3.3.3 Making marketing decisions: segmentation, targeting, positioning.

Question 1

What is market segmentation?

Answer 1

The classification of customers or potential customers into groups or sub-groups (market segments), each of which responds differently to different products or marketing approaches.

Question 2

Outline the different types of market segmentation.

Answer 2

Demographic segments.
Geographic segments.
Income segments.
Behavioural segments.

Question 3

What are the two main categories of demographic segmentation?

Answer 3

Age and gender.

Question 4

Outline geographic segments.

Answer 4

There are still major differences in tastes and purchasing behaviour based on geographic features; you’re not going to sell surfboards in New York.

Question 5

Outline one of the main geographic methods.

Answer 5

ACORN - segments the market according to house types.

A.
Classification.
Of.
Residential.
Neighbourhoods.

Question 6

Outline the main method for income segmentation.

Answer 6

Through social class as different classes are shown to have different incomes.

Question 7

Outline the two main purchases of behavioural segmentation.

Answer 7

Lifestyle (can use credit and loyalty cards to identify patterns of expenditure).

Usage/frequency of purchase (some known as early adopters, others known as followers - awareness allows firm to target the right people).

Question 8

Outline stage one of market segmentation (market segmentation).

Answer 8

1) Identify bases for segmenting market.

2) Gather profile of consumers in each of these market segments.

Question 9

Outline stage two of market segmentation (market targeting).

Answer 9

3) Assess the nature of each market segment and identify those that provide the best match to the business’s existing capabilities.
4) Select the market segment or segments on which the business will focus its efforts.

Question 10

Outline stage three of market segmentation (market positioning).

Answer 10

5) Decide on the important characteristics of the product/business that will be used to appeal to the targeted market segmentation.
6) Develop a marketing mix for each market segment.

Question 11

What does the extent to which an organisation might benefit from segmentation depend on?

Answer 11

The degree to which:

• A particular segment can be easily identified.
• Consumer behaviour varies according to market segmentation.
• The firm is able to reach that segment directly in its marketing and market research.
• The firm is able to generate profit from that market segment.

Question 12

What are the benefits of market segmentation?

Answer 12

To increase market share.

To assist in new product development.

To extend products into new markets.

To identify ways of marketing a products.

Question 13

Outline the benefit to increase market share.

Answer 13

Can help identify market segments that have not been reached and adapt its products and marketing to reach those segments.

Question 14

Outline the benefit of assisting new product development.

Answer 14

Gaps in the market segments can be used to indicate the scope for introducing new products.

Question 15

Outline the benefit of identifying ways of marketing a product.

Answer 15

A company that recognises its customers characteristics can target its advertising to media used by that market segment.

Question 16

Outline the drawbacks of market segmentation.

Answer 16

Difficulty in identifying the most important segments for a product.

Reaching the chosen segment with marketing.

Recognising changes in the segments interested in the product.

Meeting the needs of customers not included in the chosen segment.

Question 17

Outline the drawback of difficulty in identifying the most important segment for a product.

Answer 17

Successful segmentation requires market segments to be identifiable, reachable and distinct. Some markets segments are more difficult to categorise such as bread, household cleaners etc.

Question 18

Outline the drawback of reaching the chosen segment with marketing.

Answer 18

Socio-economic classes tend to be the most difficult demographic segments to target.

Question 19

Outline the drawback of

recognising changes in the segments interested in the product.

Answer 19

Markets and dynamic - cannot assume that an existing segment will stay loyal to their product.

Question 20

Outline the drawback of meeting the needs of customers not included in the chosen segment

Answer 20

Emphasis on market segmentation may lead to a business ignoring other potential customers.

Question 21

Define market targeting.

Answer 21

Deciding on the consumers/market segment(s) to whom you intend to sell your products or brands.

Question 22

Outline the concentrated marketing approach (market targeting).

Answer 22

Company goes after a large share of one or a few sub-markets (market segments). Particularly beneficial if the business has limited resources.

Question 23

Outline the differentiated marketing approach (market targeting).

Answer 23

Company targets several market segments and designs separate offers for each segment. This involves product variations and differences in marketing approach, based on the character of each.

Question 24

Outline the undifferentiated marketing approach (market targeting).

Answer 24

Company aims to appeal to the whole market with one product. Marketing concentrates on emphasising what is common in the needs of consumers rather than on differing needs.

Question 25

Define a niche market.

Answer 25

Targeting a product or service at a small segment of a larger market.

Question 26

Which size firm is niche marketing most appropriate for?

Answer 26

Small firms, as there may be very little competition in their segment.

Question 27

What are most firms in involved in niche marketing owned by?

Answer 27

Owned by, or are divisions of, larger organisations.

Question 28

What are the advantages of niche markets?

Answer 28

Less competition.
Costs.
Small scale production.
Tailor made products.
Targeting customers.

Question 29

Outline the advantage of costs in a niche market.

Answer 29

The lack of scope for cost reduction by producing on a large scale may mean that small firms can compete more effectively in a niche market.
In a niche market, there may be few too customers for large businesses to gain advantages such as buying in bulk and therefore smaller firms may be able to match the costs of larger rivals in a niche market.

Question 30

Outline the advantage of small scale production in a niche market.

Answer 30

The limited demand may suit a small business that would lack the resources to produce on a large scale.

Question 31

Outline the advantage of targeting customers in a niche market.

Answer 31

It can be easier for businesses to target customers and promote their products effectively when they are only selling to a certain type of customer.

Question 32

Outline the disadvantages of niche marketing.

Answer 32

Lower profits.
Changes in demand.
Market entry.

Question 33

Outline the disadvantage of changes in demand in a niche market.

Answer 33

Small businesses in a niche market can be vulnerable to changes in demand. These markets are specialised, so firms operating them are not able to spread their risks. For this reason, a decline in interest among consumers may threaten the firms existence.

Question 34

Outline the disadvantages of market entry in a niche market.

Answer 34

An increase in interest among consumers may be enough to attract larger firms into the market.

Question 35

Define mass marketing.

Answer 35

Aiming a product at all (or most) of the market.

Question 36

Outline the advantages of mass marketing,

Answer 36

Large scale production.
High revenues.
Barriers to entry.
Research and development.
Brand awareness.

Question 37

Outline the advantage of barriers to entry in mass marketing.

Answer 37

Mass marketing allows businesses to use the most expensive marketing because there is greater opportunity for large increases in revenue that will more than pay for the marketing - helps eliminate smaller rivals and can create barriers to entry for new firms.

Question 38

Outline the advantage of brand awareness in mass marketing.

Answer 38

Mass marketing increases brand awareness - assists sales of the branded product, also can help to break down consumer resistance to new products.

Question 39

Outline the disadvantages of mass marketing.

Answer 39

Fixed capital.
Changes in demand.
Effects of standardisation.
Competition.
Adding value.

Question 40

Outline the disadvantage of fixed capital in mass marketing.

Answer 40

High fixed capital costs are incurred, such as the purchase of large factories.

Question 41

Outline the disadvantage of effects of standardisation in mass marketing.

Answer 41

It can be difficult to appeal directly to individual customers because mass market products must be designed to suit all product.

Question 42

In a mass market, how will the firm benefit from differentiation?

Answer 42

Increased sales volume.

Greater scope for charging a high price.

Question 43

How is differentiation achieved in a mass market?

Answer 43

Through employing the elements of the marketing mix and through product proliferation.

Question 44

Define product proliferation.

Answer 44

Occurs when a variety of products are produced to serve different tastes.

Question 45

Define market positioning.

Answer 45

Where your product or brand stands in relation to the products or brands of other businesses.

Question 46

What is the aim of marketing positioning?

Answer 46

To achieve a unique and beneficial perception of a product or brand in the consumers mind, possibly enabling it to achieve a USP.

Question 47

How can a business gain a competitive advantage through market positioning?

Answer 47

Position itself as providing superior value to its target markets - through lower prices than competitors, more benefits etc - in the minds of its consumers, to justify higher prices.

Question 48

What effect do the attributes and benefits of the product have on market positioning?

Answer 48

Can allow for a USP, therefore differentiating the product form competitors.

Question 49

What effect does competition have on market positioning?

Answer 49

Does the business want to occupy a part of the market that is different to that of any business?

Question 50

What effect does the product user have on market positioning?

Answer 50

The business’s market research and market segmentation may have given it an excellent understanding of a particular market segment.

Question 51

What effect does product use or application have on market positioning?

Answer 51

The use of the product provides a key basis for positioning.