Chapter 8 Flashcards (Segmenting and Targeting Markets)

What kind of products are not differentiated and sold in the same version across the entire market?

Commodities (electric and gas)

Q: Why do companies differentiate products?

Because consumers have diverse needs and wants, so products must be tailored to different groups.

Give an example of how consumers have diverse needs in a single market.

For some, cars are just transportation; for others, cars are a means of self-expression.

Market Segments

Marketers should differentiate their products to appeal to specific groups of consumers

Target Market

The segment a company chooses to serve

Market Segment Goal

Have the products that best serve the needs of their specific target markets 

What are the wide variety of variables used to segment a market?

Age, gender, purchasing power, location

What four criteria define a good market segmentation scheme?

substantiality, measurability, accessibility, responsiveness (actionable)

Substantiality 

Each segment should be large enough that a meaningful marketing strategy can be devised to be profitable 

Measurability 

Assess the size of the segments marketers wish to target; to calculate number of potential customers, size of advertising budget, and others 

Accessibility

Ability of marketers to reach and serve the segment effectively, segments should be accessible 

What is an example of a segment that is hard to access?

Left handed people (fewer magazines, tv channels or retail outlets aimed at left handed products)

Responsiveness (Actionability)

Segments must be different enough to justify separate marketing strategies.

Why do marketers segment the market?

Because they believe different segments require different marketing plans to be effective.

How can consumer markets be segmented?

On the basis of a wide variety of variables, which can be grouped into five categories

What are the five main categories for segmenting consumer markets?

1. Demographic Segmentation

2. Psychographic Segmentation

3. Geographic Segmentation

4. Benefit Segmentation

5. Usage Rate Segmentation

Demographic Segmentation 

Includes segmentation on variables such as age, income, gender, and ethnicity; data is easy to measure

What is the most widely used base for segmentation?

Demographics

Example of easily available demographic data

United States Census Data (high quality demographic data that is readily accessible)

Why does demographic data not give a complete picture of consumers?

Because consumers in the same income group may have very different demand patterns 

Psychographic Segmentation

Focuses on attitudes, lifestyle, values (conservative or liberal); more difficult to measure and not as easily available

Geographic Segmentation

Geographic areas based on national boundaries, regions in East Coast vs West Coast, or rural vs urban areas

Why is geographic segmentation appealing?

Because there are marked differences across geographic segments, targeting different markets

Benefit Segmentation

Focuses on the different benefits consumers seek from the same product

Example of Benefit Segmentation

Orange juice being used for breakfast, refreshing cold drink on a hot day, for vitamins while recovering for illness, or for its taste

Usage Rate Segmentation 

Method of dividing a market based on how frequently or heavily consumers use a product or service 

What are common bases for segmenting business markets?

Company characteristics such as company size, type of company, nature of the industry, geographical location

What is another way of segmenting business markets besides company characteristics?

By the buying process, focusing on what the companies value in their purchases, criteria (price, quality, service)

What comes after the market has been segmented?

Selecting the segments to serve or identifying the target markets 

How many strategies are there for selecting target markets?

Three strategies 

Undifferentiated Targeting

The segments are practically ignored and the company goes after the entire market with a single product or marketing mix

Why is it rare to see undifferentiated targeting in today’s markets?

Because there are competitors focusing on individual segments who do a better job serving their specific target markets 

Concentrated Targeting

Involves going after a single segment and lets companies channel all their efforts in a very focused manner

What is a special case of concentrated targeting called?

Niche Targeting (company focuses on a very small segment that is not catered to by other companies) but can be risky

Multisegment Targeting 

To serve multiple segments using different brands or marketing mixes, but without competing against the company’s own brands; allows companies to cover a bigger portion of the market  

Example of Multisegment Targeting

Nissan segments its market according to size and offers cars of varying sizes like the Versa, Sentra, Altima, and Maxima

(other car companies do the same)

How do companies use Multisegment Targeting effectively?

They try to cover most of the market with a variety of offerings, but in such a way that they do not compete with their own brands

Product Differentiation

A way to distinguish their products from their competitors 

How does product differentiation help in the positioning of the product?

Shapes how consumers perceive the brand

Examples of Brand Positioning

• Nike motivates with its “Just Do It” slogan.

• BMW positions itself as “The Ultimate Driving Machine.”

• Subway emphasizes freshness with its “Eat Fresh” campaign.

What does a perceptual map show?

It visually captures how brands are perceived relative to competing brands

What kind of decision is creating positioning?

A strategic decision that requires substantial investment

Whatmay brands need to do if their positioning becomes outdated?

Brands may need to be repositioned meaning to change their image or appeal but this is difficult and causes confusion in minds of consumers