Chapter 6: Segmentation, Targeting & Positioning

Question 1

Name the two market categories

Answer 1

1. Consumer markets: this market consist of purchasers and household members who intend to consume or benefit from the purchased products.
2. Business markets: this market consists of people or groups that purchase a specific kind of product for one of three purposes, namely reselling, direct use in producing other products or use in general daily operations

Question 2

What is a market segment

Answer 2

It is a subgroup of people or organisation within a larger market.

Question 3

What is market segmentation

Answer 3

It is the process of dividing the total market for a particular product or category into relatively homogeneous(same) groups.

Question 4

Name the market segmentation approaches

Answer 4

• Mass marketing
• Differentiated marketing
• Niche marketing
• One-on-one marketing

Question 5

Explain mass marketing (undifferentiated)

Answer 5

This approach implies no market segmentation whatsoever, it contains the entire market.

Question 6

Explain differentiated marketing

Answer 6

Firms use some form of segmentation by dividing the total market into groups of customers with relatively similar needs, then develop a marketing program that appeals to one or more of these segments

Question 7

Explain niche marketing (concentrated)

Answer 7

Firms focus their marketing efforts on one small, well defined market segment or niche with a unique set of needs

Question 8

Explain one on one marketing

Answer 8

Used when a firm creates a unique product or marketing program for each customer in the target segments. It is commonly used in business markets.

Question 9

What is the criteria for effective market segmentation

Answer 9

• Identifiable and measurable: the characteristics of the members in the segment must be easily identifiable. Data about the segment based on location, age etc. must be available
• Substantial: the segment must be large and profitable enough to make it worthwhile for the firm to pursue
• Accessible: the segment must be accessible in terms of communication and distribution. The organisation must be able to reach its targeted segment.
• Responsive to marketing: the segment must respond to the firms marketing effort, including changes to the marketing program overtime
• Viable and sustainable: the segment must meet the basic criteria for effective exchange between buyer and seller.

Question 10

What are the bases for market segmentation (pg 179)

Answer 10

1. Demographic segmentation - age, gender, income, occupation, education
2. Geographic segmentation - city or rural area, national region, world region, market size & density, climate
3. Psychographic segmentation - personality, motive, lifestyle, geodemographics
4. Behaviouristic segmentation - product category, brand, loyalty, price point, distribution outlet
5. needs and benefits segmentation - functional benefits, psychological benefits, relationship and process benefits

Question 11

Explain target market

Answer 11

It is a group of people for whom the organization designs, implements, and maintains a marketing mix with the intention to meet the needs of that group

Question 12

What is the criteria for selecting target markets

Answer 12

• attractive in terms of profitability
• best fit between customers needs and the firms resources
• size of the segment
• ability and willingness of consumers in the segment to buy the product or service

Question 13

Name the target market selection approaches

Answer 13

• undifferentiated targeting
• differentiated targeting
• concentrated targeting

Question 14

Explain undifferentiated targeting

Answer 14

It is also refered to as mass marketing/targeting and is only used by large firms with the capabilities and resources to execute it

Advantages are potential savings on productction and marketing costs

Disadvantages are 1. unimaginative product offerings 2. firm is more vulnerable to competition

Question 15

Explain differentiated targeting

Answer 15

It is also referred to as selective targeting or multi segment and is used by firms with multiple capabilities in many different product categories

Advantages are 1.greater financial success 2.economies of scale in production and marketing

Disadvantages are 1.high costs 2.cannibalization

Question 16

Explain concentrated targeting

Answer 16

It is implemented when a firm selects a market niche for targeting its marketing effects. It is used when the firm’s capabilities are closely linked to the needs of a single market segment. The firm may be product specialists or market specialists.

Advantages are 1.stronger positioning 2.better able to compete with larger firms 3.better able to meet the needs of a narrowly defined segment

Disadvantages are 1.segments are too small or changing 2.large competitors may market to niche segments more effectively

Question 17

Explain product specialization

Answer 17

It is used when a firm’s expertise in a product category can be leveraged across many markets segments

Question 18

Explain market specialization

Answer 18

Is used when a firm has intimate knowledge and expertise in one market, allowing them to offer customized marketing programs

Question 19

What are the various approaches to behavioral segmentation (pg 183)

Answer 19

> product category segmentation - this approach is based on product attributes or features such as economy, medium-sized and prestige cars

> brand segmentation: this approach is used when a marketer of luxury goods and services chooses a narrow form of segmentation as an appropriate market to target

> product category user segmentation: this approach is based on whether a consumer is a heavy, medium, light or nonproduct category user, for example a mother shopping for her family may be regarded as a heavy user of personal care products

> rate of new product adaptation: this approach is used for segmentation purposes consumers are categorized into 5 groups they are 1.innovators 2.early adopters 3.early majority 4.late majority 5.laggards or non-adopters

> loyalty segmentation: this approach is based on brand loyalty behavior and particular attention is usually paid to identify the most loyal segments of an existing customer market. Pareto 80/20 principle is applied (80% of a firms revenue is often from 20% of its most loyal customers)

> price point segmentation: it is based on charging a premium price for a product, providing value for money based on the price charged or providing cheap products

> distribution outlet segmentation: this approach uses the type of distribution outlet (for example, boutiques or online shopping) that is frequented by different groups of consumers

Question 20

What is the state of buyer readiness

Answer 20

How aware the consumer is of the product and how certain they are to buy it

Question 21

What are the 5 stages of buyer readiness

Answer 21

• being aware
• informed
• interested
• desiring the product and
• having some intent to purchase

a person not aware of a product may be seen as a non-product category user

Question 22

What attitudes influence the state of buyer readiness

Answer 22

1.enthusiastic 2.positive 3.indifferent 4.negative and 5.hostile

Question 23

What are four groups associated with brand loyalty status

Answer 23

• hardcore loyals: consumers who buy one brand all the time
• split loyals: consumers who are loyal to two or three brands
• shifting loyals: consumers who regularly shift loyalty from one brand to another
• switchers: consumers who show no loyalty to any brand

Question 24

What are the five situation characteristics that influence purchasing behavior

Answer 24

> physical surroundings: physical environment of the outlet

> social surroundings: shopping as a social event

> temporal perspective: time needed to make the purchase

> task definition: the purpose of the purchase such as for personal use or as a gift

> pre-purchase attitude: different moods at the time of purchase

Question 25

What are the benefits that potential buyers pursue

Answer 25

• functional benefits: are tangible products attributes or features
• psychological benefits: intangible characteristics such as status esteem, self enhancement or patriotism (for example wearing an expensive watch is associated with high social status)
• relationship benefits: refers to a sense of belonging, affiliation with others or group membership (for example pick n pay loyalty programs)
• process benefits: refers to the advantages gained by convenience or outstanding customers service

Question 26

Explain benefits segmentation

Answer 26

It is the benefits the consumer expects that are directly linked to their needs

Question 27

What are the conditions that determine the effectiveness of benefit segmentation

Answer 27

1. The benefits short by the market must be identifiable
2. To use these benefits as segmentation criteria, marketers must be able to divide the market into distinct recognizable segments
3. One or more of the resultant segments must be responsive to the firm’s marketing if it’s

Question 28

The segmentation process typically consists of three stages, namely: (pg 187)

Answer 28

1. Identify and profiling customers: during this phase marketers identify possible customers and customer groups based on the selected segmentation basis, which allows them to develop a customer profile
2. Evaluating the segments attractiveness: once each segment and possible customers making up the segment have been profiled, each segment is analyzed for attractiveness based on potential sales and future profitability
3. Positioning the firms market offer (based on the 4P’s): the value proposition of the product is developed, this is what the firm will propose the value of the product to be