61 terms

Marketing Chapter 9

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market segmentation
involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action
market segments
the relatively homogeneous groups of prospective buyers that result from the market segmentation process; each consists of people who are relatively similar to each other in terms of their consumption behavior
product differentiation
the existence of different market segments has caused caused firms to use this marketing strategy; involves a firm using different marketing mix activities, such as product features and advertising, to help consumers perceive a product as being different and better than competing products; the perceived differences may involve physical features, such as size or color, or non-physical ones, such as image or price
differentiation
the process of adding a set of meaningful and valued differences to distinguish the company's offering from competitors' offerings
the link between the various buyers' needs and the organization's marketing program
the process of segmenting a market and selecting specific segments as targets
effective market segmentation
does two key things: forms meaningful groupings (people or organizations should be grouped into a market segment according to the similarity of their needs and the benefits they look for in making a purchase) and develops specific marketing mix actions (the market segments must relate to specific marketing actions that the organization can take; these actions may involve separate offerings or other aspects of the marketing mix, such as price, promotion, or distribution strategies
segmentation strategies
one product and multiple market segments, multiple products and multiple market segments, segments of one, or mass customization
one product and multiple market segments
when an organization produces only a single product or service and attempts to sell it to two or more market segments; the organization avoids the extra costs of developing and producing additional versions of the product; the incremental costs of taking the product into new market segments are typically those of a separate promotional campaign or a new channel of distribution; examples are magazines and books
multiple products and multiple market segments
multiple products are targeted or aimed at multiple market segments and different types of customers; producing different products is more expensive than producing only a single product, but the strategy is very effective if it meets customers' needs better, doesn't reduce quality or increase price, and adds to sales revenues and profits; with a two-tier marketing strategy, a firms offers different variations of the same basic offering to high-end and low-end segments; examples are lines of cars and jeans
segments of one, (mass customization)
tailoring goods or services to the tastes of individual customers on a high-volume scale because each customer has unique needs and wants and desires tender loving care
built-to-order (BTO)
manufacturing a product only when there is an order from a customer
organizational synergy
the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently
cannibalization
new products or new chains steal customers and sales from the older, existing ones
steps in segmenting and targeting markets
group potential buyers into segments, groups products to be sold into categories, develop a market-product grid and estimate size of markets, select target markets, take marketing actions to reach target markets
group potential buyers into segments
first step in segmenting and targeting markets; involves meeting some specific criteria that answer the question: would segmentation be worth doing and is it possible?
group products to be sold into categories
second step in segmenting and targeting markets; a firm's products must be grouped into meaningful categories so that customers can relate to them; the reason supermarkets and department stores are organized into product groups with departments or aisle containing related merchandise; products are grouped by judgment, the qualitative aspect of marketing
develop a market-product grid and estimate size of markets
third step in segmenting and targeting markets; labeling the markets (horizontal rows) and products (vertical columns) and estimating the size of the market in each cell (the market-product combination)
select target markets
fourth step in segmenting and targeting markets; a firm must take care to choose its target market segments carefully (if it picks a set of segments too narrowly, it may fail to reach the volume of sales and profits it needs; if it selects a set of segments too broadly, it may spread its marketing efforts so thin that the extra expenses are more than the increased sales and profits)
take marketing actions to reach target markets
fifth step in segmenting and targeting markets; the purpose of segmenting a market and then selecting target segments is to trigger marketing actions to increase sales and profits (this means that someone must develop an action plan)
steps in market segmentation, targeting, and positioning
market segmentation (identify segmentation variables and segment the market, develop profiles of resulting segments), market targeting (evaluate attractiveness of each segment, select the target segment(s)), positioning (identify possible positioning concepts for each target segment, select, develop, and communicate the chosen positioning concept)
criteria to use in forming segments
simplicity and cost-effectiveness of assigning potential buyers to segments, potential for increased profit, similarity of needs of potential buyers within a segment, difference of needs of buyers among segments, potential of a marketing action to reach a segment
bases for segmenting consumer markets
geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation
geographic segmentation
based on where prospective customers live and work (region, city size, metropolitan statistical area (MSA), density, climate); the segmentation strategy used by first generation cellular phones was based on this
demographic segmentation
based on some objective physical (gender, race), measurable (age, income, household size), or other classification attribute (birth era, occupation) of perspective customers
psychographic segmentation
based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers
behavioral segmentation
based on some observable actions or attitudes by prospective customers, such as where they buy, what benefits they seek, how frequently they buy, and why they buy (product features, usage rate, occasions, benefits, uses, attitudes)
usage rate
the quantity consumed or patronage (store visits) during a specific period
frequency marketing
a program that encourages consumers to use the product or service repeatedly
80/20 rule
a concept that suggests that 80% of a firm's sales are obtained from 20% of its customers; the percentages are not really fixed at exactly 80% and 20% but suggest that a small fraction of customers provides a large fraction of a firm's sales
bases for segmenting business markets
demographic, operating variables, purchasing approaches, situational factors, personal characteristics
segmentation variables for consumer markets
customer characteristics (include geographic, demographic, and psychographic variables) and buying situations (refers to benefits sought and consists of product features, quality, service, and warranty)
segmentation variables for organizational markets
customer characteristics (geographic and demographic (NAICS category of the buying location, the number of employees, company sales) variables) and buying situations (benefits sought (product features, technical support), nature of the good (kind, product form, where and how it is used), and buying conditions (consist of purchase location, who buys, type of buy))
levels of market segmentation
mass marketing, market segment, market sector, niche marketing, local marketing, individual customer marketing and mass-customization
mass marketing
the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers
market segment
a group of customers who share a similar set of wants
market sector
a set of customers with similar characteristics, but not necessarily similar wants
niche marketing
narrowly defined group seeking a distinctive mix of benefit; segments are divided into subsegments
local marketing
marketing programs tailored to the needs and wants of local customer groups
individual customer marketing and mass-customization
ultimate level of segmentation; segments of one, customized marketing, or one-to-one marketing; the ability of a company to prepare on a mass basis individually designed products, services, programs, and communications to meet each customer's requirements
market-product grid
a framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization; each cell in the grid can show the estimated market size of a given product sold to a specific market segment;
developing a market-product grid
identifying and labeling the markets (horizontal rows) and product groupings (vertical columns)
estimating size of markets
the size of the market in each cell (the unique market-product combination) of the market-product grid must be estimated
market preference patterns
homogeneous preferences, diffused preferences, clustered preferences
homogeneous preferences
consumers have roughly the same preferences
diffused preferences
consumers vary greatly in preference
clustered preferences
the market has distinct preference clusters called natural market segments
criteria to use in selecting target segments
market size, expected growth, competitive position, cost of reaching the segment, compatibility with the organization's objectives and resources
additional segmentation criteria
ethical choice of market targets, segment-by-segment invasion plans, segment interrelationships and supersegments, intersegment cooperation
target market selection
single-segment concentration (the company gains a strong knowledge of the segment's needs and achieves a strong market presence), selective specialization (the firm selects a number of attractive segments), product specialization (the firm makes a certain product that it sells to several segments), market specialization (the firm concentrates on serving many needs of a particular customer group), full market coverage (the firm attempts to serve all customer groups with all the products they might need)
undifferentiated marketing
the firm ignores segment differences and goes after the whole market with one offering; it designs a product and a marketing program that will appear to the broadest number of buyers; it relies on mass distribution and mass advertising
effective segmentation
measurable (size, purchasing power, profiles of segments can be measured), substantial (segments must be large or profitable enough to serve), accessible (segments can be effectively reached and served), differentiable (segments must respond differently to different marketing mix elements and actions), actionable (must be able to attract and serve the segments)
differences worth establishing
important (the difference must be important in that it delivers a highly valued benefit to a sufficient number of buyers), distinctive (the difference must be delivered in a distinctive way), superior (the difference must be superior to other ways of obtaining the benefit), preemptive (the difference should be first and not able to be easily copied by competitors), affordable (the buyer must be able to pay for the difference; it must be affordable), profitable (the company must be able to introduce the difference profitably)
differentiation dimensions
products, services, personnel, channels, image
positioning
the act of designing the company's offering and image to occupy a distinctive place in the target market's mind
product positioning
the place a product occupies in consumers' minds on important attributes relative to competitive products
product repositioning
changing the place a product occupies in consumers' minds relative to competitive products
head-to-head positioning
involves competing directly with competitors on similar product attributes in the same target market
differentiation positioning
involves seeking a less competitive, smaller market niche in which to locate a brand
value proposition
a cogent reason why the target market should buy the product
perceptual map
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 relative to its own and then take marketing actions
major positioning errors
under-positioning (occurs when the brand is seen as just another entry in a crowded marketplace), over-positioning (occurs when buyers have an image of the brand which is too narrow), confused positioning (when buyers have a confused image of the brand resulting from the company's making too many claims or changing the brand's positioning too frequently), doubtful positioning (occurs when buyers find it hard to believe the brand claims in view of the products features, price, or manufacturer)