a color, style, size, etc.
Ways to segment consumer markets:
(1) Geographic segmentation-- by country, by region within the country, by state, by neighborhood, or rural/suburban/urban.
(a) For instance, a firm might market different
beers for different regions in the United States -- e.g., South, Northeast,
and West.
(b) Or, a firm selling bicycles might sell one bicycle for rural areas (mountain
bike) and another kind of bike for urban areas.
(c) Most firms recognize that they have to use segmentation when marketing their
products to foreign countries. Marketing strategies that work in the United
States may have to be modified for other countries. This will be discussed further
in the lecture dealing with international marketing.
(2) Demographic segmentation - demographics refers to physical characteristics of people such as sex, age, ethnicity, income, family size, occupation, education, marital status, social class, and stage of the family life cycle.
Sex: shampoos, hairsprays, deodorants, vitamins, and cigarettes for men and women.
Age: cereals, vitamins, and games (e.g., Scrabble) for young people and older people.
Ethnicity: cosmetics and hairsprays for African-Americans, Asians, and Caucasians; television shows for Caucasians, African-Americans.
Income: luxury cars for high-income individuals; restaurants that cater to high-income and low-income people.
Family Size: condominiums for small families. Indeed, there are a large number of households consisting of one or two people in the United States because of divorce and the large number of singles who choose not to get married.
Occupation: calculators for engineers, accountants, and stockbrokers.
Education: newspapers for different levels of education.
Marital Status: resorts that cater to single people, married couples (Poconos), and families.
Social Class: wine for upper social classes and for lower social classes. Do electricians drink the same wine as lawyers?Family Life Cycle: 9 stages
Bachelor stage (Single men and women living on their own-- spend on fashion,
vacations, and recreation),
Newly married couples (spend on vacations, cars, and clothing)
Full Nest I (youngest child under 6 -- spend on baby food, toys; buy home and
furniture)
Full Nest II (youngest child is older than 6 -- spending money on children)
Full Nest III (older children, -- major expense is college; may travel and replace
furniture)
Empty Nest I (children have left home; family income at peak -- travel, cruises,
vacation)
Empty Nest II (head of household has retired -- may move to warmer climate and
purchase a condominium)
Solitary Survivor in Labor Force (travel, vacations, medical expenses)
The Retired Solitary Survivor (medical expenses)
Builders might use family life cycle to segment the market for condominiums. It should be noted that family life cycle is somewhat dated and many people do not fit into any of the categories, e.g., unmarried people living together and gay couples.
Geodemographic segmentation, sometimes called clustering, combines demographics (age, education, ethnicity, family life cycle, housing type, income, occupation, etc.), lifestyles, and geography. You probably noticed that the people in your neighborhood are somewhat similar to you. There is an adage: "birds of a feather flock together" and that seems to be true of people living in the same geographic areas. Firms such as Claritas (they call this PRIZM) create market segments or clusters consisting of similar individuals. Claritas has segmented the US into 62 clusters. These include:
S1 – ELITE SUBURBS
01 Blue Blood Estates: Elite Super Rich
Families
02 Winner’s Circle: Executive Suburban Families
03 Executive Suites: Upscale
White-Collar Couples
04 Pools &
Patios: Established Empty Nesters
05 Kids & Cul-de-Sacs: Upscale Suburban Families
C1 – 2nd CITY SOCIETY
11 Second City Elite: Upscale Executive Families
12 Upward Bound: Young Upscale
White-Collar Families
13 Gray Power:
Affluent Retirees in Sunbelt Cities
U3 – URBAN CORES
45 Single City Blues:
Ethnically-Mixed Urban Singles
46 Hispanic Mix: Urban Hispanic Singles & Families
47 Inner Cities: Inner City, Solo-Parent Families
If you want to see the rest, go to: http://www.tetrad.com/pcensus/usa/prizmlst.html
A marketer can determine the types of people that live in various zip codes, neighborhoods, and even blocks. Suppose you want to market a product to Hispanics. You can use the Claritas PRIZM service and find out which zip codes consist of cluster 46 ("Hispanic Mix").
(3) Lifestyle segmentation, which is sometimes called psychographics. This is measured by studying the activities, interests, and opinions (AIOs) of customers. It considers how people spend their leisure-- what do we do with our time? What kind of hobbies do you have? Are you more likely to spend your free time watching television, reading a book, at a party, or knitting? Are you more likely to be engaged in gardening or hunting? What is important to you (interests)? How do you see the world (opinions)? Some examples of lifestyle traits include: homebody, arts enthusiast, community minded, and fashion conscious. Lifestyle is thus a person's way of living. Knowing the psychographics of one’s customers enables a firm to create the correct advertising message. Suppose you determine that the typical drinker of your brand of beer loves the outdoors, likes to hunt and fish, enjoys bowling with the boys, reads magazines such as Playboy and Penthouse, and is not interested in religion. How successful would an ad be if it showed a group of nuns enjoying your beer after teaching Sunday school? Please note that extrovert (outgoing), introvert, compulsive, etc. are examples of personality traits; they are not psychographic traits. Psychographics deals with life style and personality deals with the qualities/traits that are peculiar to a particular individual. Commercials showing close-knit, happy families enjoying themselves at Pizza Hut after a fun day at the beach are using lifestyle segmentation. As noted above, lifestyle deals with how people spend their leisure time.
The SRI Company has developed a questionnaire that is used for psychographic segmentation called VALS (Values and Lifestyles). Take a few minutes, fill out their survey. Go to the SRI website at http://www.sric-bi.com/ Click on VALS Survey. Here are a sample of some of the questions in the VALS survey -- first 5 questions; the last 4 are demographic questions (Sex, Age, Education, and household income).
1. I am often interested in theories.(4) Behavioral segmentation - Usage rate, occasions,
user status, loyalty rate, and benefit segmentation.
Usage rate: heavy, medium, light, and nonusers of a product.
For instance, some people drink one cup of coffee per day (light user) while
others drink 6 or more cups per day (heavy users). Some copying machines
are targeted to the light users of copying machines--small offices. In fact, a
very successful product is the multifunction machine that copies, faxes, scans,
and prints. It is perfect for the small office that does a little of each.
Many beers are targeted to men who are between 18 and 30-years since they are
the heavy users and drink the most beer. Women drink very little beer and
generally are non-users or light users of beer.
Occasion segmentation: Some
products or services are seen as being appropriate for a particular situation or
occasion. Take orange juice as an example. Most of us think of it as
a product that is mainly a breakfast drink. This limits the market for
this product. Indeed, orange growers are trying to convince the public
that orange juice is a beverage for any occasion. How about a pizza and
orange juice for lunch? Or, hamburger and orange juice for dinner?
If the orange growers are successful in this campaign, they can greatly expand
the market for orange juice. Interestingly, Pepsi at one time was trying
to market a cola product for breakfast (I think the name of the beverage they
were testing was Pepsi AM). This makes sense since many people eat
breakfast at a fast food restaurant such as McDonald's or Burger King. However,
most people do not think cola beverages make sense for breakfast and the product
did not succeed.
The major method employed to segment markets is benefit segmentation.
To use this method, you have to determine the benefits sought by customers when
buying the generic product. For instance, some benefits desired when purchasing
shampoo include, dandruff prevention, making hair smell nice, making hair soft
and manageable, inexpensive, preventing baldness, being mild and gentle, restoring
luster, etc. The reason that benefit segmentation is so popular is because it
is the method that is the most consistent with the marketing concept. If
you see a commercial that tells you how a particular brand of toothpaste will
eliminate cavities, reduce plaque, and strengthen your gums, the
advertiser is probably using a segmentation strategy based on benefits sought.
How would you segment the market for vitamins?
Some possibilities:
By sex: vitamins for men and for women. Women need more iron and calcium than
men.
By age: older people have different needs than children. You might need several
different products: for babies, growing children, teens, adults, and senior
citizens.
How would you segment the market for films? Some possibilities:
By sex: films aimed at women. Some studios making
films are trying to attract women—a major target. Action films are made
that are women-friendly. This means less violence and strong female stars in
major roles (remember Sigourney Weaver in the Alien films).
By age: movies for children and movies for adults.
How would you segment the market for cruises?
Some possibilities:
By stage in the family life cycle: You might market cruises for empty nesters
(middle-aged couples whose children have moved out), for newlyweds, and for
bachelors (cruises aimed at singles). Club Med has vacations for couples, families,
and singles.
A builder of condominiums might segment the market
for homes by stage in the family life cycle:
Very small apartments with tiny kitchens for singles. You might have a swimming
pool and some tennis courts. In fact, these are the kind of apartments being
built in areas filled with unmarried people. Larger apartments with three
or four bedroom for full nesters. Small apartments with ramps for older empty-nesters.
Instead of tennis courts, shuffle board and bingo rooms.
Now that you know something about market
segmentation, let us look at some interesting things that are happening today.
There was a fascinating article in The New York Times (May 20, 2004;
"In the Era of Cheap DVD's, Anyone can be a Producer" by Peter Wayner,
p. G1). Wayner's article indicates that "even the most specialized
video can find a niche audience, thanks to easy-to-duplicate discs and the U.S.
mail." One university sells DVD's of its college football games
to fans around the country. Clearly, this DVD is too specialized to get
distribution in stores. A poetry group sells a DVD containing poems for $20
as part of a subscription series. Primedia Workplace Learning sells
programs of continuing education for firefighters and police officers on DVD.
There are firms (e.g., CustomFlix) that are similar to custom book publishers
that will duplicate DVDs and help market them for a fee. This is all
possible because DVDs cost less than one dollar to make and can be mailed to
customers for the price of one stamp.
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Films with Christian Values
Making films that are targeted to those with Christian values (see article by Sharon Waxman "Fox Unveils a Division for Religious-Oriented Films," NY Times, September 20, 2006, pp. E1, E8).
Fox has a new division, FoxFaith, that will distribute religious-oriented films to the vast Christian market. Many of these films will not not be released in theaters but will go straight to DVD. Fox has already had some success selling films with Christian themes on DVD. This has been going on in the music business for quite a while-- music with Christian themes. The films will "tap into Christian values"; it is believed that this market is underserved and growing. The budget for the films will be $3 - $20 million. Walt Disney went after the Christian market with "The Chronicles of Narnia: The Lion, The Witch, and The Wardrobe" and took in $774 million worldwide. A number of Christian-oriented films were made in the last several years and have been quite successful despite poor production quality and amateurish acting. Jeff Yordy, a marketing executive at Fox stated: "That's the mission: quality, story-driven entertainment that meshes with the values of the target audience. But it's entertainment first. We are not in the business of proselytizing." Fox built a network with 90,000 Christian congregations; they will receive promotional materials about films. This is a great way to generate word of mouth.
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Ethnic Marketing: Some examples.
(see article by Stuart Elliott in NY Times, July 7, 2006, C7--"Manischewitz Wants to Move to a Mainstream Aisle")
The major marketer of kosher products is Manischewitz (owned by R.A.B. Holdings). According to Elliott, Americans spend more than $50 Billion per year on kosher food; only 20% of kosher food buyers are the traditional Jewish consumer who is concerned about dietary laws. The others purchase it because of the belief that kosher products are purer and of better quality than nonkosher products. Manischewitz is trying to move the product from the ethnic aisle to mainstream aisle. This is not easy since Manischewitz does not want to lose its traditional customer.
Hebrew National uses this belief regarding kosher products in their ads. One ad for Hebrew National hot dogs targeted to mothers positions the franks as being more nutritious-- "We answer to a higher authority." Another ad for Morton Coarse Kosher Salt uses the line-- "It's the secret ingredient chefs have always used to make their dishes gourmet. Morton Coarse Kosher Salt. Now you know."
General Electric sells ovens that have a feature that is important for Orthodox Jews that do not turn ovens on or off on the Sabbath. They call it the Sabbath mode feature. The ovens have special programming that can be set before the Sabbath begins. GE also makes ranges with a "fifth burner" that looks like a long griddle and can be used by Hispanics to make quesadillas (it is also good for pancakes).
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Resonance Marketing and
Hyperdifferentiation:
(see article by Eric K. Clemons and Rick
Spitler, "The New Language of Consumer Behavior")
Today, it is possible to make products that are absolutely perfect for a consumer. This is possible because consumers can use the Internet to acquire a great deal of information about available brands. Consumers are willing to pay a premium for products that are exactly what they want rather than settle for a product that is ok. Resonance marketing is about giving your customer exactly what s/he wants rather than making products that are basically ok. When you get a product that is just right, it will resonate. To create such products, you need to hyperdifferentiate. Today, there are microbreweries that make beer that resonate with consumers. A beer made by a microbrewery might only have 75,000 customers but these consumers will be very, very excited about the beer. A beer such as Budweiser is made to appeal to millions of consumers but how many of them are excited about it. A hyperdifferentiated beer that is consumed by 75,000 extremely loyal customers will cost more. Advertising will be too expensive so you will not see any ads for it. Word of mouse (buzz marketing on the web) is the way people find out about it. The goal is to create several brands, each targeted to a small segment, and each with no competition. Hyperdifferentiated products are so unique and special that they have virtually no competition. On the other hand, a large number of people may hate the product.
Eric Clemons in his paper entitled "The
Challenges of Resonance Marketing: Managing Complexity While Creating
Profits Through Differentiation and Delight" makes the following key
points: (1) hyperdifferentiation requires a whole new way of thinking.
What you read in the textbooks is not appropriate when using extreme
differentiation. (2) Companies using resonance marketing should be concerned
about getting a smaller number of customers to love
its product rather than getting a large number of customers to like the product. As noted above, if you want
to charge more for a product, it should not be seen as a commodity (i.e., all
are the same). You want your customers to love the product so much that
they will pay more for it. In fact, they will not only pay more for it but
tell everyone about it. (3) Don't worry if a large number of people hate
your product. This is normal when you use hyperdifferentiation. The
people that hate your product are of no concern. (4)
People look for the lowest possible prices for products that do not matter very
much to them. On the other hand, if something is really important
and gets them excited (i.e., makes them resonate), they will pay a premium.
Did you ever hear of East India Pale Ale?
It is made by Brooklyn Brewery.
Go to Corey and Nate's Beerlabels.com website to
see ratings of microbrews.
http://www.beerlabels.com/reviews/
One of the great hyperdifferentiated beers is
Sierra
Nevada Pale Ale. I think that beer sounds better than Blind Pig
English Style Ale. These websites take the place of advertising.
Question to think about: What would you rather make: (a) a
product that is acceptable (they like it but do not love it) to 1,000,000
consumers but has 10 competitors. or (b) a product that is loved and resonates
with 100,000 consumers and has 0 competitors.
To answer this question, please remember that (a) needs a great deal of
advertising to convince consumers that your brand is better than the
competition; (b) should not need any advertising. Also, you can charge
considerably more for (b) than (a) since it "resonates" with consumers.
After you finish this chapter, sit down and have a bottle of Hop Devil beer! You deserve it. (I am not kidding; Clemons mentions this beer by name.)
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Another Article on Resonance Marketing This paper
appeared in the Journal of Internet Commerce, 2007, 6(1),
83-99.
A
New Kind of Marketing:
©2006
Hershey
H. Friedman, Ph.D.
Professor of Business and Marketing
Brooklyn
E-mail: x.friedman@att.net
Assistant Professor of Marketing
Brooklyn
E-mail: samot25@earthlink.net
Linda Weiser Friedman, Ph.D.
Professor of Computer Information Systems
Baruch
E-mail: Linda_Friedman@baruch.cuny.edu
A New Kind of Marketing:
Creating Micro-niches Using Resonance Marketing
In addition to its
remarkable influence over many other critical aspects of society, the Internet
has dramatically changed the field of marketing.
Today, a company competes with firms throughout the world, in real time.
With hundreds of companies offering the same product, it can be very
difficult to differentiate one’s brand. And,
where there are many brands competing for market share, it is inevitable that
the product category will eventually be seen as a commodity; when that happens,
consumers will simply purchase the one that is least expensive.
This shift appears to have already occurred, for example, in the computer
industry; many consumers do not see any difference among the personal computers
made by, say, Dell, Gateway, and Sony. Moreover,
it is very difficult to compete on the basis of price with countries where
salaries are a fraction of what they are in the Western world.
Over the past decade
or so, the success of the Internet as a channel for conducting business has
spawned a variety of new business models and strategies.
One such strategy for firms that wish to compete in today’s highly
competitive marketplace is resonance marketing.
Resonance marketing, a term coined by Clemons and Spitler (2004), is
about making products that are absolutely perfect for a small number of
consumers. The goal is not to create products that many consumers like
but, rather, to use hyper-differentiation to make products that a smaller number
of consumers love (Clemons, Gao, and Hitt, 2006;
Clemons and Spitler, 2004; Clemons et al., 2003).
Resonance marketing is about giving customers exactly what they want
rather than making products that are merely good or satisfactory. Consumers are
willing to pay a premium for products that are exactly what they want rather
than settle for a product that is ok. When a consumer buys a product that
is just right, it will resonate. Consumers will rate it as superior or
outstanding, not just good. To
create such products, you need to hyper-differentiate.
Hyper-differentiated
products are precisely on target as opposed to being merely satisfactory or
acceptable. Creating such products
requires targeting micro-niches. In
the past, it was difficult or impossible to get distribution for products
targeted to micro-niches. Brick-and-mortar
retailers have only a limited amount of shelf space.
Products with market shares of say 0.2%
are probably not going to get any shelf space at all.
The goal, therefore, has been to create products that appeal to a mass
market and thereby ensure an adequate amount of shelf space. A large market
share was also necessary to generate enough revenues to pay for the advertising,
since products appealing to a large target market require a great deal of
advertising. These advertisements use expensive media such as network television
and major national magazines. A
product that is targeted to a very wide audience will be a product that is liked
by many and loved by none. In other
words, it does not resonate, to use Clemons and Spitler’s term.
The Internet has
changed all that. Today, it is quite
possible to make a profitable product with a 0.2%
market share. This is possible today
because consumers can use the Internet to acquire a great deal of information
about available brands in any particular product category. Word of mouth on the
Internet (sometimes referred to as word of
mouse) can generate a great deal of enthusiasm.
There will be enough websites touting the product if it is loved by
enough people. Moreover, shelf space
is not a problem if distribution is via electronic commerce. All that is needed
is a good website to sell the product. Additionally,
if production is outsourced, the entire business could, in theory, be run from a
small office. The key to success in
a wired world is not shelf space but buzz marketing.
The goal is to create a huge amount of word of mouse for the product.
Allow the product to sell itself. Hyper-differentiated
products are so unique and special that they have virtually no competition.
Indeed, a large number of people may even hate the product. This should not
bother the manufacturer. The price
one pays for having a hyper-differentiated on target product that appeals to a
micro-niche is that many consumers will hate it.
This is why resonance marketing requires a different kind of marketing
research.
Marketers are already
familiar with niche marketing, a
market segmentation strategy that focuses on satisfying a narrowly defined group
of consumers. Most often, marketers
do this by dividing one market segment into several.
This is different from resonance marketing.
Resonance marketing implies niche marketing; but, niche marketing does
not imply resonance marketing. In
addition, many textbooks (see, e.g., Boone and Kurtz 2006: 308) suggest that
niche marketing, which they feel is synonymous with concentrated marketing, is a
strategy used by smaller firms attempting to compete with larger firms with
great resources. Resonance
marketing, on the other hand, is a tool for every firm.
Indeed, large and small firms in many industries may need a tool such as
resonance marketing in order to thrive in the global economy.
The purpose of this
paper is to propose that marketers use the concept of resonance marketing to go
after and create micro-niches for hyper-differentiated products.
The
Internet and the Micro-niche
Entire industries have
already been shaken up in a major way by the Internet.
Examples range from retailing to banking, to real estate, to the desktop
pc market mentioned earlier. Hyper-differentiation
is creating new web-based market segments. In
addition, digital media, such as books, movies, music, and video, are currently
undergoing a sea change.
Micro-niche
Publishing:
The rules in the publishing industry have changed. In the past, books
were sold mainly in bookstores. Shelf
space was a big consideration and the books that got published were mainly by
established authors such as Stephen King, John Grisham, Danielle Steel, Anne
Rice, or Robert Ludlum. Of course,
publishers would sometimes take chances on new names, but the bulk of the
business, however, came from books that were targeted to a very large audience.
Today, publishers such as iUniverse use print-on-demand technology so
that there are no inventories; books are published when the orders arrive.
(This is also the way Dell sells its computers.)
Books do not have to go out-of-print. Families can even write books about
themselves. Vanity presses are all
but obsolete. The three largest
self-publishing houses ―Authorhouse, iUniverse, and Xlibris―
introduced almost 12,000 titles in 2004 (Glazer, 2005). The cost of a
self-published book is a few hundred dollars; vanity presses charge between
$8,000 and $50,000 for a book.
A key advantage of self-publishing, according to Richard Sarnoff of Random House Ventures, is the ability to market books to “micro-niches that are so small that publishers would not be interested in publishing them in the traditional way” (Glazer, 2005). Laparoscopic Adjustable Gastric Banding: Achieving Permanent Weight Loss with Minimally Invasive Surgery by Jessie Ahroni has been on the iUniverse best selling list for some time. This book is definitely targeted to a micro-niche, individuals interested in losing weight with an adjustable gastric band. Some self-published books, e.g., The Rhythm of Life: Living Every Day with Passion and Purpose by Matthew Kelly, did so well – 100,000 copies sold – that they were reissued by traditional publishers. The future of self-publishing may very well be one in which almost every family will want a coffee table book that includes their favorite poems, photos, recipes and the family philosophy of life.
e-Books:
The Internet has changed the book industry in other ways.
One can now purchase a book in digital form.
The book can be downloaded and read on a computer or handheld device
(e-book reader). Students can
download chapters of textbooks and print them at home.
Instructors can, if they wish, teach a course using chapters assigned
from several different textbooks.
Distribution
of Digital Media:
Think of the largest bookstore in the world.
How many books does it have in stock? Very large bookstores may have as
many as 200,000 titles. Online
bookstores, such as Amazon, provide access to millions of books including used
books and e-books; music download stores provide access to more than 1.5 million
songs. Consumers today want access
to an unlimited selection so they can precisely choose the product they want, a
product that makes them considerably more than content.
Movies:
The film industry is also being dramatically changed by the Internet.
It is now as easy to make a film as it is to publish a book. All one
needs is a digital video camera, a computer, and some good editing software. The
problem is not in making the film, it is in getting distribution. Films released
by the major studios account for about 90% of the box office receipts (
Mashups:
Some consumers are mixing together several different songs or a song from
one album with the instrumental music of another.
These blends are known as mash-ups. Consumers
have gone far beyond blending music from different albums together.
Many are engaging in various kinds of transmuting behavior with digital
goods they have purchased and / or downloaded from the internet (Hughes and Lang
2006). People are now combining the
content of several websites to create something even better.
For instance, the website Chicagocrime.org combines crimes committed in
Marketing
Methods for Micro-niche Products
Marketing Research
for Micro-niche Products
Traditional marketing
research for most products attempts to create a product that appeals to a large
number of consumers. Indeed, many
firms believe that if you are not among the top three in market share, then you
have a dog and should leave the industry. Some
companies are not interested in competing unless its brand is either number one
or number two. This strategy made
sense when everything revolved around shelf space.
Brands could be measured in terms of the proportion of consumers that
were aware of the brand (awareness set), the proportion that would actually
consider buying the brand (evoked set), the proportion that would never buy that
brand (inept set), and the proportion that had no opinion or were neutral (inert
set). The goal, then, was to
increase the size of the evoked set. A
company wanted its brand to possess “top of mind” awareness, i.e., the one
mentioned first when consumers were asked to list brands within a product
category. With resonance marketing,
one’s brand may have such an insignificant market share that most consumers
have never even heard of it. In
fact, if the buzz marketing is very successful, it may be in many consumers
inept set. Appealing to a
micro-niche, may result in a large number of consumers who would never consider
the product.
Market research must be used to determine how to create a product that is loved,
not merely liked. Focus groups can
help with this. A company interested
in developing a new brand of cola might ask consumers loyal to a particular
brand, say, Coca Cola, the following: You
like Coke, what would make you love it? Or,
the question might ask: You like
Coke, why don’t you love it? Is
there something that might make you love it?
The company might end up selling a brand of cola that (1) contains scotch
or (2) is uncarbonated or (3) contains vitamins or (4) an organic cola.
Of course, these products will never compete with Coca Cola. They will be
targeted to micro-niches. Sound
impossible? Take a look at what is
going on with the beer industry. Microbreweries are targeting
hyper-differentiated beers to very small segments.
Websites such as Corey and Nate's
Beerlabels.com (http://www.beerlabels.com/reviews/
) rate the microbrews. One of the higher rated
hyper-differentiated beers is Sierra Nevada Pale Ale.
Men’s Journal (http://www.mensjournal.com/feature/0507/bestBeer_world.html)
rates Saison Dupont as the “best beer
in the world.” The Dupont Brewery
has a website with a 12-minute streaming media video to tell you about the
brewery (http://brasserie-dupont.com/present_en.html).
The 12-minute video takes the place of costly 30-second television
commercials on American television. This is the new kind of marketing.
Organic
cola? Uncarbonated soda?
Perhaps not as impossible as it sounds.
It is interesting to note that soda consumption is declining; the two
major brands, Pepsi and Coke Classic have lost market share.
Experts believe that consumers are moving away from carbonated beverages
to bottled water, energy drinks (e.g., Red Bull), juices, and sports drinks
(e.g., Gatorade). John Faucher, an analyst at JP Morgan Chase, feels that this
is not only due to an interest in lower calorie and more healthful alternatives.
He says that “consumers want new exciting beverages” (Warner, 2006).
It is quite likely that consumers prefer beverages that resonate, and
provide delight and pleasure, not simply satisfy.
Targeting the Micro-niche
Selecting a target market
using hyper-differentiation requires research, as noted above.
Two ways of hyper-differentiating a product are by cause marketing and
multicultural marketing.
Using
Cause Marketing:
Young consumers, especially those who are under 30, are very interested
in purchasing products that are helping making this a better world. In fact,
according to Business Week (2004),
teenagers claim that they are more likely to buy products that support
charitable causes. Millions of
dollars for cancer research were raised by Nike by selling the one dollar yellow
bracelets. This helped Nike improve its image, one hurt by reports that Nike
used foreign sweatshops to manufacture its products. Young people actually
think it is cool to wear a rubber bracelet to help fight cancer. The GAP
sells $20 teddy bears with the profits going to buy coats for poverty-stricken
children. The 2004 Cone Corporate Citizenship Study shows that 86% of
Americans are “likely to switch from one brand to another that is about the
same in price and quality if the other brand is associated with a cause”
(Cause Marketing Forum, 2005). The
same study also showed that young people between the ages of 18 and 25 are
especially likely to take into account corporate support of social causes when
making purchasing and employment decisions.
According to the IEG Sponsorship Report, the amount spent on cause
marketing in 2004 was approximately $991 million. Cause marketing is one
simple way of finding a target market.
Many traditional companies
are raising money for charity; one major reason is that cause marketing can help
a firm enhance its image (Varadarajan and Menon, 1988; Simon, 1995; Earle, 2000;
Berglind and Nakata, 2005; Kotler and Lee, 2005). However, there is
evidence that cause marketing works best when there is a good fit between the
firm’s expertise and the cause being promoted (Becker-Olsen, Cudmore, and
Hill, 2006). If there is a poor fit
and / or if the public feels that the firm is involved in cause marketing in
order to make a profit and not to benefit society, then it can hurt the firm’s
image.
To use cause marketing, a firm has to conduct research to find a charity that is
of interest to its target market and that fits its image.
What you are looking for is a charity that resonates with the target
market. Starbucks contributes 5
cents from each bottle of Ethos water sold in its stores towards the goal of
providing children living in the poorest regions of the world with clean water.
At the Ethos website (http://www.ethoswater.com/),
the point is made that “water-related diseases are the leading cause of death
among the world’s children, taking a life every 14 seconds.”
The idea of using bottled water to fund clean water and thereby save the
lives of children is a good fit.
Cause marketing is a relatively simple way of finding a
micro-niche for a product.
Closely related to cause marketing is green marketing. Menon and Menon (1997)
note that the green market is growing very rapidly. The image of a company can
be affected by its environmental performance (Miles and Covin, 2000).
Consumers are willing to pay premiums for products that are good for the
environment. Of course, the product
should also be of high quality, since it is doubtful if consumers will pay a
premium for a bad products solely because it is green. The
Green-e website (http://www.green-e.org/)
states that 98% of energy used in the
Cause marketing and green marketing can be tied together. Create a product that is green, uses environmentally-friendly packaging, and 10 cents of every sale is used to preserve the rainforests.
Using
Multicultural Marketing:
Another way of finding a micro-niche is to use multicultural marketing.
There are a large number of groups that are being ignored by marketers;
resonance marketing should work for them. There
is no standard definition of multicultural marketing (
The disabilities market is very large and will continue to grow as the baby
boomers become senior citizens; it is expected to double within 15 years.
About 20% of Americans have a disability; 10% have a severe disability
(Kraus, Stoddard, and Gilmartin, 1996). There
are many kinds of disabilities. Wilkins (2003), studying the disabilities market
in
The best rule for creating products for individuals with disabilities is to ask the disabled directly what they need. This may be the easiest way to create products that resonate with consumers. Harry Herman, a nuclear engineer, broke his ankle and discovered that crutches are very uncomfortable and can cause numerous health problems for users. He started a company, Orthotic Mobility Systems (http://orthoticmobility.com/), and developed the “Sure Foot” cane and the “Strutter.” These products are promoted on his website (Silva, 2001). Tracy Saks is a divorced mother with multiple sclerosis. She found it difficult to socialize so she created her own website for disabled singles, www.specialsinglesonline.com (Rowland, 2005)
A large number of consumers
have difficulty gripping products. Jars
that have to be twisted off are a big problem for the elderly and those with
arthritis in their fingers and hands. Jars
that are easy to grip and are arthritic-hands friendly could be a big hit with
millions of people. Canes are used
by millions of people. One problem
that comes up very often is that they tend to fall down and it is not easy for
the user to bend down and pick it up. How about canes that do not fall down?
Perhaps an electronic device can be attached to the cane so that when the
cane is not in use a button can be pressed and it will automatically be able to
stand. How about a
multi-purpose cane (a “Swiss Army” cane?) that includes a built-in light and
a button to press to get help? How
about a cane that can be used to reach for objects that are down on the floor or
on high shelves? Are these products
necessary? The way to find out is to
do research and speak to the disabled.
A marketer should make a
list of every possible disability and then use the list and ask whether
something can be done to her product to make it more useful to those with, say, hearing
difficulties, walking difficulties, seeing difficulties, gripping difficulties,
etc. How about very obese people?
Can they use the product easily? How
about the mentally handicapped? A
list of disabilities may be found at: http://en.wikipedia.org/wiki/List_of_disabilities.
Take something as simple as
a basic wheelchair. There are approximately 100 to 150 million people in need of
wheelchairs worldwide (Wheelchair Foundation, 2005). Because of landmines and
unexploded ordinance, the number will continue to grow by about 29,000 people
per year. Most people in developing
countries cannot afford the cost of a wheelchair.
An inexpensive wheelchair would be very popular worldwide. This
is a good example where cause marketing could be used as well.
For example, a company selling expensive running shoes could set aside $1
from the sale of each pair of shoes towards purchasing a wheelchair for a
disabled person. A number of companies manufacture wheelchairs and walkers that
are meant to be used on beaches. Those
with mobility problems want to use the beach but have difficulty walking on the
sand. The
The approach used with
disabilities to create micro-niches, could also be used with various illnesses.
A firm or entrepreneurial person could make a list of dozens of ailments
and see whether products could be tailor-made for them. For example, take
insomnia, it is not a disability but 60,000,000 people suffer from it (United
States Department of Health & Human Services, 2002). There are a large
number of products that would resonate with consumers.
Since a large number of people with insomnia share a bedroom with someone
else, there may be a need for a small, personal computer with wireless earphones
that enable the individual with insomnia to work or listen to music in bed
without disturbing his/her partner. Left-handedness
is also not a disability. However, left-handed people have difficulty using all
kinds of products ranging from scissors to pruners.
There is a website for left-handed people:
http://www.thelefthand.com/.
There are a large number of diabetics in the world.
Every bakery sells sugar-free cakes for them but diabetics do not love
these products; they do not even like them.
They are very poor substitutes for the real product.
Creating products that taste as good as the real McCoy would be a big
hit. Everyone probably knows at
least one diabetic that cheats and eat cheesecake and Napolean pastries.
Create products like that with the taste of the authentic pastry and you
will have a product that resonates. The
same can be said for wines for diabetics. Alcohol is a big problem for them;
there are, however, wines that are permissible for some diabetics.
There are a large number of ethnic groups in the
How about the market for religious people? For
those who think this market should be ignored:
consider that The Purpose-Driven Life by Rick Warren has been on the NY
Times best seller list for more than three years.
The publisher is Zondervan, a publisher of
books by Christian authors and dealing with subjects of interest to Christians.
Several films with Christian themes such as The Chronicles of Narnia have done quite well; it is number 23 on
the “All-Time Worldwide Box Office Receipts.”
We are reasonably certain that there are many smaller religious sects
that would be interested in films sold via the Internet.
How about books and films for those believing in Sikhism (23 million),
Juche (19 million), Baha’I (7 million), Shinto (4 million), Cao Dai ( 4
million), and/or Zoroastrianism (2.6 million)?
There are even smaller religions that could be a micro-niche:
Unitarian-Universalism (800,000) and Rastafarianism (600,000).
Even within religions, there may exist micro-niches.
In Judaism there are those that are Orthodox, i.e., Jews who are strict
about observing halacha (Jewish law),
laws that include the Sabbath and keeping kosher.
It is difficult to measure the size of this group; estimates range from
600,000 to 1,000,000 in the
Pricing the Micro-niche Product
One advantage of resonance marketing is that since the product is
hyper-differentiated so that it is very different from other brands and is loved
by customers, a higher price can be charged for it. In the case of perfect
competition, where all brands are seen as identical (homogeneous product), no
firm can charge more for its product. The
classic case is a commodity such as wheat. If
a farmer charges one cent more per bushel than other farmers, s/he will lose
every single customer. However, once
consumers believe that products are heterogeneous, the firm moves from perfect
competition to monopolistic competition and the firm can charge more for the
product. We see this with a simple
commodity such as an egg. When
consumers purchased eggs and saw them as all being identical, it became
impossible for one farmer to charge more for his/her eggs than the competition.
Today, there are eggs that cost twice as much as regular eggs.
These are enriched eggs that contain omega-3 fatty acids that are
supposed to reduce the risk of heart disease and cancer (and also help brain
function). These eggs look exactly
like other eggs; the difference is in what the hens are fed.
The real difference from a marketer’s perspective is in what people
believe. If people believe that the
eggs are different and better, a premium can be charged for them.
Promoting
a Micro-niche Product:
Hyper-differentiated
products cannot usually rely on traditional mass advertising techniques such as
television. The new kind of
promotion that must be used is buzz marketing.
Buzz marketing or viral marketing as it is sometimes called, relies on
getting consumers to “talk” about a product. Some products that have become
huge successes because of word-of-mouth include the film The Blair Witch Project, Razor scooters, and a number of
best-selling books. There is no
question that word-of-mouth is a very powerful tool for all kinds of products
and services. Oprah Winfrey has the
ability to turn a book into a bestseller simply by recommending it on her show.
Rosen (2005) makes it clear that buzz marketing requires the use of both
face-to-face communication and the Internet. He notes that 80% of consumers
claim that, in the last 12 months, they recommended a product to another person
in a face-to face situation vs. 37% that did this via e-mail.
Thus, good buzz marketing requires different kinds of people pushing a
product and different approaches. One
cannot rely solely on blogs and online communities.
The people involved in buzz marketing include those that talk to friends
(“connectors”) as well as experts (“mavens”).
One way this works is that trend-setters in communities throughout the
world have to be found. Their job is
to spread the word about the brand to friends, neighbors, and anyone willing to
listen. Spreading the word may not be difficult today since trend-setters are
often part of online communities. There
are companies such as BzzAgent (http://www.bzzagent.com/)
that encourage consumers to become BzzAgents whose job is
to spread word of mouth to friends about all kinds of products.
BzzAgent has thousands of people in its network and they do this for
prizes and it also makes them feel important.
These agents feel that they are providing an “honest” opinion since
they are not paid for this and are not obligated to promote products they do not
like (
The Internet has become a very significant advertising medium. According to Business Week (2004), about 14% of media time is spent on the Internet. The Internet allows a firm to measure response, i.e., how many viewers clicked on their website. Television ratings, on the other hand, do not measure how many viewers actually saw the commercial; what is measured is how many people watched the program. The Internet is used by a large number of consumers to search for information before purchasing a product. This is why Google has become an important advertising vehicle. When a person does a search, say, for “arthritis,” she will see many advertisements on the right-side of the page (“sponsored links”) for all kinds of products. These advertisements are meant to be clicked on, thus providing a measurable response. Google uses a sophisticated mathematical model (factors considered include gender, location, time of day, etc.) to match the advertisement to the consumer in order to encourage clicking on the advertisement. The goal is to connect the consumer with the advertisement that is most relevant to her.
To summarize, the techniques
to promote hyper-differentiated products that appeal to micro-niches will not be
the same as that of traditional products. The
Internet will have to be used and the goal will be to create a buzz about the
product, one so strong that it will reduce the necessary expenditures on
traditional advertising. This does
not mean that it will totally eliminate the need for advertising.
In fact, it may be necessary to use many kinds of promotions to get the
word out about the product.
Conclusion
The Internet has changed the
rules of marketing. Firms that want
to be successful in today’s highly networked world should use resonance
marketing, in conjunction with cause marketing and/or multicultural marketing,
to create new market niches. Marketers
will have to learn to think small rather than big.
Smaller market shares, small advertising budgets, but premium prices.
A
firm may find that the only way it can compete in a competitive market is to go
after micro-niches and develop hyper-differentiated products for them. Research
has to answer the following question: Should
we sell a product that is acceptable (they like it but do not love it) to
2,000,000 consumers, has 10 competitors, and will require a huge advertising
budget? Or, will we be better off
selling a product that is loved, resonates with 80,000 consumers, has 0
competitors, and generates enough word of mouse so that little advertising is
required? With the first
strategy, line and brand extensions are used to increase profits.
However, with enough line and brand extensions, the product may indeed
seem more and more like a commodity. With
a resonance marketing approach, totally new brands are created targeted to
different micro-niches. One website
can sell several brands, each targeted to a different niche.
Or, if the brands are not compatible, a new website can be created.
It is a lot easier to create five websites than get distribution in
supermarkets for five new brands of anything. The cost of a new website is
considerably less than the cost of slotting fees; these are fees charged to
retailers to provide shelf space for new products.
Those
interested in entrepreneurship have to understand the principles of resonance
marketing. Creating products for
micro-niches is the easiest way for a startup to go into business.
What is needed is a target market, a supplier, a website, and a product
that is loved.
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For those of you interested in entrepreneurship:
If you check the eSmallOffice website below, you will find some information on
several emerging markets: They include: African-American
Entrepreneurs, Asian-American Entrepreneurs, Hispanic Entrepreneurs, Minority
Entrepreneurs, Senior Entrepreneurs, and Women Entrepreneurs. You will also find
some interesting material on how to measure customer satisfaction.
http://www.esmalloffice.com/SBR_template.cfm?docNumber=PL12_1200.htm#sampsurvey
(c) 2011 H.H. Friedman