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Chapter 9,10, 11

Involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action.

Market segmentation

What two groups do marketers put people into when segmenting?

1.Common needs
2. Respond similarly

Why do business firms segment their markets?

So it can respond more effectively to the wants of groups of potential buyers and thus increase it's sales and profits

Market segments

relatively homogeneous groups of prospective buyers that result from the market segmentation process.

What is true about all market segments?

They have the same consumption behavior.

When a firm uses different marketing mix activities such as product features and advertising, to help consumers perceive the product as being different and better than competing products.

Product differentiation

Complete the sentence: Marketing segmentation is only...

a means to an end.

Effective market segmentation does what 2 things?

1. Forms meaningful groupings
2. Develops specific marketing mix actions.

3 steps to segmentation

1. Identify market needs
2. Link needs to actions
3. Execute marketing program actions.

3 specific segmentation strategies:

1. One product and multiple market segments
2. Multiple products and multiple segments
3. Segments of one or mass communication

Why would marketers want to produce one product and multiple market segments?

It avoids extra costs of developing and producing additional versions of the product.

An example of one product and multiple marketing segments.

Ford producing cars, SUVs, and pickup trucks

Why would marketers choose mass customization?

Internet makes it very easy and the marketers want to cater to customer needs.

An example of mass communication.

Dell using BTO (Built to order systems)

What is the key to successful product differentiation and market segmentation?

To find the ideal balance between satisfying a customer's individual wants or needs and achieving organizational synergy.

The increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently.

Organizational Synergy

When the increased customer value means adding more new products or a new chain of stores and these new products and stores steal sales and customers from the other products and stores.

Cannibalization

5 step process used to segment a market and select the target segments on which it wants to focus.

1. Group potential buyers into segments
2. Group products to be sold into categories
3. Develop a market product grid and estimate market size
4. Select target markets
5. Take marketing actions to reach target markets

Is segmentation always worth doing?

No

Criteria to use in forming segments:

1. Simplicity and cost effectiveness of assigning potential buyers to segments.
2. Potential for increased profit
3. Similarity of needs of potential buyers within a segment.
4. Difference of needs of buyers among segments
5. Potential of a marketing action to reach a segment.

True or false: If the potential needs of various segments aren't very different, make more segments.

False, make less

4 general bases of segmentation:

1. Geographic
2. Demographic-some objective physical, measurable, or other attribute.
3.Psychographic-Subjective mental or emotional attributes
4. Behavioral

Example of geographic segmentation:

Region

Example of demographic segmentation:

Household size

Example of psychographic segmentation:

Lifestyle

Example of behavioral:

Product features

The quantity consumed or patronage (store visits) during a specific period.

Usage rate

Focuses on usage rate like AA frequent flier miles.

Frequency marketing

Highest segmentation percentage:

Geographic bases: 88%

Lowest segmentation variable:

Psychographic 43%

Another name for usage rate

80/20 rate

80/20 rule:

suggests 80% of a firms sales are obtained from 20% of its customers which suggests a small fraction of customers provides large fraction of firms revenue.

A framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization.

Market-product grid

What are the horizontal lines in a market product grid?

markets

What are the vertical lines in a market product grid?

product groupings

What happens if a firm picks too narrow of a set of segment?

It may fail to reach the volume of sales and profits it needs.

Is the size of the market in the market product grid exact or estimated?

estimated

5 Criteria to use in selecting the target segments:

1. Market Size
2. Expected growth
3, Competitive position
4. Cost of reaching that segment
5. Compatibility with the organizations objectives and resources

What is the purpose of developing a market-product grid?

To trigger marketing actions to increase sales and profits.

What example does chapter nine use to show marketing segmentation?

Wendy's

The place a product occupies in consumer's minds on important attributes relative to competitive products.

Product positioning

Changing the place a product occupies in a consumer's mind relative to competitive products.

Product repositioning

2 approaches to product positioning

1. Head to head positioning
2. Differentiation positioning

Involves competing directly with competitors on similar product attributes in the same target market.

Head to head positioning

Involves seeking a less competitive, smaller market niche in which to locate a brand.

Differentiation positioning

4 steps companies take in determining it's positioning.

1. Identify the important attributes for a product or brand class.
2. Discover how target customers rate competing products or brands with respect to these attributes.
3. Discover where the company's product or brand is on these attributes in the minds of potential customers.
4. Reposition the company's product or brand in the minds of potential customers.

A means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands as well as its own product or brand.

Perceptual Map

Explain what market segmentation is and when to use it.

Market segmentation involves aggregating prospective buyers into groups that (a) have common needs and (b) will respond similarly to a marketing action. Organizations go to the expense of segmenting their markets when it increases their sales, profits, and ability to serve customers better.

Identify the five steps involved in segmenting and targeting markets.

Step 1 is to group potential buyers into segments. Buyers within a segment should have similar characteristics to each other and respond similarly to marketing actions like a new product or a lower price. Step 2 involves putting related products to be sold into meaningful groups. In step 3, organizations develop a market-product grid with estimated sizes of markets in each of the market-product cells of the resulting table. Step 4 involves selecting the target market segments on which the organization should focus. Step 5 involves taking marketing mix actions —often in the form of a marketing program—to reach the target market segments.

Recognize the bases used to segment consumer and organizational markets.

Bases used to segment consumer markets include geographic, demographic, psychographic, and behavioral ones. Organizational markets use the same bases except for psychographic ones.

Develop a market-product grid to identify a target market and recommend resulting actions

Organizations use five key criteria to segment markets, whose groupings appear in the rows of the market-product grid. Groups of related products appear in the columns. After estimating the size of market in each cell in the grid, they select the target market segments on which to focus. They then identify marketing mix actions—often in a marketing program—to reach the target market most efficiently.

Explain how marketing managers position products in the marketplace.

Marketing managers often locate competing products on two-dimensional perceptual maps to visualize the products in the minds of consumers. They then try to position new products or reposition existing products in this space to attain the maximum sales and profits.

The purpose of market segmentation is to respond more effectively to the wants of groups of potential buyers in order to

increase sales and profits

Which of the following is an example of a single product with multiple market segments?

Johnson's Baby Oil is advertised as a skin softener for babies and as a makeup remover for women.

Synergy is the increased customer value achieved through

Performing organizational functions more efficiently.

There are five steps involved in segmenting and targeting a market. What should a marketer do once he or she has grouped products to be sold into categories?

develop a market-product grid and estimate size of markets

Which of the following is a criterion used in forming market segments?

there is the potential of marketing action to reach a particular segment

People who live active outdoor lives are part of the target market for REI, a retail outdoor outfitter. This suggests that REI would most likely segment the market based on which type of consumer segmentation basis?

psychographic

On a traditional market-product grid, the horizontal axis represents __________ and the vertical axis represents __________.

market segments; product groupings

Which of the following is a criterion used for selecting a target market segment?

expected growth

Consumer markets break behavioral segmentation into variables based on product features or usage rate. Organizational markets break demographic segmentation into variables based in part on __________ and __________.

NAICS code; number of employees

Magnavox sells its target markets many different types of TVs from flat screens to a 20" combination TV/DVDs. The larger sets can be outfitted with surround sound at a higher price than the smaller sets. The smaller sets are much less expensive and allow the viewer to watch a DVD without extra equipment. Magnavox is using which type of segmentation variable in this example?

behavioral segmentation

A good, service or idea, consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in the exchange for money or something else of value.

Product

What is a tangible asset?

An asset that a consumer can perceive with his or her five senses.

What is an intangible asset?

An asset that cannot be perceived with 5 senses and embody more abstract concepts.

What is a nondurable good?

An item consumed in one or a few uses such as food, products and fuel like gum.

What is a durable good?

Usually lasts over many uses like a car.

Intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value.

Service

Services exceed how much of its GDP? (percentage)

40%

A thought that leads to an action such as a concept for a new invention, or getting people out of vote.

Idea

A product can be

a person, place, service, or idea

What are the two broad categories of products?

Consumer products and business products

Products purchased by the ultimate consumer

Consumer products

Products that organizations buy that assist in providing other products for resale.

Business products (B2B Products or industrial products)

An example of a consumer and a business product.

Apple iMac computer because it can be for business as well as personal use.

4 Types of consumer products

1. Convenience product
2. Shopping product
3. Specialty product
4. Unsought product

Items that the consumer purchases frequently, conveniently and with a minimum of shopping effort.

Convenience product

Items for which the consumer compares several alternatives on criteria such as price, quality, or style.

Shopping product

Items that the consumer makes a special effort to search out and buy.

Specialty product

Items that the consumer does not know about or knows about but does not initially want.

Unsought products

A major characteristic of business products is that their sales are often the result of ________.

Derived demand or consumer products

Two classifications of business products

1. components
2. support products

Items that become part of the final product

Components

Items used to assist in producing other goods and services.

Support products

Examples of support products

Installations, accessory equipment, supplies, industrial services

Examples of components

Raw materials, assemblies or parts

A specific product that has a unique brand, size or price.

Product Item

Example of product item

Ultra downy softner

SKU

Stock keeping unit, which is a unique identification number that defines an item for ordering or inventory purposes

A group of product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range.

Product line

Example of a product line

Shoes and clothing from Nike's product line

All the product lines offered by an organization.

Product mix

Example of a product mix

Cray Inc, has a small mix of three super computer lines that that are sold mostly to governments and large businesses.

What does the Marketing Dashboard show us?

How marketers measure actual performance versus the goals set in new product planning.

True of False: New is hard to describe and difficult to define and there are several points of view for it.

True

Newness compared with existing products means

If a product is functionally different from existing products, it can be defined as new.

Newness in legal terms means

The FTC advises that the term new be limited to use with a product up to six months after it enters regular distribution.

What is the difficulty in how the FTC defines new.

The interpretation of regular distribution

Newness from the organizations perspective means

Successful organizations view newness and innovation in their products at three levels.

The three levels of how organizations view new.

1. Lowest level- Product line extension
2. Middle level- a significant jump in the innovation or technology.
3. Highest level- True innovation

Newness from the consumer's perspective means

Classifies new products according to the degree of learning required by the consumer

Three levels of consumer perspective

1. Continuous innovation
2. Dynamically continuous innovation
3. Discontinuous innovation

Lowest degree of consumer learning needed

Continuous innovation

Highest degree of consumer learning needed

Discontinuous innovation

Requires no new learning by consumers

Continuous innovation

Disrupts consumer's normal routine but does not require totally new learning.

Dynamically continuous innovation

Requires new learning and consumption patterns by consumers.

Discontinuous innovation

Example of continuous innovation

new improved shaver or detergent

Example of dynamically continuous innovation

Electric toothbrush, CD player, and automatic flash

What is the marketing strategy for continuous innovation?

Gain consumer awareness and wide distribution

What is the marketing strategy for dynamically continuous innovation?

Advertise points of differences and benefits to consumers

What is the marketing strategy for discontinuous innovation?

Educate consumers through product trial and personal selling

A statement that, before product development begins, identifies:
1. A well-defined target market
2. Specific customer needs, wants and preferences
3. What the product will be and do

Protocol

Research suggests that it takes ________ raw unwritten ideas to produce a single commercially successful new product.

3,000

8 marketing reasons for new product failures

1. Insignificant point of difference
2. Incomplete market and product protocol before product development starts.
3. Not satisfying customer needs on critical factors.
4. Bad timing
5. Too little market attractiveness
6. Poor product quality
7. Poor execution of the marketing mix: brand name, price, package, promotion, and distribution
8. No economical access to buyers

5 organizational problems in new product failure

1. Not really listening to the voice of consumer
2. Shipping stages in the new product process
3. Pushing a poorly conceived product into the market to generate quick revenue.
4. Encountering "groupthink" in a task force and committee meetings
5. Not learning critical takeaway lessons from past failures

The seven stages an organization goes through to identify business opportunities and convert them to a salable good or service.

New-product process

What are the seven stages in the new product process.

1. New-product strategy development
2. Idea generation
3. Screening and evaluation
4. Business analysis
5. Development
6. Market Testing
7. Commercialization

The stage of the new product process that defines the role for a new product in terms of the firm's overall objectives.

New product strategy development

The stage of the new product process that develops a pool of concepts as candidates for new products, building upon the previous stage's results.

Idea generation

An organization finds and executes creative new-product ideas by developing strategic relationships with outside individual organizations.

Open innovation

Customer and supplier suggestions focus on what the new product_________than simply______.

will do for the customer; what the customer wants

Employee and co-worker suggestions example

Employees should be encouraged to suggest new product ideas through suggestion boxes

An implied art that improves the aesthetics and usefulness of mass-produced products for users.

Industrial design

The stage of the new product process that internally and externally evaluates new-product ideas to eliminate those that warrant no further effort.

Screening and evaluation

The process of managing the entire customer experience within the firm.

Customer experience management

External evaluations with consumers that consist of preliminary testing of a new product idea rather than the actual product.

Concept tests

Specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections.

Business analysis

What does the business analysis stage of product development do?

It asses the total "business fit" of the proposed new product with the company's mission and objectives

Integrating the service component of the marketing mix with efforts to influence consumer demand.

Capacity management

Charging different prices for different times of the day or week to reflect the variations in demand for their services.

Off-peak pricing

The stage of the new product process that turns the idea on paper into a prototype.

Development

The stage of the new product process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy.

Market testing

Involves offering a product for sale on a limited basis in a defined area.

Test marketing

A technique that simulates a full-scale test market but in a limited fashion.

Simulated test markets

Why is test marketing so difficult?

A service is intangible and consumers can't see what they are buying and some are very expensive.

The stage of the new product process that positions and launches a new product in full scale production and sales.

Commercialization

What is the most expensive stage of new product development

Commercialization

Introducing the product sequentially into geographical areas of the US, to allow production levels and marketing activities to build up gradually to minimize the risk of new product failure.

Regional rollouts

A payment a manufacturer makes to place a new item on a retailer's shelf.

slotting fee

A penalty payment a manufacturer makes to compensate a retailer for sales its valuable shelf space failed to make.

Failure fee

Why do large grocery product manufacturers use regional rollouts?

Slotting fees and failure fees are very costly.

Speed as a factor in new product success is an example of what?

Time to market

Cross functional team members who conduct the simultaneous development of both the product and the production process.

Parallel development

Uses a "do it, try it, fix it" approach, encouraging continuing improvement even after the initial design.

Fast prototyping

What are many large companies doing to speed up time to market?

Building "fences" around their new product teams to keep them from getting bogged down in red tape.

For Apple, Inc., the life this organization depends on how it conceives, produces, and markets __________.

new products

Among consumer products, personal selling is especially important for

durable goods

Two broad categories of products widely used in marketing based on the type of user: __________ are purchased by ultimate consumers, whereas __________ are ones that assist directly or indirectly in providing products for resale.

consumer products; business product

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