Chapter #5: Market Segmentation Strategies

Question 1

Why is it important for marketers to understand millennials as a market segment?

Answer 1

Currently aged 18 - 24 years - large segment (where lots of money is spent)

Setting the trends for many other segments

Question 2

At what point should we look at consumer needs for needs based segmentation?

Answer 2

IT should be the first step in the process

Question 3

How does needs based segmentation work?

Answer 3

Customer needs correlated with segment identity

Problems that need to be solved (needs) and then demographics, usage behaviour and psychographics

Question 4

What are demographic influencers in market segmentation?

Answer 4

Age
Income
Martial status
Education
Occupation

Question 5

What are lifestyle influencers in market segmentation?

Answer 5

Attitudes
Values
Activities
Interests
Political Views

Question 6

What are usage behaviour in market segmentation?

Answer 6

Quantity
Time of use
Personal
Social
Frequency

Question 7

What are business to business customer needs?

Answer 7

Firm demographics (average of all staff)
Company Culture
Usage behaviours

Question 8

What are examples of firm demographics in B2B market segmentation?

Answer 8

Number of employees
Sales volume
Number of office locations
Years in business
Financial situation

Question 9

What are examples of company culture in B2B market segmentation?

Answer 9

Business sophistication
Growth orientation
Innovativeness
Technology
Decision making

Question 10

What are examples of usage behaviours in B2B market segmentation?

Answer 10

Application
Quantity
Time of purchase
Frequency of purchase
Users

Question 11

What are the two main types of small business market segments?

Answer 11

Growth orientated entrepreneurs

Cost focused sustainers

Question 12

What are the attributes of “Growth focused entrepreneurs” SME segment?

Answer 12

Core business need - a way to invest and grow

Firm demographics - Medium sized, sophisticated, higher education, changing financial plan

Purchase behaviour - products that enhance productivity, high revenue per customer, willing to buy value added solution

Value proposition - solution that will help you grow your business

Question 13

What are the attributes of “Cost focused sustainers” SME segment?

Answer 13

Core business need - ways to continue and save

Firm demographics - Small # of employees, less sophisticated, lower in education, limited or no financial plan

Purchase behaviour, products that lower cost, lower cost revenue per customer, confused by value added solutions

Value proposition, solution that save your business money

Question 14

What is the process to develop a needs based market segment?

Answer 14

1. Segment by needs and benefits
2. Segment identification (demographics, lifestyles and usage behaviour)
3. Segment attractiveness
4. Segment profitability
5. Segment positioning (create a value proposition and price positioning strategy)
6. Segment strategy (acid test) - create segment storyboards to test the attractiveness of each segment positioning strategy)
7. Marketing Mix Strategy - 4 Ps

Question 15

How do we determine segment attractiveness?

Answer 15

Assess:

Market demand

Competitive Intensity

Market access

Question 16

How do we measure market demand (to determine segment attractiveness)?

Answer 16

Market size
Growth rate
Market potential

Question 17

How do we measure competitive intensity (to determine segment attractiveness)?

Answer 17

Number of companies
Ease of entry
Substitutes

Question 18

How do we measure market access (to determine segment attractiveness)?

Answer 18

Customer familiarity
Channel access
Company fit

Question 19

Why do we perform an acid test?

Answer 19

Take content (for segmentation, take storyboards) to users and ask them if they would use it, whether they would be prepared to purchase it and for how much - generally whether it resonates

Question 20

Why would a bank use different segmentation strategies?

Answer 20

To differentiate themselves in the market and appeal to different users with different needs.

Question 21

Why would a business implement an adjacent segment strategy?

Answer 21

To pursue new growth after reaching saturation point with segment A.

Question 22

What was the logic o Toyota’s adjacent segment strategy that started in 1957 at the low end of the price-quality market?

Answer 22

Market penetration upon entry.

When they started no one knew who they were. Started at the low end of the market and move up.

Question 23

When would a business go after only a small segment?/the smallest segment?

Answer 23

When they have limited resources and capabilities (e.g. regional bank example)

Question 24

What are sub-segment strategies?

Answer 24

When a target audience further segments a core segment based on their unique needs.

Question 25

What is the role of customer relationship marketing?

Answer 25

To develop a long term customer relationship that benefits the customer and the company

Question 26

What are the three levels of customer relationship marketing?

Answer 26

Mass personalisation
Mass customisation
Customer relationship management

Question 27

What is an example of mass personalisation?

Answer 27

Airline Mileage Programs

Question 28

What is an example of mass customisation?

Answer 28

Car manufacturers

Question 29

What is an example of relationship marketing?

Answer 29

Financial services, insurance brokers

Question 30

Why is it important for businesses to have a database?

Answer 30

To have enough data to know a customer’s needs, buying behaviour and product preferences.

Question 31

What is mass personalisation?

Answer 31

Recognises a customer by name, needs and buying behaviour

Question 32

What is mass customisation?

Answer 32

Allows a company to offer customers in the same segment different product-price configurations

Marketing mix is customised to the individual customer

Question 33

What are the four steps to a customer relationship management program?

Answer 33

1) Qualify current customers based on attractive levels of potential customer value and company value
2) Understand individual customer needs, product preferences and usage behaviours
3) Create individualised customer solutions based on the customer’s unique needs and alter touchpoints to serve in building and sustaining the relationship
4) Track customer experiences and satisfaction to ensure loyalty is achieved