Chapter 9

Criteria to use in forming market 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

While the percentages may not hold in a particular industry, the ______ rule suggests that a small fraction of customers provide most of a firm's revenues. 80/20 20/20 20/50 20/80 50/50

80/20

cannibalization

When new products or new chains simply steal customers and sales from the older, existing ones

Positioning strategy using perceptual maps begins with identifying the most important _________ of the product class to the target customers. market segments promotions attributes competitors

attributes

retention rate %

average percentage of customers who continue to patronize a store annually

Usage rate is a variable used in ______ segmentation. behavioral demographic psychographic geographic

behavioral

After developing a market-product grid and estimating market sizes, the marketer should select ______. its product groupings its target markets competitive strategies a marketing budget

its target markets

"For upscale American families who desire a carefree driving experience, Volvo is a premium-priced automobile that offers the utmost in safety and dependability," would best be described as a ______. segmentation slogan target market positioning statement tag line

positioning statement

The first step in positioning a product using a perceptual map is to identify ______. the promotion that will be used to highlight the product the important attributes of the product the competitors offering the same product how the product will be repositioned in the minds of customers

the important attributes of the product

market segmentation

Involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action.

Which two statements are true of product positioning? It is in relation to competitive products. It exists in the mind of the consumer. It requires consideration of the price of the product. Once established, it is permanent.

It is in relation to competitive products. It exists in the mind of the consumer.

After Zappos.com identified the needs of its target customer segment, what two marketing actions did the company take to fulfill the needs of its target customer? It started a customer loyalty program. It offered the option of returning shoes to its retail stores. It offered quick delivery and free returns. It offered a huge inventory of shoes.

It offered quick delivery and free returns. It offered a huge inventory of shoes.

Two Approaches to Product Positioning

1. Head to head positioning 2. Differentiation positioning

5 criteria to use in selecting target markets

1. Market size 2. Expected growth 3. Competitive position 4. Cost of reaching the segment 5. Organizational compatibility (objectives and resources)

Four general bases of segmentation

1. geographic segmentation 2. demographic segmentation 3. psychographic segmentation 4. behavioral segmentation

List the steps of the segmenting and targeting process

1. group potential buyers into segments 2. group products to be sold into categories 3. develop a market-product grid & estimate the size of markets 4. select target markets 5. take marketing actions to reach target markets

___________ segmentation organizes prospective customers into groups on the basis of where they live or work.

Geographic

Manufacturing a product only when there is an order from a customer is known as ______. product differentiation build-to-order segmentation mass customization

build-to-order

What measurement represents the financial worth of a customer to a company over the course of their relationship? disposable income customer lifetime value consumer confidence marketing return on investment

customer lifetime value

What three components are taken into consideration when calculating customer lifetime value? length of time the company has been in business customer loyalty customer usage rate the costs required to serve customers geographic location of customer base financial solvency of the firm

customer loyalty customer usage rate the costs required to serve customers

John is a supporter of environmental issues. He is constantly examining the "green" credentials of the products he purchases. It may be very effective to reach John with marketing actions based on ________ segmentation. geographic psychographic demographic ethical

psychographic

Head-to-head positioning

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

A business goes to the trouble and expense of segmenting its markets when ______. its customers are dissatisfied it has identified a group of affluent customers its sales are growing sharply it expects that it will increase sales and profits

it expects that it will increase sales and profits

Select the variables that are typically used in demographic segmentation. (Select all that apply) lifestyle region/city marital status usage rate income gender

marital status income gender

The third step of the market segmentation process is to develop a(n) _________ grid and estimate the size of the markets. input-outcome perceptual mapping geographic-demographic market-product

market-product

The third step of the market segmentation process is to develop a(n) _________ grid and estimate the size of the markets. perceptual mapping geographic-demographic market-product input-outcome

market-product

A fast food restaurant chain has identified day commuters as its market segment. If the chain wants to persuade this segment to buy its fast food products, what would be the most likely place for it to advertise? in health and fitness magazines on buses and with signs in parking lots in local newspapers and on the Internet through cable television commercials

on buses and with signs in parking lots

A balance between satisfying a customer's individual wants and achieving ________ benefits a firm's attempts at product differentiation and segmentation. head-to-head positioning psychographic segmentation cannibalization organizational synergy

organizational synergy

Developing a market-product grid is a step in the ______ process. consumer behavior managerial decision positioning segmenting and targeting

segmenting and targeting

The third step of the market segmentation process is to develop a market-product grid and estimate the ___________ of the markets. profitability size accessibility demographics

size

mass customization

tailoring products or services to the tastes of individual customers on a high-volume scale

To create a perceptual map, evaluations of important attributes of the relevant products are collected from whom? marketers non-users of these products competitors target customers

target customers

The first step in positioning a product using a perceptual map is to identify ______. how the product will be repositioned in the minds of customers the competitors offering the same product the promotion that will be used to highlight the product the important attributes of the product

the important attributes of the product

One main purpose of a perceptual mapping exercise is for the firm to see where competitors are positioned in the consumer's mind, and ______. whether it should seek a different target segment whether consumers will purchase the product where the firm is in relation to the competition if there is an opportunity to discount its product

where the firm is in relation to the competition

What analytical tool is used to display, in two dimensions, the locations of products or brands in the consumer's mind? A perceptual map A product graph An ideal position graph A market grid

A perceptual map

When an organization produces only a single product and attempts to sell it to two or more different market segments, which costs may it incur? Creating a separate promotional campaign Establishing mass customization Developing and producing several versions of the product Establishing a new channel of distribution

Creating a separate promotional campaign Establishing a new channel of distribution

Which product is the best example of multiple products directed at two or more distinct market segments? Betty Crocker cake mixes Custom-built homes Crest oral care products Muscle and Fitness magazine

Crest oral care products

When an organization produces only a single product and attempts to sell it to two or more market segments, it avoids which costs? Establishing a new channel of distribution Developing and producing several versions of the product Researching the chosen market segments Creating a separate promotional campaign

Developing and producing several versions of the product

In which of the following ways does the level of competition affect the attractiveness of a market segment? The less competition, the more attractive the segment is. The level of competition has no bearing on the attractiveness of a segment. The less competition, the less attractive the segment is. The level of competition only affects a market segment that is hard to reach.

The less competition, the more attractive the segment is.

build-to-order

manufacturing a product only when there is an order from a customer

Customer Lifetime Value Formula

$ margin x (retention rate % / 1 + discount rate % - retention rate %)

5 steps in segmenting and targeting markets

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

A product differentiation strategy should achieve which of the following? It should create a new product or brand that is unrecognizable to former customers. It should help consumers perceive the product as being different and better than competing ones. It should create a new and improved product with a big enough change to be worth the increased price. It should create a product that can be protected by patent.

It should help consumers perceive the product as being different and better than competing ones.

Which are specific segmentation strategies? (Select all that apply) Multiple products and multiple markets One product and multiple markets One product and one market Segments of one

Multiple products and multiple markets One product and multiple markets Segments of one

________ refers to the place a product occupies in the consumer's mind on important attributes relative to competitive products. Target marketing Marketing synergy Product positioning Market segmentation

Product positioning

What two questions should you answer affirmatively before you proceed with segmentation? Are the potential customers affluent? Would segmentation be worth doing? Is the market homogeneous? Is segmentation possible?

Would segmentation be worth doing? Is segmentation possible?

A firm wants to identify how each of its segments responds to each of its offerings in order to select which market to target. What tool would help the firm accomplish this task? a SWOT analysis a positioning statement a perceptual map a market-product grid

a market-product grid

perceptual map

a means of displaying in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how they perceive competing products or brands, as well as the firm's own product or brand

Differentiation positioning means that ______. a product competes on similar attributes in the same target market as competitors products are positioned for consumers who desire customization a product is positioned to operate in smaller, less-competitive niches marketers communicate with their customers via nonverbal methods

a product is positioned to operate in smaller, less-competitive niches

Marketing synergies often come at the expense of product synergies because

a single customer segment will likely require a variety of products, each of which will have to be designed and manufactured spending more on production

What criteria are used to select target markets? (Select all that apply) amount of competition for the segment cost of reaching the segment expected growth of segment behavioral characteristics of the segment how many segments the firm has

amount of competition for the segment cost of reaching the segment expected growth of segment

demographic segmentation

based on some objective physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective customers

psychographic segmentation

based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers

geographic segmentation

based on where prospective customers live or work (region, city size)

Demographic, psychographic, and geographic are ______. criteria for selecting target markets quadrants in positioning maps bases to segment consumer markets tools for estimating market size

bases to segment consumer markets

Segmenting on the bases of either product features desired by prospective customers or their actual usage rates are examples of _________ segmentation psychographic behavioral demographic geographic

behavioral

Where prospective customers buy, what benefits they seek, and how frequently they buy provide the bases for _________ segmentation. psychographic demographic sociological behavioral

behavioral

Grouping products into meaningful categories makes it easier for consumers to relate to them. The most logical grouping in the fast food industry that buyers would relate to would be ______. hamburgers, fish, and salads breakfast, lunch, dinner, and snacks food, drinks, and toys high price, medium price, and low price

breakfast, lunch, dinner, and snacks

Manufacturing a product only when there is an order from a customer is known as ______. product differentiation segmentation build-to-order mass customization

build-to-order

Mass customization is a step beyond a ________ strategy, because although the latter allows for good choice with quick delivery, it does not allow customers unlimited options for features. segments of one diversification cannibalization build-to-order

build-to-order

The Ann Taylor chain of stores has a problem with ________ from its sister chain Ann Taylor LOFT, whose sales have surpassed the the original Ann Taylor stores and have made it harder for them to reach their target customers. internal competition co-branding cannibalization differentiation positioning

cannibalization

When a business's own new product or new chain is stealing customers and sales from its older, existing products it is known as ______. cannibalization internal competition segments of one head-to-head positioning

cannibalization

Product repositioning refers to ______. a means of displaying or graphing in two dimensions the location of products within a store implementing new methods of distribution or new retail locations changing the place a product occupies in a consumer's mind relative to competitive products moving a product sold in a retail environment to a more visible location

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

A marketer has various groups to target but notices that the needs of the various segments aren't very different. What should the marketer do in this instance? disregard these market segments altogether continue to look for differences in the needs of the buyers in the segments treat each group as unique and market to them differently combine the various groups into fewer segments

combine the various groups into fewer segments

Steve Jobs' product matrix for Apple's computer products provided a segmentation strategy based on which two elements? consumer and professional sectors desktop and laptop computers innovative advertising and engagement distribution through specialized retail stores

consumer and professional sectors desktop and laptop computers

In developing a positioning strategy, a perceptual map is used to display the position of the products or brands in the minds of ______. consumers brand marketers retailers competitors

consumers

positioning statement are derived from the company's

customer value proposition

The ultimate criterion for an organization's marketing success is that __________ as a result of increased synergies.

customers should be better off

The original target customer for Zappos.com had which two characteristics? customers who want a large selection of shoes customers that value free return policies customers that need face-to-face help customers that value trying on shoes prior to purchase

customers who want a large selection of shoes customers that value free return policies

Because more than half of all U.S. households are made up of only one or two persons, Campbell's packages meals with only one or two servings, which is an example of ________ segmentation. behavioral demographic psychographic loyalty

demographic

Crest toothpaste markets its fruit flavored toothpaste to children, and its whitening toothpaste to adults. This is an example of ______ segmentation. behavioral demographic geographic psychographic

demographic

Segmentation based on gender, age, or occupation in would be considered ______ segmentation. demographic behavioral psychographic geographic

demographic

Since Xerox makes basic copiers for light use and copiers for heavy use with many features, Xerox takes into account the number of employees each firm has when segmenting its organizational markets. This is an example of ______ segmentation. behavioral demographic psychographic geographic

demographic

After a marketer has identified a group with specific needs and benefits, the marketer should then ______. try to increase the size of the group by highlighting the groups' specific need attempt to persuade the group to adopt a different set of needs that aligns with the company's product develop specific marketing actions that will satisfy that groups' particular needs assess whether or not the competition is already meeting the groups' needs

develop specific marketing actions that will satisfy that groups' particular needs

$ margin is the

difference between the average customer revenue per year and the average cost to serve this customer

In head-to-head positioning a company positions its product to compete directly against competitor's products, while ________ positioning allows for more indirect competition. differentiation complementary segmentation face-to-face

differentiation

When McDonald's offers healthy menu items in hopes of avoiding competition with Wendy's and Burger King, it uses ________ positioning. head-to-head differentiation complementary homogeneous

differentiation

What are two approaches to product positioning? segmentation face-to-face differentiation head-to-head complementary

differentiation head-to-head

Synergies, in the context of segmentation, are ________ that can be achieved by focusing on horizontal or vertical lines within the market-product matrix. efficiencies innovations markups shortcuts

efficiencies

Select the item that is NOT a part of the segmenting and targeting process. evaluating the marketing mix developing a market-product grid taking marketing actions to reach markets selecting target markets

evaluating the marketing mix

Select the item that is NOT a part of the segmenting and targeting process. selecting target markets taking marketing actions to reach markets evaluating the marketing mix developing a market-product grid

evaluating the marketing mix

Potential for increased profit and similarity of needs of potential buyers within a segment are criteria used to ______. develop a market-product grid position a product for a target market match a product with a target market form market segments

form market segments

Frequent-flyer programs used by airlines focus on increasing the usage rate, and are an example of ______. cannibalization frequency marketing psychographic segmentation head-to-head positioning

frequency marketing

When Macy's promotes and sells different apparel based on the location of its retail stores is it an example of ______ segmentation. geographic psychographic strategic product

geographic

Dollar Rental Car, Avis, and Hertz compete directly on similar attributes in the same target market, with ________ positioning. homogeneous complementary head-to-head differentiation

head-to-head

The 80/20 rule helps marketers recognize the importance of ______. homogeneous markets successful promotions affluent customers heavy users

heavy users

Market segments are the relatively ________ groups of prospective buyers that result from the market segmentation process. homogenous stable loyal affluent

homogenous

product positioning statement

identifies the target market and needs satisfied, the product (service) class or category in which the organization's offering competes, and the offering's unique benefits or attributes provided

developing a market-product grid means

identifying and labeling the markets and product groupings

What two outcomes result from effective market segmentation? assessing the competition developing a persuasive argument identifying specific marketing mix actions forming meaningful groupings

identifying specific marketing mix actions forming meaningful groupings

The fundamental reason a business firm engages in market segmentation is to ______. create conditions for customer loyalty identify unsatisfied needs increase its sales and profits better understand its customers

increase its sales and profits

product differentiation

involves a firm using different marketing mix actions, such as product features and advertising, to help consumers perceive the product as being different and better than competing products

differentiation positioning

involves seeking a less-competitive, smaller market niche in which to locate a brand

What is a variable used in psychographic segmentation? lifestyle occupation awareness age

lifestyle

A ________ is a framework to relate the market segments of potential buyers to products offered or potential marketing actions. BCG model positioning matrix product perceptual map market-product grid

market-product grid

When Apple focuses its marketing efforts on a single segment to which it promotes all of its relevant products, it uses _________ synergies. segmentation product marketing homogeneous

marketing

If Product Synergies are Emphasized

marketing will have to address the concerns of a wide variety of consumers, which costs more time and money

An eyeglass manufacturer produces all of the frames for its reading glasses and then inserts the eyeglass lens based on the different magnification needs of its customers. This is an example of ______. mass customization cannibalization co-branding differentiation positioning

mass customization

Dell manufactures all the necessary components for its desktops and laptops. It assembles these components into basic computers that can be sold in stores and also assembles products to the exact specifications of customers. Dell is engaged in ______. mass customization cannibalization diversification co-branding

mass customization

Tailoring goods or services to the tastes of individual customers on a high-volume scale is a segmentation strategy known as ______. diversification cannibalization product repositioning mass customization

mass customization

today's Internet ordering and flexible manufacturing and marketing processes have made ________ possible. cannibalization product positioning mass customization perceptual maps

mass customization

Product positioning refers to the place a product occupies in the consumer's _________ based on important attributes relative to competitive brands.

minds

Ford produces many types of vehicles from compact cars to trucks, each with a different type of customer in mind. This is an example of which type of segmentation strategy? multiple products and multiple markets one product and multiple markets one product and one market mass customization

multiple products and multiple markets

When expenses are greater than the potentially increased sales from segmentation, a firm should ______. consider mass customization segment only on the basis of simple demographics like gender discontinue the product in question not attempt to segment its market

not attempt to segment its market

Behavorial Segmentation

observable actions or attitudes by prospective customers- such as where they buy, what benefits they seek, how frequently they buy and why they buy

The increased customer value associated with ________ may take the form of more products, improved quality on existing ones, or lower prices. head-to-head positioning organizational synergy cannibalization environmental scanning

organizational synergy

A market-product grid shows the relationship of market segments either to products offered or to ______. competitor's product offerings potential marketing actions by an organization costs for reaching those segments important attributes of the brand

potential marketing actions by an organization

When Apple promotes a single product to all targeted segments, it uses _________ synergies. marketing segmentation heterogeneous product

product

The _________ strategy involves a firm using different marketing mix activities to help consumers perceive the product as being different and better than competing products. specialized offering perceptual mapping product differentiation market segmentation

product differentiation

In most segmentation situations, as is the case for Apple's computer products, ______. opportunities for product synergies are eliminated single product lines fit into exclusive market niches opportunities for marketing synergies are eliminated product lines and market segments overlap

product lines and market segments overlap

_________ ____________ is the place a product occupies in consumers' minds based on important attributes relative to competitive products

product positioning

Market segments are made up of ________ that are relatively similar to one another. prospective buyers retail outlets advertising campaigns existing products

prospective buyers

Product __________ involves changing the place a product occupies in a consumer's mind relative to competitive products. Listen to the complete question

repositioning

Customer Lifetime Value (CLV)

represents the financial worth of a customer to a company over the course of their relationship

A restaurant has identified a target market of elderly patrons who eat early in the evening, a slower period for the business. The best communication strategy to reach this group would be to ______. implement search engine marketing using Google Adwords distribute flyers on college campuses run a print ad with coupon in a senior center program schedule run radio commercials on a pop music station use Internet pop-ups with printable coupons

run a print ad with coupon in a senior center program schedule

A business firm should ________ its markets so it can respond more effectively to the needs of its potential buyers, which should result in increased sales and profits. combine segment disregard rank

segment

Mass customization is one of several ________ strategies. positioning segmentation development cannibalization

segmentation

A market-product grid shows various product offerings and the competitive firms that sell them. a demand estimate for each. segments of prospective buyers. the locations of purchase for each.

segments of prospective buyers.

A market-product grid shows various product offerings and the competitive firms that sell them. segments of prospective buyers. a demand estimate for each. the locations of purchase for each.

segments of prospective buyers.

Market size and compatibility with the organization's objectives and resources are two of the criteria used to ______. reposition products select target markets reach the intended audience create market segments

select target markets

The next step after developing a market-product grid and estimating market sizes in the segmentation process is to ________. group buyers into segments create a perceptual map select target markets take marketing actions

select target markets

The market-product grid can be used to identify both product and market ________ that may be available. distribution channels psychographics positions synergies

synergies

The final step of the segmentation process is to ______. position all the firm's products take marketing actions to reach the target markets select the appropriate target markets create a market-product grid with product groupings

take marketing actions to reach the target markets

The segmentation and targeting process should result in ______. a good understanding of the issues that will require looking into the development of an action plan in the form of a marketing program an estimate of demand for a new product offering a comprehensive list of competitive offerings

the development of an action plan in the form of a marketing program

organizational synergy

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

product positioning

the place a product occupies in consumers' minds based on important attributes relative to competitive products

When a firm's product is near a competitor's product on a perceptual map, these products have head-to-head positioning, meaning ______. they operate in smaller, less-competitive niches these products are most appropriate for consumers who respond to logical arguments they compete on similar attributes in the same target market they communicate with their customers via nonverbal methods

they compete on similar attributes in the same target market

Why is it important for a firm to group its products into meaningful categories? to make it seem like the firm offers a wide variety of goods to make it easier for firms to know where its sales come from to make it easy for buyers to relate to the firm's offerings to make the customer feel like it has many choices

to make it easy for buyers to relate to the firm's offerings

When it comes to selecting target markets, the best product cannot be successful, no matter how large the target market is, if that segment is ______. unsegmented, and no good method exists to segment it too expensive or impossible to reach too homogeneous growing too rapidly

too expensive or impossible to reach

Product positioning relies on _________ evaluations of a product's important attributes. consumers' marketers' competitors' changes in

consumers

A key to positioning a product or brand effectively is to discover the perceptions in the minds of potential customers. This involves taking four steps:

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

3 specific segmentation strategies

1. one product and multiple market segments 2. multiple products and multiple market segments 3. segments of one, or mass customization

80/20 rule

a concept that suggests 80 percent of a firm's sales are obtained from 20 percent of its customers

market-product grid

a framework to relate the market segments of potential buyers to products offered or potential marketing actions

product repositioning

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

True or false: It is always a good idea to segment a market.

false

McDonald's promotes coffee in Seattle and orange juice in Orlando. This is an example of ____________ segmentation.

geographic

Miller Engine company has its sales representatives personally visit its customers located in metropolitan statistical areas, but only make sales calls via the telephone for its customers located in micropolitan statistical areas. The company has made this decision based on ______ segmentation. geographic psychographic demographic behavioral

geographic

Segmentation based on the size of city in which prospective customers live would be considered ______ segmentation. behavioral geographic psychographic personality

geographic

Nielsen PRIZM uses ________ segmentation to classify market segments based on the belief that "birds of a feather flock together," with groups living near one another having similar interests and buying similar offerings. stereotype psychographic ethical sociological

psychographic

Personality traits, lifestyles, and needs of prospective customers provide the bases for _________ segmentation. demographic sociological behavioral psychographic

psychographic

What are the four bases used to segment consumer markets? psychographic demographic social status profitability geographic behavioral

psychographic demographic geographic behavioral

In a weaker economy, some high-end brands may seek to become more attractive to additional customer segments. One way to do this is to __________ the brand. cheapen identify reduce reposition

reposition

If consumers' tastes shift, marketers may need to change how these consumers think about a product in a process known as ______. appeal adjustment dynamic positioning perceptual discovery repositioning

repositioning

Ideally, a positioning statement should identify which three things? the product's unique benefits the category of the firm that the product belongs to the different ways the product will be advertised the number of competitors offering the same product the target market and needs satisfied

the product's unique benefits the category of the firm that the product belongs to the target market and needs satisfied

usage rate

the quantity consumed or patronage- the number of store visits- during a specific period

discount rate %

the time value of money adjusted for the risk associated with the company's competitive status, its competitive environment and general economic conditions