Mkt Chapter 8

Demographic segmentation

segmenting markets by age, gender, income, ethnic background, and family life cycle (8-4)

Geographic segmentation

segmenting markets by region of a country of the world, market size, market density, or climate (8-4)

8-1: Describe the characteristics of markets and market segments.

A market is composed of individuals or organizations with the ability and willingness to make purchases to fulfill their needs or wants. A market segment is a group of individuals or organizations with similar product needs as a result of one or more common characteristics.

Undifferentiated targeting strategy

a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges (8-7)

Perceptual mapping

a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers' minds (8-9)

8-2: Explain the importance of market segmentation.

Before the 1960s, few businesses targeted specific market segments. Today, segmentation is a crucial marketing strategy for nearly all successful organizations. Market segmentation enables marketers to tailor marketing mixes to meet the needs of particular population segments. Segmentation helps marketers identify consumer needs and preferences, areas of declining demand, and new marketing opportunities.

8-5: Describe the bases for segmenting business markets.

Business markets can be segmented on two general bases. First, businesses may segment markets based on company characteristics, such as customers' geographic location, type of company, company size, and product use. Second, companies may segment customers based on the buying processes those customers use.

8-8: Explain how CRM can be used as a targeting tool.

Companies that successfully implement CRM tend to customize the goods and services offered to their customers based on data generated through interactions between carefully defined groups of customers and the company. CRM relies on four things to be successful: personalization, time savings, loyalty, and technology. Although mass marketing will probably continue to be used, the advantages of CRM cannot be ignored.

8-4: Describe the bases commonly used to segment consumer markets.

Five bases are commonly used for segmenting consumer markets. Geographic segmentation is based on region, size, density, and climate characteristics. Demographic segmentation is based on age, gender, income level, ethnicity, and family life cycle characteristics. Psychographic segmentation includes personality, motives, and lifestyle characteristics. Benefits sought is a type of segmentation that identifies customers according to the benefits they seek in a product. Finally, usage segmentation divides a market by the amount of product purchased or consumed.

8-7: Discuss alternative strategies for selecting target markets.

Marketers select target markets using three different strategies: undifferentiated targeting, concentrated targeting, and multisegment targeting. An undifferentiated targeting strategy assumes that all members of a market have similar needs that can be met with a single marketing mix. A concentrated targeting strategy focuses all marketing efforts on a single market segment. Multisegment targeting is a strategy that uses two or more marketing mixes to target two or more market segments.

Product differentiation

a positioning strategy that some firms use to distinguish their products from those of competitors (8-9)

80/20 principle

a principle holding that 20 percent of all customers generate 80 percent of the demand (8-4)

8-9: Explain how and why firms implement positioning strategies and how product differentiation plays a role.

Positioning is used to influence consumer perceptions of a particular brand, product line, or organization in relation to competitors. The term position refers to the place that the offering occupies in consumers' minds. To establish a unique position, many firms use product differentiation, emphasizing the real or perceived differences between competing offerings. Products may be differentiated on the basis of attribute, price and quality, use or application, product user, product class, competitor, or emotion. Some firms, instead of using product differentiation, position their products as being similar to competing products or brands. Sometimes products or companies are repositioned in order to sustain growth in slow markets or to correct positioning mistakes.

Psychographic segmentation

Segmenting markets on the basis of personality, motives, lifestyles, and geodemographics (8-4)

8-6: List the steps involved in segmenting markets.

Six steps are involved when segmenting markets: (1) selecting a market or product category for study; (2) choosing a basis or bases for segmenting the market; (3) selecting segmentation descriptors; (4) profiling and evaluating segments; (5) selecting target markets; and (6) designing, implementing, and maintaining appropriate marketing mixes.

8-3: Discuss the criteria for successful market segmentation.

Successful market segmentation depends on four basic criteria: (1) a market segment must be substantial and have enough potential customers to be viable; (2) a market segment must be identifiable and measurable; (3) members of a market segment must be accessible to marketing efforts; and (4) a market segment must respond to particular marketing efforts in a way that distinguishes it from other segments.

Family life cycle (FLC)

a series of stages determined by a combination of age, martial status, and the presence or absence of children (8-4)

Cannibalization

a situation that occurs when sales of a new product cut into sales of a firm's existing products (8-7)

Multisegment targeting strategy

a strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each (8-7)

Concentrated targeting strategy

a strategy used to select one segment of a market for targeting marketing efforts (8-7)

Market segment

a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs (8-1)

Optimizers

business customers who consider numerous suppliers (both familiar and unfamiliar), solicit bids, and study all proposals carefully before selecting one (8-5)

Satisficers

business customers who place an order with the first familiar supplier to satisfy product and delivery requirements (8-5)

Repositioning

changing consumers' perceptions of a brand in relation to competing brands (8-9)

Segmentation bases (variables)

characteristics of individuals, groups, or organizations (8-4)

Target market

a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges (8-7)

Positioning

developing a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general (8-9)

Usage-rate segmentation

dividing a market by the amount of product bought or consumed (8-4)

Niche

one segment of a market (8-7)

Market

people or organizations with needs or wants and the ability and willingness to buy (8-1)

Position

the place a product, brand, or group of products occupies in consumers' minds relative to competing offerings (8-9)

Market segmentation

the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups (8-1)

Benefit segmentation

the process of grouping customers into market segments according to the benefits they seek from the product (8-4)