Chapter 6: Segmentation Flashcards
Is segmentation a competitive advantage? If so, why?
Yes because it allows you to make customers more happy than other competitors can by focusing on one group.
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
market segmentation
What are the 2 things that are stressed with marketing segmentation?
- Meaningful groups
- Customized marketing mix (customizing at least one of the 5 P’s)
What are the 2 things that should result from segmentation?
- Better value propositions
- Increased likelihood of customer response
What does mass marketing attempt to do?
Is there anyone who truly mass markets?
- 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.
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)
micromarketing
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)
Differentiated marketing
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.)
niche marketing
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
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)
What are the two areas of a market that are described in the Long Tail Theory called?
Briefly explain these.
- The head: the popular products; have the market share
- The tail: everything else (the niche products); contains all the products that are potentially serving one or a couple small segments.
What are the two ideas of the Long Tail Theory?
- People will increasingly look for niche products. (as people find out about the tail, they move into it)
- As niche product demand increases, creators will follow.
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?
Presumably because they serve their interests better.
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)?
- Breaking free of the constraints of physical space. (ex: going online, streaming digital music, just creating stuff digitally)
- Finding ways to talk to market segments economically
- New distribution systems (having supply distribution systems that aren’t just physical)
The 3 enablers together suggest that the more ________ a product market goes, the more likely the long tail will take place.
digital
- 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?
- The tail.
- The head.
What are the 5 criteria used to assess segments and see if the segments are good?
- Identifiable/Differentiable
- Measurable
- Substantial
- Accessible
- Responsive
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.
Measurable
Which criteria used to assess segments does this describe?
- is it worth it?
- Ex: does the segment have money?
substantial
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).
Identifiable/differentiable
Which criteria used to assess segments does this describe?
-Can you get your message to them?
- Step where it gets a little tricky.
Accessible
Which criteria used to assess segments does this describe?
- Is the segment truly different?
- Will they respond to what you’re doing?
Responsive
When creating segments, we should be trying to make groups as (different/similar) as possible within, and as (different/similar) as possible between.
- similar (homogeneous)
- different (heterogeneous)
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
a. Decrease a tiny bit (bc attitudes are sticky, the don’t change easily)
What do you do if a segment is not profitable?
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.
What are the segmentation variables/categories?
Give examples of these variables.
- Geographic → (regional stuff like where you live, city size, statistical area)
- Demographic → (gender, age, marital status, income)
- Psychographic → (personality, aspirations, needs, values, social class, the things inside your head)
- Behavioral → (usage rate, visits, spending (the things you actually do)
Which segmentation variables are generally the hardest/easiest to use and collect?
Easiest: geographic and demographic
Hardest: psychographic
What is a problem with demographic and geographic variables?
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)
How does variability affect segmentation?
More variability IN a group, the more differences, the less you are creating a worthwhile segment.
Which type of segmentation variable does this describe:
mental or emotional attributes (personality), aspirations (lifestyle), or needs of customers and prospective customers.
psychographic variables
Which segmentation variable is pretty good at making segments of similarity within the segment?
Psychographic variables
T or F: Psychographic research, and therefore variable is a recently new study.
False; occurred a long time ago
What are two examples of psychographic profiles?
- The Pleasure Oriented Man
- The Sophisticated Man
What are two problems with psychographic segmentation?
- Violates the measurable segmenting criteria. (It is difficult to find data)
- Very weak at predicting what any of these people are likely to purchase in any given product category.
The best predictor of future behavior is ____ _______, until there is change.
past behavior (ex: looking at past purchases to predict future purchases)
If there is a problem with psychographic variables, can they be used? If so, how?
Yes, they can be used, but not alone. They need to be used ALONG WITH other variables.
What are 3 things to look at for behavioral variables?
- Usage rate
- Pareto principle (80/20)
- Share of Wallet
the quantity consumed or patronage during a specific period. (light/medium/heavy)
What kind of organization uses this?
Usage rate; banks
The paretoprinciple states that 80% of your _________ come from 20% of your ________.
That is, 80% of your _______ comes from 20% of your _______.
- results; inputs
- revenue; customers
What are you doing if you are using the paretoprinciple to segment?
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)
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.
share of wallet
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)
True
What is the purpose of the 3 behavioral variables?
To get really good data of what customers are doing over time in order to segment them effectively and cater to them better
What kind of data (segmentation variables) is VALS, Tapestry, and PRIZM using?
- 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.
If you want to create segments that will be inclined to purchase more, what must you segment on?
Segmentation variables MUST be related to purchase decisions.
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.
True
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.
True
What are the 6 steps in the segmentation process?
- Define broad market
- Define narrow market
- Select categories for segmentation
- Select variables within each category
- Identify groups based on variables
- Develop profiles of the segments
What is a shortened version of the segmentation process (the 3 step version)?
- Define your market (1&2 combined)
- Pick your relevant variables (3&4)
- Create and profile the segments (5&6)
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.
targeting
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)
target market
Why is choosing a target market a high risk activity?
Choosing wrong target market can have serious financial consequences for the company.
What are two reasons why companies should initially focus on one segment?
- 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.
- Makes it more likely the company uses its marketing resources effectively and efficiently.
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)
positioning
What are the two “key ideas” of positioning?
- 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)
- 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.)
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.
perceptual maps
How similar and/or different are the variables for business customers as compared to consumers (under each variable list what is different for them)?
- Geographic → same for both
- Demographic →
- B: Age is length of time in
business; company sales;
industry
- C: Age is actual age or
generation; income;
occupation - Psychographic → not really used in business
- Behavioral →
- B: purchase occasion (regular
purchase, special purchase) - C: usage (regular occasion,
special occasion)
- B: purchase occasion (regular
