Chapter 2 (lecture 1)

Question 1

What is market segmentation?

Answer 1

The process of dividing the large and diverse mass marketing into subsets of consumers who share common needs, characteristics or behaviors. After that targeting one or more of those segments with a distinct marketing mix.

Question 2

What are the key assumptions underlying market segmentation?

Answer 2

1. Consumer preferences vary
2. By tailoring a product or service to a segment’s specific needs, marketeers can make the offering so appealing that members of the segment are willing to pay a price that offsets the costs associated with caring to the specialized needs of the segment.

Question 3

What are the benefits of marketing segmentation?

Answer 3

1. Consumers no longer have to receive and evaluate marketing information that is irrelevant
2. Consumers get their specific needs catered to
3. Consumers get to learn about products and services that actually would benefit them

Question 4

What is market aggregation?

Answer 4

The opposite of market segmentation: a single-product, one-size-fits-all strategy in which individual difference among consumers are ignored.

Question 5

What is mass marketing?

Answer 5

It means offering the same product and marketing mix to all consumers

Question 6

What is micro marketing?

Answer 6

It means to market one-to-one with a customer

Question 7

Which strategy you choose depends on 4 considerations? What are those 4 considerations?

Answer 7

1. Consumer preference heterogeneity - the extent to which tastes and preferences differ among consumers
2. Majority fallacy - focus exclusively on large average segments and neglect smaller segments.
3. Sales-cost trade-off: as market segmentation increases, sales increase because a firm’s offerings align more closely to consumers’ preferences.
4. Risk of cannibalization: when products offered by the same firm are so similar that they compete among themselves

Question 8

What is perceived pain?

Answer 8

The amount of anxiety and negative feelings a consumer experiences when paying what he or she believes is a high price for a product

Question 9

What is perceived value?

Answer 9

The amount of product differentiation a consumer perceives among products, or the degree to which a consumer views brands within product category as unique based on price.

Question 10

What are the four segments?

Answer 10

1. Price segment - don’t want to pay a high price for a particular brand
2. Convenience segment - consumers are not sensitive to price, they are sensitive to time
3. Loyal segment - always loyal to a brand
4. Value segment - the best brand names and the lowest price

Question 11

What is the VALS System?

Answer 11

A widely used market segmentation tool that employs psychographics. It divides consumers in different typologies based on multiple questions.

Question 12

What are the two dimensions in the VALS system

Answer 12

1. Primary motivation: governs an individuals’s activities. Consumers are inspired by one of three primary motivations: ideals, achievement and self-expression
2. Resources: comprise psychological attributes such as self-confidence, energy, vanity and intellectualism coupled with demographic characteristics that influence one’s ability to act on his or her primary motivation such as income and education

Question 13

What are the 8 VALS typologies?

Answer 13

1. Innovators
2. Thinkers
3. Believers
4. Achievers
5. Strivers
6. Experiencers
7. Makers
8. Survivors

Question 14

What is the position of a product?

Answer 14

The place the product occupies the customers’ minds, relative to the competitor’s products.

Question 15

What are pioneering brands?

Answer 15

The first brands to enter and define a market.

Question 16

What are the advantages for pioneering brands?

Answer 16

1. They are novel and interesting
2. Because it is new, consumers are unsure about their preferences.
3. When follower brands are introduced, consumer tend to compare follower brands with the pioneer but not vice versa. The pioneer seems unique and special

Question 17

What are the main strategies when positioning a following brand?

Answer 17

1. Separate the brand from the leader by creating what appears to the customer as a new product category
2. Pursuing a doing the opposite positioning strategy
3. Turning disadvantages into advantages is a useful strategy for follower brands. Not the biggest, just the best is an example.

Question 18

What are the strategies that apply to all types of brands?

Answer 18

1. Positioning by core benefit
2. Positioning by price
3. Positioning by product usage situation: focuses on when or how a product is purchased and consumed
4. Positioning by product user: marketers use real-life representation or through characters that are archetypes of the user.

Question 19

What is repositioning?

Answer 19

It attempts to change the way consumers perceive a brand, either their own brand or a competitor’s.

Question 20

What are perceptual maps?

Answer 20

They measure the way products are positioned in the minds of consumers and show these perceptions on a graph whose axes are formed by product attributes. The maps provide a research tool to assess how multiple products in a category are positioned, how the attributes relating to the product are seen in the customer’s eyes and whether there are any product gaps in the market.

Question 21

What are ideal vectors?

Answer 21

These can be plotted on perceptual maps, which show ideal combinations of attributes. The slope of the ideal vector indicates the ratio of the two dimension prefers by consumers.