Chapter 2: MP #1 Flashcards
5 sources of Heterogeneity
Individual differences
Life experiences
Functional needs
Self-identity/image
Marketing activities
Individual differences
a person’s stable and consistent way of responding to the environment in a specific domain
life experiences
events and experiences unique to the person’s life that have a lasting impact on the value/preferences
functional needs
personal decisions weightings across functional attributes based on personal circumstances
self-identity
customers actively seek products that they believe will support/promote their desired self-image
marketing activities
firms’ attempts to build linkages between their brands and prototypical identities/meanings
latent heterogeneity
potential differences in desires that are unobserved and have not become manifest in customer purchase preferences/behaviour
factor analysis
data reduction technique that can be used to identify a small number of latent “factors” that explain the major variation in a large number of observed variables
When to use factor analysis?
- to condense large pool of potential needs/wants/preferences into a short set of similar characteristics
- to reduce high correlation among predictors
Cluster analysis
data-driven partitioning technique that can identify and classify a large set of heterogeneous consumers/companies into a small number of homogenous subjects
When to use cluster analysis
demystify heterogeneity to understand similar preferences
discover how customers naturally differ and cater to unique needs of chosen target customer sements
Steps of Cluster Analysis
- Segment
- Target
Six criteria a target segment should meet:
- based on customer needs
- different than other segments
- firm can execute targeting with resource constraints
- sustainable
- identifiable
- financially valuable
What do you use to help visualize target segments?
GE matrix
