Study Guide Marketing Exam 2 Market Segmentation Aggregating prospective buyers into groups that have common needs

s and will respond similarly to a marketing action Market Segments Relatively homogenous groups of prospective buyers that result from the market segnemntation process Product Differentiation A strategy that involves a firm using different marketing mix activities, such as product feathers and advertising, to help consumers perceive the product as being different and better than competing products. Segmentation Strategies One Product Multiple Market Segments When an organization produces one product and markets it to sell it to two or more market segments. (ie. Different magazine covers, same issue, different markets) Multiple Products Multiple Market Segments When an organization produces multiple products and markets it to more than two markets. (ie. Car companies, Tiffany/Wal-Mart Strategies). Segments of One: Mass Customization Tailoring goods and services to the tastes of individual customers on a highvolume scale. Next step beyond Built-to-Order Criteria for Segmentation Criteria to Use in Forming the Segments 1. Simplicity and cost-effectiveness of assigning potential buyers to segments. 2. Potential for increased profit. (Maximizes future profit and ROI) 3. Similarity of needs of potential buyers within a segment. 4. Difference of needs of buyers among segments. (If needs arent different between segments, combine them) 5. Potential of a marketing action to reach a segment. Usage Rate The quantity consumed or patronage-store visits-during a specific period. Airlines developed frequent-flier programs to encourage passengers ot use the same airline and create loyal customers. 80/20 Rule A concept that suggest 80 percent of a firms sales are obtained from 20 percent of its customers. Percentages are not fixed it just suggests that a small amount of customers provide a high percentage of the firms sales.

Ways to Segment Consumer Markets 1. Geographic Segmentation: Region 2. Geographic Segmentation: Household Size 3. Psychographic Segmentation: Lifestyle 4. Behavioral Segmentation: Product Features Variables to Use in Forming Segments 1. Geographic variables (city or zip code) 2. Demographic variables (gender, age, year in school, or college major) 3. Psychographic variables (personality or needs) Market Product Grid Framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization Criteria for Selecting Target Markets 1. Market Size 2. Expected Growth 3. Competitive Position 4. Cost of Reaching the Segment 5. Compatibility with the Organizations Objectives and Resources Ultimately, a marketing executive has to use these criteria to choose the segments for special marketing efforts. Product Positioning the place a product occupies in consumers minds on important attributes relative to competitive products. Product Repositioning Changing the place a product occupies in a consumers mind relative to competitive products Head-to-head Positioning Competing directly with competitors on similar product attributes in the same target market. (Dollar rental car competing directly with Avis and Hertz) Differentiation Positioning Seeking a less-competitive, smaller market niche in which to locate a brand. (McDonalds turning healthy) Product Positioning Using Perceptual Maps 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 companys product or brand is on these attributes in the minds of potential customers. 4. Reposition the companys product or brand in the minds of potential customers.

Perceptual map - a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands, as well as its own product or brand.