• Micro marketing

• Micro marketing

Segment and niche marketers tailor their offers and marketing programmes So meet the needs of various market segments. At the same time, however, they do not customize their offers to each individual customer. Thus, segment marketing and niche marketing fall between the extremes of mass marketing and

382 • Chapter 9 Market Segmentation and Targeting

Marketing

Markets of One:

Guests have responded strongly to such markets­of­one service.

Customizing the

Highlight

Since inaugurating the guest­

Marketing Offer

9.1 history system in 1992, the Ritz­

Carleton has boosted guest Several technologies have con­

retention by 23 per cent. An verged in recent years to allow

amazing 95 per cent of departing companies in a wide range of

guests report that their stay has industries to treat large numbers

been a truly memorable of customers as unique 'markets of

experience.

one'. Advances in computer­ At Andersen Windows, design, database, interactive­

customers now help design their communication and manufactur­

own windows, whether they're ing technologies have given birth

complex, lofty Gothic windows or to 'mass customization', the process through

centimetres­high miniatures. Previously, as which firms interact one­to­one with masses

the number of different products offered by of customers to design products and services

Andersen grew from 28,000 in 1985 to tailor­made to individual needs. Here are some

86,000 in 1991, the company's customers ­ examples:

mainly homeowners and building contractors ­ faced a mind­numbing array of

Check into any Ritz­Carleton hotel around standard window choices, displayed in rows the world, and you'll be amazed at how well

of hefty catalogues. Designing a complicated the hotel's employees manage to anticipate

custom treatment ­ such as an arched your slightest need. Without ever asking,

window ­ required advanced design skills they seem to know that you want a non­

and a working knowledge of trigonometry. smoking room with a king­size bed, a non­

Preparing a price quote for windows could allergenic pillow, and breakfast with

take several hours, and the quote itself could decaffeinated coffee in your room. How does

run as long as 15 pages. One alarming result the Ritz­Garleton work this magic? Starting

of this complexity was a rising error rate. By with a fervent dedication to satisfying the

1991, 20 per cent of deliveries of Andersen unique needs of each of its thousands of

windows contained at least one discrepancy. guests, die hotel employs a system that

Andersen responded by supplying its combines information technology and

distributors and retailers with what is flexible operations to customize the hotel

essentially an interactive, computerized experience. At the heart of the system is a

catalogue system called Windows of huge customer database, which contains

Knowledge. An industry analyst describes information about guests gathered through

the system: 'Using this tool, a salesperson the observations of hotel employees. Each

can help customers [select from 50,000 day, hotel staffers ­ from those at the front

possible window components] and add, desk to those in maintenance and

change and strip away features until they've housekeeping ­ discretely record the unique

designed a window they're pleased with. It's habits, likes and dislikes of each guest on

akin to playing with building Modes. The small 'guest preference pads'. These

computer automatically checks the window observations are then transferred to 3

specs for structural soundness and then corporate­wide 'guest history database'.

generates a price quote. ...The retailer's Every morning, a 'guest historian' at each

computer transmits each order to [the hotel reviews the files of all new arrivals who

factory] where it's assigned a unique have previously stayed at ;i Ritz­Carleton

"licence plate number", which can be and prepares a list of suggested extra

tracked ... using bar­code technology from touches that might delight each guest.

the assembly line through to the warehouse.'

Market Segmentation • 383

Such 'bateh­of­one' manufacturing lias the windows they want with a minimum of greatly increased the customer's product

hassle. All this has made Andersen a real selection while at the same time reducing

markets­of­one advocate. Sums up one errors. By 1996 Andersen offered 188,000

executive, 'We're on a journey toward purer different products, yet fewer than one in 200

and purer mass customization.' truckloads contained an order problem. Moreover, by making almost everything to

SOURCES: B. Joseph Pine II, Don Peppers and Martha Rogers.

order, Andersen has greatly reduced its 'Do you want to keep your customers forever?', Harvard

Business Revieia (March­April 1995), pp. 103­14;

inventory requirements. Distributors are

Christopher W. Hart, 'Made to order,' Marketing

delighted with the Windows of Knowledge

Management (Summer 1996), pp 11­22; Justin Martin, 'Are

system. Says one retailer, 'It's a terrific tool.

you as good as you think you are?', Fortune (30 September

It does things that would drive me crazy

1996); James H. GilmoTe and B. Joseph Pine II, 'The four

when I used to have to do them by hand.' faces of mass customisation,' Harvard Business Review

(January—February 1997), pp. 91­101; Kim CJeland, '1'eapod,

But the real winners are Andersen's, the

Shoppers Express vie for online grocery business,'

homeowners and contractors, who get just

Advertising Age (9 June 1997). p. 40.

micromarketing. Micromarketing is the practice of tailoring products and

m i c r i mtarke ting

marketing programmes to suit the tastes of specific individuals and locations. Aform of target Micromarketing includes local marketing and individual marketing.

marketing in which QfnnpimicK tailor their

marketing programmes LOCAL MARKETING. Local marketing involves tailoring brands and pro­

to the needs and wants motions to the needs and wants of local customer groups ­ cities, neighbourhoods

of narrowly defined and even specific stores. Thus, retailers such as Akia and G & A customize eaeh

geographic, store's merchandise and promotions to match its specific elientele. Kraft helps

demographic, supermarket chains identify the specific cheese assortments and shelf positioning

psychographio or that will optimize cheese sales in low­income, middle­income and high­income

behavioural segments. stores, and in different ethnic communities.

Local marketing has some drawbacks. It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistical prob­ lems as companies try to meet the varied requirements of different regional and

local markets. And a brand's overall image may be diluted if the product and message vary in different localities. Still, as companies face increasingly frag­ mented markets, and as new supporting technologies develop, the advantages of local marketing often outweigh the drawbacks. Local marketing helps a company

to market more effectively in the face of pronounced regional and local differ­ ences in community demographies and lifestyles. It also meets the needs of the company's 'first­line customers' ­ retailers — who prefer more fine­tuned product assortments for their neighbourhoods.

INDIVIDUAL MARKETING. In the extreme, micromarketing becomes indi­ individual marketing vidual marketing tailoring products and marketing programmes to the needs

Tailoring products and and preferences of individual customers. Individual marketing has also been

marketing programmes labelled 'markets­of­one marketing', 'customized marketing' and 'one­to­one

to the needs and, marketing' (see Marketing Highlight 9.1). s The prevalence of mass marketing has

preferences of individual obscured the fact that for centuries consumers were served as individuals: the

customers. tailor custom­made the suit, the cobbler designed shoes for the individual, the

cabinet maker made furniture to order. Today, however, new technologies are permitting many companies to return to customized marketing. More powerful

384 • Chapter 9 Market Segmentation and Targeting

computers, detailed databases, robotic production, and immediate and inter­ active communication media such as e­mail, fax and the Internet — all have

mass customization combined to foster 'mass customization'.''Mass customization is the ability to Preparing individually

prepare on a mass basis individually designed products and communications to designed products and

meet each customer's requirements.

communications on a Consumer marketers are now providing custom­made products in areas large scale.

ranging from hotel stays and furniture to clothing and bicycles. For example, Suited for Sun, a swim wear manufacturer, uses a computer/camera system in

retail stores to design custom­tailored swimsuits for women. The customer puts on an 'off the rack' garment, and the system's digital camera captures her image

on the computer screen. The shop assistant applies a stylus to the screen to create a garment with perfect fit. The customer can select from more than 150

patterns and styles, which are re­imaged over her body on the computer screen until she finds the one that she likes best. The system then transmits the

measurements to the factory, and the one­of­a­kind bathing suit is mailed to the delighted customer in a matter of days.

Another example is the National Industrial Bicycle Company in Japan, which uses flexible manufacturing to turn out large numbers of bikes specially fitted to the needs of individual buyers. Customers visit their local bike shop where the shopkeeper measures them on a special frame and faxes the specifications to the factory. At the factory, the measurements are punched into a computer, which

creates blueprints in three minutes that would take a draftsman 60 times that long. The computer then guides robots and workers through the production process. The factory is ready to produce any of 18 million variations on ] 8 bicycle

models in 199 colour patterns and about as many sizes as there are people. The price is steep ­ between Y65,000 and Y400,000 ­ but within two weeks the buyer

is riding a custom­made, one­of­a­kind machine.

Business­to­business marketers are also finding new ways to customize their offerings. For example, Motorola salespeople now use a hand­held computer to custom­design pagers following a business customer's wishes. The design data are

transmitted to the Motorola factory, and production starts within 17 minutes. The customized pagers are ready for shipment within two hours.

The move towards individual marketing mirrors the trend in consumer self­ marketing. Increasingly, individual customers are taking more responsibility for determining which products and brands to buy. Consider two business buyers with two different purchasing styles. The first sees several salespeople, each trying to persuade him to buy their product. The second sees no salespeople but rather logs on to the Internet; searches for information on and evaluations of available products; interacts electronically with various suppliers, users and product analysts; and then makes up her own mind about the best offer. The second purchasing agent has taken more responsibility for the buying process, and the marketer has had less influence over her buying decision.

As the trend towards more interactive dialogue and less advertising mono­ logue continues, self­marketing will grow in importance. As more buyers look up consumer reports, join Internet pro duct­discuss ion forums, and place orders via phone or online, marketers will have to influence the buying process in new ways. They will need to involve customers more in all phases of the product­develop­ ment and buying process, increasing opportunities for buyers to practise self­ marketing.

According to the chief designer for Mazda, 'Customers will want to express their individuality with the products they buy.' The opportunities offered by these technologies promise to turn marketing from 'a broadcast medium to a dialog medium', where the customer participates actively in the design of the product and offer. 7

Market Segmentation • 385