Lesson 7: Targeted Marketing

Objectives

• Design a direct mail campaign based on market segments to gather information about specific customers

• Identify survey segments and their percentage of the total market

• Describe the benefits associated with targeted marketing based on demographics, geographics, and psychographics

• Calculate disposable and discretionary income from gross income and expenses

• Explain how the results of target marketing can impact a store’s product mix and merchandising

1. Identifying the Customer

• Market – a group of people who have common merchandise needs and wants and the means to buy the merchandise

• Market segmentation – the process used to classify a broad market into smaller groups

• Target market – the specific group of people a retailer wants as customers (the marketing will be targeted towards this group)

• Target market profile – description of the characteristics shared by the target market– This drives most of the retailer’s decisions

Side Note…

• The tobacco industry has been found guilty of targeting which market?

• Why did the tobacco industry do this?

• Despite paying fines, was it still profitable for them?

2. Characteristics in a Target Market Profile

• Demographics

• Geographics

• Pyschographics

• Info easily obtained from the US Census Bureau

3. Demographics

• Describes the basic characteristics that identify and distinguish the people in a target market– Age – diff. ages value diff. items / styles– Gender – male vs. female– Income – tells how much $ the target market will

spend – Marital Status – difference in spending habits– Ethnic Background – specialized interests– Education and Occupation

4. Types of Income

• Disposable income – amount of money left to spend after taxes have been taken out– Ie: net income

• Discretionary income – the amount of money left to spend after taxes AND necessities are paid for– Ie: how much money is left after bills have

been paid

5. Geographics

• Describes the physical location of customers

• Point out similarities between people in a specific geographical area– Ie: people in Florida don’t need snow tires

6. Psychographics

• The analysis of customer lifestyles and how they spend their time and money– Customer activities

• What people enjoy doing during free time• Golf vs. playing video games

– Attitudes• How people feel about topics• Do you like organic foods?

– Opinions• What people think of places and things around them• Are you conservative or liberal?

7. Target Marketing and Product Mix

• Product Mix – the type of merchandise a retailer has for sale

• Ie: Sporting goods store– Equipment for baseball, football, soccer,

volleyball, basketball, golf, tennis, etc.– If the target market is 21-35 year olds

because the store is near an apartment complex, the store could carry less child size equipment

8. Differences in Age for Target Marketing

• Younger people like vibrant colors, loud music

• Older people like soft music, to-the-point advertisements (no gimmicks)

• Celebrity Endorsements are equally effective amongst both age groups

9. Key Math Concepts

# Customers Sharing a Characteristic =

% of Market Segment x Total # of Customers

Amount of taxes paid = % of taxes X gross income

Disposable Income = Gross income – Taxes