Chapter 9 Marketing Exam 2

____ ____ is when you aggregate consumers into groups that have similar needs and will react similarly to a marketing action
market segmentation
this matters because: new products fail all the time because of poor marketing segmentation, companies try to sell to the wrong customers, have to adjust approach for different segments
what are the 3 segmentation strategies
1. one product and many segments
2. multiple products and multiple segments
3. mass customization
market segmentation links ____ ____ to an org.’s marketing program
market needs
what are some of the variables for market segmenttion
1. demographics
2. geography
3. psychographics
4. usage/commitment (behavioral)
5. benefits (behavioral)
what 3 things are involved in psychographics
(what is in the middle and what are the 3 arrows that point to that)
1. activities/attitudes
2. interests
3. opinions
What is the 80/20 rule?
80% of profits come from 20% of consumers
-heavy users drive profit
what are the steps involved in need-based market segmentation?
1. need-based segmentation
2. segment ID
3. segment attractiveness
4. segment profitability
5. segment positioning
6. segment strategy “acid test”
7. marketing mix strategy
what does the STP marketing process stand for
market segmentation, targeting, and positioning
what is involved in the segment attractiveness step?
1. market demand (market size, growth rate, growth potential)
2. competitive industry (is there a big enough market)?
3. market access (ex: barriers to entry)
-overall trend: question you are trying to answer is is this feasible?
what is involved in the segment profitability step?
this is the financial side of the process-
ex: how long will it take to breakeven?
-estimate net marketing contribution
what is involved in the segment positioning step?
after choosing which segment to target
-position differently to each segment
-involves developing a customized value proposition
-highlight the benefits
perceptual position: perception in people’s minds; perception in relation to competitors
-develop a storyboard for each segment
-market research is important in this step
“Volvo is a premium-price automobile that offers the utmost safety and dependability”
What is this an ex of?
a positioning statement
The ____ of a product/brand in consumers minds relative to competitors products
-part of positioning
what is important in perceptual positioning?
1. positioning is directed to target markets
2. based on substantive brand value, no fluff
3. memorable, distinctive, and different
What are 4 popular bases for positioning?
1. attribute
2. price and quality
3. competition
4. product user
a product is associated with an _____, product feature, or consumer benefit in which positioning base?
ex: colgate
this positioning base stresses high price as a signal of quality or emphasizes low price as an indication of value
-give an ex
Price and quality
-ex: rolex
a product is positioned directly against or away from one or more ______ in which positioning base
competitors; competition
-ex: pepsi vs. coke
this positioning base focuses on a personality or a type of user
product user base
-ex: mac (creative, young, cool type) vs pc (frumpy, old-fashioned, business type, old man)
what positioning base is used in this case:
-when a company is trying to catch up to industry leaders
-usually newbies/underdogs comparing themselves to really established brands/leader brands
Competition positioning base
Companies ____ rarely and only if they have to, because consumers want consistency
changing the place of offering occupies in a consumer’s mind relative to competitive products
this technique is….
-used to revive an ailing brand
-used if original ____ is obsolete
-fix a new market entry
-original positioning (ex: in the auto industry if positioning was that you are the safest, not enough anymore, most cars are by law very safe)
What is the challenge associated with repositioning?
changing perceptions of a brand forged over years of advertising
-hard to change perceptions
____ ____ are used for (re)positioning
perceptual maps
-multi-attribute, multi-alternative model
briefly describe the steps involved in repositioning chocolate milk for adults
1. identify important attributes of chocolate milk for adult drinkers
2. discover how adults rate various competing drinks/attributes
3. discover how consumers see your chocolate milk/attributes
4. reposition chocolate milk to make it more appealing to adults
discuss the perceptual map we used in class for repositioning chocolate milk for adults
on the x axis: kid drink—-adult drink
on the y axis: low nutrition—high nutrition
-originally, chocolate milk was pretty high in nutrition but considered a kid drink
-reposition strategy was the diagonal drawn from the kid drink side to the adult drink side with an increase in nutrition
What was the repositioning strategy for chocolate milk
-promoted traditional nutritional value
-changed packaging (ex: made it bigger for bigger hands, made it so it fit in cup holder)
what is involved in the segment strategy step
-“Acid test”
-test your storyboard w a sample of customers
-marketing mix stragey for those segments
What are the 5 important pieces of shortcut criteria for effective segmentation
1. similarity of needs of potential buyers within a segment itself
2. difference of needs (in order to be separate segments)
3. simplicity and cost of assigning potential buyers to segments
4. potential for increased ROI and profit (financially viable?)
5. feasibility of reaching a chosen segment with a particular marketing action (can we reach after developing 4 Ps?)
what is the shortcut of criteria for selecting a target market?
1. size of segment (has to be big enough to be profitable)
2. expected growth of segment
3. competitive position (within market)
4. cost of reaching the segment
5. compatibility with the organization’s objectives and resources
What is the calculation/equation for net marketing contribution?
What step is this value assigned with?
Net marketing contribution= segment demand x segment share x price/unit x percent margin – (marketing + sales expenses)
Segment Profitability
involves aggregating prospective buyers into groups, ____, that 1) have common needs and 2) will respond similarly to a marketing action
market segmentation
the relatively homogeneous groups of prospective buyers
market segments
the existence of different market segments has caused firms to use a marketing strategy of
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 differentiation
-differences can be nonphysical, size, color, image, price
a business goes to the trouble and expense of —- its markets when it expects that this extra effort will increase its sales, profit, and ROI
What is a benefit to the multiple market segments 1 product approach
-avoids the extra costs of developing additional products
What is an example of the 1 product multiple segments segmentation strategy
-books, movies
-Harry Potter: marketed to preteens, teens, and adults
-disney resorts
What are the 5 criteria for effective segmentation
1. similarity of needs of potential buyers within a segment
2. difference of needs
3. simplicity and cost of assigning potential buyers to segments
4. potential for Increased profit and ROI
5. feasibility of reaching a chosen segment with particular marketing action
____ _ ___ requires both detailed analysis and large doses of common sense and managerial judgment
segmenting a market
What are the 5 essential criteria market segments should meet?
1. simplicity and cost-effectiveness of assigning potential buyers to segments
2. potential for increased profits
3. similarity of needs of potential buyers within a segment (that in turn lead to common marketing actions)
4. difference of needs of buyers among segments (if the needs of the various segments aren’t different enough, combine them into fewer segments)
5. potential of a marketing action to reach a segment (should require a simple but effective marketing action)
if increased sales don’t offset extra costs of adding a different segment…
combine segments and reduce the number of marketing actions
What are the 5 variables that can be used to segment US consumer markets
1. demographics
-based on an objective classification attribute whether physical (gender, race), measurable (age, income) of prospective customers

2. psychographics
-based on some subjective mental or emotional attributes (personality), aspiration or needs of prospective customers

3. geography
-based on where prospective customers live or work (region, city size)

4. benefits-behavioral segmentation
5. usage/commitment-behavioral segmentation
-based on observable actions or attitudes by prospective customers such as where they buy, what benefits they seek, how frequently they buy and why they buy

Because more than half of US households are made up of only 1 or 2 people, Campbell packages meals with only 1 or 2 servings for this market segment.
Demographic segmentation
People that live near one another tend to have similar lifestyles, have similar interests, and buy similar offerings. T/F
College dorm students want to keep/prepare their own food but they are short of space. Micro-Fridge understands this and markets a combination microwave, refrigerator, and charging station all in one.
behavioral segmentation: benefits of product features
Airlines have developed frequent flyer programs to encourage passengers to use the same airline repeatedly to create loyal customers.
behavioral segmentation: usage rate
What does the 80/20 rule suggest
that a small fraction of customers provides most of the firm’s sales
36.1% of the US pop that are heavy fast food users provide 63.6% of the actual consumption volume. What is this an example of?
the 80/20 rule
Why must a firm choose its target markets carefully and reach the perfect middle ground?
if it picks too narrow of segments, it may fail to reach the volume of sales and profits it needs
-if it selects too broad a set of segments, it may spread its marketing efforts so thin that they extra expense exceed the increased sales and profits
What are some of the criteria used in selecting the target segment/looking for segment attractiveness
1. market size
-there is no market for breakfast among dorm students who are on meal plans, so you should not devote any marketing efforts toward reaching this tiny segment

2. expected growth
-sales of fast food meals eaten outside the restaurant are projected to exceed those eaten inside, and Wendy’s drive thru is faster than McDonalds. This speed and convenance could benefit night commuters in adult education programs

3. competitive position
-the less the competition, the more attractive the segment is
-dorms announcing “no meals on weekends” is more promising for wendys
-wendys recently introduced an app for ordering to keep up with burger king

4. cost of reaching the segment
-the few nonstudents who live in the area may not be reachable

5. compatibility with the org.s objectives and resources
-if Wendy’s does not have the cooking equip. to make bfast and has a policy against spending more $ on equip.

Step 5: segment positioning
-in the book, “take marketing actions to reach target markets”
What do you do here?
develop a customized value proposition, highlight the benefits
when a company introduces a new product, a decision critical to its long-term success is how prospective buyers view it in relation to those products offered by its competitors
positioning the product
___ ___ refers to a place a product occupies in consumers’ minds based on important attributes relative to competitors products
product positioning
-position in the mind
“For upscale American families who desire a carefree driving experience, Volvo is a premium-price automobile that offers the utmost in safety and dependability”
positioning statement
-focuses Volves North America marketing strategy, so Volvo advertising almost always mentions safety and dependabilitiy
What are the 4 steps associated with discovering the perceptions in the minds of potential customers
1. Identify the important attributes for the product
2. Discover how target customers rate competing products for the same attributes
3. Discover where the company’s product is on these attributes on the minds of customers
4. Reposition the product in the minds of potential customers
a means of displaying in 2 dimensions the location of products/brands in the minds of consumers
-enables managers to see how consumers perceive competing products/brands as well as the firms own product/brand
perceptual maps
What were the 4 specific steps involving in repositioning chocolate milk
1. Identify the important attributes for adult drinks
2. Discover how adults see various competing drinks
3. Discover how adults see chocolate milk
4. Reposition chocolate milk to make it more appeal to adults

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