Chapter 9 Flashcards
Market Segmentation
Involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action.
Market segments
the groups of consumers who have shared characteristics and similar product needs
5 Steps in Segmenting & Targeting Markets
- Group potential buyers into segments
- Group products to be sold into categories
- Develop a market-product grid and estimate size of markets
- Select target markets
- Take marketing actions to reach target markets
Segmentation Criteria
1) profitability
2) reachability
3) differential response
4) measurability (assignment)
Profitability
Company’s ability to generate an adequate return on invested capital.
-Ability to make money
Reachability
the ability to reach your audience
Ex: advertising, communication
2 Types of Reachability
1) Selective Targeting
2) Self-selection
Selective Targeting
firms can identify mechanisms whereby they can communicate with a specific target segment
Self-selection
people associating themselves with a certain group
Differential Response
responding differently to one of the 4P’s
Measurability (assignment)
understanding the differences b/w segments
measuring the difference b/w customers & assigning customers to a certain segment
Segmentation Bases (measurability)
1) Geographic
2) Demographic
3) Psychographic
4) Behavioral
5) Past Purchase
6) Brand Ratings/Importance
Geographic segmentation
based on where prospective customers live or work (region, city size)
Demographic segmentation
based on some objective physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective customers
Indexing
periodic process of adjusting social benefits or wages to account for increases in the cost of living
Psychographic segmentation
based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers
Behavioral segmentation
based on some observable actions or attitudes by prospective customers—such as where they buy, what benefits they seek, how frequently they buy, and why they buy
Ex: Product features, usage rate, importance
Past Purchase segmentation
customer’s usage rate & purchasing behaviors
Brand Ratings & Importance segmentation
what a customer considers important
usage rate
the quantity consumed or the number of store visits during a specific period
Customer Lifetime Value (CLV)
represents the financial worth of a customer to a company over the course of their relationship
80/20 rule
20% of users account for 80% of sales
small group of people have a huge impact
Benefit segmentation
segment based on what benefits are important
4 Targeting Strategies
1) Mass Marketing
2) Concentration
3) Multi-Segment
4) Mass Customization
Mass Marketing
single product/marketing strategy to reach all customers
Ex: regular toothpaste
Concentration (Niche)
a company choses one segment, which becomes the target market
hitting market need extremely specific
Ex: Toothpaste for sensitive teeth
Multi-Segment
targeting multiple segments of the market
offering multiple types of products for different segments
Ex: P&G offering diff types of diapers - Luvs, pampers, organic
Mass Customization
tailoring products to meet the needs of individual customers
being targeted at the individual level (personal)
Ex: Nike lets you design your own shoe/personalized shoe
Other Considerations in Targeting Segments
expected size/growth
competition
cost
compatibility
Majority Fallacy
The targeting of only the largest segment or group of segments, when a smaller loyal segment could be more profitable.
Build-to-Order (BTO)
manufacturing a product only when there is an order from a customer
market-product grid
a framework to relate the market segments of potential buyers to products offered or potential marketing actions
Marketing synergies
running horizontally across the grid, each row represents an opportunity for efficiency in terms of a market segment
Product synergies
running vertically down the market-product grid, each column represents an opportunity for efficiency in research and development and production
Product Positioning
the place a product occupies in consumers’ minds based on important attributes relative to competitive products
2 Approaches to Product Positioning
- Head to head positioning
- Differentiation positioning
Head-to-head positioning
involves competing directly with competitors on similar product attributes in the same target market
Differentiation Positioning
seeking a less-competitive, smaller market niche in which to locate a brand
Points of Parity
Features or benefits deemed essential by consumers for a brand to be a viable entry in the product category
Ex: a brand needs to have a certain attribute in order for them to be in a consumer’s consideration set
Point of Differentiation
unique/desirable brand features that differentiate it from other competitors in the product category
being different
Ex: Different beers
Product Positioning Statement
identifies the target market and needs satisfied, the product (service) class or category in which the organization’s offering competes, and the offering’s unique benefits or attributes provided
Perceptual Map
a means of displaying in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how they perceive competing products or brands, as well as the firm’s own product or brand
4 steps of product positioning
- Identify the important attributes for a product or brand class.
- Discover how target customers rate competing products or brands with respect to these attributes.
- Discover where the company’s product or brand is on these attributes in the minds of potential customers.
- Reposition the company’s product or brand in the minds of potential customers.
Approaches to positioning
Product Feature
Product Benefit
User Category
Against Other Brand
Against Product Category
Specific Use
Product Repositioning
changing the place a product occupies in a consumer’s mind relative to competitive products
