customer heterogeneity

week 1

5 sources of customer heterogeneity

individual differences; life experiences; functional needs; self identity; marketing activities

describe individual differences

person’s stable and consistent way of responding to the environment in a specific domain

describe life experiences

experiences that capture events and experiences that are unique to the customer’s life which affects preferences independent of individual differences

describe functional needs

a person’s individual decision weightings across functional attributes based on their personal circumstances

describe self identity

self image desired by customers which makes them actively seek products that they feel will support this image

describe marketing strategies

firm’s attempt to build linkages between brands and identities or meanings

what does SWOT stand for

strengths weaknesses opportunities and threats

what inputs are analysed using the swot analysis

company and competitors

relevant legal structure, competitor’s core competencies; market share; changes in customer demographics are all what kind of factors

external

core competencies; market share; competitive advantages are all examples of what factors

internal

strengths in SWOT analysis

current strengths that firm can leverage by developing new products

weaknesses in SWOT analysis

current weaknesses that need to be eliminated by strategies

opportunities in SWOT analysis

future opportunities that need to be taken advantage of by strategies

threats in SWOT analysis

future threats that need to be overcome by strategies

company in 3c analysis

competencies; aspirations; resources

customers in 3c analysis

who and what are their needs

competitors in 3c analysis

what are competitors offering and what can they firm offer that they can’t

3 steps of STP

identify customer segments; select target segments; position against customers

4 outputs of the framework used to manage customer heterogeneity

industry segmentation; target segmentation; positioning statements; building customer centricity

what is industry segmentation in the framework

describe industry segments; name the segments; salient purchase preferences; demographic variables; potential demand opportunities

target segmentation in the framework

specific segments of interest and providing very detailed description of each

positioning statements in the framework

statements used to direct the internal and external marketing activities

3 questions to position the firm

who should be targeted; what needs and benefits are being fulfilled; why does this offering provide a relative advantage over competitive offerings

building customer centricity in the framework

top down enduring commitment by senior leaders to institute customer centric philosophy

3 target market sizes/eras from big to small

mass; niche; one to one

3 instruments that have been used to reduce target market size

media; printing and manufacturing; communication

describe mass marketing era

mass media to appeal to a whole market with a single message; mostly ignores customer heterogeneity; assumes that reaching the largest possible audience leads to the largest sales revenue

describe niche marketing era

focused marketing efforts on well defined narrow segments; gives firm a competitive advantage by specializing

describe one to one marketing

marketing strategies that apply directly to specific consumers

define segmenting

dividing the market into groups of similar customers based on needs and not descriptors

define targeting

selecting best customer group

define positioning

improving our relative advantage in the minds of targeted customers

4 steps of segmenting

qualitative research on potential needs and descriptors; collect data from random sample of potential customers based on importance of needs to purchase decision; segment market based on needs into homogenous customer groups; name segments

describe cluster analysis

data driven partitioning technique used to identify and classify a large set of heterogenous consumers into a small number of homogenous segments

2 steps of cluster analysis

segmentation; describing

the validity of segmentation results and corresponding targeting strategy is considered by criteria of 4 things

identifiability; stability; responsiveness; viability

when conducting cluster analysis, we should combine customers with similar purchase intentions because it results in

limited loss of information

we shouldn’t combine too many customers together that are not super similar because it results in

prohibitive loss of information

when choosing the number of clusters we should pick a number that

explains a relatively large variance

2 criteria used to select segments to target

market attractiveness; competitive strength

6 criteria of an ideal target segment

customer care; difference in segments so little crossover competition; firms competencies match differences so resource constraints are viable; sustainable customers; identifiable customers; financially valuable in the long term

what is the GE matrix used for

visualize and select target segments

name first the x axis of the GE matrix and second the y axis

firm’s competitive strength; market attractiveness

4 Ps that impact positioning

place; price; promotion; product

what’s a perceptual map used for

analysis tool for positioning decisions

what is repositioning used for

firm shifts target market

how many axes does a perceptual map have

4

3 key questions of a positioning statement

who are the customers; what is the set of needs that the product fulfills; why is this product the best option to satisfy the customer’s needs

describe factor analysis

data reduction technique used to identify a small number of latent factors that explain the major variation in a large number of observed variables

when is a factor analysis used

condense a large pool of potential customer needs wants and preference into short set of similar characteristics; reduce high correlation among predictors

what does EFA stand for and how is it used

exploratory factor analysis; look for structure in data

what does CFA stand for and how is it used

confirmatory factor analysis; confirm theoretically derived structure

which latent factors from the factor analysis should be used

factors with an eigenvalue above 1