Class 4 | Chap 10 | Market Segmentation Flashcards
What is the least cost production paradigm?
Mass marketing that creates the largest potential market, which leads to the lowest cost, which in turn can lead to lower prices and or higher margins
Micromarketing =
Focus marketing on one of the four levels: segment, niches, local areas and individuals.
4 levels of micromarketing including description:
Market segment : A group of customers who share similar needs and wants.
Niche marketing: more narrowly defined customer group seeking a distinctive mix of benefits or values
Local marketing: focused on wants and needs of local groups
Individual marketing: one-to-one marketing
Flexible marketperceived value offering =
Flexible market offerings to all members of the segment, consists of two parts: naked solution (offering attributes and benefits that all segment members value) discretionary value options (some segments members require)
How can you characterise marketing segments?
To identify preferences:
- Homogeneous preferences: all customers roughly the same preferences
- Diffused preferences: vary greatly in their requirements
- Clustered preferences: natural market segments emerge from groups of customers with shared preferences
Grassroots marketing =
A growing trend that concentrates marketing activities on getting as close and personally relevant to individual customers as possible
What are the risks of localised marketing?
- Tendency to drive up manufacturing costs and so reduce economies scale
- Tendency to create logistical problems
- Possibility that the overall image of the brand may be put at risk
What is customerisation?
Combines operationally driven mass customisation with customised marketing in a way that empowers consumers to design the customer-perceived value offering their choice (design your own shoes).
At what descriptive characteristics are some researchers looking for segmentation?
Geographic: dividing the market in geographical units
demographic: dividing the market based on variables
and psychographic. Also look at behavioural considerations
what differences are important in global and local marketing
Regional, rural and urban characteristics are highly significant
Key Variables demographic segmentation (7)
- Age and life cycle change
- Life stage
- Gender
- Income
- The new consumer
- generation
- Social class
Why is the demographic approach so popular?
Is that they are often associated with customer needs and wants
What are the key trends in social and cultural environment?
- Grey market: constitutes an attractive target market for several perceived-value offerings
- Youth market: generation Y. declining levels of purchasing power in EU and less growth
- Ethnic market: ethnic migration and therefore pay attention to that different cultures have distinct value sets
Psychographic segmentation
using psychology and demographics to better understand consumer markets, based on 3 variables (AIO factors):
- activities
- interests
- opinions
What is VALS
Segmentation system based on psychographic measurements -> values and lifestyles. With the main dimensions: customer motivation and customer resources.. Inspired by one of 3 primary motivations: ideals, achievements and self-expression.
What are the 8 groups in VALS?
Higher resources:
- Innovators
- Thinkers
- Achievers
- Experiencers
Lower resources:
- Believers
- Strivers
- Makers
- Survivors
What is behavioural segmentation?
Place buyers into groups on the basis of their knowledge of, attitude towards use of response to a product/service or market offering package.
What are behavioural variables?
- Occasions
- Benefits
- User status
- usage rate
- buyers-readiness stage
- loyalty status
- attitude
What type of loyalty status are there?
- hardcore loyals: 1 brand all the time
- split loyals: split between 2 or 3 brands
- Shifting loyals: shift loyalty from one brand to another
- switchers: show no loyalty to any brand
What is the conversion model?
Measures the strength of customers psychological commitments to brands and their openness to change to determine how easily a customer can be converted to another choice.
What 8 groups of users do the conversion model segment?
Users of the brand
- Convertible: most likely to defect
- Shallow: uncommitted, could switch
- Average: unlikely to switch brands on short term
- Entrenched: strongly committed to the brand they are using
non-users of the brand
- strongly unavailable: unlikely to switch
- Weakly unavailable: not available to the brand because their preferences lies with their current brand. Although not strongly
- Ambivalent: as attracted to the brand as they are to their current brands
- Available: most likely to be acquired in the short run
VALS:
Which of these motivations look for physical activity, variety and risk
Self-Expression
VALS:
are guided by knowledge and principles
Ideals
VALS:
look for purchases that demonstrate success to their peers
Achievements
5 roles in a buying decision:
initiator influencer decider buyer user
The main segmentation variables for Business-to-Business markets are
Demographic Operating variables Purchasing approaches Situational factors Personal characteristics
To be useful, marketing segments must be capable of assessment on 5 criteria
1 measureable: size, purchasing power and characteristics can be measured
2 substantial: large and profitable enough to serve
3 accessible: can be effectively reached and served
4 differentiable: conceptually distinguishable
5 Actionable: effective programmes can be formulated for servind segments
What are the 5 patterns of target market selection?
1 single-segment concentration 2 selective specialisation 3 product (market offer) specialisation 4 market specialisation 5 full market coverage
What is undifferentiated marketing?
firm ignores segment differences and trades on the whole market with one offer
What is differentiatied marketing?
the firm operates in several market segments and designs different product/service offers for each (Nestle: water, baby foods, chocolate, pet care etc).
Creates more sales, but also increases costs of doing business
What is the crucial pillar of marketing strategy?
STP: segmentation, targeting, positioning
What is SCA?
Sustained competitive advantages
What is the result of good positioning?
customer-focused value proposition: a cognent reason why the target customer should buy from the provider
What does deciding on positioning require?
- Determining a frame of reference: identifying target market and competition
- Identifying Points Of Parity (POP) and Points Of Difference (POD)
Points of Parity =
are associations that are not necessarily unique to the brand and may be shared with other brands
Points of Difference =
attributes or benefits that consumers associates strongly with a brand, evaluate positively and believe they could not find to the same extent with a competitive brand.
3 ways of communicating brands category membership
- Announcing category benefits
- Comparing to exemplars
- Relying on the product discriptor
The author’s cite three ways in which a firm can develop and communicate a differentiation strategy:
Cost Leadership
Distinctive Superior Quality
Cost Leadership and Differentiation (combination of first two) - not cost leadership and focus (which was lifted from Porter’s strategic approaches)
Other ways in which a firm can gain a competitive advantage by differentiating its offering include:
- Personnel - by the people they employ
- Channel - where their product is located
- Image - how distinctive it is.
