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Applied Marketing Strategies

2 Target Markets / Page 2.11 Concentrated Marketing On this page: 3 of 3 attempted (100%) | 3 of 3 correct (100%)

Concentrated Marketing

Some businesses—especially smaller ones with limited resources—engage in concentrated marketing. Concentrated marketing involves targeting a very select group of customers. Concentrated marketing can be a risky strategy because companies really do have all their eggs in one basket. The auto parts industry is an example. Traditionally, many North American auto parts makers have supplied parts exclusively to auto manufacturers. But when General Motors, Ford, Chrysler, and other auto companies experienced a slump in sales following the recession that began in 2008, the auto parts makers found themselves in trouble. Many of them began trying to make and sell parts for wind turbines, solar panels, construction equipment, and aerospace tools.24

MULTIPLE-CHOICE QUESTION

Niche marketing involves targeting an even more select group of consumers. When engaging in niche marketing, a company’s goal is often to be a big fish in a small pond instead of a small fish in a big pond.25 For example, Tetra, a tropical fish-food manufacturer, has 80 percent of the world’s market. Likewise, the market for harmonicas isn’t huge, but the Hohner Company nearly owns it with about 85 percent of the world’s harmonica sales.26

NOTIFICATIONS

Why is concentrated marketing a risky strategy for a company?

Correct. Concentrated marketing—which involves targeting a very select group of

customers—can be a risky strategy because companies have no other sources of revenue. If

the targeted customers stop buying, the company has no revenue.

Saved moments ago.

If the targeted group of customers likes the product, they will try to create their own

version.

If the targeted group of customers grows, the company must increase production.

If the targeted group of customers stops buying, the company has no other source of

revenue.

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Hohner Company got a world of mileage out of this ad. The company began running it shortly after people around the globe heard U.S. astronaut Wally Schirra play “Jingle Bells” on a Hohner harmonica while aboard a space mission in December 1965. Hohner later produced a “Wally Schirra” model to commemorate

the event.

Hohner/Wikimedia

MULTIPLE-CHOICE QUESTION

Sometimes, however, companies start out as niche marketers and then gain enough market share to grow bigger and expand their offerings. Hoka

Niche marketing targets an even more select group of customers than concentrated marketing. How are companies that employ this strategy able to make money?

Correct. Companies that employ a niche marketing strategy are able to make money by

controlling a large portion of their target market, even if that market is relatively small.

Saved moments ago.

They maintain very high product quality.

They charge very high prices for their products.

They control a very large share of their market.

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running shoes were originally designed for ultramarathoners who run a hundred miles or so a week. But the shoes are so comfortable, other people began wearing them. The company now makes additional products such as hiking shoes. Similarly, Under Armour started out by making T-shirts that wicked away perspiration and selling them to professional sports teams. Today the company makes many different products that it sells to people all around the world.

Other niche markets are small and remain so. The internet has helped keep many brands alive by allowing them to be marketed to niche groups of customers. The intimate apparel company Frederick’s of Hollywood, which used to have stores in many shopping malls, is an example. Eventually the company’s market share dropped, and it ended up closing its stores and selling its brand to an online business that sells the items to loyal customers who can’t buy the products anywhere else.

A new trend related to niche marketing is to provide goods more oriented to a certain geographic area rather than goods aimed at the mass market. It’s being done in an effort to attract the increasing number of people who want to buy produce that is locally grown, shop at local boutiques, and so forth. To help regain some of its market share, Target has begun providing locally oriented collections of clothing, food, and household items tailored to different cities, such as Boston, Chicago, and San Francisco. In Boston, the retailer sells a marshmallow-and-peanut-butter spread popular among locals who use it to make sandwiches they call Fluffernutters.27

Microtargeting, or narrowcasting, involves gathering all kinds of data available on people—everything from their tax and phone records to the catalogs they receive. One company that compiles information such as this is Acxiom. For a fee, Acxiom can provide you with a list of Hispanic consumers who own two pets, drive an SUV, buy certain personal care products, subscribe to certain television cable channels, read specified magazines, and have income and education levels within a given range.28

Clearly, there are privacy and ethical implications related to microtargeting. Other ethical problems with targeting in general occur when companies prey on vulnerable consumers who may not be in the best position to make good decisions for themselves or spot deceptive advertising and marketing practices. Children, the elderly, the mentally disabled, and the poor are frequently taken advantage of by sellers that promise products that don’t deliver or that aren’t in their best interests. The providers of “pay day” loans—high-interest loans that cash-strapped consumers take out when they are trying to pay their bills before their paychecks come in—have often been criticized for these practices. Although the loans are legal, people who take them out are often desperate and end up in worse financial shape as a result.

MULTIPLE-CHOICE QUESTION

Which of the following has the greatest ethical implications?

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24 Bernard Simon (April 23, 2009), “Alternative Routes For Survival,” Financial Times, 8.

25 “Niche Marketing,” BusinessDictionary.com, http://www.businessdictionary.com/definition/niche-marketing.

26 José María Manzanedo (February 20, 2005), “Market Segmentation Strategies. How to Maximize Opportunities on the Potential Market,” http://www.daemonquest.com/en/research_and_insight/2006/10 /11/market_segmentation_strategies_how_to_maximize_opportunities_on_the_potential _market. Accessed December 1, 2009.

27 Christina Binkley (July 16, 2015), “Target Goes Local Cool,” Wall Street Journal, D3.

28 Leon Schiffman and Leslie Kanuk (2010), Consumer Behavior, 10th ed. Upper Saddle River, NJ: Prentice Hall, 80.

close

Correct. Microtargeting has ethical implications due to the fact that it involves gathering all

kinds of data available on people.

Saved moments ago.

niche marketing

concentrated marketing

microtargeting

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