Chapter 6

What four characteristics must individuals or organizations have to be considered part of a market?

Desire, ability, willingness, and authority to purchase a product

What is the difference between consumer and business markets?

• Consumer Market (B2C): Buyers purchase goods for personal use, not for profit.

• Business Market (B2B): Buyers purchase goods for resale, production, or daily operations.

Can a product belong to both a business and consumer market?

Yes; it depends on end use. For example, a chair for home = B2C; the same chair for an office = B2B.

What is the undifferentiated targeting strategy?

One single marketing mix aimed at an entire homogeneous market.

What is the concentrated targeting strategy?

Focusing marketing efforts on one specific segment of a heterogeneous market.

Give an example of a heterogeneous market.

The automobile market—consumers have varied needs (e.g., trucks vs. small city cars).

What is a differentiated targeting strategy?

A strategy where an organization creates separate marketing mixes for two or more market segments.

Why might a company move from a concentrated to a differentiated strategy?

To pursue additional market segments and expand sales—often after success in one segment.

What are the pros and cons of a differentiated strategy?

Pros:

• Greater market coverage

• Can increase overall sales

• Absorbs excess production capacity

Cons:

• Higher production and operational costs

• Requires more resources (materials, processes, people)

What are segmentation variables?

Characteristics used to divide a market into meaningful segments—e.g., age, gender, usage rate.

Segmentation variables are grouped into 4 major categories

1. Demographic

2. Geographic

3. Psychographic

4. Behavioristic

What are geographic segmentation variables?

Climate, terrain, city size, population density, and urban/rural classification.

What is market density?

The number of potential customers per unit of land area (e.g., per square mile).

What are psychographic variables?

Personality traits, motives, and lifestyles.

What are behavioristic segmentation methods?

Usage rate, brand loyalty, benefit sought, and user status (heavy, light, nonuser).

What variables are used in business market segmentation?

• Geographic location – regional needs vary (e.g., lumber, textiles).

• Type of organization – different orgs need different product features or pricing (e.g., auto makers vs. wholesalers).

  • Customer size – influences quantity, service needs, and pricing.

What is a market segment profile?

A detailed description of the typical customer in a specific segment, outlining needs, behaviors, demographics, and psychographics.

What are the key dimensions for estimating sales potential?

• Product level (item vs. product line)

• Geographic area

• Time range (short, medium, long)

  • Competitive level (single firm vs. industry)

What is market potential?

The total demand for a product in a specific time frame across the industry.

What is company sales potential?

The maximum share of market potential a firm expects to capture.

What are the two methods for estimating sales potential?

• Breakdown Approach: Start with general economic forecast → estimate total market potential → derive company share

• Buildup Approach: Estimate demand per customer in each area → multiply by number of customers → total for all areas

Why is it important to assess competitors when evaluating market segments?

A segment might look attractive on paper but be dominated by strong competitors.

Key competitive assessment questions include:

• Who are the competitors?

• What are their strengths and weaknesses?

• Can we compete effectively?

  • Will new competitors enter the segment?

Why are cost estimates crucial in segment evaluation?

Because developing a tailored marketing mix can be expensive, and some segments may be inaccessible due to high costs.

What cost factors must marketers evaluate?

Product features, packaging, advertising, personal service, promotional offers, and distribution.

What factors influence the selection of specific market segments?

• Sales potential

• Competitive position

• Cost of reaching the segment

• Company objectives and resources

• Compatibility with overall strategy

What is a sales forecast?

The expected level of actual sales during a specific time period at a defined level of marketing effort.

How does it differ from sales potential?

• Sales potential = what’s possible

• Sales forecast = what’s expected

Executive Judgment

• Based on managerial intuition

• Fast and low-cost, but subjective and can be biased by recent events

Surveys

• Ask customers, sales staff, or experts

• Salesforce forecasting taps into reps’ insights and builds buy-in

  • Expert surveys offer outside perspective; Delphi technique refines estimates through rounds of averaging

Time Series Analysis

• Uses historical sales data to find patterns

• Includes:

  • Trend analysis (long-term direction)

  • Cycle analysis (multi-year patterns)

  • Seasonal analysis (short-term, e.g., holidays)

  • Random factor analysis (unexpected events)

Regression Analysis

• Finds statistical relationships between sales and variables (e.g., income, GDP)

• Requires extensive past data

• Useful only when strong associations exist

Market Tests

• Launch products in test markets to gauge real consumer behavior

• Best for new products

• Pros: Reveals real responses to marketing mix

  • Cons: Expensive, slow, not always generalizable

Using Multiple Methods