Segmentation, Targeting, and Positioning Short Answer

Chapter 06 - Segmentation, Targeting, and Positioning Short Answer Questions 113. Explain how the psychographic system VALS™ classifies customers. VALS™ classifies consumers into eight segments in two dimensions. On the vertical dimension, segments are described by their resources, including their income, education, health, energy level, and degree of innovativeness. The upper segments have more resources and are more innovative; those on the bottom have fewer resources and are less innovative. The horizontal dimension shows the segment's primary motivation. Consumers buy many products and services because of their primary motivations—that is, how they see themselves in the world and how that self-image governs their activities. The three universal primary motives are ideals, achievement, and self-expression. People who are primarily motivated by ideals are guided by knowledge and principles, whereas those who are motivated by achievement look for products and services that demonstrate success to their peers. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 6-64 Chapter 06 - Segmentation, Targeting, and Positioning 114. Explain loyalty segmentation. Why is it important for companies to consider loyalty segmentation? Provide one example to support your answer. Firms have long known that it pays to retain loyal customers. Loyal customers are those who feel so strongly that the firm can meet their relevant needs best that any competitors are virtually excluded from their consideration—that is, these customers buy almost exclusively from the firm. These loyal customers are the most profitable in the long term. In light of the high cost of finding new customers and the profitability of loyal customers, today's companies are using loyalty segmentation and investing in retention and loyalty initiatives to retain their most profitable customers. Airlines, for instance, definitely believe that all customers aren't created equal. For example, at Air Canada, customers who have flown the most miles with the company, the Super Elite, receive a distinctive card, personalized Air Canada Super Elite luggage tags, special access to Aeroplan Reward seats, priority reservation waitlist, preferred seat selection, Air Canada concierge service, priority airport check-in, extra checked-baggage allowance, priority boarding, guaranteed reservations for full-fare tickets, and priority baggage handling, among other benefits. None of these special services are available to the occasional flyer. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 115. Explain why geodemographic segmentation can be particularly useful for retailers. Geodemographic segmentation can be particularly useful for retailers because customers typically patronize stores close to their neighbourhood. Thus, retailers can use geodemographic segmentation to tailor each store's assortment to the preferences of the local community. For example, if a toy chain discovers that one of its stores is surrounded by Big Sky Families, it can adjust its offerings to include less expensive merchandise. This kind of segmentation is also useful for finding new locations; retailers identify their best locations and determine what type of people live in the area surrounding those stores, according to the geodemographic clusters. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 6-65 Chapter 06 - Segmentation, Targeting, and Positioning 116. Explain the criteria that marketers use to determine whether a segment is worth pursuing. Marketers need the segment they target to be identifiable. They must determine who is within their market to be able to design products or services to meet their needs. It is equally important to ensure that the segments are distinct from one another because too much overlap between segments means that distinct marketing strategies aren't necessary to meet segment members' needs. The best product or service cannot have any impact if that market cannot be reached (or accessed) through persuasive communications and product distribution. The segment should be reachable. Consumers must know the product or service exists, understand what it can do for them, and recognize how to buy it. For a segmentation strategy to be successful, the market must also be responsive. The customers in the segment must react similarly and positively to the firm's offering. If, through its distinctive competencies, the firm cannot provide products or services to that segment, it should not target it. Once the firm has identified its potential target markets, it needs to measure their size and growth potential to determine that they are substantial and profitable. If a market is too small or its buying power insignificant, it won't generate sufficient profits or be able to support the marketing mix activities. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-02 Identify the criteria for determining the attractiveness of a segment and whether it is worth pursuing (targeting). Topic: 06-04 Step 3: Evaluate Segment Attractiveness 6-66 Chapter 06 - Segmentation, Targeting, and Positioning 117. Explain how the use of the Internet helps companies use mass customization. Provide an example to support your answer. Mass customization is the practice of interacting on a one-to-one basis with many people to create custom-made products or services. The Internet helps companies cater to very small segments, sometimes as small as one customer at a time, relatively efficiently and inexpensively (e.g., mortgage and insurance sites provide personalized quotes). An Internetbased company can offer one-to-one service more inexpensively than can other venues, such as retail stores or telephone-based businesses. For example, frequent fliers of Air Canada can check prices and choose special services online at a fraction of the cost that the company would incur for a phone consultation with a ticket agent. The Internet also simplifies customer identification. Cookies, or small text files a website stores in a visitor's browser, provide a unique identification of each potential customer who visits and details how the customer has searched the site. Marketers also can ask visitors to fill out an online registration form. Using such information, the company can make a variety of recommendations to customers. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-03 Explain the differences among targeting strategies: undifferentiated; differentiated; concentrated; or micromarketing. Topic: 06-05 Step 4: Select Target Market 118. Cramwool Inc., an apparel company, targets several market segments with a different offering for each. Explain the segmentation strategy Cramwool is using. Cramwool is using a differentiated segmentation strategy. Firms using a differentiated segmentation strategy target several market segments with a different offering for each. Firms embrace differentiated segmentation because it helps them obtain a bigger share of the market and increase the market for their products overall. The more retail formats Cramwool develops to reach different market segments, the more apparel and accessories it can and will sell. Furthermore, providing products or services that appeal to multiple segments helps diversify the business, thereby lowering the company's overall risk. For example, if a line directed toward one segment is performing poorly, the impact on the firm's profitability can be offset by revenue from another line that is doing well. Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 06-03 Explain the differences among targeting strategies: undifferentiated; differentiated; concentrated; or micromarketing. Topic: 06-05 Step 4: Select Target Market 6-67 Chapter 06 - Segmentation, Targeting, and Positioning 119. Explain the concentrated targeting strategy. Discuss one company that use this strategy. When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market's needs, it is using a concentrated or niche targeting strategy. Entrepreneurial startup ventures often benefit from using a concentrated strategy, which allows them to employ their limited resources more efficiently. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-03 Explain the differences among targeting strategies: undifferentiated; differentiated; concentrated; or micromarketing. Topic: 06-05 Step 4: Select Target Market 120. Explain the concept of positioning. Positioning is the mental picture or perception—the thoughts, feelings, and impressions—that people have about a company, its products, and brands relative to competing products, brands, or companies. This mental picture is formed from multiple sources such as friends, family, relatives, reference groups, published articles in magazines and newspapers, reports and stories from radio, TV, and the Internet, as well as the customer's own experience. Regardless of whether companies want them to or not, consumers form their own ideas and feelings about a product or brand, and it is those very ideas and emotions that drive them toward or away from a brand or company. The positioning strategy can help communicate the firm's or the product's value proposition, which communicates the customer benefits to be received from a product or service and thereby provides reasons for wanting to purchase it. Positioning is one of the most important but difficult and least understood aspects of marketing strategy development. Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Moderate Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-06 Step 5: Identify and Develop Positioning Strategy 6-68 Chapter 06 - Segmentation, Targeting, and Positioning 121. Discuss the use of value as a positioning method with examples. Value is a popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision. Value does not necessarily mean low priced. For example, in the kids' toy market, Mega Bloks uses a low-price, value-based strategy, whereas its competitor, Lego, relies on a high-price positioning strategy. Watchmaker Patek Philippe uses the advertising tagline, "You never actually own a Patek Philippe. You merely take care of it for the next generation," to encourage buyers to consider its arm candy an investment. Other brands that rely on a similar idea of luxury value include Hermes, Chanel, and Mercedes-Benz. Some companies claim that they are offering the same value for much less money. This type of positioning is common among wireless service providers, cable/satellite TV and radio providers, electronics retailers, and department stores. Companies such as Internet Superstore, Buy.com, and TigerDirect emphasize that consumers are getting the best computer deals anywhere but at much lower prices. Finally, companies may use value positioning to let consumers know that while they are getting much less, they are also paying much less. WestJet, dollar stores, and countless retailers targeting cost-conscious consumers commonly use this strategy. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-07 Positioning Methods 6-69 Chapter 06 - Segmentation, Targeting, and Positioning 122. Explain the steps that marketers can follow to derive a perceptual map with examples. To derive a perceptual map, marketers follow six steps. 1. Determine consumers' perceptions and evaluations of the product or service in relation to competitors': Marketers determine their brand's position by asking consumers a series of questions about their and competitors' products. 2. Identify the market's ideal points and size: On a perceptual map, marketers can represent the size of current and potential markets. 3. Identify competitors' positions: When the firm understands how its customers view its brand relative to competitors', it must study how those same competitors position themselves. 4. Determine consumer preferences: The firm knows what the consumer thinks of the products or services in the marketplace and their positions relative to one another. Now it must find out what the consumer really wants—that is, determine the ideal product or service that appeals to each market. 5. Select the position: A company could develop a new product to meet the needs of the market. Alternatively, it could adjust or reposition its marketing approach. Finally, it could hope that consumers will be attracted to the product they currently produce because it is closer to their ideal product than anything else on the market. 6. Monitor the positioning strategy: Markets are not stagnant. Consumers' tastes shift, and competitors react to those shifts. Attempting to maintain the same position year after year can spell disaster for any company. Thus, firms must always view the first three steps of the positioning process as ongoing, with adjustments made in step 4 as necessary. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-08 Positioning by Using Perceptual Mapping 6-70 Chapter 06 - Segmentation, Targeting, and Positioning 123. Explain psychographic segmentation. Psychographic segmentation delves into how consumers describe themselves. Usually marketers determine (through demographics, buying patterns, or usage) into which segment an individual consumer falls. But psychographics allows people to describe themselves by using those characteristics that help them choose how they occupy their time (behaviour) and what underlying psychological reasons determine those choices. Determining psychographics involves knowing and understanding three components: self-values, self-concept, and lifestyles. Self-values are life goals, not just the goals one wants to accomplish in a day. In this context, they refer to overriding desires that drive how a person lives his or her life. This motivation causes people to develop self-images of how they want to be and then determine a way of life that will help them arrive at these ultimate goals. From a marketing point of view, self-values help determine the benefits the target market may be looking for from a product. Self-concept refers to the image people have of themselves. Lifestyles, the third component of people's psychographic makeup, are the ways we live. If values provide an end goal and selfconcept is the way one sees oneself in the context of that goal, lifestyles are how we live our lives to achieve goals. Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Moderate Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 6-71 Chapter 06 - Segmentation, Targeting, and Positioning 124. Explain the concept of PSYTE cluster profiles. How can marketer use PSYTE cluster profile? Provide an example. One tool used by Canada Post for geodemographic segmentation in Canada is PSYTE cluster profiles. The PSYTE system groups all neighbourhoods in Canada into 60 different lifestyles clusters with specific locations. Three PSYTE cluster examples are Urban Bohemia, Suburban Affluence, and Asian Heights. PRIZM CE, a tool developed by Environics Research, groups Canadians into one of 66 lifestyle types—with names such as Cosmopolitan Elite, Electric Avenues, Les Chics, and Lunch at Tim's—and is also widely used in Canada. The system provides a Canadian segmentation model that has linked geodemographics to psychographics, incorporating Social Values data from Environics Research with demographics and product preferences to explain consumer behaviour. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 6-72 Chapter 06 - Segmentation, Targeting, and Positioning 125. The Canadian Wireless Communication is a $50 billion industry. The number of Canadian cell phone subscribers exceeds 30 million, as of Q3 2016. Use segmentation grid and define at least three segments for this industry. Students answer will vary. Exhibit 6.6 should be used to define each segment. One segment that is most likely to be mentioned is "students". Another segments such as "businessmen", "salesmen", "soccer moms", or "families" could be discussed as well. Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 06-01 Describe the bases marketers use to segment a market. Topic: 06-03 Step 2: Segmentation Bases 126. You are planning to launch a new reality TV show. What would be your target market? Would you go for undifferentiated, differentiated, or concentrated segmentation? How would you position your TV show? Develop a positioning statement for it. Student answers will vary. They will choose from one of the following: · Undifferentiated segmentation strategy, or mass marketing: When everyone might be considered a potential user of its product, a firm uses an undifferentiated segmentation strategy. · Differentiated segmentation strategy: Firms using a differentiated segmentation strategy target several market segments with a different offering for each. · Concentrated (niche) segmentation strategy: When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market's needs, it is using a concentrated or niche segmentation strategy. Positioning is the mental picture or perception—the thoughts, feelings, and impressions—that people have about a company, its products, and brands relative to competing products, brands, or companies. Positioning strategies are realized by communicating particular messages (i.e., the positioning statement) in persuasive communications through different media. It expresses how a company wants to be perceived by consumers. Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 06-03 Explain the differences among targeting strategies: undifferentiated; differentiated; concentrated; or micromarketing. Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-05 Step 4: Select Target Market Topic: 06-06 Step 5: Identify and Develop Positioning Strategy 6-73 Chapter 06 - Segmentation, Targeting, and Positioning 127. You are a product manager in a pharmaceutical company. You have developed a new drug to treat a particular terminal illness. How, as a manager, would you segment, target, and position the market for the pharmaceutical company? How would you position the new drug? Student answers will vary. They will choose from one of the following in each group: · Geographic: The grouping of consumers on the basis of where they live · Demographic: The grouping of consumers on the basis of age, gender, income, education, occupation, race, marital status, family size, family life cycle, religion, ethnic background, generational cohort, home ownership · Psychographic: The grouping of consumers on the basis of lifestyle, personality/selfconcept, social class · Behavioural: The grouping of consumers on the basis of benefits sought, usage, loyalty Targeting strategies: · Undifferentiated segmentation strategy, or mass marketing: When everyone might be considered a potential user of its product, a firm uses an undifferentiated segmentation strategy. · Differentiated segmentation strategy: Firms using a differentiated segmentation strategy target several market segments with a different offering for each. · Concentrated (niche) segmentation strategy: When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market's needs, it is using a concentrated or niche segmentation strategy. Positioning is the mental picture or perception—the thoughts, feelings, and impressions—that people have about a company, its products, and brands relative to competing products, brands, or companies. Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 06-03 Explain the differences among targeting strategies: undifferentiated; differentiated; concentrated; or micromarketing. Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-03 Step 2: Segmentation Bases Topic: 06-05 Step 4: Select Target Market Topic: 06-06 Step 5: Identify and Develop Positioning Strategy 6-74 Chapter 06 - Segmentation, Targeting, and Positioning 128. Develop a perceptual map for your educational institution. Make sure to include at least 3 other universities/colleges in your map. Student answers will vary. They should use 2 attributes such as university/college reputation, program qualities, class sizes, minimum admission requirements etc. to compare the institutions. Accessibility: Keyboard Navigation Blooms: Apply Difficulty: Difficult Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-06 Step 5: Identify and Develop Positioning Strategy 129. Explain brand repositioning. Brand repositioning refers to a strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences. Repositioning can change the quality image of the brand. Repositioning also breathes life into old brands. Such revitalization sometimes can result from changing the packaging and/or altering the characteristics of the brand. Although repositioning can improve the brand's fit with its target segment or boost the vitality of old brands, it is not without costs and risks. Firms often need to spend tremendous amounts of money to make tangible changes to the product and packages, as well as intangible changes to the brand's image through various forms of promotion. These costs may not be recovered if the repositioned brand and messages are not credible to the consumer or if the firm has mistaken a fad for a long-term market trend. Accessibility: Keyboard Navigation Blooms: Understand Difficulty: Moderate Learning Objective: 06-04 Define positioning and describe how firms do it. Topic: 06-09 Repositioning 6-75