Segmentation, Targeting, and Positioning Answer Key Part 4

108) Demographic segmentation focuses on different marketing approaches for different time periods of people's lives and different family situations. Answer: FALSE 109) Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. Answer: TRUE 110) Shopping For The Rich and Famous is a buying service that helps wealthy clients find the best buys in exclusive clothing, high-end cars, travel, and financial services. This firm would use household income segmentation. Answer: TRUE 111) Your assignment at work is to divide buyers into different groups based on social class, lifestyle, and personality characteristics. After a planning session with the marketing and sales staff, you issue a memo to upper management recommending psychographic segmentation. You are right on target. Answer: TRUE 112) User status segmentation involves finding the major advantages or features people look for in the product class, the kinds of people who look for each advantage or feature, and the major brands that deliver each advantage or feature. Answer: FALSE 113) LaGrange Florists segments markets into groups of nonusers, ex-users, potential users, firsttime users, and regular users of its flowers and services. This firm uses usage rate as the segmentation approach. Answer: FALSE 114) Research about and planning for loyalty status as a segmentation approach is generally not useful or practical for most firms. Answer: FALSE 115) For simplicity's sake, most marketers generally limit their segmentation analysis to one or a few variables. Answer: FALSE 116) Clusters of marketable groups of customers with similar likes, dislikes, lifestyles, and purchase behaviors can be identified by multivariable segmentation systems that merge and analyze geographic, demographic, lifestyle, and behavioural data. Answer: TRUE 117) Business and consumer marketers use the same set of variables to segment their markets. Answer: FALSE 118) The majority of North America-based companies have developed the resources and the will to operate in multiple foreign countries. Answer: FALSE 119) There are many exceptions to the geographic segmentation assumption that consumers in nations close to one another will have many common behaviours and traits. Answer: TRUE 120) Because there is such variation among the economies of countries around the world, it is not practical to segment international markets on the basis of economic factors. Answer: FALSE 121) For market segments to be useful they must be measurable, accessible, substantial, differentiable, and actionable. Answer: TRUE 122) In evaluating different market segments, a firm must look at three factors: segment size and growth, segment structural attractiveness, and company objectives and resources. Answer: TRUE 123) At a recent marketing seminar, the featured speaker stated that a target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. This is a correct definition. Answer: TRUE 124) Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments. Answer: TRUE 125) Because Cruise Ships International currently has limited financial and personnel resources, it should avoid concentrated or niche marketing until resources are again substantial. Answer: FALSE 126) Niche marketing offers smaller companies an opportunity to compete by focusing their limited resources on serving niches that may be unimportant to or overlooked by larger companies. Answer: TRUE 127) Though the use of mass marketing has been widespread in the past 100 years, for centuries consumers were served as individuals as businesses practiced individual marketing. Answer: TRUE 128) Mass marketing is becoming the marketing principle for the twenty-first century. Answer: FALSE 129) When a company chooses a target marketing strategy, its choices are influenced by factors related to company resources, the degree of product variability, and the product's life-cycle stage. Answer: TRUE 130) Most marketing targeted at children, minorities, or other special segments provides benefits to targeted consumers. Answer: TRUE 131) A product's position is the way the product is defined by the retailers who sell it to target markets. It is how it is defined on important attributes—the place the product occupies in the retailers' minds relative to competing products. Answer: FALSE 132) Consumers position products in their minds in order to simplify the buying process. Answer: TRUE 133) When Kia offers a new model of car with the same features as a comparable Toyota or Ford and provides a longer warranty, Kia is following a more-for-less strategy. Answer: FALSE 134) A brand's position is assessed relative to a competitor's positioning. Answer: TRUE 135) Apple says it makes its newest iPad has superior design and usability. Apple is referring to differentiation. Answer: TRUE 136) Explain the four major steps in designing a customer-driven marketing strategy. Answer: The first step is market segmentation: dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes. The company identifies different ways to segment the market and develops profiles of the resulting market segments. The second step is market targeting: evaluating each market segment's attractiveness and selecting one or more of the market segments to enter. The third step is differentiation: actually differentiating the firm's market offering to create a superior customer value. Finally, the last step is market positioning: arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of consumers. 137) Explain the four major segmenting variables for consumer markets. Answer: Geographic segmentation divides the market into different geographic units, such as nations, regions, states, countries, cities, or neighbourhoods. Many companies are localizing their products, advertising, promotion, and sales efforts or are seeking to cultivate as-yet untapped geographic territory. Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. These are the most popular factors because they are easy to measure, and consumer needs, wants, and usage rates often vary closely with demographic variables. Psychographic segmentation, on the other hand, divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeup. Behavioural segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behaviour variables are the best starting point for building market segments. 138) Describe how marketers use multiple-segmenting bases to their advantage. Answer: Marketers rarely limit their segmenting analysis to only one or a few variables. Instead, they use multiple segmentation bases in an effort to identify smaller, better-defined target groups of consumers who share likes, dislikes, lifestyles, and purchase behaviours. Companies often begin by segmenting their markets using a single base, and then expand using other bases. 139) Why and how do businesses segment their markets? Answer: By going after segments instead of the whole market, companies have a much better chance to deliver value to customers and to receive maximum rewards for close attention to customer needs. Like consumer groups, business buyers can be segmented using geographic, demographic, benefits sought, user status, usage rate, and loyalty status segmentations. Business buyers are also segmented by the variables of operating characteristics, purchasing approaches, situational factors, and personal characteristics. 140) How might the marketing mix be different for a hotel targeting a business traveller versus family holiday travellers? Answer: Business travellers and family travellers are different segments and require different marketing mixes. A business traveller would likely desire his/her room to have a desk, reliable wifi, and possibly an iron and ironing board. Family travellers would likely want larger rooms, multiple beds, and child-safe rooms. Business travellers will likely be more price insensitive than their family counterparts because the business traveller's employer would likely be paying for the room. Hotels targeting the business travellers will tend to be located closer to financial districts and businesses. Family-oriented travellers would tend to stay closer to places with familyoriented entertainment or shopping. Finally, promotions will likely be very different. Business communications may stress convenience, a good night's sleep, and focus on single-person travellers. Promotions geared to families may emphasize fun for the family and value. 141) "Because the Internet has no borders, it is useless for firms offering goods and services over the Internet to use geographical segmentation." Discuss this statement. Answer: This is not a well-thought out statement. If anything, the Internet expands the number of locations that a firm can reach. Marketers can define and reach segments of like-minded consumers no matter where in the world they are. Therefore, the number of locally segmented groups a firm can reach increases. In addition, local segmentations may be required for products offered, languages, and delivery. 142) Why do international markets need to be segmented? Answer: Few companies have either the resources or the will to operate in all, or even most, of the countries that dot the globe. Different countries, even those that are close together, can vary greatly in their economic, cultural, technological, and political makeup. International firms need to group their world markets into segments with distinctive buying needs and behaviours. 143) Imagine that you are presenting a workshop on Requirements for Effective Segmentation. Briefly describe the five traits of market segments that will help your audience understand your topic. Answer: The size, purchasing power, and profiles of the segments must be measurable. The major problem may be that the segment will be hard to identify and measure. The market segments must be accessible; that is they can be effectively reached and served. The segment must be substantial or large/profitable enough to serve. It should be the largest possible homogeneous group worth pursuing with a tailored marketing program. To be differentiable, the segments need to be conceptually distinguishable and respond differently to different marketing mix elements and programs. Finally, the segment must be actionable, meaning that effective programs can be designed for attracting and serving consumers who make up the segment. 144) Explain how companies identify attractive market segments and choose a target marketing strategy. Answer: To target the best market segments, the company first evaluates each segment's size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four marketing strategies—ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated marketing. This involves mass-producing, mass-distributing, and masspromoting about the same product in about the same way to all consumers. Or the seller can adopt differentiated marketing—developing different market offers for several segments. Concentrated marketing involves focusing on only one or a few market segments. Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product life cycle stage, market variability, and competitive marketing strategies. 145) Compare and contrast four major segmenting strategies. Answer: An undifferentiated marketing strategy ignores market segment differences and targets the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different. In contrast, a differentiated strategy targets several market segments and designs separate offers for each. Companies hope for higher sales and a stronger position within each market segment. Concentrated or niche marketing goes after a large share of one or a few segments or niches instead of going after a share of a large market. These niches may be overlooked, unimportant, or under worked. Niching offers smaller companies an opportunity to compete by focusing their limited resources more effectively. Using micromarketing, a company can tailor products and marketing programs to suit the tastes of specific individuals and locations. It includes local and individual marketing. 146) In what ways might a marketer engage in socially responsible target marketing? Answer: Socially responsible marketers work to avoid purposefully targeting vulnerable or disadvantaged consumers with controversial or potentially harmful products. In addition, marketers should reconsider the marketing of adult products that may spill over into the child segment—either intentionally or unintentionally; primary examples include beer, cigarettes, and fast food. The growth of the Internet has also presented potential problems—namely that makers of questionable products or deceptive advertisers may more readily victimize the most vulnerable audiences; marketers can avoid becoming involved in these harmful situations as they attempt to reach vast numbers of consumers with such precise, refined targeting strategies. 147) Explain the concept of positioning for competitive advantage. Answer: A product's position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers' minds relative to competing products. Positioning involves implanting the brand's unique benefits and differentiation in customers' minds. To carry out effective positioning, a company must identify a set of possible competitive advantages upon which to build a position, choose the right competitive advantages, and select an overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market. 148) Why do marketers segment the market? Answer: Marketers divide heterogeneous markets into smaller groups that can be reached more efficiently with products and services that match their unique tastes; firms focus on buyers they can serve best and most profitably. 149) When might be the best time for a marketer to use geographic segmentation? Answer: Geographic segmentation may be especially profitable when consumers in different regions, states, counties, and so forth share distinct buying behaviours and product or service preferences. 150) Why might demographic segmentation be the most common type of segmentation? Answer: Demographic segmentation is often based on observable features, making demographic segmentation easier than other types. Another reason is that consumer needs, wants and usage rates often vary closely with demographic variables. 151) Why must marketers guard against stereotypes when using age and life cycle segmentation? Answer: Not all consumers in the same age and life cycle categories share the same abilities and interests; some 40-year-olds may have more in common with typical 20-year-olds, for example, than with other 40-year-olds. 152) What characteristics would interest a marketer who focuses on psychographic segmentation? Answer: Such characteristics include social class, lifestyle, and personality. 153) If Kool-Aid promotes a year-round campaign that "Kool-Aid isn't just a summertime drink," what type of segmentation is being used? Answer: Occasion segmentation is being used in this scenario. 154) Half of a marketer's consumers buy a product because it is "in style"; the other half buy the product because of its superior functionality. What is this type of segmentation called? Answer: This is benefit segmentation. 155) What is one way in which a marketer can attract non-loyal consumers? Answer: Marketers can attract consumers who show no loyalty to any brand by putting their brand on sale or by altering price. 156) How might a marketer benefit most from using PRIZM? Answer: The Nielsen Company's PRIZM classifies households based on many demographic, behavioral, and lifestyle factors. It then classifies and names these segments according to marketable groups of like-minded consumers. Marketers can more closely tailor their efforts to their target PRIZM segment. 157) List three variables that may be used to segment both consumer and business markets. Answer: Variables that apply to both consumer and business markets include geographics, demographics, benefits sought, user status, usage rate, and loyalty status. 158) List variables that are applicable to segmenting business markets. Answer: Operating characteristics, purchasing approaches, situational factors, and personal characteristics can all be used to segment business markets but not consumer markets. 159) What assumption about consumers is made by a marketer using intermarket segmentation? Answer: Such marketers assume that segments of consumers have similar needs and buying behaviour even though they are located in different countries. 160) What factors may impact segment attractiveness? Answer: The number of competitors, substitute products, power of buyers, and powerful suppliers may impact segment attractiveness. 161) What is one major assumption made by marketers who choose to use an undifferentiated marketing strategy? Answer: Such marketers assume that all consumers share something in common, regardless of how different the consumers may be. 162) XYZ Computers, Inc., a business with limited resources, is a market nicher. How might XYZ benefit from this? Answer: XYZ Computers will have an opportunity to compete by focusing its limited resources on serving niches that may be unimportant to or overlooked by larger competitors. 163) BMW allows customers to design their own vehicle from a set of options at BMW's Web site. What is this called? Answer: This is mass customization. 164) Explain how market variability impacts the choice of a target-marketing strategy. Answer: If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing may be appropriate. 165) In which step of target marketing is the marketing mix created in detail? Answer: Once a marketing positioning statement has been chosen, the company must deliver and communicate the desired position to customers. All the marketing mix efforts must support the positioning strategy. 166) Why might a marketer of laundry detergent be interested in viewing a perceptual positioning map? Answer: Perceptual positioning maps show consumer perceptions of a brand versus competing products on important buying dimensions. Laundry detergent, for example, may be placed on a perceptual map based on price and cleaning power; this allows a marketer to view how consumers perceive their product with respect to others' products along those dimensions. 167) In what ways might a marketer be able to gain competitive advantage through channel differentiation? Answer: Firms that practice channel differentiation gain competitive advantage through the way they design their channel's coverage, expertise, and performance. Such factors as the level of customer service, speed of delivery, packaging, transportation type, and so on may play a role in channel differentiation. The Montreal Athletic Association (MAA) is an upscale club and fitness facility in downtown Montreal. The club offers comprehensive fitness services that include a state-of-the-art weight room, squash courts, handball court, boxing ring, Olympic-sized swimming pool, zumba dance classes, yoga rooms, spinning classes, and a gymnasium for volleyball, badminton, basketball, and floor hockey. Several of the classes and personal training services are headed by fitness celebrities and former Olympic athletes. Beyond fitness, the MAA offers a world-class sports clinic that serves its members and many professional athletes. The clinic includes sports doctors, physiotherapists, and dietician services; and massage services and a restaurant are also part of the MAA offering. The restaurant, affectionately known by its members as "the Captain's Pub," has daily changes to its menu. Members routinely gather at the restaurant for drinks, holiday parties, Mother's Day brunches, and special events such as whiskey tastings. The staff likes to surprise its MAA "family members" by handing out roses to mothers on Mother's Day and having recognized experts lead the wine tasting sessions. Some members have belonged to the MAA for over 70 years! Not surprisingly, MAA is a favourite of celebrities when they shoot movies or perform concerts in Montreal. It is not uncommon for members to invite an A-lister movie star to join in a game of basketball or see a member have a game of squash with a rock-star. A few years ago, Reader's Digest voted MAA the best club in the country. The MAA likes to pamper its members. Change rooms are equipped with luxury towels and full amenities (e.g., shaving cream, razors, lotions, and shampoos). Laundry services and a pro shop with dedicated pros offering lessons are additional services that members can purchase. The MAA is not an inexpensive club. Each new member enters with an initiation fee of $250. Base monthly memberships on a 1-year contract start at $99 for those under 30, $109 for those between 30-35, and $125 for those over 35. The longstanding members who capture the "the spirit of the Club" are awarded Gold Memberships, which give the gold members access to special club privileges. 168) Discuss some of the different approaches that the MAA could use to segment the market. Be specific. Answer: Lots of different answers could apply here. Geographical segmentation applies. The club is based in downtown Montreal and therefore will target based on proximity to downtown/urban locations. Demographic breakdowns could be used as well. Income levels apply, as a higher disposable income is required for a $1500/year club membership. Age is a clear segmentation variable for the club as evidenced through its pricing structure. Occupation might apply as well. Professionals (business people, lawyers, etc.) and professional athletes seem to be relevant segments. Psychographically, several segmentations could apply. For example, social class is a segmentation approach that could be applied. The club segments based on upper classes. Lifestyle may play a role as well. People who integrate fitness in their lives would be another way to look at segmenting the market. Behavioural segmentation approaches may involve benefits sought, loyalty, and user status. Individuals looking for a "club" environment, an "intimate" environment, or being part of a prestige club could also form appropriate segments. Within its existing membership base, the MAA clearly segments based on user rates and loyalty to the club via its Gold Membership. 169) You meet the General Manager of the MAA. He asks, "How should we assess the attractiveness of the different market segments?" Answer: The segments should be large enough and have enough financial means to use the MAA services. The segments should also be readily identifiable so that the MAA can access them with a marketing mix. Relatedly, the segments should respond to the MAA marketing mix. In short, the segments should be measureable, accessible, substantial, differentiable, and actionable. 170) How does the MAA differentiate its offering? How is this differentiation related to the position of the MAA? Answer: The MAA has several differentiating aspects. First, it offers a comprehensive fitness experience. Second, it provides a prestigious club feel for its members. Taken together, these differentiation aspects merge to form the positioning of the MAA in customers' minds The positioning strategy is "more for more."