Chapter 6: Segmentation

Question 1

Is segmentation a competitive advantage? If so, why?

Answer 1

Yes because it allows you to make customers more happy than other competitors can by focusing on one group.

Question 2

the process of categorizing groups of customers to divide a market into manageable pieces based on customer differences; must be able to be reached economically

Answer 2

market segmentation

Question 3

What are the 2 things that are stressed with marketing segmentation?

Answer 3

1. Meaningful groups
2. Customized marketing mix (customizing at least one of the 5 P’s)

Question 4

What are the 2 things that should result from segmentation?

Answer 4

1. Better value propositions
2. Increased likelihood of customer response

Question 5

What does mass marketing attempt to do?
Is there anyone who truly mass markets?

Answer 5

• Appeal to everyone (ex: one product fits all) and talk to everyone the same.
• No, because every company is at least talking to a couple of people differently.

Question 6

a marketing approach where a company considers every customer to be a segment of one, customizing the marketing mix for each customer (typically not practical, very expensive, often not necessary, so few companies use it save for perhaps those that offer customized products/services to select customers)

Answer 6

micromarketing

Question 7

a marketing approach where a company identifies large groups that share similar characteristics (more common because it offers a reasonable trade-off between focus and cost in most markets)

Answer 7

Differentiated marketing

Question 8

a marketing approach where the company identifies a subsegment that has special needs that typically is not large enough for the larger competitors in a market to pursue. (ex: title loan companies pursue high-credit-risk loan customers that traditional banks would not pursue due to the risk. The title loan companies charge higher-than-normal interest rates to accept the additional risk.)

Answer 8

niche marketing

Question 9

a theory created to explain the phenomenon we see of why some products are becoming more and more segmented than others; developed by Chris Anderson

Answer 9

The Long Tail (we used to have 3 news outlets (abc, cbs, and nbc). And now, we have so many news outlets, lots of choices of where to get our news)

Question 10

What are the two areas of a market that are described in the Long Tail Theory called?
Briefly explain these.

Answer 10

1. The head: the popular products; have the market share
2. The tail: everything else (the niche products); contains all the products that are potentially serving one or a couple small segments.

Question 11

What are the two ideas of the Long Tail Theory?

Answer 11

1. People will increasingly look for niche products. (as people find out about the tail, they move into it)
2. As niche product demand increases, creators will follow.

Question 12

In relation to the Long Tail Theory, why are people moving away from the head (the popular products) and they’re going for the more niche products?

Answer 12

Presumably because they serve their interests better.

Question 13

What is the long tail enabled by (what are the 3 things that have to happen for the Long Tail Theory to actually take place)?

Answer 13

1. Breaking free of the constraints of physical space. (ex: going online, streaming digital music, just creating stuff digitally)
2. Finding ways to talk to market segments economically
3. New distribution systems (having supply distribution systems that aren’t just physical)

Question 14

The 3 enablers together suggest that the more ________ a product market goes, the more likely the long tail will take place.

Answer 14

digital

Question 15

• Based on the Long Tail theory, where does the majority of potential revenue fall, in the head or the tail?
• Where are the products with the majority of demand?

Answer 15

• The tail.
• The head.

Question 16

What are the 5 criteria used to assess segments and see if the segments are good?

Answer 16

1. Identifiable/Differentiable
2. Measurable
3. Substantial
4. Accessible
5. Responsive

Question 17

Which criteria used to assess segments does this describe?
- can you find them in the data?
- If you get data on your customers, will I know which segment they fall into?
- Not just about if you can get data on them (cause you can mostly get data on anything), but more about if you can find them in the data.

Answer 17

Measurable

Question 18

Which criteria used to assess segments does this describe?
- is it worth it?
- Ex: does the segment have money?

Answer 18

substantial

Question 19

Which criteria used to assess segments does this describe?
- Can you see them? Can you see the segment?
- Are we talking about something that’s external or internal? Internal would be like personality. It gets hard to identify internal things (ex: you only wanna market to anxious people). On the other hand, if we’re talking about for example a gender, geographic, or income difference, this is more easy to identify (external).

Answer 19

Identifiable/differentiable

Question 20

Which criteria used to assess segments does this describe?
-Can you get your message to them?
- Step where it gets a little tricky.

Answer 20

Accessible

Question 21

Which criteria used to assess segments does this describe?
- Is the segment truly different?
- Will they respond to what you’re doing?

Answer 21

Responsive

Question 22

When creating segments, we should be trying to make groups as (different/similar) as possible within, and as (different/similar) as possible between.

Answer 22

• similar (homogeneous)
• different (heterogeneous)

Question 23

According to the ideas of selective perception and attitude change, if Toyota had one recall, we would expect consumer attitudes, on average, to:
a. Decrease a tiny bit
b. Increase a lot
c. Increase a tiny bit
d. Decrease a lot

Answer 23

a. Decrease a tiny bit (bc attitudes are sticky, the don’t change easily)

Question 24

What do you do if a segment is not profitable?

Answer 24

Go through the segment criteria and find out which one/ones are not right, and make a plan to change those in order to make it profitable.

Question 25

What are the segmentation variables/categories? Give examples of these variables.

Answer 25

1. Geographic → (regional stuff like where you live, city size, statistical area) 2. Demographic → (gender, age, marital status, income) 3. Psychographic → (personality, aspirations, needs, values, social class, the things inside your head) 4. Behavioral → (usage rate, visits, spending (the things you actually do)

Question 26

Which segmentation variables are generally the hardest/easiest to use and collect?

Answer 26

Easiest: geographic and demographic Hardest: psychographic

Question 27

What is a problem with demographic and geographic variables?

Answer 27

There can be a lot of variability between people even when they have the same demographics and geographics, so they may not buy the same. (so you may need to market to them differently. Can cause segmenting to be too broad)

Question 28

How does variability affect segmentation?

Answer 28

More variability IN a group, the more differences, the less you are creating a worthwhile segment.

Question 29

Which type of segmentation variable does this describe: mental or emotional attributes (personality), aspirations (lifestyle), or needs of customers and prospective customers.

Answer 29

psychographic variables

Question 30

Which segmentation variable is pretty good at making segments of similarity within the segment?

Answer 30

Psychographic variables

Question 31

T or F: Psychographic research, and therefore variable is a recently new study.

Answer 31

False; occurred a long time ago

Question 32

What are two examples of psychographic profiles?

Answer 32

1. The Pleasure Oriented Man 2. The Sophisticated Man

Question 33

What are two problems with psychographic segmentation?

Answer 33

1. Violates the measurable segmenting criteria. (It is difficult to find data) 2. Very weak at predicting what any of these people are likely to purchase in any given product category.

Question 34

The best predictor of future behavior is ____ _______, until there is change.

Answer 34

past behavior (ex: looking at past purchases to predict future purchases)

Question 35

If there is a problem with psychographic variables, can they be used? If so, how?

Answer 35

Yes, they can be used, but not alone. They need to be used ALONG WITH other variables.

Question 36

What are 3 things to look at for behavioral variables?

Answer 36

1. Usage rate 2. Pareto principle (80/20) 3. Share of Wallet

Question 37

the quantity consumed or patronage during a specific period. (light/medium/heavy) What kind of organization uses this?

Answer 37

Usage rate; banks

Question 38

The paretoprinciple states that 80% of your _________ come from 20% of your ________. That is, 80% of your _______ comes from 20% of your _______.

Answer 38

- results; inputs - revenue; customers

Question 39

What are you doing if you are using the paretoprinciple to segment?

Answer 39

Trying to focus on that 20% of customers to figure them out. (ex: Winn Dixie focusing on the 20% of their customers in the 80’s who consistently spent a lot on groceries. They found that it was moms with big families. So, they decided to customize stores to attract the same type of customers and keep the current moms)

Question 40

percentage of a customer’s category/industry spending that they spend with a company; how much people spend overall, and how much of that spending goes to you.

Answer 40

share of wallet

Question 41

T or F: Marketers don’t have easy access to share of wallet, but they could ask directly and research. Sometimes get it through third party entities (ex: credit card company)

Answer 41

True

Question 42

What is the purpose of the 3 behavioral variables?

Answer 42

To get really good data of what customers are doing over time in order to segment them effectively and cater to them better

Question 43

What kind of data (segmentation variables) is VALS, Tapestry, and PRIZM using?

Answer 43

- VALS: based on a combination of behaviors, demographics, and attitudes. - Tapestry and PRIZM: Both of these tools combine elements of all four broad segmentation variable categories.

Question 44

If you want to create segments that will be inclined to purchase more, what must you segment on?

Answer 44

Segmentation variables MUST be related to purchase decisions.

Question 45

T or F: Unrelated psychographics can create “cute” advertising but it doesn’t do anything more… unless talking about TV shows. But psychographics of segments that are already formed based on relevant variables can be very informative.

Answer 45

True

Question 46

T or F: The key requirement of segmentation analysis is that the marketing director should never assume in advance that any one method of segmentation is the best. His first job should be to muster all probable segmentation and then choose the most meaningful ones to work with.

Answer 46

True

Question 47

What are the 6 steps in the segmentation process?

Answer 47

1. Define broad market 2. Define narrow market 3. Select categories for segmentation 4. Select variables within each category 5. Identify groups based on variables 6. Develop profiles of the segments

Question 48

What is a shortened version of the segmentation process (the 3 step version)?

Answer 48

1. Define your market (1&2 combined) 2. Pick your relevant variables (3&4) 3. Create and profile the segments (5&6)

Question 49

the process of focusing marketing mix efforts on a specific customer segment to maximize perceived value to that segment and increase the likelihood of a successful marketing exchange.

Answer 49

targeting

Question 50

the primary group of customers towards which a company directs its marketing efforts. (basically the group you’re focusing on which you segment in some way)

Answer 50

target market

Question 51

Why is choosing a target market a high risk activity?

Answer 51

Choosing wrong target market can have serious financial consequences for the company.

Question 52

What are two reasons why companies should initially focus on one segment?

Answer 52

1. To become an expert on one group of customers, which should give the company the advantage and the best chance of being successful with that group. 2. Makes it more likely the company uses its marketing resources effectively and efficiently.

Question 53

creating a specific perception in the customer’s mind relative to other opinions. (if you create a segment and are trying to customize your mix, likely what your doing is trying to push ONE thing that you really care about; ex: high quality)

Answer 53

positioning

Question 54

What are the two “key ideas” of positioning?

Answer 54

1. You can only own one position (ex: Yeti position is they keep ice cold forever; they were trying to own that position of being the highest quality cooler ever) 2. A position can only be owned by one brand (copying a competitor’s position is unlikely to lead one to “win” the market. At best, you may split the market.)

Question 55

a graphical representation of customer perceptions of competitive products. It can suggest product features important to customers, and it graphically represents similarities and differences customers perceive for brands.

Answer 55

perceptual maps

Question 56

How similar and/or different are the variables for business customers as compared to consumers (under each variable list what is different for them)?

Answer 56

1. Geographic → same for both 2. Demographic → - B: Age is length of time in business; company sales; industry - C: Age is actual age or generation; income; occupation 3. Psychographic → not really used in business 4. Behavioral → - B: purchase occasion (regular purchase, special purchase) - C: usage (regular occasion, special occasion)