Key Terms CH.6

CH6LO1 Explain market segmentation and its relevance to marketing

-Market segmentation involves aggregating prospective buyers into groups that have common needs and respond similarly to marketing programs. -In the marketing world, there are two main market segments: (1) the consumer market and (2) the business market.

CH6LO3 Describe the elements included in target market profiles and personas (4)

-Marketers define their target markets by looking at four main variables: (1) geographics, (2) demographics, (3) psychographics, and (4) behaviouristics. -Geographics looks at where a target market lives, such as a country, region, province, city size, and type of location, such as urban, suburban, or rural. -Demographics includes identifying ranges for age, gender, family composition, income, occupation, education, ethnic background, and home ownership. -Psychographics involves understanding consumer attitudes to life, values, personalities, general interests, opinions, and activities. -Behaviouristics looks at why consumers buy a product, the product benefit, how and when the product is used, and whether consumers are brand loyal in their purchase behaviour. Usage rate also plays a role in this information. -Personas are character descriptions of a product's typical customers in the form of fictional character narratives, complete with images that capture the personalities, values, attitudes, beliefs, demographics, and expected interactions of a typical user with a brand.

CH6LO5 Understand the concept of product positioning (4)

-Product positioning refers to the image of a branded product relative to the competition. -Marketers create positioning statements to clearly and simply outline the positioning of a product. -Repositioning includes a shifting of the product image and adjusting its marketing mix to more accurately meet consumer needs. -Positioning maps are otherwise known as perceptual maps. They visually represent how products or product groups are positioned within a category to consumers.-

CH6LO4 Have insight into the scope of segmentation analytics

-Segmentation analytics analyzes market segments and provides data to help target specific groups with high levels of accuracy. -Segmentation analytics data clusters consumers into lifestyle segments and provides information that details geographics, demographics, psychographic, and behaviouristic data by postal code, defined shopping areas, or neighbourhood.

CH6LO6 Outline the steps involved in segmenting a market

-Segmenting the market involves 10 steps that require analytical skills, strategic thinking, an understanding of the consumer, a vision of where the market is heading, and how this fits with company objectives. -The 10 market segmentation steps start with a review of company and business unit objectives and continues by clustering consumer needs, conducting a SWOT analysis, and finally identifying the segment and product potential by analyzing its forecasted sales, and pinpointing marketing budgets and profit projections.

CH6LO2 Detail the different forms of market segmentation

There are four different market segmentation strategies: mass marketing, segment marketing, niche marketing, and individualized marketing.

value proposition

a cogent reason why the target market should buy the product

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

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;

market segment

a group of customers who share a similar set of wants

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

frequency marketing

a program that encourages consumers to use the product or service repeatedly

market sector

a set of customers with similar characteristics, but not necessarily similar wants

demographic segmentation

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

psychographic segmentation (2)

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

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

product repositioning

changing the place a product occupies in consumers' minds relative to competitive products

homogeneous preferences

consumers have roughly the same preferences

diffused preferences

consumers vary greatly in preference

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))

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)

bases for segmenting business markets

demographic, operating variables, purchasing approaches, situational factors, personal characteristics

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

additional segmentation criteria

ethical choice of market targets, segment-by-segment invasion plans, segment interrelationships and supersegments, intersegment cooperation

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)

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?

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)

bases for segmenting consumer markets

geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation

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

market preference patterns

homogeneous preferences, diffused preferences, clustered preferences

developing a market-product grid

identifying and labeling the markets (horizontal rows) and product groupings (vertical columns)

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)

market segmentation

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

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

built-to-order (BTO)

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

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 selecting target segments

market size, expected growth, competitive position, cost of reaching the segment, compatibility with the organization's objectives and resources

local marketing

marketing programs tailored to the needs and wants of local customer groups

levels of market segmentation (7)

mass marketing, market segment, market sector, niche marketing, local marketing, individual customer marketing and mass-customization

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)

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

niche marketing

narrowly defined group seeking a distinctive mix of benefit; segments are divided into subsegments

cannibalization

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

segmentation strategies

one product and multiple market segments, multiple products and multiple market segments, segments of one, or mass customization

differentiation dimensions

products, services, personnel, channels, image

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

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

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)

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

positioning

the act of designing the company's offering and image to occupy a distinctive place in the target market's mind

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

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

organizational synergy

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

clustered preferences

the market has distinct preference clusters called natural market segments

product positioning

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

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

usage rate

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

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

mass marketing

the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers

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

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)

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

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)

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