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Why business firms segment there markets:
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Market segmentation involves aggregating prospective buyers into groups, or segments, that:
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Marketing Chp 9
Marketing Chp 9 Lecture Notes Pt 1
| Question | Answer |
|---|---|
| Why business firms segment there markets: | To respond more effectively to the wants of groups of potential buyers to increase sales and profits |
| Market segmentation involves aggregating prospective buyers into groups, or segments, that: | 1) Have common needs 2) will respond similarly to a marketing action |
| Different market segments cause firms to use: | Product Differentiation |
| What is product differentiation | Marketing strategy that involves a firm using different marketing mix activities to help consumers perceive the products as being different and better than competing products |
| What does segmentation do: | The process of segmenting a market and selecting specific segments as targets is the link between the various buyers needs and the organizations marketing program |
| People or organizations should be grouped into a market segment accourding to | - similarity of needs and benefits they look for in making a purchase |
| Devloping Specific Marketing Mix (4 Ps) actions may involve: | - separate offerings and other aspects of themarketing mix, such as price, promotion, or distribution strategies |
| When to Segment Markets | One-Sized fits all mass markets no longer exist, firm goes to the trouble & expense of segmenting its markets when it expects that this will increase it sales, profit, & return on investment, when expenses are greater than the potentially increased sales |
| Three specific segmentation strategies | One product & multiple market segments, multiple products & multiple market segments, segments of one or mass customization |
| What is one product and multiple market segments | When a firm produces only a single product or service and attempts to sell it to two or more market segments, it avoids the extra costs of developing and producing additional versions of the product |
| What is multiple products and multiple market segments | Marketing different products is more expensive than producing just one but is justified if it serves customers'need better, doesnt reduce quality of increase price, and adds to sales and profits |
| What is segments of one (Mass Customization) | The essence of customer relation management (CRM) every customer has unique wants and needs. Next step beyond build-to-order (BTO), manufacturing a product only when one is ordered |
| What is synergy | Is the increased customer value achieved through performing organizational functions more efficiently, can lead to cannibalization of sales from one segment to another |
| Market segmentation involves aggregating prospective buyers into groups that have two key characteristics, what are they? | The groups should have common needs and respond similarly to a marketing action |
| In terms of market segments and products, whar are the three market segmentation startegies? | 1) One product and Multiple Market Segments 2) Multiple products and multiple markets segments 3) "segments of one" or mass customization |
| The process of segmenting a market and then selecting and reaching the target segments is divided into how many steps? | Five Steps |
| Criteria to Use in Forming the Segments | 1) Simplicity & Cost of Assiging potential buyers to segements 2) Potential for increased profit 3) Similarity of needs of potential buyers w/in a segment 4) Difference of needs of buyers among segments 5) potential of a marketing action to reach a segmen |
| What is simplicity and cost of assigning potential buyers to segments | Need to cost effectively identify characteristics of potential buyers in order to assign them to a segment |
| What is potential for increased profit | If future profit and ROI are maximized without segmentation, dont segment |
| What is similarity of needs of potential buyers within a segment | Potential buyers within a segment should be similar in terms of a marketing action, such as product features sought or advertising media used |
| What is the difference of needs of buyers among segments | If the needs of various segments arent very different, combine them into fewer segments. If increased sales dont offset extra costs combine segments and reduce the number of marketing action |
| What is potential of a marketing action to reach a segment | reaching a segment requires a simple but effective marketing action. If no such action exists, dont segment |
| What are the four general bases of segmentation and the typical variables that can be used to segment U.S. consumer markets | Geographic Segmentation, Demographic Segmentation, Psychographic Segmentation, Behavioral Segmentation |
| What is Geographic Segmentation | Based on where prospective customers live or work (region, city, state) |
| What is Demographic Segmentation | Which is based on some objective physical (gender, race) measurable (age, income) or other classification attribute (birth era, occupation) or prospective customers |
| What is Psychographic Segementation | Which is based on some subjective mental or emotional attributes (personality), aspiration (lifestyle), or needs of prospective customers |
| What is Behavioral Segmentation | Is based on some observable action or attitudes by prospective customers, such as where they buy, what benefits they seek, how frequently they buy, and why they buy |
| What is usage rate | The quantity consumed or patronage (store visits) during a specific period |
| What is frequency marketing | Is a program that encourages consumers to use the product or service repeatedly |
| What is the 80/20 rule | It is what usage rate may be reffered as, it is a concept that suggests 80 percent of a firms sales are obtained from 20 percent of its customers |
| Ways to Segment Organizational Markets | Geographic, Demographic, Behavioral |
| What is gegraphic segments in organizational markets | Consists of metropolitan and micropolitan statistical areas |
| What is demographic segments in organizational markets | consists of NAICs, number of employees, sales |
| What is behavioral segments in organizational markets | consists of usage, rate, application |
| The process of segemnting and targeting markets is a bridge between what two marketing activities | Identifying market needs and taking marketing actions |
| What is the difference between the demographic and behavioral bases of market segmentation | Demographic segmentation is based on some objective physical, measurable, or other classification attribute of prospective customers wheras behavioral segmentation is based on some observable action or attitude by prospective customers |
Created by:
kkolsch