Marketing Notes 3 - Segmentation

Marketing notes 3 Marketing Segmentation aggregating groups into groups, or segments, that have common needs and will respond similarly to a marketing action. Product Differentiation A marketing strategy that involves a firm using different marketing mix techniques such as product features and advertising, to help customers perceive the product as being different and better than competing products. What are three specific marketing segmentation strategies? (1) one product and multiple market segments, (2) multiple products and multiple market segments, and (3) segments of one, or mass customization. Market-product grid A framework to relate the market segments of potential buyers to products offered or potential marketing actions Mass Customization Tailoring products or services to the tastes of individual customers on a highvolume scale. Build-to-order (BTO) Manufacturing a product only when there is an order from a customer. Organizational Synergy Increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently. Canniablization A new product or new chain simply stealing customers and sales from the older, existing ones. What are the 5 steps used to segment a market? 1. Group potential buyers into segments. 2. Group products to be sold into categories. 3. Develop a market-product grid and estimate size of markets. 4. Select target markets. 5. Take marketing actions to reach target markets. What are the five essential criteria in forming a market segment? 1. Simplicity and cost effectiveness of assigning potential buyers into segments. 2. Potential for increased profit. 3. Similarity of needs of potential buyers within a segment. 4. Difference of needs of buyers among segments. 5. Potential of a marketing action to reach each segment. geographic segmentation Segmentation based on where prospective customers live or work. psychographic segmentation Segmentation based on some subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers demographic segmentation Segmentation based on some objective physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective customers behavioral segmentation 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. 80/20 rule Concept that suggests 80 percent of a firm's sales are obtained from 20 percent of its customers. Criteria to use in selecting target segments. 1. Market size 2. Expected growth 3. Competitive position 4. Cost of reaching the segment 5. Compatibility with the organizations objectives and resources. product positioning The place a product occupies in 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. Head to head positioning Competing directly with competitors on similar product attributes in the same target market. Differentiation positioning Seeking a less-competitive, smaller market niche in which to locate a brand. perceptual map A means of displaying in two dimensions the location of products or brands in the minds of consumers. 4 Steps to discovering the perceptions in the minds of potential customers (product positioning) 1. Identify the important attributes for a product or brand class. 2. Discover how target customers rate competing products or brands with respect to these attributes. 3. Discover where the company's product or brand is on these attributes in the minds of potential customers. 4. Reposition the company's product or brand in the minds of potential customers.