MKTG (Chapter 8)

(1) People or organizations with (2) needs and wants and with (3) the ability and (4) the willingness to buy
Market
A subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs
Market Segment
The process of dividing a market into meaningful, relatively similar, and identifiable segments, or groups
Market Segmentation
What is the purpose of Market Segmentation?
To identify market opportunities
Why is Market Segmentation important? (2)
-Helps marketers define customer needs and wants
-Helps decision makers define marketing objectives and better allocate resources
What are 3 reasons for segmenting markets?
-Enables marketers to identify groups of customers with similar needs and analyze buying behavior of these groups
-Helps marketers design marketing mixes specifically matched with the characteristics and desires of one or more segments
-Consistent with the marketing concept of satisfying customer wants and needs while meeting the organization’s objectives
What are 4 basic criteria the segmentation scheme must meet?
-Accessibility
-Identifiability and Measurability
-Responsiveness
-Substantiality
A segment must be large enough to warrant developing and maintain a special marketing mix
Substantiality
Segments must be identifiable and their size measurable
Identifiability and Measurability
The firm must be able to reach members of targeted segments with customized marketing mixes
Accessibility
Markets can be segmented using any criteria that seem logical…unless one market segment responds to a marketing mix differently than other segments, however, that segment need not be treated separately
Responsiveness
Characteristics of individuals, groups, or organizations, to divide a total market into segments
Segmentation Bases (Variables)
What are 3 disadvantages of multi-variable segmentation?
-As number of segmentation base increases, the size of the individual segments decrease
-Harder to use
-Usable secondary data are less likely to be available
Segmenting markets by region of a country or the world, market size, market density, or climate
Geographic Segmentation
The number of people within a unit of land
Market Density
Why is Climate used in Geographic Segmentation?
Because of its dramatic impact on residents’ needs and purchasing behavior
Why do consumer goods companies take a regional approach to marketing? (4)
-Many firms need to find new ways to generate sales
-Computerized checkout stations with scanners tell retailers which brands sell best in their region
-Many packaged-goods companies are introducing new regional brands intended to appeal to local preferences
-Consumer goods companies to react more quickly to competition
Segmenting markets by age, gender, income, ethnic background, and family life cycle
Demographic Segmentation
What are the 5 types of Demographic Segmentation?
-Age
-Ethnic
-Family Life Cycle
-Gender
-Income
True/False: Millennials are more likely to listen to their peers regarding product decisions while distrusting advertising.
True
Which age segmentation is the most educated, diverse, and technology proficient group ever?
Millennials
What age segmentation grew up as Latchkey Kids?
Generation X
What are Latchkey Kids?
Refers to Generation X and means this generation grew up as spending time alone at home while their (often divorced) parents worked long into the night
Which age segmentation is more focused on experiences than products?
Baby Boomers
True/False: Men account for 85% of purchases of consumer goods each year.
False (Women)
Income level influences consumers’ _______ and determines their ________________.
Wants; buying power
How have firms changed in order to meet the needs and wants of expanding ethnic groups?
Some companies make products geared toward specific ethnic groups
A series of stages determined by a combination of age, marital status, and the presence or absence of children
Family Life Cycle
Segmenting markets on the basis of personality, motives, life-styles, and geo-demographics
Psychographic Segmentation
What are the 4 types of Psychographic Segmentation?
-Geo-Demographic Segmentation
-Lifestyle
-Motives
-Personality
Reflects a person’s traits, attitudes, and habits
Personality
Segmentation divides people into groups according to the way they spend their time, the importance of the thing around them, their beliefs, and socioeconomic characteristics
Lifestyle
Clusters potential customers into neighborhood lifestyle categories
Geo-Demographic Segmentation
What can Psychographic variables be used for?
Can be used individually to segment markets or can be combined with other variables to provide more detailed descriptions of market segments
The process of grouping customers into market segments according to the benefits they seek from the product
Benefit Segmentation
Divides a market by the amount of product bought or consumed
Usage-Age Segmentation
Why is segmenting by Usage Rate important?
Enables marketers to focus their efforts on heavy users or to develop multiple marketing mixes aimed at different segments
A principle holding that 20 percent of all customers generate 80 percent of the demand
80/20 Principle
What 4 segments does the business market consist of?
-Governments
-Institutions
-Producers
-Re-sellers
How do firms that sell to Geographically concentrated industries benefit?
By locating close to their markets
What does segmenting by Customer Type allow business marketers to do?
To tailor their marketing mixes to the unique needs of particular types of organizations or industries
What are 6 company characteristics?
-Company Type
-Customer Type
-Geography
-Organization’s Size
-Product Use
-Volume of Purchase
What are 2 types of purchasing profiles?
-Satisficers
-Optimizers
Business customers who place an order with the first familiar supplier to satisfy product and delivery requirements
Satisficers
Business customers who consider numerous suppliers, solicit bids, and study all proposals carefully before selecting one
Optimizers
What are 5 buyer characteristics?
-Confidence Level
-Decision Style
-Demographics
-Job Responsibilities
-Tolerance for Risk
What are the 6 steps in segmenting a market?
-Select a market or product category for study
-Choose a basis or bases for segmenting the market
-Select segmentation descriptors
-Profile and analyze segments
-Select markets
-Design, implement, and maintain appropriate marketing mixes
A group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges
Target Market
What are 3 general strategies for selecting target markets?
-Undifferentiated Target Strategy
-Concentrated Target Strategy
-Multisegment Targeting
A marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix
Undifferentiated Target Strategy
Who generally uses the Undifferentiated Target Strategy?
The first firm in an industry
What is an advantage of Undifferentiated Target Strategy?
The potential for saving on production and marketing
What are 2 disadvantages of Undifferentiated Target Strategy?
-Unimaginative product offerings
-Company more susceptible to competition
A strategy used to select one segment (niche) of a market for targeting marketing efforts
Concentrated Targeting Strategy
What type of firms often adopt a Concentrated Targeting Strategy?
Small firms
What are 4 advantages of Concentrated Targeting Strategy?
-Allows small firms to better compete with larger firms
-Can better meet the needs of a narrowly defined segment
-Concentration of resources
-Strong positioning
What are 2 disadvantages of Concentrated Targeting Strategy?
-Segments too small or changing
-Large competitors may more effectively market to niche segment
A strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each
Multisegment Targeting
What are 2 advantages of Multisegment Targeting?
-Economies of scale in producing/marketing
-Greater financial success
What are 2 disadvantages of Multisegment Targeting?
-High costs
-Cannibalization
Occurs when sales of a new product cut into sales of a firm’s existing products
Cannibalization
A process that influences potential customers’ overall perception of a brand, product line, or organization in general
Positioning
The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings
Position
What does Positioning assume?
That consumers compare products on the basis of important features
A positioning strategy that some firms use to distinguish their products from those of competitors
Product Differentiation
A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds
Perceptual Mapping
What are the 7 Positioning bases?
-Attribute
-Competitor
-Emotion
-Price and Quality
-Product Class
-Product User
-Use or Application
This Positioning Base may stress high price as a signal of quality or emphasize low price as a indication of value
Price and Quality
This Positioning Base focuses on a personality type of user
Product User
The objective of this Positioning Base is to position the product as being associated with a particular category of products
Product Class
Changing consumers’ perceptions of a brand in relation to competing brands
Repositioning