Market-Based Management Chapter 5: Market Segmentation and Segmentation Strategies

Customer Relationship Marketing

A range of one-on-one relationship marketing programs based on the level of company and customer value

Which of the following is true about database marketing? A) It is at the core of customer relationship marketing. B) It assumes that all customers have the same needs. C) It prioritizes creating efficiency through technological advances over building customer relationships. D) It treats all customers as the same, instead of assuming that each customer is unique. E) It avoids building a more personal relationship between the business and the customer.

A) It is at the core of customer relationship marketing.

Which of the following is true of needs-based market segments? A) To make the segments actionable, the observable demographics and behaviors have to be determined. B) Relevant demographics that cause differences in needs include investments, size of investment portfolio, and portfolio diversification. C) The main advantage is that individual customers who fall into each segment can be identified. D) The main disadvantage is that the segments are not directly based on specific customer needs. E) The usage behaviors that cause differences in needs include income and assets.

A) To make the segments actionable, the observable demographics and behaviors have to be determined.

Growth-oriented entrepreneurs differ from cost-focused sustainers in that growth-oriented entrepreneurs ________. A) are more sophisticated in their operations B) have a lower level of formal education at the leadership level C) are more interested in maintaining the status quo at the lowest cost D) are confused by value-added solutions E) are less likely to have a working financial plan

A) are more sophisticated in their operations

Which of the following is a lifestyle influence that shapes customer needs? A) interests B) occupation C) income D) education E) age

A) interests

Karen is interested in assessing a market segment's attractiveness by analyzing the market demand. Which of the following would be a variable should she assess? A) market size B) access to channels that reach target customers C) customer familiarity with her company D) number of companies E) ease of entry

A) market size

________ are tools that marketing managers use to assess the merits of a proposed marketing communication and the strategy behind it. A) Strategy functions B) Storyboards C) Value propositions D) Touch points E) Remote segments

B) Storyboards

HomeVenture Inc. manufactures and sells a line of furniture under the brand name Elegant Lines. The firm has a 3 percent share of the U.S. furniture market, and competes with industry giants who have large economies of scale and marketing resources. However, Elegant Lines holds 65 percent of the overlooked "customized art furniture" segment, specializing in very expensive custom-designed, furniture. Each of the Elegant Lines furniture pieces is a unique piece of art. What type of market segmentation strategy is HomeVenture Inc. pursuing? A) a mass-segment strategy B) a niche-segment strategy C) a market-development strategy D) a mass-market strategy E) a large-segment strategy

B) a niche-segment strategy

Number of employees, sales volume, number of locations, years in business, and financial situation are all examples of ________ forces shaping business market needs. A) lifestyle B) firm demographic C) usage behavior D) company culture E) demographic

B) firm demographic

Which of the following is a part of a company's culture? A) sales volume B) innovativeness C) number of employees D) number of locations E) years in business

B) innovativeness

Niche-segment strategies differ from mass-market strategy in that niche-market strategies ________. A) have no segment focus B) involve highly refined marketing effort directed at an overlooked, small group of customers C) are used when demographics are not distinctive D) are used when the company markets to a closely related attractive segment first E) address one set of core customer needs of a large market segment

B) involve highly refined marketing effort directed at an overlooked, small group of customers

A(n) ________ includes all the key elements of the situation and the benefits the target customer is looking for in a given purchase. A) marketing mix strategy B) value proposition C) storyboard D) Pareto chart E) acid test

B) value proposition

Kate owns a women's fashion apparel manufacturing firm. She has determined that the customers for her business' products can be segmented into three distinct segments differing in primary needs, demographics, lifestyle, and purchase behaviors. She now wants to develop a value proposition that delivers value to target customers in each segment. Which stage of the needs-based market segmentation process does this represent? A) segment marketing mix strategy B) segment profitability C) segment positioning D) segment attractiveness E) segment identification

C) segment positioning

Which of the following is true about customer relationship marketing? A) It is a high-level program for developing ongoing individualized relationships with certain customers when both company and customer value are very high. B) It has the same meaning as customer relationship management. C) It is more focused on what happens before a customer is acquired. D) It is a range of one-on-one relationship marketing programs based on the level of company and customer value. E) It aims to develop a short-term customer relationship to lower the cost of marketing.

D) It is a range of one-on-one relationship marketing programs based on the level of company and customer value.

Which of the following statements is true of customer needs? A) The factors influencing the needs of both consumers and businesses are the same. B) Satisfying customer needs is the first step in successful market segmentation. C) All potential customers have the same needs. D) Solving customer problems requires knowing the identity of target customers. E) A business with a strong market orientation rarely divides its served market into customer segments.

D) Solving customer problems requires knowing the identity of target customers.

Which of the following is a characteristic of cost-focused sustainers? A) They have a high level of formal education at the leadership level. B) They are willing to buy value-added solutions. C) They have a very high revenue per customer. D) They look for new ways to invest and grow their business. E) They have a limited or no financial plan.

E) They have a limited or no financial plan.

Which of the following market segments is most likely to be considered attractive by a firm? A) a market segment with many substitute products B) a market segment with high price competition C) a market segment with limited product differentiation D) a market segment with low barriers to competitor entry E) a market segment with cost-effective access to customers

E) a market segment with cost-effective access to customers

Mass-customization differs from mass-personalization in that mass-customization ________. A) is a customer relationship marketing strategy B) assumes that all customers have the same needs C) recognizes individual customers by name, needs, and buying behavior. D) involves pursuing a large-segment strategy E) allows each customer to build a custom product to meet that customer's specific needs

E) allows each customer to build a custom product to meet that customer's specific needs

Differences in values, attitudes, and interests are examples of ________ forces shaping consumer needs. A) usage behavior B) demographic C) firmographic D) geographic E) lifestyle

E) lifestyle

The first level of customer relationship marketing is a ________ strategy that recognizes individual customers by name and buying behavior. A) sub-segment B) core-segment C) decentralization D) mass-market E) mass-personalization

E) mass-personalization

Which of the following is used to determine a segment's marketing profitability? A) net profit (after taxes) B) gross profit C) customer retention index D) gross revenue E) net marketing contribution

E) net marketing contribution

McEwan and Co., a commercial real estate brokerage firm, creates four storyboards, each of which delineates a different value proposition and segment positioning strategy. The firm recruits a group of executives from different industries, and assigns them to one of the four segments. The executives are asked to critique each segment's storyboard and select the one that most appeals to them. The firm aims to assess its understanding of segment needs and its ability to translate that understanding into a value proposition. In this example, which of the following methods is McEwan and Co. using? A) segment attractiveness test B) mass-market strategy test C) the emphatic method D) marketing mix strategy test E) segment strategy "acid test"

E) segment strategy "acid test"

Both consumers and businesses have market needs, and the factors influencing their needs are essentially the same.

False

Business sophistication, growth orientation, innovativeness, technology, and decision making are all examples of firm demographic forces that can have a profound impact on consumer needs.

False

For a segment marketing mix strategy to be successful, the strategy needs to include only certain elements of the marketing mix.

False

In customer relationship management, every interaction with a customer or potential customer is known as a storyboard.

False

Lifestyle forces that shape customer needs and market demand include how the product is used, when it is used, and how much it is used.

False

The best way to identify groups of similar customers is to segment customers on the basis of demographics, lifestyles, and usage behaviors.

False

Name and describe the seven key steps in a needs-based market segmentation process.

Needs-Based Segmentation: Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem Segment identification: For each needs-based segment, determine which demographics, life-styles and usage behaviors make the segment distinct and actionable Segment attractiveness: Using predetermined segment attractiveness criteria, determine the overall attractiveness of each segment Segment profitability: Determine segment profitability (NMC) Segment Positioning: Create a value proposition and product-price positioning strategy based on that segment's unique customer needs and characteristics Segment Strategy "acid test": Create 'segment storyboards' to test the attractiveness of each segment's positioning strategy Marketing Mix Strategy: Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, place, and service.

Which of the following would be considered an indirect customer touch point? A) News article B) Service calls C) Return counters D) Voice mail systems E) In-store interactions

News articles

In the context of customer relationship management, every interaction with a customer or a potential customer is a(n) ________. A) sales contact B) service contact C) irrelevant cost D) value proposition E) touch point

Touch point

A key benefit of market segmentation is identifying segments that should not be pursued.

True

Common to most assessments of segment attractiveness are measurements of market demand, competitive intensity, and market access.

True

In order to implement a mass-personalization strategy, a business's database marketing system must be able to track individual customers and their buying history.

True

The benefit of needs-based market segmentation is that it allows us to identify in advance the individual customers who would fall into each segment.

True

The primary forces that shape the needs of consumers are demographic influences, lifestyle influences, and usage behaviors.

True

The purpose of needs-based segmentation is to offer product benefits that satisfy the needs of target customers.

True

The ultimate goal of a customer relationship management is to build one-on-one customized relationships between a business and individual customers.

True

When a market is segmented and marketing resources are limited, a business could elect to pursue a large-segment strategy.

True

Which of the following customer relationship marketing strategies allows customers to become their own individual market segments? A) mass-customization B) mass-personalization C) database marketing D) decentralization E) core-segment strategy

mass-customization

MyStyle Clothes Inc. is a women's fashion apparel firm that allows its customers to personalize their clothes. MyStyle Clothes Inc. has a web site where customers can choose from a range of fabrics, colors, buttons, fits, and designs to create clothes. Customers can place orders with their measurements, and the clothes are manufactured according to the customer's specifications and sent to her by courier. In this example, MyStyle Clothes Inc. uses which of the following strategies? A) mass-customization B) multi-segment C) sub-segment D) mass-personalization E) customer relationship management

A) mass-customization

Which of the following is a customer relationship marketing strategy? A) mass-customization strategy B) core-segment strategy C) decentralization strategy D) mass-market strategy E) sub-segment strategy

A) mass-customization strategy

A(n) ________ strategy presents a generic value proposition built around the core customer need and the business's generic positioning strategy. A) mass-market B) niche-segment C) large-segment D) adjacent-segment E) multi-segment

A) mass-market

Which of the following steps in the segmentation process involves determining the demographics, lifestyles, and usage behaviors that make one segment meaningfully different from another? A) segment identification B) segment positioning C) segment attractiveness D) segment strategy "acid test" E) segment profitability

A) segment identification

David has determined that there are meaningful differences in customer needs within the health supplements market segment in the U.S., that are not being met by the current segmentation strategy used by the businesses in the sector. What market segmentation strategy would be appropriate for David to use to capitalize on this opportunity? A) subsegment strategy B) large-market strategy C) market penetration strategy D) undifferentiated strategy E) mass-market strategy

A) subsegment strategy

The rapid growth of database marketing technologies has lured many businesses down a side road where technology is seen as the solution instead of a tool for building a solution. Without a solid commitment to serving individual customer needs, these businesses can fall into a ________. A) downward spiral B) technology trap C) reverse marketing trap D) price trap E) customization trap

B) technology trap

A business could elect to pursue a large-segment strategy when ________. A) differences in customer needs are small B) demographics are not distinctive C) a market is segmented and marketing resources are limited D) it wants to carve out a niche within a segment using a highly refined marketing effort directed at an overlooked group of customers E) it wants to provide customized products

C) a market is segmented and marketing resources are limited

Which of the following segmentation strategies involves using a highly refined marketing effort directed at an overlooked, small group of target customers? A) a large-segment strategy B) a multi-segment strategy C) a niche-segment strategy D) a mass-market strategy E) an adjacent-segment strategy

C) a niche-segment strategy

Which of the following is a demographic force that shapes consumer needs? A) attitudes B) political views C) marital status D) interests E) quantity used

C) marital status

Which of the following forces that shape segment attractiveness include market size, growth rate, and growth potential? A) profitability B) competitive intensity C) market demand D) feasibility E) market access

C) market demand

Vermont Home Builders conducted a study of the customers in the housing sector, which revealed that there are seven kinds of buyers, each a little different and each differently profitable. Vermont Home Builders decided to focus their attention on the three most profitable segments. In this example, Vermont Home Builders uses which of the following market segmentation strategies? A) mass-market strategy B) niche-segment strategy C) multi-segment strategy D) adjacent-segment strategy E) subsegment strategy

C) multi-segment strategy

In the context of market segmentation, interests, opinions, and leisure pursuits of consumers are related to ________ segmentation. A) geographic B) demographic C) psychographic D) firmographic E)usage behavior

C) psychographic

A large-segment strategy differs from a mass-market strategy in that a large-segment strategy ________. A) has no segment focus B) is used when differences in customer needs are small C) is used when demographics are not distinctive D) addresses one set of core customer needs E) allows customers to build their own products

D) addresses one set of core customer needs

Dynamo Inc., a motor company, started by selling sturdy, affordable, low-maintenance motorcycles in the U.S. Initially the firm pursued a single-segment focus, and targeted the middle-income group. When the company reached the point of full market penetration of the middle-income group, it marketed to a closely related attractive segment by introducing a line of luxury motorcycles for the high-income group of consumers. Which of the following type of market segmentation strategy does Dynamo Inc. use when it targets the high-income group of consumers? A) niche-segment strategy B) multi-segment strategy C) mass-market strategy D) adjacent-segment strategy E) mass-customization strategy

D) adjacent-segment strategy

When differences in customer needs are small or demographics are not distinctive, a business may elect to use a ________ strategy. A) niche-segment B) small-segment C) horizontal integration D) mass-market E) vertical integration

D) mass-market

When pursuing a large-segment strategy, a business presents a generic value proposition built around the core customer need and the business's generic positioning strategy to the entire market.

False