MKT338 – Chapter 5 Study Guide Dr. Arash Zadeh
CHAPTER 5
Segmentation Definition and Characteristics
- The process of dividing the total market for a particular product or product category into
relatively homogeneous segments or groups
- Should create groups where members are similar to each other but dissimilar to
other groups
- involves the fundamental decision of whether to segment at all
- Typically allows firms to be more successful
Different types of segmentation as well as their advantages and disadvantages: mass
marketing, niche marketing, mass customization, permission marketing, one to one marketing,
and so forth.
- Mass Marketing (full market coverage)
- Works best when the needs of an entire market are homogeneous
- Risky and vulnerable to competitors
- Difficult to be focused/specialized
- Lower marketing costs
-
Niche Marketing (single segment)
Focusing on a single market segment that has a unique, specific set of needs
and attempting to gain maximum share in that segment.
- Pros: Lower costs of production, distribution and promotion
- It leads to specialization
- Strong market presence and becoming a market leader
- Cons: Segments’ preferences may change over time, which can create problems
- Difficulty of diversify or expand into other segments
-
Mass Customization
- An extension of one-to-one marketing
- Refers to providing unique solutions to individual customers on a mass scale
-
Permission Marketing
- Customers choose to become a member of the firm’s target market
- Key advantage: Customers are already interested in the product offering
-
One-to-one marketing
- Involves creating an entirely unique product offering for each customer
Criteria for a successful market segmentation
1. Identifiable and measurable - Must be easily identifiable
2. Substantial - large and profitable enough to make it worthwhile for the firm
3. Accessible - in terms of communication (advertising, etc.) and distribution (retail outlets)
4. Responsive - must respond to the firm’s marketing efforts
5. Viable and sustainable - meet the basic criteria for exchange, including being ready,
willing, and able to conduct business
AVOID** Ethically sensitive (legal) segments i.e. gambling & AVOID segments that do
not match the firm's expertise
4 types of segmentation: behavioral, demographic, psychographic, and geographic
- Behavioral: Most powerful approach and most closely associated with consumers’
needs
- Ex: chocolates and premium foods will sell on festivals
- Demographic: Gender, Income, Age, Occupation, etc.
- Psychographic: Personality, lifestyle, motives, etc.
- Geographic: Regional, city/country size, population density
Some specifications of VALS profiles: innovators, experiences, survivors, etc.
- Innovators - abundant resources and high self-esteem; concerned about image as an
expression of self, but not as an expression of status or power.
- Example products: fine wines, upscale home furnishings, etc.
-
Thinkers - well-educated consumers who value order, knowledge, and responsibility.
Conservative consumers who look for practicality, durability, functionality, and value.
- Example products: news and information services, low-emission vehicles,
-
Achievers - focused and structured around family, a place of worship, and career. lead
busy lives; hence, they value products that can save them time and effort.
- Example products: SUVs, family vacations, etc
-
Experiencers - young, enthusiastic, and impulsive consumers motivated by selfexpression. emphasize variety, excitement, the offbeat.
- Example products: fashion, entertainment, sports/exercise,
-
Believers - conservative, conventional consumers who hold steadfast beliefs based on
traditional values. predictable in that they follow established routines centered on family,
community.
- Example products: membership in social, religious, etc.
-
Strivers - motivated by achievement, yet they lack the resources to meet all their
desires; Think of themselves as having jobs rather than careers.
- Example products: stylish products, impulse items, credit cards, etc.
-
Makers - motivated by self-expression. However, these consumers experience the world
by engaging in many do-it-yourself activities such as repairing their own cars, building
houses. unimpressed by material possessions, new ideas, or big business.
- Example products: Auto parts, home-improvement supplies, etc.
-
Survivors - narrowly focused lives and have few resources with which to cope. Cautious
consumers who represent a fairly small market for most products. They are loyal to
favorite brands, especially if they can buy them on sale.
- Example products: Basic necessities and staples, etc.
CHAPTER 6
Product
Different types of consumer products and related characteristics (decision making, quality, price,
etc.)
- Convenience Products: Does not require the customers to go through an intensive
decision making process.
- Widely available
- Can be found readily
- Purchased frequently with minimal effort
- Ex: Soda, milk, gas
-
Shopping Products: Consumers compare on such bases as suitability, quality, price,
and style
- Requires customers go through a moderate decision-making process.
- Ex: furniture, fridges, etc.
-
Speciality Products: Customers are willing to make a special purchasing effort.
- Requires customers to go through an intensive decision-making process.
- Ex: Cars, boats
-
Unsought Products: Customers do not know about or normally think of buying.
- Ex: Carbon monoxide detector, emergency medicine
Definition and differences of product line, product portfolio, and related strategic decisions
- Product line: A group of closely related product lines
- Product portfolio (mix): The total group of products offered by the firm
- Related strategic decisions
- Variety: Number of product lines offered
- Assortment (depth): Depth of each product line
Unique characteristics of services
- Intangible
- Inseparable
- Heterogeneity
- Perishable
Pricing
Common Pricing objectives (exhibit 6.4)
- Profit-oriented
- Volume-oriented
- Market Demand
- Market Share
- Cash Flow
- Competitive Matching
- Prestige
- Status Quo
Base Pricing Strategies (Price skimming, penetration, prestige, etc.)
- Price Skimming: Set a relatively high initial price, then lower the price over time.
- Price Penetration: Set price initially low to rapidly reach a wide fraction of the market
and initiate word of mouth
- Prestige Pricing: Set the price at a high level in order to give the appearance of quality.
- Value-Based Pricing (EDLP): sets prices primarily, but not exclusively, according to the
perceived or estimated value of a product or service to the customer rather than
according to the cost of the product or historical prices.
- Competitive Matching: Set the price based on what the competition is charging.
- Non-Price Strategies: strategies include advertising, enhanced service quality, longer
opening hours and extended warranties.
Price elasticity
- Refers to customers’ sensitivity to changes in price
- The relative impact on the demand for a product, given specific increases or decreases
in the price charged for that product
- Perhaps the most important overall consideration in setting effective prices.
Situations that increase/decrease price sensitivity
- Situations that INCREASE price sensitivity...
- Availability of Substitute Products
- Customers are more sensitive to price changes when they can choose
among a number of substitute products.
- Higher Total Expenditure
- The higher the total expense, the more elastic the demand
- Noticeable Price Differences
- Products having heavily promoted prices tend to experience more elastic
demand.
- Easy Price Comparisons
- Customers are more price sensitive if they can shop around for a better
price.
-
Situations that DECREASE price sensitivity…
- Lack of Substitutes
- Customers are less price sensitive when they have fewer options.
- Real or Perceived Necessities
- These products have very inelastic demand because customers have to
have them.
- Complementary Products
- If the price of one product falls, customers will be less sensitive to the
price of complementary.
- Perceived Product Benefits
- Sometimes, products are “just worth it” to consumers.
- Situational Influences
- Customers are less price sensitive in certain situations (time pressure,
emergencies, gift giving)
- Product Differentiation
- Differentiation reduces the number of perceived substitutes.
IMC
Components of IMC strategy and their related activities
- Advertising
- Print, broadcast, online/interactive, wireless, direct marketing
- Public Relations
- Publicity, Press releases, Newsletters
-
Personal Selling
- Account management, Prospecting, retail sales
Sales Promotion
- Consumer promotion, trade promotion
Types of advertising
- Brand advertising
- Product advertising
** Most all advertising is a blend between the two**
Advertising plan & Advertising campaign
- Advertising Plan: A document that outlines the activities to be completed and
resources needed to create advertising.
- Advertising Campaign: A series of related advertisements with a similar look, feel, and
theme that centers on a specific product, service, or brand.
Steps of advertising campaign
1. Identify and analyze the target market
2. Define advertising objectives
3. Determine advertising budget
4. Select advertising medium
5. Creating advertising message
6. Implementation and evaluation
Method of determining advertising budget
- Objective & Task: Determining campaign objectives and the tasks needed to obtain
objectives (most effective)
- Percent of Sales: Multiplying the firm’s past and expected sales by a standard
percentage
- Competition matching: Matching competitors advertising outlays
- Arbitrary: Budget specified by high-level executive in the firm
Selecting advertising medium: Bases of selection and characteristic of the
How to decide on the right social media channel (Twitter, Facebook, Instagram, etc.)
Implementing and evaluating advertising
- Pretests: evaluation of advertisements performed before a campaign begins
- Consumer jury: involves asking consumers to compare, rank, and otherwise
evaluate the ads.
- Post-test: evaluation of advertising effectiveness after the campaign
-
Recognition (readership): a random sample of readers are asked if they
noticed or read a particular advertisement.
Aided and Unaided Recall: respondents watch an ad and then are quizzed on
the brand, with (without) mentioning the brand’s name.
Strategic issues in IMC (AIDA, Pull and Push, etc.)
- AIDA
- Attention, interest, desire, action
- Pull Strategy: Focus promotional efforts toward consumers
- Push Strategy: Focus promotional efforts toward the supply chain
Methods of Public Relations
- News (or press) releases
- Feature articles
- White papers
- Press conferences
- Event sponsorship
- Employee relations
SUPPLY CHAIN
Factors in successful supply chain integration
- Stability
- Interdependence
- Trust
- Cooperation
- Mutual Benefit
Strategic supply chain issues: Marketing Channel Structure
- Exclusive Distribution
- Giving one merchant or outlet the sole right to sell a product within a defined
geographic region
- Selective Distribution
- Giving several merchants or outlets the right to sell a product within a defined
geographic region
- Intensive Distribution
- Making a product available in the maximum number of merchants or outlets to
gain as much exposure and sales opportunities as possible
Strategic supply chain issues: Power in Supply Chain
- The Basis of Conflict in the Supply Chain
- Each firm is different, and has its own goals and objectives
- Mutual interdependence goes against the natural tendency of firms to seek their
own self-interests.
-
Sources of Power in a supply chain
- Legitimate power
- Reward power
- Coercive power
- Information power
- Referent power
Trends in Supply Chain Strategy
- Technological improvements
- E-commerce
- Radio frequency identification (RFID)
- Outsourcing channel functions
- Outsourcing vs. offshoring
- Growth of non-traditional channels
- Catalog and direct marketing
- Direct selling
- Home shopping networks
- Vending
- Direct response advertising