MKT 381 Exam 2 Prep (Ch07 - Ch08)

segmentation bases

variables or characteristics that help marketers break down people into groups that have things in common

7 types of business goods/services

> major equipment > accessory equipment > raw materials > component parts > processed materials > supplies > business services

processed materials

> materials that have been processed to make into something suitable for firms to use > ex: sheet metal, chemicals, treated lumber

producers

> often called original equipment manufacturers (OEMs), use purchases to produce other products, to incorporate into other products, or to facilitate daily operations > ex: automobile manufacturers (Ford), Apple

what is a market?

> people or organizations that have a need or want for a product/service and have the ability and willingness to make a purchase for that product/service > if you aren't able to make the purchase, you are not considered to be a part of the target market

concentrated strategy

> pick 1 specific target and meet their needs > create 1 marketing mix > niche competitive advantage > ex: telsa

multisegment strategy

> pick 2 or more groups and create different marketing mixes for each > ex: gap, inc (gap, old navy), hilton, inc (hilton hotels, hilton garden, double tree)

market segmentation

> process of dividing a market into segments or groups where those people have things in common > helps marketers precisely understand what customers need > allows marketers to make accurate marketing objectives and marketing mixes > improves resource allocation

4 major types of business marketing customers

> producers > resellers > governments > institutions

joint demand

> products are being purchased by the SAME CUSTOMER (individual consumer) > quantity demanded from 1 product is dependent on quantity demanded from another > ex: demand for PS4 consoles are linked to demand for PS4 games

use of reciprocity: is reciprocity more or less common in business markets?

> reciprocity is saying "if you're one of my customers, i want to be one of yours" > MORE common

what does STP stand for?

> s = segmenting > t = targeting > p = positioning

institutions

> seek to achieve goals other than the standard business goals of profit, market share, and return on investment > ex: institutions of higher learning, hospitals, credit unions, etc

disadvantages of concentrated strategy

> segment too small or changing > large competitors may market to niche segment

supplies

> standardized, less expensive items that are consumed by firms that don't become part of a product the firm is selling > ex: hand soap, paper towels, toilet paper, light bulbs

in order to be considered a part of the target market, a group must be:

> substantial (segment must be large enough to warrant a special marketing mix) > identifiable & measurable (obvious factors) > accessible (members of targeted segments must be reachable with marketing mix) > responsive (this group responds and acts differently to your product; separate treatment is needed if this is the case)

customer relationship management (CRM)

> system, process, and technology to track customer interactions > customer data are used to predict the customer's value > helps marketers prioritize and customize marketing efforts to individual customers

positioning

> the place that your product/brand occupies in the mind's of consumers > deals with building a marketing mix that influences customers overall perception of a product/brand/organization

governments

> thousands of federal, state, and local buying units that buy products to keep functioning > U.S. government is the LARGEST business consumer

3 types of targeting strategies

> undifferentiated > concentrated > multisegment

raw materials

> unprocessed, extracted products > used to make something new that firms will sell > ex: ore, timber, wheat, corn, fish, veggies, raw cotton

emotion

position yourself around positive emotions like happiness (ex: coca-cola)

competitor

position yourself as the better version of your competition

advantages of undifferentiated strategy

potential savings on production and marketing costs

demand

quantity of product that will be sold at different prices

cannibalization

reduction in sales volume, sales revenue, or market share of one product when the same company introduces a new product; same customers in different markets

benefits sought

separates people according to what benefits they seek from a product

which steps fall under the targeting part of the STP process?

step 5

which steps fall under the positioning part of the STP process?

step 6

which steps fall under the segmenting part of the STP process?

steps 1-3

market segment

subgroups of people or organizations that share 1 or more characteristics that cause them to have similar product needs

use or application

suggest how you should and when you should use a product

advantages of concentrated strategy

> allows firms to concentrate on 1 market and resources > meets narrowly defined segment > small firms can compete > strong positioning

business products:

> are used to manufacture other products > become part of another product > aid in the normal operations of an organization

7 positioning bases

> attribute > price and quality > use or application > product user > product class > competitor > emotion

usage rate

> breaking down a market according to how often they buy/use a product > based on the 80/20 principle (80% of demand comes from 20% of customers)

geographic segmentation

> breaking down consumers based on location, climate, market size, & market density > only used if it matters

resellers

> buy finished goods and resell them for profit > ex: Amazon, Walmart, Kroger

5 most common segmentation bases for business markets

> by type (producers, resellers, governments, institutions) > company characteristics (geographic location, size of company, type of company > product use > purchase volume > buying process

in the U.S., what 8 states are most firms found in?

> cali > new york > ohio > illinois > michigan > texas > pennsylvania > new jersey

major equipment

> capital goods (expensive and large) > designed just for the business customer > depreciates over a period > ex: airplanes, buildings, x-ray machines

repositioning

> changing consumers' perceptions of a brand in relation to competing brands > change marketing mix > want to avoid at all costs

why is personal selling used in business marketing?

> channel of distribution is shorter > firms want to deal with manufacturers directly > there are fewer customers > B2B marketing is more geographically concentrated

inelastic demand

> consumer will still buy the same product despite changes in its price > occurs in business and consumer markets but more prevalent in business markets

11 ways business markets are different from consumer markets

> demand > purchase volume > number of customers > concentration of customers > distribution structure > nature of buying > nature of buying influence > type of negotiations > use of reciprocity > use of leasing > primary promotional method

fluctuating demand

> demand changes over time (if there are small changes in consumer demand, it will have big effects on business demand) > demand for business products is less stable than consumer products

derived demand

> demand for a product is related to demand for another > sold to 2 DIFFERENT CUSTOMERS (1 business customer & 1 individual consumer customer) > ex: the amount of products a bakery buys is dependent on how many customers come to their store

4 types of demand

> derived > inelastic > joint > fluctuating

undifferentiated strategy

> everybody is apart of your target market (not really segmenting) > not often used > craft 1 marketing mix > ex: coca-cola

business services

> expense items that don't become part of the final product > ex: ad services, cleaning services

5 most common segmentation bases for consumer markets

> geography > demographics > psychographics > benefits sought > usage rate

STP process

used to help process marketing strategies (specifically, target market and marketing mix)

accessory equipment

> goods and materials that get used in production (less expensive and have a shorter lifespan than major equipment) > design is standardized > ex: portable drills, power tools

advantages of multisegment strategy

> greater financial success > economies of scale

disadvantages of multisegment strategy

> higher costs > cannibalization

component parts

> items that, on their own, are finished goods > finished goods that are incorporated in a new product > ex: batteries, tires

steps involved in segmenting a market

1. select a market or product category for study 2. choose a segmentation base(s) 3. select segmentation descriptors 4. profile and analyze segments 5. select markets 6. design, implement, & maintain appropriate marketing mixes

number of customers: how many customers does a business market typically have?

FEWER customers

demographic segmentation

breaking down consumers based on basic descriptions of people (age, gender, job, income, ethnicity, family life cycle)

type of negotiations: is negotiating more or less common in business markets?

MORE common

nature of buying influence: how many people are involved the business purchase process in business markets?

MORE people

product user

a brand positions themselves as a particular customer (ex: chicken salad chick)

consumer marketing

aka "B-C" marketing, happens most often and is when a business market produces and sells products to individuals (consumers)

business marketing

aka industrial marketing, "B-to-B" marketing, or "B2B" marketing, the sale of goods and services to businesses for purposes other than personal consumption

psychographic segmentation

breaking down consumers based on personality, motives, geodemographics ((segmenting potential customers into neighborhood lifestyle categories) combines geography, demographics, and lifestyle), and lifestyle

primary promotional method

business marketers tend to use PERSONAL SELLING in their promotional efforts

concentration of customers: are business markets spread out across a large geographic area or are they all concentrated in a small area?

business markets in the U.S. are MORE geographically concentrated

purchase volume: how much are business consumers buying?

buying LARGER quantities

distribution structure: how do products move in a channel of distribution in business markets?

channels of distribution are usually SHORTER than consumer markets (most businesses use personal selling as a method of promotion)

low concentrated markets

customers are spread across a larger geographic area

attribute

feature

key difference between business products and consumer products:

intended use (how one uses a product)

use of leasing

leasing is MORE common in business marketing

highly concentrated markets

lots of customers in 1 small area

price & quality

low price (ex: mcdonald's); cost competitive advantage

nature of buying: are businesses more formal or less in business markets?

more FORMAL

product class

the segment of the marketplace you occupy based on your product or service

disadvantages of undifferentiated strategy

unimaginative product offerings, company more susceptible to competition