Ch 8 - Market Segmentation, Targeting, and Positioning

Question 1

Explain what market segmentation is and when to use it.

Answer 1

Market segmentation involves aggregating prospective buyers into groups that (a) have common needs and (b) will respond similarly to a marketing action. Organizations go to the expense of segmenting their markets when it increases their sales, profits, and ability to serve customers better.

Question 2

Identify the five steps involved in segmenting and targeting markets.

Answer 2

Step 1 is to group potential buyers into segments. Buyers within a segment should have similar characteristics to each other and respond similarly to marketing actions like a new product or a lower price. Step 2 involves putting related products to be sold into meaningful groups. In step 3, organizations develop a market-product grid with estimated sizes of markets in each of the market-product cells of the resulting table. Step 4 involves selecting the target market segments on which the organization should focus. Step 5 involves taking marketing mix actions—often in the form of a marketing program—to reach the target market segments.

Question 3

Recognize the bases used to segment consumer and organizational (business) markets.

Answer 3

Bases used to segment consumer markets include geographic, demographic, psychographic, and behavioral ones. Organizational markets use the same bases except for psychographic ones.

Question 4

Develop a market-product grid to identify a target market and recommend resulting actions.

Answer 4

Organizations use five key criteria to segment markets, whose groupings appear in the rows of the market-product grid. Groups of related products appear in the columns. After estimating the size of the market in each cell in the grid, they select the target market segments on which to focus. They then identify marketing mix actions—often in a marketing program—to reach the target market most efficiently.

Question 5

Explain how marketing managers position products in the marketplace.

Answer 5

Marketing managers often locate competing products on two-dimensional perceptual maps to visualize the products in the minds of consumers. They then try to position new products or reposition existing products in this space to attain maximum sales and profits.

Question 6

80/20 rule

Answer 6

A concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers.

Question 7

market-product grid

Answer 7

A framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization.

Question 8

market segmentation

Answer 8

Involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action.

Question 9

market segments

Answer 9

The relatively homogeneous groups of prospective buyers that result from the market segmentation process.

Question 10

perceptual map

Answer 10

A means of displaying 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 the firm’s own product or brand.

Question 11

product differentiation

Answer 11

A marketing strategy that involves a firm using different marketing mix activities to help consumers perceive the product as being different and better than competing products.

Question 12

product positioning

Answer 12

The place a product occupies in consumers’ minds on important attributes relative to competitive products.

Question 13

product repositioning

Answer 13

Changing the place a product occupies in a consumer’s mind relative to competitive products.

Question 14

usage rate

Answer 14

The quantity consumed or patronage (store visits) during a specific period. Also called ‘frequency marketing’.

Question 15

Market segmentation involves aggregating prospective buyers into groups that have two key characteristics. What are they?

Answer 15

Answer: The groups (1) should have common needs and (2) will respond similarly to a marketing action.

Question 16

In terms of market segments and products, what are the three market segmentation strategies?

Answer 16

Answer: The three market segmentation strategies are: (1) one product and multiple market segments; (2) multiple products and multiple market segments; and (3) “segments of one,” or mass customization.

Question 17

The process of segmenting and targeting markets is a bridge between which two marketing activities?

Answer 17

Answer: identifying market needs and executing the marketing program

Question 18

What is the difference between the demographic and behavioral bases of market segmentation?

Answer 18

Answer: Demographic segmentation is based on some objective physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective customers. Behavioral segmentation is 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.

Question 19

What factor is estimated or measured for each of the cells in a market-product grid?

Answer 19

Answer: Each cell in the grid can show the estimated market size of a given product sold to a specific market segment.

Question 20

What are some criteria used to decide which segments to choose for targets?

Answer 20

Answer: Possible criteria include market size, expected growth, competitive position, cost of reaching the segment, and compatibility with the organization’s objectives and resources.

Question 21

How are marketing and product synergies different in a market-product grid?

Answer 21

Answer: Marketing synergies run horizontally across a market-product grid. Each row represents an opportunity for efficiency in the marketing efforts to a market segment. Product synergies run vertically down the market-product grid. Each column represents an opportunity for efficiency in research and development (R&D) and production.

Question 22

What is the difference between product positioning and product repositioning?

Answer 22

Answer: Product positioning refers to the place a product occupies in consumers’ minds based on important attributes relative to competitive products. Product repositioning involves changing the place a product occupies in a consumer’s mind relative to competitive products.

Question 23

Why do marketers use perceptual maps in product positioning decisions?

Answer 23

Answer: Perceptual maps are a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers. Marketers use perceptual maps to see how consumers perceive competing products or brands as well as their own product or brand. Then, they can develop marketing actions to move their product or brand to an ideal position.