TUTORIAL 3:
Developing Lists & Discovering Markets (Week 4)
CLASS ACTIVITIES:

Revise Topic 3

Tutorial questions

Case Discussion Questions
Learning outcome

Understand the importance of market segmentation and the role that lists serve in direct
marketing

Be familiar with the five bases (geographic, demographic, social, psychological and
behavioral) used in segmenting the consumer market

Be able to differentiate between house, response and compiled lists and be able to critically
evaluate the value of each for direct marketers

Be able to explain how the list industry operates and the interaction between the various
members in this industry
Tutorial questions
1. What is market segmentation and how do direct marketers use it?
Market segmentation is a marketing strategy devised to attract and meet the needs of a
specific sub-market. Direct marketers use it to differentiate products for particular market
segments and to position these products so that they will have special appeal to the intended
market
2. How segmenting industrial is markets different from segmenting final consumer
markets?
Segmenting industrial markets is different from segmenting final consumer markets based on
purchase behavior and the type of segmentation bases used to classify consumers into
respective market segments. Industrial consumer market segmentation is based on industrial
classifications (MSIC Codes) while final consumer market segmentation is based on
geographic, demographic, social, psychological and behavioral dimensions.
3. What are psychographics? In what way are they useful to direct marketers?
Psychographics is the study of life-styles, habits, attitudes, beliefs, and value system of
individuals. Psychographics are useful to direct marketers when they can identify and
measure influences such as environment, self-perception, and lifestyles. This will help in
effectively segmenting the mailing lists and thus predict potential consumer response by
recognizing and evaluating the simultaneous appearance of a prospect’s name on a variety of
lists.
4. How can ZIP codes help achieve product differentiation or promotional strategy?
ZIP codes can help achieve product differentiation or promotional strategy by enabling direct
marketers to know more about their markets and to organize them according to local
transportation patterns. For example, many major coupon distributors segment their markets
on the basis of ZIP code areas. These companies also know which ZIP code areas possess a
heavy concentration of residential households and coupon users.
Case Discussion Questions: Lillian Vernon Corporation (Textbook p.83 – 87)
1. Discuss the various methods used by Lillian Vernon Corporation to acquire names of
prospective customers. Which methods have been most productive?
Lillian Vernon Corporation used several methods to acquire names of prospective customers.
Trading names (response lists) with different direct marketers proved to be one way to gain
prospective customers. Including a space on each order form that asked each customer for
the names of other people who might also like to receive a catalog was another way Lillian
Vernon was productive in expanding prospective customers. Participating in list rental
activities (including obtaining compiled lists) was another method used to acquire prospects.
2. Given the three criteria used by Lillian Vernon Corporation when renting a response
list, name some response lists that Lillian Vernon Corporation should pursue.
This question enables students to exercise creative thinking in identifying the various
response lists that the company may pursue—using the criteria of merchandise, customer and
price compatibility. Some of the more obvious lists would include the various book and
magazine publishing businesses as well as retailers of collectibles. This answer will also
vary depending on a specific market segment Lillian Vernon decides to pursue.
3. Identify some direct marketing companies that might have an interest in renting Lillian
Vernon Corporation’s customer list. Explain why each company would possess such an
interest and whether or not Lillian Vernon Corporation should permit such a list rental
transaction.
There are a variety of direct marketing companies that might have an interest in renting
Lillian Vernon Corporation’s customer list. Once again, students can think creatively in
providing an answer to this question. Question responses will be based on the
products/services and various customer market segments that the company presently serves.
For example, the ABC distributing company may be interested in renting Lillian Vernon’s
customer list. The ABC distributing company has a similar product variety to that of Lillian
Vernon Corporation. Therefore, Lillian Vernon should not permit this rental transaction
because ABC distributing company should be viewed as a direct competitor.
Identifying the many direct marketing companies that may have an interest in renting Lillian
Vernon’s list can be explored further by examining the various market segments to which the
company appeals.