Marketing Segmentation, Targeting and Positioning

Question 1

Define Market Segmentation

Answer 1

Market Segmentation - “The basic premise of market segmentation is that a heterogeneous group of customers can be grouped into homogenous clusters or segments, each requiring differing applications of the marketing mix to service their needs”, Jenkins and McDonald, 1995.

Question 2

What is the basic idea behind segmentation?

Answer 2

Based on the idea that there are too many customers in the market as a whole and that Companies will perform better if they separate the market into groups, in the hope that they will act homogenously and respond in the same way to marketing stimuli.

Question 3

What economic theory is market segmentation based on?

Answer 3

Market segmentation based on economic pricing theory, which suggested that discriminatory pricing could be used to maximise profits amongst different consumer groups

Question 4

What are the four ways of segmenting a market?

Answer 4

Geographic, demographic, psychographic and behavioral segmentation.

Question 5

What does segmentation allow the effective allocation of?

Answer 5

Resources including financial ones.

Question 6

What does segmentation help with the understanding of? What does it make them focus on?

Answer 6

Customers. The customers who they have the best chance of satisfying.

Question 7

What does a market consist of according to Weinstein, 2006?

Answer 7

A market consists of customers (actual and potential), needs, products, technologies and competitors.

Question 8

What is one of the most difficult tasks that managers face?

Answer 8

How to define relevant and pre-segmented markets.

Question 9

What are the potential pitfalls of market segmentation according to Weinstein, 2006?

Answer 9

A market definition too narrow limits potential opportunities; one too large leads to mass marketing thinking and can make an organization’s efforts and resources seem almost insignificant.

Question 10

What are the stages in the market segmentation, targeting and positioning process?

Answer 10

Market Segmentation
• Identify bases for segmenting market
• Develop profiles of resulting segments

Market Targeting
• Develop measures of segment attractiveness
• Select the target segment(s)

Market Positioning
• Develop positioning for each segment
• Develop marketing mix for each segment

Question 11

What are the benefits of segmentation?

Answer 11

• Improves understanding of the customer base
• Provides a clear classification of the customers
• Enables the generation of a targeted product portfolio that responds to the needs of the market place
• Helps gauge a company’s market position relative to the competition
• Leads to the effective fine tuning of marketing strategies and competitive advantage if done well

Question 12

What are the disadvantages of segmentation?

Answer 12

• The market is so small that marketing to a portion of it is not profitable.
• Heavy users make such a large proportion of the sales volume that they are only the relevant target.
• The brand is the dominant brand in the market.

Question 13

What are the segmentation variables?

Answer 13

Geographic segmentation – location
Demographic segmentation – information, such as age, gender, family size, income, education, religion, or ethnicity
Psychographic segmentation – variables, such as social class, personality, or their approach to life
Behavioural

Question 14

Discuss geographic segmentation

Answer 14

Easy to define and measure but within geographic segments wide variety of needs and wants

Question 15

What are the demographic segmentation factors?

Answer 15

Age 
Race
Sex
Income
Occupation
Socio-economic status
Family structure
Dress size

Question 16

What are the four factors of social class?

Answer 16

1. occupation,
2. education,
3. socialization,
4. Income - there isn’t a direct relationship with class

Question 17

What is geodemographic segmentation?

Answer 17

Segmentation by way of demographic and geographic segmentation. Acorn Classification is the leading tool.

Question 18

What is psychographic segmentation?

Answer 18

The process of dividing markets into segments on the basis of consumer life styles. On the basis of
Activities, Interests or Opinions

Question 19

What are the behaviour segmentation factors?

Answer 19

• End use
• Benefits sought
• Usage Rate
• Loyalty
• Attitude
• Buyer Readiness Stage

Question 20

Discuss the segmentation of business markets.

Answer 20

• Consumer and business marketers use many of the same variables to segment their markets.
• Business buyers can be segmented geographically or by benefits sought, user status, usage rate, or loyalty status.
• Additional variables unique to this market would be:
○ business customer demographics (industry, company size)
○ operating characteristics
○ purchasing approaches
○ situational factors, and
○ personal characteristics.

Question 21

What is the criteria for effective segmentation?

Answer 21

• Substantiality (sufficient size for profitability)
• Behavioural Variations
• Reach-ability/Access
• Measurability
• Stability

Question 22

Discuss the tactical steps to segmenting markets

Answer 22

Define the market as a whole.
• start with the broadest definition
• think about the competition & problems you & competition seek to solve for consumers
• list all the needs that all potential customers may have in this market.
Decide which segment to zero in on.
• who are your best customers now?
• what are they like & what do they have in common?
• find out these attributes that will lead you to more people like them.
Collect & analyse information about segment.
• where among customers and prospects can you find a group of people who have a lot in common, and attributes that make them different from all the rest.
• look for segmenting dimensions.
Create a profile of your target customer.
• be as specific as possible (never will have perfect info.)
• name the possible market segments.
• seek better understanding of possible market segments.
Develop a marketing plan to address this target market. (i.e. re-consider 4 P’s)
• be sure that it is big enough to be profitable.
• if it looks good, then develop a positioning strategy to appeal to that market.
• don’t forget to check out the competition.

Question 23

Define Target Market

Answer 23

A target market is a set of buyers sharing common needs or characteristics that a company decides to serve.

Question 24

Discuss the process of market targeting.

Answer 24

• The process of evaluating each market segment’s attractiveness, and selecting one or more segments to enter
• The Identification and Selection of Markets for a Business or a Product

Question 25

What factors does choosing a market coverage strategy depend on?

Answer 25

Choosing a market coverage strategy depends on Company resources, Degree of product variability, Product life cycle stage, Market viability and Competitors’ marketing strategies.

Question 26

Define Market Positioning

Answer 26

Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
Formulating competitive positioning for a product, and creating a detailed marketing mix

Question 27

Define Product Position

Answer 27

Product position: the way the product is defined by consumers on important attributes, relative to competing products

Question 28

What is competitive advantage and how do you achieve it?

Answer 28

Competitive advantage: an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices
Three Important Steps:
1. Identifying a set of possibly competitive advantages upon which to build a position
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy

Question 29

What do the differences in market positioning have to be?

Answer 29

Important, Distinctive, Superior, Communicable, Pre-emptive,Affordable and Profitable

Question 30

Define Unique Selling Proposition

Answer 30

Choosing one attribute and aggressively promoting itself as being the best on that benefit.

Question 31

Define Value Proposition

Answer 31

The full mix of benefits on which a product/brand is positioned