Module 3 Customers, Segmentation, and Target Marketing

Question 1

What is the aim of segmentation and target marketing?

Answer 1

To identify specific customer needs and design marketing programs to satisfy those needs.

Question 2

What does segmentation allow marketers to do?

Answer 2

Allows marketers to more precisely define and understand customer needs, and gives them the ability to tailor products to better suit those needs.

Question 3

Describe buyer behavior in consumer markets.

Answer 3

Often irrational and unpredictable. Consumers often say one thing and do another.

Question 4

What are the stages of buyer behavior in consumer markets? (5 of them)

Answer 4

1. Need recognition.
2. Information search.
3. Evaluation of alternatives.
4. Purchase decision.
5. Post-purchase evaluation.

Question 5

What are 3 issues in the buying process in consumer markets?

Answer 5

1. Consumers do not always follow stages in the sequence and can be swayed by brand loyalty
2. Involves making parallel decisions What to buy Where to buy 3. Bias towards a merchant limits purchasing powers

Issues in the buying process:

1. The buying process describes the possible range of activities that may occur in consumers’ making purchase decisions. However, consumers do not always follow these processes in sequence and may even skip stages en route to making a purchase (e.g., impulse purchases or loyalty toward a product or brand).
2. The buying process often involves a parallel sequence of activities associated with finding the most suitable merchant of the product in question. In other words, consumers consider what product to buy and where they might buy it at the same time. In the case of name brand products, for example, this selection process may focus on the product’s price and availability at different stores or online merchants.
3. The choice of a suitable merchant may actually take precedence over the choice of a specific product. In some cases, consumers are so loyal to a particular merchant that they will not consider looking elsewhere. For example, if some consumers are fiercely loyal to American car manufacturers, they may limit their product selection to a single brand or dealership, greatly limitng their range of potential product choices.

Question 6

Explain Need Recognition from the consumer buying process.

Answer 6

• Need
• Occurs when the consumer’s existing level of satisfaction and desired level of satisfaction are not the same
• Based on internal (e.g., hunger, thirst, and fatigue) or external (e.g., advertising, window shopping, interacting with salespeople) stimuli
• Want
• Consumer’s desire for a specific product that will satisfy the need
• Demand
• Occurs only when a consumer’s ability and willingness to purchase a specific product backs up the want for that product

The buying process begins when consumers recognize that they have an “unmet” need.

Question 7

Explain the relationship between “need” and “want”.

Answer 7

The relationship between need and want: If some people would argue that they need a car when their “real need” is for transportation. Their need for a car is really a “want” for a car. Please take a look at the above descriptions of need and want again. Hence, people need transportation, but they choose to fulfill that need with a car, rather than with alternative products like motorcycles, bicycles, public transportation, a taxi, or Uber.

Question 8

Explain the difference between “want” and “demand”.

Answer 8

The difference between want and demand: Many customers “want” a luxury car, but only a few are able and willing to buy one (i.e., demand).

Question 9

Explain Information Search in the consumer buying process.

Answer 9

• Marketing activities can stimulate a desire for information
• Passive information search (consumer becomes more attentive and receptive to information)
• Active information search (consumer purposely seeks additional information)
• Sources of information
• Internal sources - Personal experiences and memories
• External sources - Advertising, websites, packaging, display, and salespeople
• Amount of time, effort, and expense dedicated to information search depends on:
• Degree of risk involved in the purchase
• Amount of expertise with the product category
• Actual cost of the search (time and money)
• Evoked set
• Narrowing down potential product choices to a few products that can meet consumer needs
• Represents the outcome of information search and the beginning of the next stage of the buying process

Question 10

Sources of information: _\_1______ are typically the first type of information that consumers search. Information can also come from word-of-mouth advice from friends, family, or coworkers (i.e., getting the advice can be a personal experience, it can be stored as your memory).

Although _____2_____ are the most numerous, consumers typically trust these sources less than internal and personal sources of information (i.e., this may be because consumers perceive that the ____3_______ are initially designed to sell and promote a product instead to provide information about the product).

Answer 10

1) Internal sources
2) external sources
3) external sources

Question 11

Evoked set

Answer 11

Throughout the information search, consumers learn about different products or brands and begin to remove some from further consideration.

Question 12

Consumers are naturally risk ___1____; they use their search for information to ______2_____ risk and increase the odds of making the right choice.

Answer 12

1) averse
2) reduce

Risks comes in many forms, such as financial risk (paying reasonable price for a house), social risk (buying socially acceptable products, emotional risk (lead to negative emotions if the product is different from what you expected), and personal risk (choosing a right drug or surgeon).

Question 13

What are some forms of risk consumers may try to avoid through their information search?

Answer 13

1) financial risk (paying reasonable price for a house)
2) social risk (buying socially acceptable products)
3) emotional risk (lead to negative emotions if the product is different from what you expected)
4) personal risk (choosing a right drug or surgeon).

Question 14

Explain the Evaluation of Alternatives phase of the consumer buying process.

Answer 14

• Consumers evaluate products as bundles of attributes - _{<em>consumers base their evaluation on a number of different criteria, which usually equate with a number of product attributes</em>}
• Each attribute has a different level of importance -_{<em> for example, in buying a car, each potential choice represents a bundle of attributes, such as brand attributes, product features, aesthetic attributes, and price. Some put safety first, while others consider price the dominant attribute. </em>}
• Priority of choice criteria can change during the process - _{<em>for example, consumers may visit a dealership with prices as their dominant cirterion, only to leave the dealership with price dropping to third on their list of important attributes.</em>}
• Important considerations
• Products must be in the evoked set
• Consumers’ choice criteria must be understood
• Marketing programs must be designed to:
• Change priority of choice criteria
• Change consumers’ opinions about product or brand image

At this stage, the consumer essentially translates his or her need into a want for a specific product or brand. Consumers evaluate products as bundles of attributes that have varying abilities to satisfy their needs. Important marketing considerations during the evaluation stage:

1. The marketer’s products must be in the evoked set of potential alternatives. For this reason, marketers must constantly remind consumers of their company and its product offerings.
2. Marketers must take steps to understand consumers’ choice criteria and the importance they place on specific product attributes. Understanding the connection between customers’ needs and product attributes is an important consideration in market segmentation and target marketing decisions.
3. Marketers must often design marketing programs that change the priority of choice criteria or change consumers’ opinions about a product’s image. For example, Microsoft has moved to combat the rapid growth of Apple’s iPad and MacBook by aggressively promoting its own Surface Pro 3. With the success of the Surface Pro 3, Microsoft will continue to push forward with a flurry of advertisements touting its highly rated tablet.

Question 15

Explain the Purchase Decision phase in the consumer buying process.

Answer 15

• Unforeseen circumstances can interfere with consumer’s decision to buy a product
• Marketers overcome these factors by:
• Reducing the risk of purchase
• Making purchase easy
• Finding creative solutions to unexpected problems.
• Key issues in the purchase decision stage:
• Product availability
• Possession utility

After a consumer has evaluated each alternative in the evoked set, he or she forms an intention to purchase a particular product or brand. However, a purchase intention and the actual act of buying are distinct concepts.

For example, a consumer may have every intention of purchasing a new car, but several factors may prevent the actual purchase from taking place, such as an illness or job loss. Or the consumer may simply change his or her mind.

To overcome these factors, marketers need to reduce or eliminate these problems by reducing the risk of purchase through warranties or guarantees, making the purchase stage as easy as possible, or finding creative solutions to unexpected problems.

Product availability: Closely related to the distribution component of the marketing program; convenience. Its goal is to put the product within the consumer’s reach wherever that consumer happens to be.
Possession utility: Being very easy for customers to find a product; the ease of taking possession of the product. To increase possession utility, marketers may have to offer financing or layaway for large dollar purchases, delivery and installation of products, such as home delivery of convenience items like newspapers or pizza, or the proper packaging and prompt shipment of items through the mail.

Question 16

Explain the Post-purchase Evaluation phase of the consumer buying process.

Answer 16

• Connection between buying process and developing long-term customer relationships
• Four possible outcomes

1. Delight
2. Satisfaction
3. Dissatisfaction
4. Cognitive dissonance (post-purchase doubt)

• High likelihood of experiencing dissatisfaction or cognitive dissonance when: _{<em>- Firms can manage these responses by offering liberal return policies, providing extensive post-sale support, or reinforcing the wisdom of the consumer’s purchase decision. </em>}
• Dollar value of the purchase increases
• Opportunity costs of rejected alternatives are high
• Purchase decision is emotionally involving

In the postpurchase stage, consumers will experience one of these four outcomes:

1. Delight—the product’s performance “greatly exceeds” the buyer’s expectations
2. Satisfaction—the product’s performance “matches” the buyer’s expectations
3. Dissatisfaction—the product’s performance “falls” short of the buyer’s expectations
4. Cognitive Dissonance (Postpurchase Doubt)—the buyer is “unsure” of the product’s performance relative to his or her “expectations”

Question 17

What factors affect the consumer buying process?

Answer 17

• Decision-making complexity
• Primary reason for variations in the buying process
• Individual influences
• Demographics, perceptions, motives, interests, attitudes, opinions, or lifestyles
• Social influences
• Culture, subculture, social class, reference groups, and opinion leaders
• Situational influences
• Affect amount of time and effort devoted to the purchase task

Decision-making complexity: the primary reason why the buying process will vary across consumers and with the same consumer in different situations. Level of risk and complexity will often determine whether a consumer spends a long time deciding to purchase a product (e.g., house, car) or only a small amount of time (e.g., groceries). It is important for marketers to manage decision-making complexity. For instance, with complex products entailing much risk, marketers should provide access to high-quality and useful information.

Individual influences: many individual influences (age, life cycle, occupation, and socioeconomic status) are fairly easy to understand and incorporate into the marketing strategy. Other factors (perceptions, motives, interests, attitudes, opinions, or lifestyles) are much harder to understand because they do not clearly coincide with demographic characteristics.

Social influences: culture, subculture, social class, reference groups, and family have a profound impact on what, why, and how consumers buy. Reference groups and opinion leaders have an important impact on consumers’ buying processes. Reference groups act as a point of comparison and source of product information. A consumer’s purchase decisions tend to fall in line with the advice, beliefs, and actions of one or more reference groups. Opinion leaders can be part of a reference group or may be specific individuals that exist outside of a reference group. When consumers feel like they lack personal expertise, they seek the advice of opinion leaders, who they view as being well informed in a particular field of knowledge.

Situational influences: typically affect the amount of time and effort that consumers devote to the purchase task, or they affect specific product choices. For more information, please take a look at the next slide.

Question 18

What are some common situational influences that affect the consumer buying process?

Answer 18

• Physical and spatial influences
• Such as retail atmospherics, retail crowding, or store layout and design
• Social and interpersonal influences
• Such as shopping in groups, salespeople (e.g., rude salespeople can end the buying process), or other customers (e.g., obnoxious other customers may cause the consumers to leave)
• Temporal influences
• Such as lack of time, emergencies, or convenience (e.g., ample time may allow consumers to seek information on many different product alternatives)
• Purchase task or product usage influences
• Such as special occasions, buying for others, or buying a gift (e.g., they may lead consumers to buyer higher quality products)
• Consumer dispositional influences
• Such as stress, anxiety, fear, fatigue, emotional involvement, or good/bad mood

Question 19

What are the 4 types of business markets?

(Buyer behavior in business markets)

Answer 19

• Commercial markets: buying raw materials for use in producing finished goods, and buying facilitating goods and services used in the production of finished goods
• Reseller markets: consisting of channel intermediaries such as wholesalers, retailers, or brokers that buy finished goods from the commercial market and resell them at a profit
• Government markets: including federal, state, county, city, and local governments (buying goods for citizens, such as education, fire and police protection, maintenance and repair of roads, and water and sewage treatment)
• Institutional markets: consisting of a diverse group of non-commercial organizations such as churches, charities, schools, hospitals, or professional organizations.

Question 20

What are the unique characteristics of business markets?

(Buyer behavior in business markets)

Answer 20

• Buying center
• Hard and soft costs
• Reciprocity
• Mutual dependence

Buying center: the group of people responsible for making purchase decisions. It can be complex and difficult to identify, in part because it may include three distinct groups of people—economic buyers, technical buyers, and users.

Economic buyers are senior managers with the overall responsibility of achieving the buying firm’s objectives. In recent years, economic buyers have become increasingly influential as price has become less important in determining a product’s true value to the buying firm.

Technical buyers are employees with the responsibility of buying products to meet needs on an ongoing basis, including purchasing agents and materials managers. These buyers have the responsibility of narrowing the number of product options and delivering buying recommendations to the economic buyer(s) that are within budget.

Users are managers and employees who have the responsibility of using a product purchased by the firm, comprising the last group of people in the buying center. The user is often not the ultimate decision maker, but frequently has a place in the decision process.

Hard and soft costs: both consumers and organizations consider hard costs (monetary price, shipping, installation). Organizations must also consider soft costs (downtime, opportunity costs, and human resource costs associated with the compatibility of systems in the buying decision). For example, the purchase and implementation of a new payroll system will decrease productivity and increase training costs in the payroll department until the new system has been fully integrated.

Reciprocity: business marketing is often a two-way street, with each firm marketing products that the other firm buys. For example, a company may buy office supplies from another company that in turn buys copiers from the first firm. In fact, such arrangements can be an upfront condition of purchase in purely transaction-based marketing.

Mutual dependence: the buyer and seller are more likely to be dependent on one another, especially in situations of sole-source or limited-source buying. This characteristic can be applied when consumers are loyal to a brand or merchant. In this case, consumers become dependent on a single brand or merchant, and the firm can become dependent on the sales volume generated by these brand loyal consumers. This is not the case in business markets where sole-source or limited-source buying may leave an organization’s operations severely distressed when a supplier shuts down or cannot deliver. The same is true for the loss of a customer. The selling firm has invested significantly in the client relationship, often modifying products and altering information or other systems central to the organization. Each client relationship represents a significant portion of the firm’s profit, and the loss of a single customer can take months or even years to replace.

Question 21

Describe the business buying process.

Answer 21

• Problem Recognition—Business buyers often recognize needs due to special circumstances, such as when equipment or machinery breaks or malfunctions.
• Develop Product Specifications—Detailed product specifications often define business purchases because new purchases must be integrated with current technologies and processes.
• Vendor Identification and Qualification—Business buyers must ensure that potential vendors can deliver on needed product specifications, within a specified time frame and in the needed quantities.
• Solicitation of Proposals or Bids—The buying firm may request that qualified vendors submit proposals or bids.
• Vendor Selection—The buying firm will select the vendor or vendors that can best meet its needs. Issues such as reputation, timeliness of delivery, guarantees, or personal relationships with the members of the buying center are often more important than price.
• Order Processing—Processing involves the details of processing the order, negotiating credit terms, setting firm delivery dates, and any final technical assistance needed to complete the purchase.
• Vendor Performance Review—In this stage, both product and vendor specifications can be evaluated.

Like consumers, businesses follow a buying process. However, given the complexity, risk, and expense of many business purchases, business buyers tend to follow the above stages in sequence.

Question 22

What factors influence the business buying process?

Answer 22

• Environmental conditions
• Increase uncertainty, risk, and complexity associated with purchase
• Organizational factors
• Include internal and external environmental conditions
• Individual factors
• Importance depends on specific buying situations and the importance of the firm’s goals and objectives

However, like consumer markets, there are a number of factors that can influence the business buying process.

Environmental conditions: in situations of rapid “environmental change”, business buyers may alter their buying plans, postpone purchases, or even cancel purchases until things settle down. Environmental conditions affect the purchase of products as well as decisions regarding the recruitment and hiring of employees.

Organizational factors: a shift in a firm’s resources can change buying decisions, such as a temporary delay in purchasing until favorable credit terms can be arranged. Likewise, if a supplier suddenly cannot provide needed quantities of products or cannot meet a needed delivery schedule, the buying firm will be forced to identify and qualify new suppliers.

Individual factors: it occurs when members of the buying center are at odds over purchase decisions. Power struggles are not common in business buying, and they can bring the entire process to a halt if not handled properly. Also, a manager’s personal preferences or prejudices can influence business buying decision as individual factors.

Question 23

What is market segmentation?

Answer 23

the process of dividing the total market for a particular product or product category into relatively homogeneous segments or groups.

Its goal is creating groups where the members within the group have similar likes, tastes, needs, wants, or preferences but where the groups themselves are dissimilar from each other.

Question 24

Most firms opt to target one or more segments of the total market because ______1_______ . In today’s economy, segmentation is often mandated by customers due to their search for unique products and their changing uses of communication media. The end result is that customer segments have become ______2________. Many firms today take segmentation to the extreme by targeting small niches of a market, or even the smallest of market segments: individuals.

Answer 24

1) they find that they can be more successful when they tailor products to fit unique needs or requirements
2) even more fragmented and more difficult to reach

Question 25

Market segmentation

Answer 25

• Process of dividing total market for a particular product into homogeneous segments or groups
• Should create groups where members are similar to each other but dissimilar to other groups
• Involves the fundamental decision of whether to segment at all
• Mandate in today’s economy due to:
• Search for niche or unique products
• Changing use of media

Question 26

Traditional Segmentation Approach: Mass Marketing

Answer 26

1. Involves no segmentation
2. Adopts an undifferentiated approach
3. Works best when the needs of an entire market are similar
4. Results in efficient production and lower marketing costs
5. Risky since it makes firm’s vulnerable to competitors

Many segmentation approaches are traditional in the sense that firms have used them successfully for decades.

Mass marketing can be one type of traditional segmentation:

1. involves no segmentation whatsoever, occurs when companies aim marketing campaigns at the total (whole) market for a particular product.
2. Companies that adopt mass marketing take an undifferentiated approach that assumes that all customers in the market have similar needs and wants that can be reasonably satisfied with a single marketing program.
3. Mass marketing works best when the needs of an entire market are relatively homogeneous.
4. Mass marketing is advantageous in terms of production efficiency and lower marketing costs; however, it is inherently risky.
5. By offering a standard product to all customers, the organization becomes vulnerable to competitors that offer specialized products that better match customers’ needs.

Question 27

Traditional Segmentation Approach: Differentiated Marketing

Answer 27

• Dividing the total market into groups of customers having relatively common or homogenous needs
• Developing marketing strategies to pursue one or more of these groups
• Multi-segment approach
• Attracting buyers in more than one segment by offering a variety of products that appeal to different needs
• Market concentration
• Focusing on a single market segment

This approach may be necessary when customer needs are similar within a single group, but their needs differ across groups. Through well-designed and carefully conducted research, firms can identify the particular needs of each market segment to create marketing programs that best match those needs and expectations. This approach has two options: (1) multi-segment approach; and (2) market concentration.

(1) Multi-segment approach: Medium- to large-sized firms use this approach. In particular, it is common in packaged goods and grocery products. For example, Kellogg’s offers seemingly hundreds of brands of breakfast cereals targeted at specific segments, such as children (e.g., Apple Jacks), health-conscious adults (e.g., Shredded Wheat), parents looking for healthier foods for their children (e.g., Life, Kix), and so on. Also, Kraft Foods offers 69 different flavor and package varieties under the Maxwell House brand alone.
(2) Market concentration: Firms often find it most efficient to seek a maximum share in one segment of the market. Armor All, for example, markets a well-known line of automotive cleaners, protectants, and polishes targeted primarily to young, driving-age males. Its main advantage is specialization, as it allows the firm to focus all of its resources toward understanding and serving a single segment. However, its disadvantage is that the firm can be vulnerable to changes in its market segment, such as demographic shifts and economic downturns by “putting all of its eggs in one basket.”

Question 28

Traditional Segmentation Approach: Niche Marketing

Answer 28

• Efforts are focused on one small, well-defined market segment or niche
• Possess unique and specific set of needs
• Customers will pay high prices for products that match specialized needs
• Firms should understand and meet the needs of target customers completely in order to earn a substantial share of the market segment

Some companies focus their efforts on one small, well-defined market segment or niche that has a unique, specific set of needs. Customers in niche markets will typically pay higher prices for products that match their specialized needs. The key to niche marketing is to understand and meet the needs of target customers so completely that the firm’s substantial share makes the segment highly profitable. An attractive market niche is one that has growth and profit potential, but is not so appealing that it attracts competitors.

In the gym industry, for example, Curves (a health club for women) has 10,000 locations in 90 countries around the world. In addition, The Little Gym (a gym for kids ages 4 months through 12 years) has over 300 locations worldwide.

Question 29

Individualized Segmentation Approaches

Answer 29

• One-to-one marketing
• Creating an entirely unique product offering for each customer
• Mass customization
• Extension of one-to-one marketing
• Provides unique solutions to individual customers on a mass scale
• Permission marketing
• Customers choose to become part of firm’s target market
• Key advantage - Customers are already interested in the product offering

One-to-one marketing, mass customization, and permission marketing will become even more important in the future because their focus on individual customers makes them critical to the development and maintenance of long-term relationships. Today, personalization means much more than simply calling customers by name. We use the term to describe the idea of giving customers choices—not only in terms of product configuration.

One-to-One Marketing: occurring when a company creates an entirely unique product or marketing program for each customer in the target segment. Historically, it has been used less often in consumer markets. However, it is common in luxury and custom-made products, as well as in services. It has grown rapidly in electronic commerce where customers can be targeted very precisely.

Mass Customization: referring to providing unique products and solutions to individual customers on a mass scale. Along with the Internet, advances in supply chain management have allowed companies to customize products in ways that are both cost effective and practical.

Permission Marketing: occurring when customers choose to become part of a firm’s market segment by giving companies permission to specifically target them in their marketing efforts. The most common tool used in permission marketing is the opt-in e-mail list, where customers permit a firm—or a third-party partner of the firm—to send periodic e-mail about goods and services. Its major advantage is that customers who opt-in have already shown interest in the products offered by the firm.

Question 30

Criteria for Successful Segmentation

Answer 30

•Segmentation approach must be:

1. Identifiable and measurable
2. Substantial
3. Accessible
4. Responsive
5. Viable and sustainable

• Avoid
• Ethically sensitive (e.g., gaming or gambling), yet legal segments (e.g., illicit drugs or pornography)
• Segments that do not match firm’s expertise - _{<em>just because a market segment is viable or highly profitable does not mean the firm should pursue it.</em>}

1. Identifiable and measurable: the characteristics of the segment’s members must be easily identifiable.
2. Substantial: the segment must be large and profitable enough to make it worthwhile for the firm.
3. Accessible: the segment must be accessible in terms of communication and distribution.
4. Responsive: the segment must respond to the firm’s marketing efforts, including changes to the marketing program over time.
5. Viable and sustainable: the segment must meet the basic criteria for exchange, including being ready, willing, and able to conduct business with the firm.

Question 31

Identifying Market Segments

Answer 31

• Select most relevant characteristics to identify and define target market or market segment
• Most variables (e.g., demographics, lifestyles, product usage, or firm size) are part of the situation analysis of the marketing plan
• Reasons for shifts in target market
• New or revised marketing strategies to correct problems in the previous marketing strategy
• In response to changes in specific marketing program elements (e.g., reducing price to enhance value or adding a new product feature to make the benefits more meaningful)
• Target market and marketing program are interdependent - _{<em>the target market and the marketing program are interdependent, and changes in one typically require changes in the other. </em>}

Question 32

Common Segmentation Variables Used in Consumer Markets

Answer 32

1. Behavioral segmentation

•Variables: benefits sought, product usage, occasions or situations

2. Demographic segmentation

•Variables: gender, occupation, education

3. Psychographic segmentation

•Variables: personality, lifestyle, motives

4. Geographic segmentation

•Variables: city/country size, population density

1. Behavioral segmentation: the most powerful approach because it uses actual consumer behavior or product usage to make distinctions among market segments. It, unlike other types of consumer segmentation, is most closely associated with consumer needs. The key to successful behavioral segmentation is to clearly understand the basic needs and benefits sought by different consumer groups.
2. Demographic segmentation: dividing markets into segments using demographic factors such as gender, age, income, and education. It tends to be the most widely used basis for segmenting consumer markets because demographic information is widely available and relatively easy to measure. It becomes less useful when the firm has a strong interest in understanding the motives or values that drive buying behavior.
3. Psychographic segmentation: dealing with state-of-mind issues such as motives, attitudes, opinions, values, lifestyles, interests, and personality. Psychographic profiles are usually combined with demographic, geographic, or behavioral segmentation to create fully developed consumer profiles. It is useful because it transcends purely descriptive characteristics to help explain personal motives, attitudes, emotions, and lifestyles.
4. Geographic segmentation: it often play a large part in developing market segments, especially when retailers use geography to develop trade areas. It is often most useful when combined with other segmentation variables. One of the best examples is geodemographic segmentation, or geoclustering that looks at neighborhood profiles based on demographic, geographic, and lifestyle segmentation variables. One of the best-known geoclustering tools is Nielsen’s PRIZM segmentation system, which classifies every neighborhood in the United States into one of 66 different demographic and behavioral clusters.

Question 33

Basis for Segmentation of Business Buyers

Answer 33

1. Type of organization
2. Organizational characteristics
3. Benefits sought or buying processes
4. Personal and psychological characteristics
5. Relationship intensity

The most basic method of segmenting business markets involves the four types of markets: commercial markets, reseller markets, government markets, and institutional markets. Business buyers can also be segmented on:

1. Type of Organization: different types of organizations may require different and specific marketing programs, such as product modifications, different distribution and delivery structures, or selling strategies.
2. Organizational characteristics: the needs of business buyers often vary based on their size, geographic location, or product usage.
3. Benefits sought or buying processes: organizations differ with respect to the benefits they seek and the buying processes they use.
4. Personal and psychological characteristics: the personal characteristics of the buyers themselves often play a role in segmentation decisions.
5. Relationship intensity: business markets can also be segmented based on the strength and longevity of the relationship with the firm.

Question 34

Target Marketing Strategies

Answer 34

1. Single segment targeting
2. Selective targeting
3. Mass market targeting
4. Product specialization
5. Market specialization

Once the firm has completed segmenting a market, it must then evaluate each segment to determine its attractiveness and whether it offers opportunities that match the firm’s capabilities and resources. There are five basic strategies for target market selection.

1. Single segment targeting: firms use single segment targeting when their capabilities are intrinsically tied to the needs of a specific market segment.
2. Selective targeting: firms that have multiple capabilities in many different product categories use selective targeting successfully. This strategy has several advantages, including diversification of the firm’s risk and the ability to cherry pick only the most attractive market segments.
3. Mass market targeting: only the largest firms have the capability to execute mass market targeting, which involves the development of multiple marketing programs to serve all customer segments simultaneously.
4. Product specialization: firms engage in product specialization when their expertise in a product category can be leveraged across many different market segments.
5. Market specialization: firms engage in market specialization when their intimate knowledge and expertise in one market allows them to offer customized marketing programs that not only deliver needed products, but also provide needed solutions to customers’ problems.

Question 35

Targeting Noncustomers

Answer 35

• Understand why customers do not buy the products
• Unique customer needs
• Better competing alternative
• High switching costs
• Lack of product awareness
• Existence of long-held assumptions
• Find ways to remove obstacles
• Major strategic issue in developing effective marketing programs

In addition to targeting a subset of current customers within the product/market, firms can also take steps to target noncustomers. The key to targeting noncustomers lies in understanding the reasons that they do not buy and then finding ways to remove these obstacles. Removing obstacles to purchase, whether they exist in product design, affordability, distribution convenience, or product awareness, is a major strategic issue in developing an effective marketing program.