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What is targeting? What criteria are used to determine which segment(s) to target?
Firms must take care to choose its target market segments carefully. If it picks too narrow a set of segments, it may fail to reach volume of sales and profits. If it picks to broad it may spread its marketing efforts so thin that the extra expenses exceeds increased sales and profits. Market size - Estimated size of the market within the segment Expected growth - small market may grow to be a big market Competitive position - Less competition within the market the better Cost of reaching the segment - If the costs outweigh profits do not pursue Compatibility with objectives and resources - Don't go out of the company's way to reach a segment.
What is a market-product grid?
Market product grid - A framework to relate the market segments of potential buyers to products offered or potential marketing actions
What is market segmentation? What is it used for?
Market segmentation - involves aggregating prospective buyers into groups with common needs and that will respond similarly to a marketing action Used in order to select target markets.
What are the trade-offs that one must consider when segmenting markets?
Need to find the ideal balance between satisfying a customers individual wants and achieving organizational synergy, the increased customer value achieved by performing organizational functions Both the customer and the company should be better off after segmenting. The company should be seeing increased revenue and profits. Want to avoid Cannibalization - creating a new product or adding features that steal customers from preexisting products.
How are markets segmented? What are the bases of segmentation used in consumer markets? What are the key criteria in forming market segments?
One product and multiple markets - Producing one single product or service and attempting to sell it to two or more market segments o Avoids costs of developing/producing additional versions o Extra costs are only new promotional campaigns and marketing Multiple products and multiple market segments - Producing multiple products for multiple different markets each with their own distinct applicability o Ford produces cars, SUVS, and pick up trucks for all different consumers o More expensive but effective Segments of one or mass customization - Manufacturing a product only when there is a customer order for the product. Criteria: Simplicity and cost effectiveness of assigning potential buyers to segments - Identifying potential buyers and then cost effectively assigning them to specific segments Potential for increased profit - Maximizing ROI through segmentation, if this is already maxed then there is no need to segment. Similarity of needs of potential buyers within a segment - Potential buyers should be similar in segments by their needs, which will in return lead to similar marketing actions Difference of needs of buyers among segments - If needs of segments aren't very different combine them, different segments require different marketing actions, which increases costs Potential of a marketing action to reach a segment - Requires a simple yet effective marketing action. Don't create expensive/complicated actions just to reach a segment
What is product differentiation? How are market segmentation and product differentiation related concepts?
Product differentiation - Strategy involving a firm using different marketing mix actions such as product features and advertising, to help consumers view their products as different/better Product differentiation and segmentation are related because a company may change a certain product in order to reach a specific marketing segment.
What is product positioning? What are the two approaches that one can use to position products? How are perceptual maps used in positioning? What does it mean to reposition at product?
Product positioning - The place where a product lies in a consumers mind based on attributes compared to competitors 1. Head-to- head positioning - Involves competing directly with others on product attributes in the same target market 2. Differentiation positioning - Involves seeking a less-competitive, smaller market niche in which to locate a brand Perceptual maps: o 1. Identify the important attributes for a product or brand class o 2. Discover how target customers rate competing products or brands with respect to these attributes o 3. Discover where the company's product or brand is on these attributes in the minds of potential customers o 4. Reposition the company's product or brand in the minds of potential customers Change something about the product so that people think of it different and position it differently in their minds
Which of the following statements is most accurate about build-to-order (BTO) manufacturing?
BTO involves manufacturing products only when a customer places an order. Built-to-order (BTO) refers to manufacturing products only when a customer places an order. This system falls a bit short of total mass customization because customers do not have an unlimited number of features they can choose from.
Which two of the following demographic segmentation variables would firms use to segment organizational markets?
NAICS code and number of employees The segmentation bases for U.S. organizational markets include geographic, demographic, and behavioral segmentation bases. The demographic segmentation base includes variables such as NAICS code, NAICS sector, number of employees, and annual sales.
Which of the following is an example of a single product with multiple market segments?
Residence Inn only offers suites that are larger than traditional hotel rooms, appealing to both business travelers and families with children. A one product and multiple market segment strategy simply involves producing a single product and selling it to two or more market segments, as is the case with Residence Inn's hotel suites.
Walmart is opening 12 stores to test the concept of Walmart Express, stores that are one-tenth the size of its supercenters and sell groceries. One risk to this effort is __________.
cannibalization Cannibalization occurs when new products introduced by a brand, or even its own new chain steal customers and sales from the older, existing ones. It is possible that the Express stores could take customers from traditional Walmart stores.
When McDonald's introduced its low-fat McLean Deluxe hamburger, it used __________ to avoid direct competition with Wendy's and Burger King.
differentiation positioning Differentiation positioning involves seeking a less competitive, smaller market niche in which to locate a brand.
Positioning a product or brand effectively involves taking four steps, one of which includes
discovering where the company's product or brand is on the relevant attributes in the minds of potential customers. Companies take four steps: (1) identify the important attributes for the 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 of potential customers and (4) reposition the company's product or brand in determining its positioning in the minds of customers
An important part of creating a market-product grid is to
estimate the size of the markets. Developing a market-product grid means identifying and labeling the markets (or horizontal rows) and product groupings (vertical columns). Each cell in the grid can show the estimated market size of a given product sold to a specific market segment
demographic segmentation of consumer markets example
ethnicity Consumer demographic variables are based on some objective physical (gender, race), measurable (age, income), or other classification attribute (household size, birth era, education, occupation) of prospective customers.
A business firm uses market segmentation to respond more effectively to the wants of groups of potential buyers in order to
increase sales and profits. A business firm segments its markets so it can respond more effectively to the needs and wants of groups of potential buyers in order to increase its sales and profits.
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, is referred to as a __________.
perceptual map
Dollar Shave Club asks men to "Shave Money, Shave Time" in its commercials; it offer high-quality blades available by mail for a few dollars a month. Dollar Shave Club's advertising promotes the time- and money-saving aspects of its product as an example of
product differentiation.
Kitchen World has put its offerings in store locations based upon the cooking activity—the way consumers prepare and present various meals. Everything for baking is in one spot, while food preparation utensils are in another, and table settings are in yet another. This strategy uses
product groupings. Finding a means of grouping the products a firm sells into meaningful categories is as important as forming customers into segments. If the firm has only one product or service, this isn't a problem. But when it has dozens or hundreds, these must be grouped in a way that buyers can relate to them.
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 consumer segmentation basis?
psychographic Psychographic segmentation includes the lifestyle segmentation variable, which determines how consumers like to spend their time and how they want to live—an active, outdoor lifestyle that meshes with REI's offerings.
Potential buyers within a market segment should be
similar in terms of the advertising media used. One of the five criteria to use in forming segments is that potential buyers within a segment should be similar in terms of common needs that, in turn, lead to a common marketing action, such as product features sought or advertising media used.
criterion used to select a target market segment?
there are five criteria used for selecting a target segment: 1. market size, 2. expected growth, 3. competitive position, 4. cost of reaching the segment, 5. and compatibility with the organization's objectives and resources. There are also five criteria to use in forming market segments, which are often confused with those used to select segments.