Using an undifferentiated marketing (or mass marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. Such a strategy focuses on what is common in the needs of consumers rather than on what is ­different. The company designs a product and a marketing program that will appeal to the largest number of buyers.

As noted earlier in the chapter, most modern marketers have strong doubts about this strategy. Difficulties arise in developing a product or brand that will satisfy all consumers. Moreover, mass marketers often have trouble competing with more-focused firms that do a better job of satisfying the needs of specific segments and niches.

Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs separate offers for each. For example, P&G markets at least six different laundry detergent brands in the United States (Tide, Gain, Cheer, Era, Dreft, and Bold), which compete with each other on supermarket shelves. Then P&G further segments each detergent brand to serve even narrower niches. For example, you can buy any of dozens of versions of Tide—from Tide Original, Tide Coldwater, or Tide Pods to Tide Free & Gentle, Tide Vivid White + Bright, Tide Colorguard, Tide plus Febreze, or Tide with a Touch of Downy.

By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment. Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments. Thanks to its differentiated approach, P&G is really cleaning up in the $15 billion U.S. laundry detergent market. Incredibly, by itself, the Tide family of brands captures a 38 percent share of all North American detergent sales; the Gain brand pulls in another 15 percent. Even more incredible, all P&G detergent brands combined capture a 60 percent U.S. market share.16

But differentiated marketing also increases the costs of doing business. A firm usually finds it more expensive to develop and produce, say, 10 units of 10 different products than 100 units of a single product. Developing separate marketing plans for separate segments requires extra marketing research, forecasting, sales analysis, promotion planning, and channel management. And trying to reach different market segments with different advertising campaigns increases promotion costs. Thus, the company must weigh increased sales against increased costs when deciding on a differentiated marketing strategy.

When using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, a firm goes after a large share of one or a few smaller segments or niches. For example, consider nicher Stance Socks:17

“Rihanna designs them, Jay Z sings about them, and the rest of the world can’t seem to get enough of Stance socks,” says one observer. They’ve even become the official on-court sock of the NBA and a favorite of many professional players on game day. Nicher Stance sells socks and only socks. Yet it’s thriving in the shadows of much larger competitors who sell socks mostly as a sideline. Five years ago, Stance’s founders discovered socks as a large but largely overlooked and undervalued market. While walking through the sock section a local Target store, says Stance’s CEO and cofounder, Jeff Kearl, “It was like, black, white, brown, and gray—with some argyle—in plastic bags. I thought, we could totally [reinvent] socks, because everyone was ignoring them.”

So Stance set out to breathe new life into the sock category by creating technically superior socks that also offered fun, style, and status. Mission accomplished. You’ll now find colorful displays of Stance’s comfortable but quirky socks in stores in more than 40 countries, from the local surf shop to Foot Locker to Nordstrom, Bloomingdale’s, and Macy’s. Selling at prices ranging from $10 to $40 a pair, Stance sold an estimated 12 million pairs of socks last year. That’s small potatoes for giant competitors such as Hanes or Nike, but it’s nicely profitable for nicher Stance. Next up? Another often overlooked niche—Stance men’s underwear.

Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Niching lets smaller companies focus their limited resources on serving niches that may be unimportant to or overlooked by larger competitors. Many companies start as nichers to get a foothold against larger, more resourceful competitors and then grow into broader competitors. For example, Southwest Airlines began by serving intrastate, no-frills commuters in Texas but is now one of the nation’s largest airlines. And Enterprise Rent-A-Car began by building a network of neighborhood offices rather than competing with Hertz and Avis in airport locations. Enterprise is now the nation’s largest car rental company.

Today, the low cost of setting up shop on the internet makes it even more profitable to serve seemingly small niches. Small businesses, in particular, are realizing riches from serving niches on the web. Consider online women’s fashion retailer Stitch Fix:18

Stitch Fix offers affordable personal styling services online to busy women on the go. It positions itself as “Your partner in personal style.” Although “personal service” and “online” might seem a contradiction, Stitch Fix pulls it off with a team of more than 2,000 personal stylists who apply a sophisticated algorithm to determine each customer’s unique sense of style. A customer begins by filling out a detailed style profile that goes far beyond the usual sizing charts. It probes personal preferences with questions such as “What do you like to flaunt?” and “How adventurous do you want your Fix selections to be?” (One answer choice: “Frequently: Adventure is my middle name, bring it on!”) The customer also rates photo montages of different fashions and can even submit links to her own Pinterest pages or other social media.

Combining the algorithm with large doses of human judgment (the stylist may completely override the algorithm), the personal stylist assembles and ships the customer’s first fashion “Fix”—a box containing five clothing or accessory items pegged to the customer’s special tastes. “Our professional stylists will pick out items they think you’ll love—sometimes a little out of your comfort zone, but that’s part of the fun,” says the company. The customer keeps what she likes and returns the rest, along with detailed feedback. The first Fix is the hardest because the stylist and algorithm are still learning. But after that, the Stitch Fix experience becomes downright addictive for many shoppers. More than 80 percent of customers visit the site within 90 days for a second order, and one-third spend 50 percent of their clothing budget with Stitch Fix. Thanks to the power and personalization qualities of the internet, Stitch Fix is attracting attention and growing fast. The online nicher has inspired a virtual army of pro–Stitch Fix blog and social media posters, and its revenues have skyrocketed to more than $200 million annually.

Concentrated marketing can be highly profitable. At the same time, it involves higher-than-normal risks. Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or larger competitors may decide to enter the same segment with greater resources. In fact, many large companies develop or acquire niche brands of their own. For example, Coca-Cola’s Venturing and Emerging Brands unit markets a cooler full of niche beverages. Its brands include Honest Tea (the nation’s number-one organic bottled tea brand), NOS (an energy drink popular among auto enthusiasts), FUZE (a fusion of tea, fruit, and other flavors), Zico (pure premium coconut water), Odwalla (natural beverages and bars that “bring goodness to your life”), Fairlife (unfiltered milk), and many others. Such brands let Coca-Cola compete effectively in smaller, specialized markets, and some will grow into future powerhouse brands.19

Differentiated and concentrated marketers tailor their offers and marketing programs to meet the needs of various market segments and niches. At the same time, however, they do not customize their offers to each individual customer. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments. Rather than seeing a customer in every individual, micromarketers see the individual in every customer. Micromarketing includes local marketing and individual marketing.

Local Marketing

Local marketing involves tailoring brands and promotions to the needs and wants of local customers. For example, Marriott’s Renaissance Hotels has rolled out its Navigator program, which hyper-localizes guest experiences at each of its 155 lifestyle hotels around the world:20

Renaissance Hotels’ Navigator program puts a personal and local face on each location by “micro-localizing” recommendations for guests’ food, shopping, entertainment, and cultural experiences at each destination. The program is anchored by on-site Renaissance Hotels “Navigators” at each location. Whether it’s Omar Bennett, a restaurant-loving Brooklynite at the Renaissance New York Times Square Hotel, or James Elliott at the St. Pancras Renaissance London Hotel, a history buff and local pub expert, Navigators are extensively trained locals who are deeply passionate about the destination and often have a personal connection to the locale. Based on 100-plus hours of intense training plus their own personal experiences and ongoing research, they work with guests personally to help them experience “the hidden gems throughout the neighborhood of each hotel through the eyes of those who know it best.”

In addition, Renaissance Hotels engages locals in each city to participate by inviting them to follow their local Navigator via social media as well as adding their own favorites to the system, creating each hotel’s own version of Yelp. Navigators then cull through submitted tips and feature the best recommendations alongside their own for sharing within the hotel lobby or on its web, mobile, and social media channels. Since introducing the hyper-localized Navigator program as part of Renaissance Hotels’ “Live Life to Discover” campaign two years ago, the hotel’s website traffic has grown more than 80 percent, Facebook Likes have exploded from 40,000 to more than 900,000, and Twitter followers have surged from 5,000 to 110,000.

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Advances in communications technology have given rise to new high-tech versions of location-based marketing. Thanks to the explosion in smartphones and tablets that integrate geolocation technology, companies can now track consumers’ whereabouts closely and engage them on the go with localized deals and information fast, wherever they may be. It’s called SoLoMo (social+local+mobile) marketing. Services such as Foursquare and Shopkick and retailers ranging from REI and Starbucks to Walgreens and Macy’s have jumped onto the SoLoMo bandwagon, primarily in the form of smartphone and tablet apps. Mobile app Shopkick excels at SoLoMo:21

Shopkick sends special offers and rewards to shoppers simply for checking into client stores such as Target, Macy’s, Best Buy, Old Navy, or Crate & Barrel and buying brands from Shopkick partners such as P&G, Unilever, Disney, Kraft, and L’Oréal. When shoppers are near a participating store, the Shopkick app on their phone picks up a signal from the store and spits out store coupons, deal alerts, and product information. When Shopkickers walk into their favorite retail stores, the app automatically checks them in and they rack up rewards points or “kicks.” If they buy something or scan product bar codes, they get even more kicks. Users can use their kicks for discounted or free merchandise of their own choosing. Shopkick helps users get the most out of their efforts by mapping out potential kicks in a given geographic area. Shopkick has grown quickly to become one of the nation’s top shopping apps, with more 15 million users and 300 brand partners.

Local marketing has some drawbacks, however. It can drive up manufacturing and marketing costs by reducing the economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different local markets. Still, as companies face increasingly fragmented markets and as new supporting digital technologies develop, the advantages of local marketing often outweigh the drawbacks.

Individual Marketing

In the extreme, micromarketing becomes individual marketing—tailoring products and marketing programs to the needs and preferences of individual customers. Individual marketing has also been labeled one-to-one marketing, mass customization, and markets-of-one marketing.

The widespread use of mass marketing has obscured the fact that for centuries consumers were served as individuals: The tailor custom-made a suit, the cobbler designed shoes for an individual, and the cabinetmaker made furniture to order. Today, new technologies are permitting many companies to return to customized marketing. Detailed databases, robotic production and flexible manufacturing, and interactive technologies such as smartphones and online and social media have combined to foster mass customization. Mass customization is the process by which firms interact one to one with masses of customers to design products, services, and marketing programs tailor-made to individual needs.

Companies these days are hyper-customizing everything from food, artwork, earphones, and sneakers to high-end luxury products. At one end of the spectrum, candy lovers can go to mymms.com and buy M&Ms with personalized messages or pictures embossed on each little candy. Visit Nike ID or Puma Factory online to design and order your very own personalized sneakers. JH Audio in Orlando makes customized earphones based on molds of customers’ ears to provide optimized fit and better and safer sound. The company even laser-prints designs on the tiny ear buds—some people request a kid for each ear; others prefer a dog.

At the other extreme are “bespoke” luxury goods (a fancy word for “custom-made” or “made to order”). For the right price, well-heeled customers can buy custom-designed goods ranging from bespoke fashions and accessories by Hermes and Gucci to bespoke cars from Aston Martin or Rolls-Royce.22

Ninety-five percent of Rolls-Royce buyers customize their cars in some way. Customers can sit down with a Rolls-Royce Bespoke design team—color experts, leather-smiths, master woodworkers—in a lounge filled with images, materials, and other inspirational elements to design their own unique Rolls-Royces. Want to match the exterior paint and interior leather to your favorite pale pink leather gloves? No problem. Want to customize your door handles, have your initials and a meaningful logo stitched into the headrests, or install mother-of-pearl inlays, crocodile skin seating, rabbit-pelt linings, or mahogany trim? Easily done. One customer even wanted his car’s interior trim to be made from a favorite tree that had recently fallen on his estate. After analyzing a sample, a Rolls-Royce craftsman deemed the wood acceptable and the customer’s tree will now live forever in the dash and door panels of his custom Rolls-Royce. “Outside of compromising the safety of the car—or disfiguring the Spirit of Ecstasy—we won’t say no,” says a Rolls-Royce executive.

Beyond customizing products, marketers also customize their marketing messages to engage customers on a one-to-one basis. For example, Nike collected data on its most enthusiastic customers, those who train using FuelBands and apps such as Nike+ Running. It then used the data to create 100,000 customized animated videos based on each individual’s actual workout activities. For example, one video might feature an animation of a person in Los Angeles running past the Hollywood sign; another might show a New Yorker running in the rain along the East River. Nike then emailed the unique customized videos to each of the 100,000 Nike+ users, challenging them to achieve new heights in the coming year. The videos not only engaged Nike’s biggest fans, they also spread to the broader Nike community. “These are some of the most social people on the planet,” says one campaign manager. “They share like crazy. So that becomes a pretty awesome flagship marketing move for Nike.”23

Companies need to consider many factors when choosing a market-targeting strategy. Which strategy is best depends on the company’s resources. When the firm’s resources are limited, concentrated marketing makes the most sense. The best strategy also depends on the degree of product variability. Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration. The product’s life-cycle stage also must be considered. When a firm introduces a new product, it may be practical to launch one version only, and undifferentiated marketing or concentrated marketing may make the most sense. In the mature stage of the product life cycle, however, differentiated marketing often makes more sense.

Another factor is market variability. If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate. Finally, competitors’ marketing strategies should be considered. When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of buyers in specific segments.

Smart targeting helps companies become more efficient and effective by focusing on the segments that they can satisfy best and most profitably. Targeting also benefits ­consumers—companies serve specific groups of consumers with offers carefully tailored to their needs. However, target marketing sometimes generates controversy and concern. The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.

For example, fast-food chains have generated controversy over the years by their attempts to target inner-city minority consumers. They’ve been accused of pitching their high-fat, salt-laden fare to low-income, urban residents who are much more likely than suburbanites to be heavy consumers. Similarly, big banks and mortgage lenders have been criticized for targeting consumers in poor urban areas with attractive adjustable-rate home mortgages that they can’t really afford.

Children are seen as an especially vulnerable audience. Marketers in a wide range of industries—from cereal, soft drinks, and fast food to toys and fashion—have been criticized for their marketing efforts directed toward children. Critics worry that enticing premium offers and high-powered advertising appeals will overwhelm children’s defenses. In recent years, for instance, McDonald’s has been criticized by various health advocates and parent groups concerned that its popular Happy Meals offers—featuring trinkets and other items tied in with popular children’s movies and TV shows—create a too-powerful connection between children and less-healthy eating. McDonald’s has responded by putting the Happy Meal on a diet, cutting the overall calorie count by 20 percent, adding fruit to every meal, and promoting Happy Meals only with milk, water, and juice. And for a two-week span each year, McDonald’s replaces the toys in its Happy Meals with children’s books.24

The digital era may make children even more vulnerable to targeted marketing messages. Traditional child-directed TV and print ads usually contain fairly obvious pitches that are easily detected and controlled by parents. However, marketing in digital media may be subtly embedded within the content and viewed by children on personal, small-screen devices that are beyond even the most watchful parent’s eye. In digital platforms, the lines between educational, entertainment, and commercial content are often blurred. Thus, as children consume increasing amounts of online and digital content, one expert advises that kids “shouldn’t be entirely left to their own devices.”25

More broadly, the growth of the internet, smartphones, and other carefully targeted direct media has raised fresh concerns about potential targeting abuses. The internet and mobile marketing allow more precise targeting, letting the makers of questionable products or deceptive advertisers zero in on the most vulnerable audiences. Unscrupulous marketers can now send tailor-made, deceptive messages by email directly to millions of unsuspecting consumers. For example, the Federal Bureau of Investigation’s Internet Crime Complaint Center website alone received more than 269,000 complaints last year.26

Today’s marketers are also using sophisticated analytical techniques to track consumers’ digital movements and to build amazingly detailed customer profiles containing highly personal information. Such profiles can then be used to hypertarget individual consumers with personalized brand messages and offers. However, with such targeting, marketers often walk a fine line between serving customers better and stalking them:

How well does your smartphone know you? What stories could your laptop tell? In truth, your digital devices probably know more about you than you know about yourself. Smartphones and other digital equipment have become fundamental extensions of our lives. Whatever you do—at work, at play, socializing, shopping—your phone, tablet, laptop, or desktop is almost always a part of the action. These devices go where you go, entertain you, connect you with friends, take you browsing and shopping, feed you news and information, and listen in on even your most intimate voice, text, and email conversations. And more and more, these devices are sharing all that personal information with marketers. Companies have now developed sophisticated new ways that border on wizardry to extract intimate insights about consumers. For brands and marketers, such information is pure gold.

Marketers argue that using all of this up-close-and-personal information better serves both customers and a company. Customers receive tailored, relevant information and offers from brands that really understand and interest them. However, many consumers and privacy advocates are concerned that such intimate information in the hands of unscrupulous marketers could result in more harm than benefit to consumers. They often view big data and hypertargeting less as “getting to know consumers better to serve them better” and more as “stalking” consumers and “profiling” them. Although most consumers are willing to share some personal information if it means getting better service or deals, many consumers worry that marketers might go too far.

Thus, in target marketing, the issue is not really who is targeted but rather how and for what. Controversies arise when marketers attempt to profit at the expense of targeted ­segments—when they unfairly target vulnerable segments or target them with questionable products or tactics. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.