Bronis Verhage ISBN: 9789001818661 http://www.marketingfundamentals.noordhoff.nl © 2016 Noordhoff Uitgevers bv GLOSSARY Chapter 6 Market segmentation and positioning Market From a marketing perspective: customers - groups of people or organizations with similar needs and wants that firms can satisfy with their products or services. Market arena A market, broadly defined, in which companies compete – regardless of the industry in which they operate – that satisfy the same need or whose products fulfill the same function. Generic need satisfaction The notion that a company’s market and competition should be defined by overall customer experience instead of specific products or services; thus, a movie theatre competes with night clubs, restaurants and other establishments with a similar recreational function. Potential market Estimate of a product’s maximum possible sales in the entire market if all suppliers would have an optimal marketing strategy; in other words, the effective demand plus the potential demand (Market potential). Effective demand Total number of products currently sold or – in the case of durable goods – purchased by customers in the past. Potential demand The number of products over and above current sales that suppliers could sell between them, assuming they have an optimal marketing mix. Repeat purchase Subsequent purchase of a product after a buyer’s first purchase, indicating that he is becoming brand loyal. Durable consumer goods Products (such as bikes) that consumers use for a relatively long period of time. Initial demand Demand from first-time buyers who never purchased the product before. Replacement demand Demand from those who already own the product, but purchase a new one to replace it. Additional demand Demand from customers who already own the product and buy another one to use it in addition to the existing product. Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e 1 Bronis Verhage http://www.marketingfundamentals.noordhoff.nl ISBN: 9789001818661 © 2016 Noordhoff Uitgevers bv Extended demand The sum total of the initial demand plus the additional demand for a particular product during a period of time. Total demand The sum total of the extended demand plus the replacement demand. Product differentiation In the context of a product range: Offering several products that differ in style, quality, price or another product attribute, primarily to attract buyers who are looking for variation (Differentiation). Market segmentation Dividing the total heterogeneous market for a product – based on demographic, geographic, psychographic or behavioural criteria – into smaller, homogeneous market segments of buyers who have similar needs and wants or respond in a same way to a distinct marketing strategy (Segmentation) Safety stock Extra inventory that a company keeps on hand as a safety cushion in case the demand for a product exceeds the sales forecast. Cannibalization The loss of sales by a company in its established product after launching a new, usually lower priced, version of the product that – since buyers perceive it as a substitute – steals some of the sales of the original item. Segmentation conditions Requirements for effective market segmentation, such as the measurability, size and accessibility of the segments, and the feasibility of the strategy. Segmentation criteria Consumer characteristics – such as demographic, geographic, psychographic or behavioural variables – that can be used to subdivide the aggregate market into more homogeneous subsets of buyers or market segments,. Demographic market segmentation Dividing the total market into subgroups based on demographic consumer data such as income, social class, age, stage in the family life cycle, gender, ethnic background, and education. Heavy user A consumer who uses a considerably larger amount of a particular product than the average level of consumption of all buyers of this product. Ethnic pattern Attitudinal and behavioural characteristics of members of an ethnic group – that is a minority in a larger society – having racial, religious, linguistic, cultural or other traits in common. Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e 2 Bronis Verhage http://www.marketingfundamentals.noordhoff.nl ISBN: 9789001818661 © 2016 Noordhoff Uitgevers bv Geodemographic segmentation Segmentation of consumers based on a combination of geographic and demographic data by clustering potential customers in neighborhoods or zip code areas based on consumer behaviour and lifestyle data. Geographic segmentation Segmenting business and consumer markets based on geographic criteria, such as nations, provinces, cities, neighbourhoods, market size, population density, or climate in order to better tailor the marketing strategy to the preferences in various regions. Psychographic market segmentation Dividing markets into segments based on consumers’ lifestyle, attitudes, interests and personality characteristics. Personality characteristics Someone’s tendency to respond in a consistent and characteristic (e.g. ambitious or aggressive) way to stimuli from his environment as a way of coping with perceived reality. Lifestyle segmentation Market segmentation based on how groups of people – given their underlying values, attitudes, opinions and behaviour patterns – conduct their lives. Benefit segmentation A form of psychographic segmentation in which markets are defined in terms of the benefits that people seek from the product, and then segmented based on consumer preferences for specific product characteristics (Benefits-sought segmentation). Behavioural segmentation Subdividing the aggregate market into segments based on people’s product usage rate, degree of brand loyalty, and willingness to buy. Light user Consumer who uses significantly less of a particular product in a certain time period than the average level of consumption of all buyers of that product. Brand loyalty The degree to which a customer will keep buying the same brand, regardless of modifications in the marketing mix or the alternatives offered by rivals. Marketing proposition A carefully tailored marketing mix to target a specific market segment upon market entry Homogeneous products Products that buyers view as identical, such as milk, sugar, bananas and metals, making price their primary choice criterion. Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e 3 Bronis Verhage http://www.marketingfundamentals.noordhoff.nl ISBN: 9789001818661 © 2016 Noordhoff Uitgevers bv Heterogeneous products Products such as clothing and cars that buyers perceive as being different from one another. Undifferentiated marketing Targeting strategy used when a company goes after the whole market with the same product and a marketing strategy with mass appeal, hoping to achieve economies of scale and keep costs at a minimum. Concentrated marketing Targeting strategy in which a firm – with the same marketing mix – focuses on only one or a few markets, hoping to gain a large share of these segments. Niche strategy A company that – as a ‘nicher’ – concentrates on only one market segment that is of minor interest to major rivals, hoping to avoid a competitive fight. Market leader A company holding the largest share of a certain market segment, thanks to economies of scale in production, promotion, and distribution. Differentiated marketing Targeting strategy in which a company tries to reach the entire market (or the greatest possible part of it) by developing a unique, tailored marketing mix for each of the segments it operates in. Target market selection Choosing the segment(s) of buyers that the company defines as its market, and for which it develops specific marketing activities. Positioning Creating a clear, powerful and consistent image for the company’s products – relative to those of competitors – that should occupy a prominent position in the customer’s mind. Perceptual map A graph showing how (potential) customers perceive competing brands in a product category along two or more dimensions (e.g. cheap/inexpensive and progressive/conservative), usually important product attributes (Product positioning map). Instrumental product characteristics Product features (such as the design or technology used) that – since they satisfy the buyer’s functional needs – are sometimes used in the positioning strategy. Expressive product characteristics Symbolic product features – such as the emotional meaning of a brand – that meet the buyer’s need to express his lifestyle (e.g. status) or personality (e.g. ambition), often used as a positioning theme. Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e 4 Bronis Verhage http://www.marketingfundamentals.noordhoff.nl ISBN: 9789001818661 © 2016 Noordhoff Uitgevers bv Repositioning Attempt to create a new image in the customer’s mind for an existing brand through a combination of advertising and other marketing activities. Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e 5