Chapter 3

Developing Lists and

Discovering Markets

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
THREE TYPES OF LISTS
1. HOUSE LISTS
2. RESPONSE LISTS
3. COMPILED LISTS

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
1-House lists
 House lists- lists of an organization’s own
customers
 (both active as well as inactive).
 Also called “Goodwill”
 More productive than lists from outside
sources lists
 generate future business at a cost much less
than that of acquiring responses from outside
lists.
House lists include 4 segments:
1. Those who have become inactive
2. Those who have inquired but not purchased
 (expression of interest)
3. Those who have been referred or recommended by
present customers of the firm.
4. Those who have transacted, Measure degree of
customer activity (transaction):
 RFM: Recency, frequency, and dollar value of such
purchases.
 The source of the customer
 Define suitable promotional strategy for each customer
2-Response lists
 Response lists- lists of those who have
responded to another direct marketer’s offer.
 Ex: a customer who has subscribed to a news magazine
by mail USA Today, for example could be an ideal
prospect for a competitive news magazine such as
Newsweek.
2-Response lists
 Lists of directly competitive firms is good source…
 lists should be segmented: G.D.S.P.B. factors.
 + Also by type of response and/or transaction or
purchase (RFM).
What are Good Response lists:
 Qualified response lists:
1. Name has a history of response to direct
marketed offers
2. Equally important characteristic an
indication of response
3. history of purchase of related items.
4. Lists of directly competitive firms.

Also see slide of Evaluation of lists

3-Compiled lists
 Compiled lists- lists that have been generated by
a third party or market research firm of individuals
who do not have a response history.
1. Telephone directory listings
2. Automobile and driver's license registrations
3. Newly married and the newly born
4. High school and college student rosters
5. Public records such as voter lists
6. Manufacturer warranty cards
 Marketers combine those lists.
Compiled lists Wall Street Journal example

 Wanted to promote to one of its most challenging

segments-college students with limited financial
resources
 Used a customized student segmentation strategy to
determine high probability prospect student responders
based on a profile like:
1. Current college student subscribers
2. Major
3. Class year
4. Most responsive geographical school locations
5. …etc.
 …45 select criteria for obtaining student prospect
data…
Service bureaus (generate Compiled lists)

 Service bureaus- provide:

 Data processing
 Data mining
 Outsourcing
 OLAP on-line analytical processing
 to support the interchange of lists and
database information.
The List Industry
 List users
 List owners
 List managers
 List compilers
 List brokers
 Service bureaus

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
 List user: direct marketer who uses a list.
 List owner: organization that owns list (magazine)
 List manager: person in list owner’s organization responsible for
keeping information in list accurate.
 List compiler: The business of creating lists from printed
records.
 The individual or company making such lists is known as a
compiler.
 (serving as their own list managers and brokers.)
 List broker: brings list owner and list user together.
 Service bureaus: can put the entire direct marketing program
together for you (get list, create mailer, etc.)
Business customers
segmentation
Organizational Buyer Markets

Company size Small, Medium, Large, Large relative to industry.

Purchase quantity Small, Medium, Large account

Product application Production, Maintenance, Product Component

Organization type Manufacturer, Retailer, Government Agency, Hospital.

Location North, South, East, etc.

New Customer, Occasional Purchaser, Frequent

Purchase status
Purchaser, nonpurchaser.

Attribute importance Price, Service, Reliability of Supply.

Segmenting Business Markets
 A common means of industrial market
segmentation is through the
Standard Industrial Classification (SIC) c
oding system
.
 The SIC codes serve as a basis for
statistical data, used by government, trade
associations, and business enterprises.
Copyright© 2010 Pearson Education, Inc.
Publishing as Prentice Hall
SIC codes
 SIC codes classify business customers
by the main economic activity in which
they engage. All major activities are
assigned a two-digit code number. As a
company’s business activity becomes
more specialized, up to six digits can be
added to the two digit SIC code to
identify sub groups.
Copyright© 2010 Pearson Education, Inc.
Publishing as Prentice Hall
NAICS
 The North American Industry
Classification System (NAICS) has
replaced the SIC system.
 The NAICS has several improvements
over the SIC system.

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
NAICS Improvements
 1- relevance (NAICS identify more than 350 new
industry)
 2- comparability (NAICS was developed by USA,
Canada and Mexico to produce comparable data for
all three nations
 3- consistency ( business that use similar production
processes are grouped together

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
NAICS Improvements
 4- adaptability (NAICS will be reviewed every 5
years so classification and information keep up with
the changing economy)
 5- quality has been improved with key measures of
U.S. economic activity such as retail services,
manufacturer’s shipments, etc.

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
Segmenting Consumer Market
The 5 Bases For Market
Segmentation
1. Geographic
2. Demographic
3. Social
4. Psychological
5. Behavioral

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
 1-Geographic Segmentation
 Neighborhood subdivisions
 States
 Countries
 Trading areas
 Cities, towns
 Neighborhoods, etc.

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
 1-Geographic Segmentation
 There are also numerical codes:
 ZIP codes, telephone area codes, and computer
“match” codes.
 GPS-Global Positioning System
 (a technological segmentation tool that associates latitude
and longitude coordinates with street addresses)
 Direct marketers use this system (GPS) to identify
geographic locations, establish business sites, locate
competitor, measure distance, and generate data about
the demographics of a business location.

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
 2-Demographics
 Demographics are identifiable and
measurable statistics that describe the
consumer population.
 Examples: age, gender, income, marital status,
occupation, type of housing, home ownership status,
education level, etc.
 Statistics that describe the consumer
population must be
 Identifiable
 Measurable
3-Social Factor Segmentation
 Social factors demonstrate the influence
others have on our behaviors

A- Reference (Peer) group and Reference

individual
B- Culture and Sub-culture
C- Social class rank

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
A- Reference (Peer) group & Reference
individual

1- Reference groups- the people a

consumer turns to for reinforcement.
This reinforcement comes after the consumer makes a purchase
decision.

2- Reference individuals- persons a

consumer turns to for advice.
This person will influence the consumer before he or she makes a
purchase decision
A- Reference Groups and Families
 Who makes the purchase? And who decide?
1. Primary reference groups include family (household) and close
friends
 The family constitutes an important reference group
 The family life cycle is a useful way of classifying and
segmenting individuals and families because it combines trends
in earning power with demands placed on income
2. Secondary reference groups
3. Product Nature more public use = more reference groups
influence (clothes – automobiles…)
 Reference Groups
oc us
ds ,F r In A
In A uperio ds,
s own Show
on tional ce bein ers
c g
fun orman Necessity Luxury for t admi
f heir re
per rand prod d
by b uct
Public Necessities Public Luxuries
Reference group influence: Reference group influence:
Public
Product: Weak Product: Strong
Use
Brand: Strong Brand: Strong
Ex: automobile-man’s suit Ex: Golf clubs, sailboat, health club
cu s on r not F oc
Fo ome ce us o
t how n
cus eferen pro
r
his p Private Necessities Private Luxuries cate duct
r ou g
g Reference group influence: fu o r y
Reference group influence:pe lfill
Private rso
use
Product: Weak Product: Strong nee nal
ds
Brand: Weak Brand: Weak
Ex: Mattress, floor lamp. Ex: Plasma TV- Ice maker
B- Culture & Subculture
 System of shared beliefs and values that
develops within a society that guides the
behavior.
B- Culture & Subculture
Cultural and subculture Influences on Consumer
Behavior
 One of the most basic influences on an individual’s
needs
 Transmitted through three basic organizations
1. Family
2. Religious organizations
3. Educational institutions
 Marketing managers should adapt the marketing mix
to cultural values
 and constantly monitor value changes and
differences in both domestic and global markets.
C- Social Classes
 Based on aspects like
 Wealth
 Skill
 Power
 Occupation (strongest)
4- Psychographic Segmentation
 Psychographics- the study of life-
styles, habits, attitudes, beliefs, and
value system of individuals.
 Lifestyles
 Habits
 Attitudes
 Beliefs
 Value systems

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
4-Psychographic Segmentation
1- Asking customers questions about lifestyles
2- Grouped on the basis of similarity
3- Lifestyles are measured by asking about
(AIO)
 Activities (hobbies-work- vacations)
 Interests (family-job-community)
 Opinions (social-politics-business)
Lifestyle Selector
 The lifestyle selector is a direct marketing industry’s
largest and most comprehensive database of self-
reported consumer information.
 More than 500 response segments cover all aspects
of how consumer live, what they spend their money
on, and what interests they possess. This derived
from two sources: response to consumer surveys and
product registration cards filled out by consumer
after they have completed a product purchase.


Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
Lifestyle Selector
 Included for each of the 47 million consumer names
and addresses are a variety of demographic
characteristics and activities or hobbies. It is possible
for a direct marketer to develop a psychographic
and demographic profile of his or her company’s
house lists by matching the lists with the lifestyle
selector, and to extend his or her prospect base by
adding other names from data file

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
Psychological Influences
 How consumers think and feel about particular
product or brand.

 How this information are interpreted and used

 How it impacts consumer decision-making behavior
process.
1. Product Knowledge
2. Product Involvement
Psychological Influences
1. Product knowledge
 refers to the amount of information a
consumer has stored in his or her memory
about the product
 Psychological Influences
1. Product knowledge
a. Knowledge about:
 Product class – Form – Brand – Model (package size)
– Ways to purchase (stores).
 Example:
 Consumer know a lot about coffee (product class)

Know the difference between ground coffee and instant
coffee (product form)
 Know: Lavaza versus Maxwell House (brand)
 Know Various package sizes (models)
 Know which stores that sell each.
Psychological Influences
1. Product knowledge
b. Reference Group and Marketing efforts influences
determine level of product knowledge.
 Example:
 Consumer hear about new starbucks opening from friend
(group influence)
 See an ad for it in the newspaper (marketing influence)
 See the coffee shop on the way to work (situational
influence)
Psychological Influences
1. Product knowledge
c. How much information is sought influence
the level of product knowledge:
 Example:
 Consumer already believes Lavaza is best-tasting
coffee
 knows where to buy it
 Knows how much it costs
 Then Little information is sought to be enough.
Psychological Influences
1. Product knowledge
d. Product knowledge affect how quickly goes in
deciding to purchase
 Example:

 new products (little knowledge) require more time

to decide
Psychological Influences
2. Product involvement refers to a consumer’s
perception of the importance or personal
relevance of an item.
 High Involvement product
1. → consumers develop high degree of product knowledge
2. → That leads to more time to decide the purchase,
because of the extensive decision making by consumers
 Example:
 Harley-Davidson motorcycle owners are generally highly
involved in the purchase and use of the product, brand, and
accessories.
 Buying new toothbrush is view of low involvement
Segmenting by Psychological influences
 Knowledge level about the product by
consumers
 Knowledgeable consumers
 Non-Knowledgeable consumers
 Low involved consumers to product
 High involved consumers to product
 Each requires different promotional message
and objectives of offers and campaigns differs
according.
 Ex: Non-Knowledgeable consumers requires awareness
campaigns first.
 Behavioral Segmentation
What  Specific types of products and
services consumers have purchased
When  Time the transaction took place
Where & How  Method or location of their purchases
How much Q&$  Method of payment they choose
 “Cookies” placed on their computers

Copyright© 2010 Pearson Education, Inc.

Publishing as Prentice Hall
Cookie
 Cookie- an electronic tag on the
consumer’s computer that enables the
website to follow consumers as they
shop and recognize them on return
visits.