Market Segmentation and Product Development Strategies

Market

A set of buyers, who have some interest in the product.

Target market

The market the company decides to sell to.

Measurable

Important to be able to assess the size of the segments marketers wish to calculate.

Accessible

Segments should be accessible; for example, markets may design a product line for left-handed people but accessing left-handers is not easy.

Responsive (actionable)

If two segments respond the same way to the marketing mix, splitting them into two segments is unnecessary; it will be better to stay in one.

Substantial

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

Demographic

A widely used basis for segmenting consumer markets.

Geographic

Based on geographic areas, like east coast and west coast.

Psychographic

Meaningful; what people actually buy is more dictated by attitudes and lifestyle, harder to measure.

Benefit sought

Like orange juice being a drink for breakfast and it having vitamins.

Usage rate

Like beer and cigarettes.

Undifferentiated strategy

A company may go after the entire market instead of individual segments.

Concentrated strategy

Going after a single segment; an example would be niche targeting, which can be risky.

Multisegment targeting

Companies offer different brands in different segments, like car brands having SUVs and sedans.

Product differentiation

Helps with positioning of the product and how consumers perceive the brand, like Subway emphasizing its 'Eat Fresh' campaign.

Perceptual Mapping

A technique used to visualize the positioning of products or brands in the market.

Repositioning

The process of changing the place a product occupies in a consumer's mind relative to competitive products.

Decision Support Systems (DSS)

Helps managers make better decisions.

Competitive market intelligence

Ongoing research about the market and competitors that improves the quality of marketing decisions.

Exploratory research

Uses a small sample size, findings are not conclusive, and is the first step to other research.

Descriptive Research

Detail-oriented and precise, often expensive and requires a large sample size.

Performance-monitoring research

Looking at information (sales, customer retention) over a period of time to track company performance.

Casual research

Uses experiments to determine if 'if I do x, I will get y.'

Sampling procedures

Get a group of respondents that is replicated for the entire group of interest.

Probability (Random) Samples

Samples where subjects are chosen purely randomly.

Systematic Samples

May choose every 100th individual, using a system to choose randomly.

Stratified Samples

Subgroups within a population may have major differences, splitting the population into groups like male or female.

Cluster sampling

In-person sampling over a large geographical area, like a few cities instead of the entire region.

Non-probability samples

Samples that are not chosen randomly.

Convenience sampling

Sampling that may choose participants purely based on convenience.

Judgement sampling

Sampling where researchers choose who they want to participate.

Quota sampling

Sampling similar to stratified but not chosen randomly.

Snowball sampling

Sampling that uses initial respondents to choose other respondents.

Frame error

An error that occurs when the sampling frame does not represent the population.

Non-response error

An error that occurs when not getting a response from selected participants.

Response error

An error that occurs when participants cut short their responses in the survey.

Random errors

Errors that occur from calling people during specific hours, such as 9-5.

Product

Anything that satisfies a need or a want.

Good

A tangible offering that satisfies needs.

Service

An intangible offering that satisfies a need.

Core purpose

The primary reason for purchasing a product.

Augmented product

Additional benefits provided by a dealership to entice the motive for the core purpose.

Convenience products

Products that are conveniently located, available everywhere, low priced, and bought often with low financial risk.

Shopping products

Products that consumers are willing to research and travel for due to their higher price point.

Specialty products

High price point products that consumers have a preference for and do not shop around for.

Unsought products

Goods that consumers only think about when necessary.

Product line depth

Variations within a product line.

Product line width

Different types of products a company carries.

Product line extension

Increasing the width or depth of a product line.

Product modification

Making a product obsolete to encourage new purchases.

Repositioning

Changing the perception of a product in the market.

Primary packaging

The plastic that holds the cereal.

Secondary packaging

The cereal box itself that the plastic is in.

Tertiary packaging

The shipping cartons used for transporting products.

Brand loyalty

A specific preference for one brand over another.

Brand equity

The value associated with a brand.

Co-branding

A partnership where two brands collaborate, such as Häagen-Dazs and M&M's.

Ingredient co-branding

Co-branding that involves using one brand's ingredient in another brand's product.

Cooperative branding

A partnership between brands, such as credit cards and airlines.

Complementary co-branding

Promoting brands that work well together.

Wholesaler

A seller who sells to retailers.

New to the world products

Products that have not been sold by anyone before.

New product lines

New products that are new to the company but already offered by others.

Additions to existing product lines

Variations added to currently offered products.

Improvements over existing products

Revisions made to an existing product.

New and Improved

May include minor or major changes.

Repositioned Products

Focused on changing the brand's appeal to a different market segment.

Lower Priced Products

Products like Dior releasing a cheaper coat at Nordstrom, differing in material, quality, and weight.

New Product Development Process

Introducing a new product is very expensive; as the list goes on, the more expensive it gets.

Idea Generation

Creating a list of ideas that can come from employees or others, with the goal of generating a long list.

Idea Screening

Eliminating ideas that do not meet the criteria.

Business Analysis

Crunching the numbers to estimate sales and determine if the product makes sense.

Development

Starting to actually develop the product.

Test Marketing

Participants are shown ads and then shop to see if the ads work; can be standard or simulated.

Commercialization

The launch of the product in the marketplace, with the possibility of making changes afterward.

Diffusion of Innovations

The process by which products are adopted by the market.

Five Categories of Adopters

Innovators, Early Adopters, Early Majority, Late Majority, Laggards.

Innovators

First group and a very small portion of the market; they are variety seekers and likely to try new products.

Early Adopters

A relatively big group that welcomes new ideas and products; they are well-informed and passionate.

Early Majority

Rational consumers who systematically weigh the pros and cons before purchasing.

Late Majority

Skeptical by nature and adopt the product because it is adopted by others.

Laggards

Reluctant to change, typically older and more traditional consumers.

Product Characteristics and Rate of Adoption

A higher score on each dimension leads to faster adoption.

Relative Advantage

The advantage the new product offers over existing substitutes.

Compatibility

Compatibility with the physical setup and lifestyle, such as a microwave being efficient for a busy lifestyle.

Simplicity

Products that are easy to understand have a faster rate of adoption.

Communicability

If it is easy to convey the benefits of the product, adoption will be faster.

Trialability

The ability to try a product without making a significant investment.

Product Life Cycle

Stages a product goes through: Introduction, Growth, Maturation, Decline.

Introduction Stage

Investing in the development and commercialization of the product before it has entered the market.

Growth Stage

If the market accepts the product, sales will increase, followed by intense competition.

Maturation Stage

Sales stabilize or grow at a nominal pace; prices drop but competition increases.

Decline Stage

A drop in sales; the market shrinks, making it difficult for competitors to stay profitable.

Computability

Product characteristic representing degree of superiority over similar existing product

Observability

Product characteristic representing degree of superiority over similar existing product

Relative advantage

Product characteristic representing degree of superiority over similar existing product

Growth

Stage of lifecycle where products incur losses due to promotional costs to gain competitive advantage

Decline

Stage of lifecycle where products incur losses due to promotional costs to gain competitive advantage

Maturity

Stage of lifecycle where products incur losses due to promotional costs to gain competitive advantage

Saturation

Stage of lifecycle where products incur losses due to promotional costs to gain competitive advantage