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Applied Marketing Strategies

2 Target Markets / Page 2.2 Targeted Marketing vs. Mass Marketing On this page: 5 of 5 attempted (100%) | 5 of 5 correct (100%)

Targeted Marketing vs. Mass Marketing

The segment(s) or group(s) of people and organizations you decide to sell to is called a target market. Targeted marketing, or differentiated marketing, means that you differentiate some aspect of your marketing (the product, promotion, and/or price) based on different groups of customers. It consists of tailoring a message and aiming it at one type of customer using select channels. Targeted marketing is a relatively new phenomenon.

Mass marketing, or undifferentiated marketing, came first. It evolved alongside mass production and involves selling the same product to everyone on every medium available, as often as you can afford to do so.1

You could forget about buying a custom Model T from Ford in the early 1900s. The good news was that the standard model was very affordable.

Unknown author/Wikimedia

Automaker Henry Ford was very successful at both mass production and mass marketing. Ford pioneered the modern-day assembly line early in the 20th century, which helped him pump out huge numbers of identical Model T automobiles in a cost-effective manner. They came in only one color: black. “Any

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customer can have a car painted any color he wants, so long as it is black,” Ford used to joke. He also advertised in every major newspaper and persuaded all kinds of publications to carry stories about the new, inexpensive cars. By 1918, half of all cars on America’s roads were Model Ts.2

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Then, Alfred P. Sloan, the head of General Motors (GM), appeared on the scene. Sloan began to segment consumers in the automobile market—to divide them up by the prices they wanted to pay and the different cars they wanted to buy. The idea was to offer a car for every target market, which he divided based on income level. His efforts were successful, and in the 1950s, GM overtook Ford as the nation’s top automaker.3 That said, before GM declared bankruptcy in 2009, it was widely believed the automaker had gone too far, with too many car models and brands. After eliminating many models and the Pontiac and Oldsmobile brands, and streamlining its marketing efforts to focus on its remaining models, General Motors later posted a large profit.

MULTIPLE-CHOICE QUESTION

Why was the Ford Model T an example of mass marketing?

Correct. Mass marketing is selling the same product to all consumers, and Ford did this by

marketing identical Model T automobiles to all consumers across the country.

Saved moments ago.

Ford marketed a range of customizable cars in automobile magazines.

Ford marketed a single product to consumers in every major newspaper.

Ford marketed a single product to a select group of high-end consumers.

What is the major difference between mass marketing and targeted marketing?

Correct. Mass marketing deals with selling the same product to all consumers, while targeted

marketing adjusts the marketing mix to cater to a select group of people.

Targeted marketing can lead to too many offerings, while mass marketing only allows for

one offering.

Targeted marketing adjusts the marketing mix to appeal to different customers, while

mass marketing lacks differentiation.

Mass marketing differentiates customers based on their needs, while targeted marketing

offers a “one-size-fits-all” approach.

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Benefits of Segmenting and Targeting Markets

The story of General Motors raises an important point, which is that segmenting and targeting markets doesn’t necessarily mean “skinnying down” the number of your customers. In fact, it can help you enlarge your customer base by giving you information with which to successfully adjust some component of your offering—the offering itself, its price, or the way you service and market the product. More specifically, the process can help you:

• Avoid head-on competition with other businesses trying to capture the same customers. Walmart initially began in rural areas where Sears and other large retailers didn’t have stores. Only when it got big enough to compete head-on did Walmart take on urban markets.

• Develop new offerings and expand profitable brands and product lines. Arby’s has grown considerably in the past few years with new offerings such as gyros.

• Remarket older, less-profitable products and brands. Ferguson, which makes plumbing products, moves older products from high-end plumbing distributors to Lowe’s and Home Depot when newer designs come out.

• Identify early adopters, or people who are inclined to adopt new products as soon as they hit the market. Apple engages in this strategy with each new iPhone.

• Redistribute money and sales efforts to focus on your most profitable customers. PNC Bank regularly evaluates customer profitability for its treasury management services and alters sales efforts accordingly.

• Retain “at-risk” customers in danger of defecting to your competitors. Verizon is one of the best at recognizing who is likely to switch, and then making an offer to retain each customer.

The trend today is toward more precise, targeted marketing. One reason why is because most companies don’t have the resources to market their products to everyone using all available mediums. Nor would such an effort be efficient, because no single product is right for each and every consumer. Instead, businesses have to figure out which groups of people are most likely to buy their products and focus their efforts on those customers.

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Saved moments ago.

Targeted marketing focuses on a smaller customer base than mass marketing. How can focusing on a smaller market help a company enlarge its customer base?

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Figuring out “who’s who” in terms of your customers involves some detective work—often what is referred to as market research. A variety of tools and research techniques can be used to segment markets. Government agencies, such as the U.S. Census Bureau, collect and report vast amounts of population information and economic data that can reveal changing consumption trends. Technology is also making it easier for even small companies and entrepreneurs to gather information about potential customers. For example, the online game company GamePUMA.com originally believed its target market consisted of U.S. customers. But after taking a closer look at who was downloading games from their website, they found that people were doing so from all over the globe. With the increased use of social media, companies are also able to get information about consumers’ search behavior. Loyalty cards that consumers scan at many grocery and drugstores provide an incredible amount of information on consumers’ buying behavior.

MULTIPLE-CHOICE QUESTION

Correct. When a company has honed in on a target market, it can effectively market its

offering to the people who will most likely purchase that offering.

Saved moments ago.

Targeted marketing focuses on a smaller market and therefore cannot enlarge a

company’s customer base.

Targeted marketing requires the company to gather information about its customers,

allowing the company to effectively taper its marketing mix to customers who are most

likely to buy its product.

Targeted marketing is a method that companies use to avoid competing with companies

that use a mass marketing approach.

How can store loyalty cards benefit marketers?

Correct. Loyalty cards provide an incredible amount of information on consumers’ buying

behavior. This can help marketers target those consumers more effectively.

Saved moments ago.

They help consumers score good deals.

They protect and hide consumers’ data.

They allow marketers to better understand customer buying behavior.

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Remember that great product idea you had? Consider tracking people’s web browsing patterns and segmenting them into target groups. Even small businesses are able to do this in a cost-effective way because they don’t need their own software and programs. For example, by simply signing up online for programs like Google Ads and AdWords, you can access a plethora of data about what people are looking for online. You can locate potential customers by looking at blog sites and online discussion forums. Do you have a blog? Using free tools, you can embed a survey in your blog to see what people think of your idea. If you have a website, you can download an application onto your iPhone that will give you up-to-the- minute information and statistics on your site’s visitors.

Getting a read on potential target markets doesn’t necessarily have to involve technology, however. Your own personal experience and talking to would-be buyers is an important part of the puzzle. Go where you think would-be buyers go—restaurants, malls, gyms, subways, grocery stores, daycare centers, and offices—and ask questions to find out what they do during the day, what they talk about, the products and services they use, and the quality of experiences they have using those products or services.

The Healthy Choice line of frozen dinners was launched by a heart attack victim.

Shutterstock

Healthy Choice frozen dinners were conceived as a result of polling potential customers. The food maker ConAgra launched the dinners in the late 1980s after its CEO, Charlie Harper, suffered a heart attack. One day a colleague complimented Harper on his wife’s tasty, low-fat turkey stew. That’s when Harper realized there were people like him who wanted healthy convenience foods, so he began talking to them about what they wanted. Two years after the Healthy Choice line was launched, it controlled 10 percent of the frozen-dinner market by concentrating on the health conscious segment.4

MULTIPLE-CHOICE QUESTION

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1 Robert Spellings, Jr. (March 20, 2009), “Mass Marketing Is Dead. Make Way for Personal Marketing,” The Direct Marketing Voice, http://thedirectmarketingvoice.com/2009/03/20/mass-marketing-is-dead-make-way-for-personal-marketing.

2 Henry Ford (1922), My Life and Work, Garden City, NY: Garden City Publishing Co., 72.

3 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.

4 John Birchall (June 4, 2009), “Out to Launch in a Downturn,” Financial Times, 10.

close

Which activity can a company engage in to help them learn more about their target market?

Correct. Gathering data such as age, ethnicity, and even preferences can help a company

better understand its target market.

Saved moments ago.

gathering data on competing companies

gathering data on consumers

using the experience of the CEO

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