SEGMENTING AND TARGETING MARKETS



SEGMENTING AND TARGETING MARKETS

A few years ago, executives at work-apparel maker Williamson-Dickey noticed that its twill pants were becoming hugely popular with West Coast teens and young adults who are traditionally attracted to designer brands. They were buying Dickies clothes for everyday wear and buying items in slightly larger sizes to achieve a baggy look.

Company management, dubbing it an “antifashion fashion,” did nothing about this trend; they predicted it was a fad that would be gone in a year. Instead, the trend expanded nationwide and onto the streets of Europe.

At the same time of the grassroots fashion movement, Dickies was in the midst of rolling out a new line of women’s work wear, which was a significant departure and undertaking for a company that had been making men’s work wear for more than seventy-five years. Through marketing research, the company learned that about one million women were buying and wearing its men’s work pants. The company took three years to develop and test the women’s work wear and it was not about to abandon these efforts. The women’s line has earned the Good Housekeeping Seal, recognized as a mark of consumer product excellence.

A marketing team was called in to address the two markets. To reach the new customers, Dickies has shifted from advertising only in men’s trade journals. Dickies uses Parade, which reaches more households than any medium except television, as its primary national advertising vehicle. Since it began using Parade to create brand awareness, the marketing director says sales have increased. Dickies has added magazines such as Spin and Transworld Skateboarding to reach the youth market and Good Housekeeping and First for Women to reach the female market.

Dickies is also getting back into boys wear, a line it abandoned in the early 1980s because sales were sluggish. The new line will include twill pants, jeans, shorts, and oxford cloth and polo shirts. The line is being marketed as a choice in the growing public school uniform market, an estimated $11 billion segment. It is being advertised in trade publications such as Principal, School Administrator, and School Uniforms. The company has also started a Uniform Curriculum Program as an incentive to get its clothing on children. Schools earn points redeemable for such things as computers, playground equipment, and school supplies when parents turn in Dickies labels.1

Based on this story, how would you define market segmentation and targeting? What type of targeting strategy is Dickies using? Do you think the company will be successful in its new efforts?

Global Perspectives

Europe Is Deaf to Snap! Crackle! Pop!

Cereal companies view European countries such as Italy as an opportunity for growth at a time when the U.S. cereal market is in decline. However, after years of aggressive marketing campaigns and health-awareness programs in Italy, promoting the benefits of cereal, most Italians continue to eat breakfast Italian style: espresso or cappuccino and biscotti dipped into the coffee. American cereals like corn flakes have been available in Italy since the 1950s. But until this decade they were considered a niche product and relegated to the nation’s pharmacies and health-food stores. Some progress has been made as a growing number of Italian parents are now giving their children cereal for breakfast.

In the early 1990s when U.S. companies started encountering problems at home, they began looking at markets abroad. Kellogg’s, for example, started investing heavily in Europe, entering Italy full steam and opening manufacturing plants in Latvia and Denmark. For an American cereal company, Europe offered distinct advantages, including higher prices and profit margins, cheaper television time, and fewer competitors. But Kellogg’s timing was unfortunate. The fall of European trade restrictions as the European Union moved toward the single market made so many plants unnecessary, especially when the number of people eating cereal was not multiplying that rapidly.

As they look for a turnaround, the cereal companies are trying to take advantage of some cultural shifts. The traditional long European lunch is giving way to the American habit of grabbing a quick bite, making a bigger breakfast essential. Also, large U.S.-style supermarkets with wide aisles are taking over from smaller mom-and-pop type stores, which are less inclined to switch to new, untried products.

At one modern Milanese supermarket, cereals occupy a promi-nent shelf position: The boxes are stacked on top of the fruit counter, and beneath them are multipacks of milk cartons. One mother in the store who is loading up on Kellogg’s Corn Flakes and All-Bran says she buys the cereal for her kids—they see commercials on television and tell her what to buy.

Cereal ads in Italy feature hazy sunrises, fields of grain, and wholesome-looking families. They also emphasize the American nature of the product; one Kellogg’s Corn Flakes ad uses a series of child Elvis impersonators and begins “the best things always come from America.” Several newer ads have a more Italian look. For example, one ad shows an Italian farm family eating breakfast outside their old stone house while their child is talking on a mobile phone—an essential element of modern Italian life.

Kellogg’s now dominates Italy’s cereal market with an estimated 61 percent market share but has come under attack from store brands launched by domestic retail chains. Furthermore, U.S. cereal makers face new competition from an Italian food manufacturer, Banila SpA, which recently introduced a pressed cereal breakfast bar. Called Armonie, it is marketed as a nutritious breakfast food ideal for dipping in milk or coffee, just like biscotti. Ads for Armonie show a young woman flinging open the windows to let the sun shine in and then dipping the cereal bars in milk.10

Could cereal companies more effectively segment the Italian cereal market? What segments might be promising? How should they position their products?

Ethics in Marketing

Building Children’s Databases on the Net

Mr. Jelly Belly is awfully sweet to kids on-line. The rotund mascot at candy maker Herman Goelitz, Inc.’s World Wide Web site offers visitors free one-ounce samples of jelly beans—so long as they spill the beans about their name, address, gender, age, and where they shop. Only in the fine-print disclaimer does Mr. Jelly Belly reveal what might be done with this personal data: “. . . anything you disclose to us is ours. So we can do anything we want with the stuff you post. We can reproduce it, disclose it, transmit it, publish it, broadcast it, and post it someplace else.”

As millions of kids go on-line, marketers are in hot pursuit. Eager to reach an enthusiastic audience more open to pitches than the typical adult buried in junk mail, companies often entertain tykes on-line with games and contests. But to play, these sites frequently require children to fill out questionnaires about themselves and their families and friends—valuable data to be sorted and stored in marketing databases.

“It’s a huge problem. It’s deceptive and fraudulent,” says Marc Rotenberg, director of the Electronic Privacy Information Center, an on-line privacy-rights group. “Kids don’t know how their personal information is being used.” He adds that typical on-line questionnaires are “much more detailed than the traditional cereal-box promotion.”

Marketers, however, have been gathering information about kids for decades, dating back to the first decoder ring and proof of purchase. Some experts question whether a raft of new legislation is the right answer, rather than simply extending current rules on fraudulent and deceptive practices to the on-line market.

Companies are chomping at the bit for details from on-line surfers, no matter how young. At Microsoft Corp.’s Kids pages, signing the guest book means offering up the name, e-mail address, whether the user is a boy or a girl, and the home address. Kids are encouraged to answer questions about what they like to do on-line but are also asked, “. . . can a Microsoft representative contact you?” If so, “Please include your telephone number including area code.”

Isn’t what Herman Goelitz, Inc. is doing with Mr. Jelly Belly just an extension of compiling a mailing list of who ordered decoder rings in the old days? Defend your answer. Do you agree with Marc Rotenberg or think that everyone should simply lighten up? Do you think new legislation is needed to address the building of Jelly Belly–type databases? Why or why not?

SOURCE: From “Ply and Pry: How Business Pumps Kids on Web,” by Jared Sandberg, The Wall Street Journal, June 9, 1997. Reprinted by permission of the Wall Street Journal, © 1997 Dow Jones & Company, Inc. All Rights Reserved Worldwide.

Entrepreneurial Insights

Businesses Gain a Foothold Through Niche Marketing

The estimated annual sales for retail franchising are expected to reach more than $1 trillion by the year 2000, accounting for more than 50 percent of all U.S. retail sales. According to analysts, niche marketing is the biggest source for this success, enabling small retailers to compete with big retailers like Wal-Mart.

Analysts say the key to a successful retail franchise is to identify and exploit a specialist product that satisfies consumer needs. A number of companies are doing this. For example, Battery Patrol, Inc., stocks more than five thousand different batteries, from hearing-aid batteries to 140-pound batteries for earth-moving equipment. Battery Patrol expects annual growth of at least 30 percent in 1998, the president of the company says. The company has five wholly owned stores and began franchising last year.

Another example is Honolulu-based Magneato, which sells refrigerator magnets—six hundred different types ranging in price from $5 to $10. Magneato’s flagship five-hundred-square-foot store in the Waikiki Beachcomber Hotel is joined by one in Honolulu and another in a shopping mall in Guam. The Guam store did $17,600 in sales on New Year’s Day alone. A new shop is scheduled to open in Oakland, Michigan, and the company is also discussing a franchise with a New York-based group.

Tried and tested retail concepts are frequently being franchised with an emphasis on extraordinary service to distinguish them from more traditional stores. Michael Charles Premier Wine Shops in Warren, Ohio, hopes to franchise the company’s idea for unpretentious, low-key wine stores. The three existing stores try for a “Barnes and Noble” approach (which encourages customers to spend hours at the store mixing shopping with sociability) by offering wine tastings and classes to help overcome any embarrassment customers may feel about a limited knowledge of fine wines. The company has plans to open ten to twelve carefully chosen franchises throughout the Midwest.

Mark Siebert, president of a Chicago-based franchising consulting firm, emphasizes the tremendous amount of potential in sticking with a well-defined niche. “We’re seeing more and more specialization,” he says. “If you try to be too much, you’re going to have a hard time. By focusing, you’re going to be successful.”44

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