Learning from the Consumer Side - Financial Services Marketing

On the consumer side, it is better understood that the market is no longer undifferentiated. Back in the 1950s, there was a mass market. There was one kind of Coke, and Coke sold it to everyone in the world in the same way. But those were also the days when television consisted of three networks and most people read mass-market magazines like Life.

Today, the “mass market” is made up of multiple niche segments that do not intersect. Girls ages 12 to 15 read different magazines, watch different television programs, go to different websites than do older or younger girls. Television has splintered into hundreds of cable channels, devoted to specific demographic market segments (women, Hispanics) or niche interests (golf, Wall Street). Very few magazines reach a heterogeneous audience—today magazines are targeted to ever-narrower niches (black entrepreneurs, retirees in Florida).

Very few companies can afford to be everything to everyone any more. Even companies with mass- market products (like basic checking accounts) segment their markets so that they can focus their limited marketing dollars on the most profitable segments. Mass advertising is often a waste of money. For example, a thirty-second spot on the Super Bowl can cost $2 million for airtime, plus a few more million in production costs. Advertising an online brokerage when only half the viewers transact their business online is wasting half one’s marketing dollars—something many dot-coms didn’t learn until too late.

Choosing Target Segments

Targeting is picking the actual market segments you want to go after. The benefits of targeting include the following:

Targeting helps you identify the media that best reach your target segments.

When you’ve identified a particular segment (for example, young professionals just starting out in practice), you can more easily determine the media that best reach these markets (for example, law or medical school alumni magazines).

Targeting helps build referral business. People tend to affiliate with people who are similar in interests or demographics. They are also likely to refer business to their friends and follow each other’s purchasing patterns.

Targeting specific market segments increases the potential return of your marketing dollars. It might seem obvious that when you buy a mailing list, you should limit your use of it to people who have the ability to buy your product. Yet, at least one bank, failing to cross-analyze its own customer list, sent a solicitation for renters’ insurance to home owners who had mortgages with the bank! Targeting should help avoid such waste and irritation to customers.

Targeting helps you narrow the focus of your message, making it more likely that the prospect will respond. Although the average direct mail offer today gets less than a 2 percent response, when the list, the offer, and the message are narrowly targeted, response can go up to 10 percent or more.

Targeting enables organizations to build products designed for target segments and to avoid market segments for whom they have no appropriate products. An investment company that specializes in fixed-income funds is not going to have much to offer day traders looking for fast profits and shouldn’t waste its money seeking them. However, if a target segment, such as retirees, is looking for a related product, like annuities, it may be sensible to investigate offering such products.

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