Chapter 9, Market Segmentation, Targeting, and Positioning

80/20 rule
a concept that suggests 80% of a firm’s sales are obtained from 20% of its customers, i.e. a small fraction of customers provides most of a firm’s sales
market segmentation
involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action
market-product grid
a framework to relate the market segments of potential buyers to products offered or potential marketing actions
perceptual map
a means of displaying in two dimensions the location of products or brands in the minds of customers
product differentiation
involves a firm using different marketing mix actions, such as product features and advertising, to help consumers perceive the product as being different and better than competing products
product positioning
refers to the place a product occupies in the consumers’ minds based on important attributes relative to competitive products
product repositioning
changing the place a product occupies in a consumer’s mind relative to competitive products
usage rate
the quantity consumed or patronage-store visits- during a specific period, it varies significantly among different customer groups
undifferentiated (mass) marketing
Targeting very broadly; One market segment (e.g., the whole market), one product, one marketing mix approach
concentrated (niche) marketing
Targeting narrowly; Marketing Firms target a very large share of narrowly defined markets, or segments of potential buyers; Requires lot of fine tuning, of products, prices, and promotional or delivery programs to meet the needs of carefully defined segments. That is, requires a lot of fine tuning of the “marketing mix.”
micro marketing
targeting extremely narrowly; Entails the practice of specifically tailoring products and marketing programs to suit the tastes, meet the needs, and solve the problems of highly specialized individuals or Firms.
Differentiated (segmented) marketing
entails targeting multiple segments, wherein each segment is targeted with a specific marketing mix. The idea is to have differing market mixes unique targeted at each of the differing segments that the Firm chooses to pursue. This targeting approach greatly increases costs of marketing. But it should greatly increase revenues, as well.
the “differences” (in the brand/product) are “important” to consumers as they decide which choices to make.
Value proposition
the sum of potential and actual values that positioned products offer to prospects or customers.
dividing buyers into different segments based on their social class status, their [preferred] life styles (Activities, Interests, & Opinions; i.e., AIOs), their personality characteristics.
mass customization
tailoring products or services to the tastes of individual customers on a high-volume scale
build-to-order (BTO)
manufacturing a product only when there is an order form the customer
organizational synergy
the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently
when new products or new chain simply steals customers and sales from the older, existing products
criteria to use in forming the segments
simplicity and cost-effectiveness of assigning potential buyers, potential for increased profit, similarity of needs of potential buyers within a segment, difference of needs of buyers among segments, potential of a marketing action to reach a segment
bases of segmentation
geographic, demographic, psychographic, behavioral
geographic segmentation
segmentation based on region, city size, statistical area, media-television, or density
demographic segmentation
segmentation based on gender, age, race/ethnicity, life stage, birth era, household size, marital status, income, education, or occupation
psychographic segmentation
segmentation based on personality, values, lifestyle, or needs
behavioral segmentation
segmentation based on retail store type, direct marketing, product features, usage rate, user status, awareness/intentions
frequency marketing
marketing that focuses on usage rate
ways to segment organizational markets
geographic, demographic, behavioral segmentation
geographic segmentation (organizational)
segmentation based on global region/country, statistical area, or density
demographic segmentation (organizational)
segmentation based on NAICS code/sector, number of employees, or annual sales
behavioral segmentation (organizational)
segmentation based on number of locations, kind, where used, application, purchase location, who buys, type of buy
criteria used in selecting target segments
market size, expected growth, competitive position, cost of reaching the segment, compatibility with the organizations objectives/resources
key synergies
head-to-head positioning
involves competing directly with competitors on similar product attributes in the same target market
differentiation positioning
involves seeking a less-competitive, smaller market niche in which to locate a brand

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