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Marketing Management > Session 3 > Flashcards

Session 3 Flashcards

1
Q

What is market segmentation

A

Market segmentation is the process of dividing the total market into groups based on consumer characteristics and their vulnerability to certain marketing strategies in their purchase decision making process.

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2
Q

Why should companies segment the market?

A
  1. Different consumers want different benefits. It is hard to satisfy entire market with one product. Allows to find competitive advantage in one segment
  2. It improves the effectiveness of your marketing mix because it allows you to focus on the consumer segment that is actually looking for the benefits you offer. (Honda and BMW motorcycles are nothing for Harley Davidson tough guys).
  3. Allows companies to tailor services to what consumer wants and limit the required resources.
  4. Fallacy of aggregation
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3
Q

What are the assumptions underlying market segmentation

A
  1. It’s possible to identify segments with similar traits
  2. Marketer will choose target segments where his offering fits best
  3. Marketer is willing to design unique marketing strategies for each target segment
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4
Q

Criteria of segments for an effective market segmentation

A
  1. Internally homogeneous: consumers in segment look more like each other than members of other segments
  2. Identifiable: members of groups should be identified as member of them
  3. Accessible: segments can be reached through advertising efforts
  4. Have effective demand: segment size and income are compatible with product price.
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5
Q

What should markets be segmented on?

A
  1. Consumer background characteristics
    2, Market history
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6
Q

Elements of consumer background characteristics

A

Who is consumer? Can be based on demographic, geographic, psychographic and general lifestyle factors.

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7
Q

Elements of market history

A

Elements of market history are:
1. Product usage (frequency, brand loyalty etc.)
2. Product benefit (to be used when product offers multiple benefits to determine which are valued most)
3. Decision-process (shopping and media-use patterns, price sensitivit).

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8
Q

Why should consumer background characteristics and market history be identified?

A
  1. Define factors that determine customer behavior
  2. Discriminate major segments
  3. Choose most promising market
  4. Detail target group’s characteristics
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9
Q

Steps in segmentation analysis and application

A
  1. Define purpose and scope of segmentation
  2. Analyze total market
  3. Develop segment profiles
  4. Evaluate segmentation
  5. Select target segments
  6. Designing marketing strategy for target segment
  7. Reappraisal of segmentation
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10
Q

Which factor in consumer background characteristics is the most useful in market segmentation? And which the least?

A

The general lifestyle factors are the most useful, because they offer a multidimensional view of the customer that focuses on emotional needs.

The least useful is geographic, because through globalization geography doesn’t limit market size anymore.

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11
Q

Different groups in base of pyramid

A
  1. Low income $3-5 a day
  2. Subsistence $1-3 a day
  3. Extreme poverty <$1 a day
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12
Q

Marketing strategy for entering low income market

A

Providing appropriate and affordable products and services directly to consumers. Example: Licensing deal for generic drug manufacturers

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13
Q

Marketing strategies for focusing on subsistence market

A
  1. Enlisting retail outlets to provide efficient reach and coverage
  2. Engaging in community to coproduce value
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14
Q

Marketing strategy to focus on extreme poverty market

A

Forming commercial partnerships with governments and NGOs.

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15
Q

How can companies provide value at base of the pyramid

A

By providing basic necessities to customers for low prices

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16
Q

Keys to succeed in markets at base of the pyramid

A

1.Link commercial success to customers’ well-being when entering emerging markets. Customers tend to be low-income level.
2. PRovide value by offering necessities to consumers
3. Keep in mind that responsibilities do not end when product has been delivered.

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17
Q

How to treat people in low income segment

A

People in low income segment should be treated as customers. Companies should offer neccessities.
These people will be employed to produce for higher income.

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18
Q

How to treat people in subsistence segment

A

People in subsistence segment have less customer potential. Companies should use their low-income skills for coproduction, as more income is their primary objective

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19
Q

How to treat people in extreme poverty level

A

People in this segment do not have enough skills to coproduce. They should be treated as clients of agents (governments, enterprises and ngo’s) that collect resources and neccessities on their behalf.

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20
Q

How to create commercial and public value in low income segment

A

Create cheap access to neccessities. Businesses should strive for scale through innovative business models that enlist the local community in their operations by offering appropriate incentives.

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21
Q

How to create commercial and public value in subsistence segment

A

Inform about benefits and neccessities desired by community. Recruit local leaders to protect your assets that produce value by offering incentives

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22
Q

How to create commercial and public value in extreme poverty segment

A

Enter public-private partnerships and deliver good quality products.

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23
Q

Most effective predictors of customer buying patterns

A
  1. Values
  2. Norms
  3. Identity
  4. Attitudinal indicators
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24
Q

Which questions does a good market segmentation answer?

A
  1. Which benefits matter most to customer?
  2. Which customers are willing to pay more
  3. What are relative (dis)advantages from customers perspective
  4. What trends are seen in purchasing behavior?
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25
Q

What should good segmentation research and analysis do?

A
  1. Reflect company’s strategy
  2. Identify which customers drive profit
  3. Identify which benefits matter to buying decision?
  4. What are customers actually doing?
  5. It should make sense to senior management. They decide
  6. Determine whether segmentation can change
26
Q

Levels of gravity in the decision spectrum

A
  1. Shallow end
  2. Middle
  3. Deepest end
27
Q

What are customer expectations in shallow end?

A

Purchase saves time and money

28
Q

What are customer expectations in middle

A

Big-ticket purchases where quality, design and status are important

29
Q

What are customer expectations in deepest end

A

Emotional investments in which core values are engaged.

30
Q

What are common segmentation mistakes

A
  1. Focus too much in identity and too little on features that matter most to customers
  2. Too little emphasis on customer behavior
  3. Too much dwelling in technical details when determining market segmentations.
31
Q

Why does it matter which factors influence buying decisions in market segmentation?

A

Lifestyles, attitudes should be measured against product to discover what customers ultimately value most.

32
Q

Why should the company analyze what the customer is doing in market segmentation?

A

The company should analyze what the customer wants when he can design the product and packaging himself. This will tell you what the customer actually wants (latent needs)

33
Q

Why should management understand the segmentation process?

A

Management are the ones making the decisions. They need to understand the segmentation process to be able to accurately assess the segmentations.

34
Q

Should segmentation factors change?

A

Segmentation factors should be changed as soon as they lose relevance and other segmentation criteria are more accurate.

35
Q

Ways to demonstrate the value your products deliver to the customer

A
  1. Value case histories: show cost savings of reference customers
  2. Domcument cost savings and incremental profits by customers to show to prospects
36
Q

Types of value elements

A
  1. Points of parity
  2. Points of difference
  3. Points of connection
37
Q

Points of parity

A

Elements of performance or functionality are the same to those of competitors

38
Q

Points of difference

A

Points that make your product superior/inferior to those of competitors

39
Q

Points of connection

A

Disagreement between seller and buyer on their place compared to competing products

40
Q

Two takeaways from customer value propositions

A
  1. Understand what customers want through customer value research. This is often customized
  2. Focus customer value proposition in one to three elements that the customer values most.
41
Q

Why do market leaders wait with introducing innovations?

A
  1. Discomfort
  2. Other priorities
  3. Stress
  4. Arrogance/ ignorance
  5. Inflexible corporate structure that makes it hard to stay hungry.
42
Q

Different types of competition

A
  1. Narrow (in market) vs broad (correlating market) competition
  2. Now vs later
43
Q

Levels of competition

A
  1. Direct (same product)
  2. Category (ps4, xbox, wii are all gaming devices)
  3. Generic (more affordable knock-offs)
  4. Budget
44
Q

Why is budget a form of competition?

A

If people have a limited amount of money to spend. They might choose between going out for dinner, watching a ball game, or go to a festival. They have to choose one, which makes budget a form of competition.

45
Q

Ways to identify closest competitors

A
  1. Customer judgment (ranking surveys, consideration sets, substitution by use)
  2. Purchase records (cross-elasticity of demand, switching in purchase behavior during problems in distribution channel)
46
Q

What are the three important questions for the 3C-model

A
  1. What benefits are the most important for customers?
  2. Do we have the resources to deliver those benefits to the customer?
  3. Are we delivering superior benefits to those offered by competitors?
47
Q

Different advertising methods

A
  1. Mass market advertising
  2. Customized strategy
  3. Segmented strategy
48
Q

Different segmentation methods

A
  1. Horizontal : taste differences. Features that are unique per product.
  2. Vertical: quality (premium products)

Best segmentation is both. Focus on product differentiation and different quality lines.

49
Q

Criteria of a good segmentation method

A
  1. mutually exclusive
  2. Collectively exhaustive
50
Q

What is cannibalization

A

The loss of sales of older products because the company introduced a new product

Can be prevented by vertical differentiation

51
Q

Factors to determine segment attractiveness

A
  1. Size
  2. Growth potential
  3. Cannibalization
  4. Synergy
  5. Impact on other segments
52
Q

Importance-performance model

A

Model that rates segment’s benefit importance in percentages.
Measures how well you deliver benefits and how well your competitors do.

Multiply importance by performance for each competitor/benefit combination.

Target market where you are relatively the best.

53
Q

Characteristics of mass market advertising

A
  1. One size (ad) fits all consumers
  2. Efficient but not effective, as all segments value things differently
54
Q

Characteristics of a customized marketing approach

A
  1. Marketing strategy is unique for each customer in the market
  2. Effective but not efficient
55
Q

What is a mutually exclusive segmentation?

A

This means that customers can be in only one market segment

56
Q

What is a collectively exhaustive segmentation?

A

This means that the segments designed by marketers cover the entire market

57
Q

What is the S-T-P model

A

S-T-P stands for segmentation, targeting and positioning

58
Q

What will the S-T-P model do?

A

The model will bring all Cs together from a customer perspective

59
Q

Steps in S-T-P model

A
  1. Identify segmentation variables and segment market
  2. Develop profiles of market segments
  3. Evaluate each segment’s attractiveness
  4. Choose target segment
  5. Identify positioning for each market segment
  6. Select, Develop, Signal and Maintain the Chosen Positioning Concept
60
Q

FAllacy of aggregation

A

Aggregated data show a trend, but de-aggregating it refutes the trend.

Marketing Management (6 decks)

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