Ch07 Market Segmentation Targeting

CHAPTER 7 MARKET SEGMENTATION, TARGETING, AND POSITIONING FOR COMPETITIVE ADVANTAGE MULTIPLE CHOICE QUESTIONS 1. At one time, firms scattered their marketing efforts (a “shotgun” approach) to reach consumers. Today, a firm is more likely to use: a. a “bazooka” approach, where special effects are used to “explode” into the buyer’s consciousness. b. a “knife” approach, where the firm tries to “cut” to the most important product advantage. c. a “rifle” approach, where the firm focuses on the buyers who have greater interest in the values that the firm creates best. d. a “pistol” approach, where the firm realizes that it has multiple chances to gain consumer interest. Answer: (c) Page: 235 2. ________________ is the process of dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes. a. Mass marketing b. Market segmentation c. Target marketing d. Market positioning Answer: (b) Page: 235 3. __________________ is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. a. Mass marketing b. Market segmentation c. Market targeting d. Market positioning Answer: (c) Page: 235 4. Setting the competitive positioning for the product and creating a detailed marketing mix is called: a. mass marketing. b. target marketing. c. market segmentation. d. marketing positioning. Answer: (d) Page: 235 5. During which step of the marketing segmentation, targeting, and positioning process does the firm “develop a marketing mix for each segment?” a. market segmentation b. market targeting c. market positioning d. The firm does not go through the “development” during any of the above steps. Answer: (c) Page: 235, Figure 7-1 6. During one of the steps in the marketing segmentation, targeting, and positioning process, the marketer develops measures of segment attractiveness. This procedure belongs in the category of: a. market segmentation. b. market targeting. c. market massing. d. market positioning. Answer: (b) Page: 235, Figure 7-1 7. When companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match their unique needs, they are conducting a ___________________ process. a. marketing aggregation b. marketing positioning c. marketing target d. marketing segmentation Answer: (d) Page: 236 8. Market segmentation can be carried out at several different levels. Which of the following WOULD NOT BE among these levels? a. micromarketing b. segment marketing c. competition marketing d. niche marketing Answer: (c) Page: 236 9. Another word for complete segmentation is: a. macromarketing. b. micromarketing. c. niche marketing. d. mass marketing. Answer: (b) Page: 236 10. For most of the 20th century, firms practiced which of the following forms of marketing? a. mass marketing b. micromarketing c. niche marketing d. segment marketing Answer: (a) Page: 236 11. Which of the following marketers epitomized the mass marketing strategy? a. Henry Ford b. Bill Gates c. F.W. Woolworth d. Thomas A. Edison Answer: (a) Page: 236 12. Which of the following statements is closest to the traditional argument for mass marketing? a. Find a need and fill it. b. The largest potential market can lead to the lowest costs, which translates into either lower prices or higher margins. c. The rifle approach rarely hits what it is aiming at. d. The consumer is king. Long live the king. Answer: (b) Page: 236 13. Isolating broad segments that make up a market and adapting the marketing to match the needs of one or more segments is called _________________. a. niche marketing b. mass marketing c. segment marketing d. micromarketing Answer: (c) Page: 237 14. When General Motors designs specific models for different income and age groups, it is practicing which of the following marketing formats? a. micromarketing b. macromarketing c. mass marketing d. segment marketing Answer: (d) Page: 237 15. Segment marketing offers several benefits over mass marketing. All of the following would be among those benefits EXCEPT: a. the company can market more efficiently and target its programs toward only those consumers that it can serve best. b. the company can fine-tune its programs to meet the needs of carefully defined segments. c. the company can reduce costs because of the ability to sell to customers one-on-one. d. the company may face fewer competitors if fewer competitors are focusing on the company’s chosen market segment. Answer: (c) Page: 237 16. A company is practicing ________________ if it focuses on subsegments with distinctive traits that may seek a special combination of benefits. a. micromarketing b. niche marketing c. mass marketing d. segment marketing Answer: (b) Page: 237 17. As an example of _______________, a company could build sport utility vehicles and direct marketing efforts towards the luxury SUV market (as does Lexus). a. micromarketing b. niche marketing c. mass marketing d. segment marketing Answer: (b) Page: 237 18. American Express offers not only its traditional green cards but also gold cards, corporate cards, and even a black card, called the Centurian, with a $1,000 annual fee aimed at a small group of “superpremium customers.” Which of the following marketing efforts is American Express following with their credit card policies? a. macromarketing b. segment marketing c. niche marketing d. self-marketing Answer: (c) Page: 237 19. _________________ is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. a. Niche marketing b. Micromarketing c. Segment marketing d. Mass marketing Answer: (b) Page: 238 20. Micromarketing includes: a. segment marketing and niche marketing. b. mass marketing and demographic marketing. c. local marketing and individual marketing. d. individual marketing and self-marketing. Answer: (c) Page: 238 21. ______________ involves tailoring brands and promotions to the needs and wants of specific small groups such as cities, neighborhoods, and even specific stores. a. Niche marketing b. Local marketing c. Detail marketing d. Individual marketing Answer: (b) Page: 238 22. All of the following are considered to be drawbacks of local marketing EXCEPT: a. it can drive up manufacturing and marketing costs by reducing economies of scale. b. it can create logistical problems when the company tries to meet varied requirements. c. it can attract unwanted competition. d. it can dilute the brand’s overall image. Answer: (c) Page: 238 23. ________________ is tailoring products and marketing programs to the needs and preferences of individual customers. a. Niche marketing b. Local marketing c. Self-marketing marketing d. Individual marketing Answer: (d) Page: 238 24. Individual marketing is known by a variety of names. All of the following would appropriately be called individual marketing EXCEPT: a. mono-marketing. b. one-to-one marketing. c. customized marketing. d. markets-of-one marketing. Answer: (a) Page: 238 25. ______________ is the process through which firms interact one-to-one with masses of customers to create customer-unique value by designing products and services tailor-made to individual needs. a. Mass marketing b. Detail marketing c. Mass globalization d. Mass customization Answer: (d) Page: 239 26. The move toward individual marketing mirrors the trend in consumer _________. a. backlash b. self-marketing. c. dialog marketing d. niche marketing Answer: (b) Page: 242 27. All of the following are considered to be major variables for segmenting markets EXCEPT: a. geographic variables. b. trait variables. c. demographic variables. d. psychographic variables. Answer: (b) Page: 243, Table 7-1 28. If a marketer attempts segmentation of a market by dividing the market into different units based on nations, regions, states, counties, cities, or even neighborhoods, then the marketer is practicing ____________ segmentation. a. demographic b. geographic c. political d. cartographic Answer: (b) Page: 243, Table 7-1 29. When Campbell Soup makes Cajun gumbo soup for Louisiana and Mississippi and nacho cheese soup for Texas and California, it is practicing _______________ segmentation. a. geographic b. demographic c. psychographic d. behavioral variable Answer: (a) Page: 242 30. All of the following would be ways to segment within the category of psychographic segmentation EXCEPT: a. social class. b. occupation. c. lifestyle. d. personality. Answer: (b) Page: 243, Table 7-1 31. All of the following would be ways to segment within the category of behavioral variable segmentation EXCEPT: a. occasions. b. user status. c. loyalty status. d. lifestyle. Answer: (d) Page: 243, Table 7-1 32. _______________ factors are the most popular bases for segmenting customer groups. a. Geographic b. Demographic c. Psychographic d. Behavioral Answer: (b) Page: 244 33. _________________ factors or variables are generally easier to measure than most of the other types of variables or factors. a. Geographic b. Demographic c. Psychographic d. Behavioral Answer: (b) Page: 244 34. Age is often a poor predictor of a person’s life-cycle, health, work, or family status. Therefore, when using age and life-cycle segmentation, the marketer must guard against: a. stereotyping. b. gender bias. c. racial bias. d. intellectual bias. Answer: (a) Page: 244-245 35. Proctor & Gamble joined a growing list of marketers who use __________ segmentation when they developed Secret, a brand specially formulated for a woman’s chemistry. a. geographic b. income c. benefit d. gender Answer: (d) Page: 245 36. All of the following Web sites would be examples of sites wishing to make gender segmentation appeals as their primary marketing segmentation strategy EXCEPT: a. www.iVillage.com. b. www.girlson.com. c. www.playboy.com. d. www.neimanmarcus.com. Answer: (d) Page: 246 37. ___________________ is the process of dividing a market into different groups based on social class, lifestyle, or personality characteristics. a. Gender segmentation b. Behavioral segmentation c. Psychological segmentation d. Psychographic segmentation Answer: (d) Page: 247 38. Many marketers believe that ________________ are the best starting point for building market segments and programs. a. behavioral variables b. geographic variables c. demographic variables d. psychographic variables Answer: (a) Page: 247 39. “Coke in the morning” is an attempt to segment according to which of the following? a. gender segmentation b. psychographic segmentation c. benefit segmentation d. occasion segmentation Answer: (d) Page: 248 40. The orange juice manufacturers know that orange juice is most often consumed in the mornings. However, they would like to change this and make the drink acceptable for other time periods during the day. Which form of segmentation would they need to work with to establish a strategy reflective of their desires? a. gender segmentation b. benefit segmentation c. occasion segmentation d. age and life-cycle segmentation Answer: (c) Page: 248 41. When companies market products on the basis of what the product’s attributes will do for a given segment of consumers, they are using a powerful form of behavioral segmentation known as: a. occasion segmentation. b. benefit segmentation. c. user status segmentation. d. usage rate segmentation. Answer: (b) Page: 249 42. If people that take cruise ship vacations do so because of “gambling,” “fun,” or “for adventure or educational purposes,” then it is possible to segment this market based on what might be called: a. psychographic segmentation. b. benefit segmentation. c. demographic segmentation. d. gender segmentation. Answer: (b) Page: 249 43. A marketing firm classifies customers as nonusers, ex-users, potential users, first- time users, and regular users. Which of the following classifications is the firm most likely using to segment its market and devise strategies for selling its products and services? a. user status b. user rate c. loyalty status d. benefit status Answer: (a) Page: 249 44. One of the most promising developments in multivariable segmentation is called _________________, where a host of demographic and socioeconomic factors are used. a. terragraphic segmentation b. fermagraphic segmentation c. geothermal segmentation d. geodemographic segmentation Answer: (d) Page: 250 45. All of the following are major variables that can be used to segment business markets EXCEPT: a. operating characteristics. b. psychographics. c. demographics. d. situational factors. Answer: (b) Page: 250 46. ____________________ is forming segments of consumers who have similar needs and buying behavior even though they are located in different countries. a. External segmentation b. International segmentation c. Intermarket segmentation d. Enriched segmentation Answer: (c) Page: 253 47. When Mercedes-Benz targets the world’s well-to-do, regardless of their country, they are most likely following a segmentation strategy called: a. external segmentation. b. international segmentation. c. enriched segmentation. d. intermarket segmentation. Answer: (d) Page: 253 48. Clearly, there are many ways to segment markets. However, not all segmentations are effective or successful. To be useful, market segments must have all the following characteristics EXCEPT being: a. measurable. b. plausible. c. accessible. d. actionable. Answer: (b) Page: 254 49. It is a fact that there are 32.5 million left-handed people in the United States. However, most marketers do not attempt to appeal to or design products for this group because there is little in the way of census data about this group. Therefore, this group fails in one of the requirements for effective segmentation. Which of the following is most likely to apply in this case? a. actionable b. substantial c. differentiable d. measurable Answer: (d) Page: 254 50. Knowing the size, purchasing power, and profiles of a market segment are all part of which of the following characteristics? a. substantiality b. measurability c. actionability d. accessibility Answer: (b) Page: 254 51. The ability to reach and serve a market segment defines the characteristic of: a. measurability. b. actionability. c. accessibility. d. substantiality. Answer: (c) Difficulty: (1) Page: 254 52. Married and unmarried women may use the same perfume, and might respond in a similar way to promotional sales of this fragrance. It might, therefore, be difficult to consider that marital status designates separate segments in this case. Which of the following requirements of effective segmentation would probably rule out segmentation based on marital status in this case? a. actionable b. substantial c. differentiable d. measurable Answer: (c) Page: 254 53. Stephanie Cross has a small clothing store, and has identified seven separate categories of clothing buyers that form the general market for clothing stores in her city. Her problem is that because of a limited advertising budget, she cannot effectively reach these various segments (especially since several of the segments are distant from her store). Which of the following requirements of effective segmentation would probably rule out segmentation based on Stephanie’s current segmentation classification scheme? a. actionable b. substantial. c. differentiable d. measurable Answer: (a) Page: 254 54. In market targeting, a firm looks at all of the following factors EXCEPT: a. segment size and growth. b. segment structural attractiveness. c. company objectives and resources. d. segment public relations value. Answer: (d) Difficulty (2) Page: 255 55. All of the following factors can affect the attractiveness of a market segment EXCEPT: a. the presence of many strong and aggressive competitors. b. the likelihood of government monitoring. c. actual or potential substitute products. d. the power of buyers in the segment. Answer: (b) Page: 256 56. A(n) __________________ is a set of buyers sharing common needs or characteristics that the company decides to serve. a. undifferentiated market b. market segment c. target market d. differentiated market Answer: (c) Page: 255 57. A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer is called: a. undifferentiated marketing. b. differentiated marketing. c. concentrated marketing. d. turbo marketing. Answer: (a) Page: 255, 256, Figure 7-3 58. Deciding to target several market segments and design separate offers for each is called: a. undifferentiated marketing. b. differentiated marketing. c. concentrated marketing. d. turbo marketing. Answer: (b) Page: 256, Figure 7-3 59. A growing number of firms have adopted differentiated marketing. However, one drawback to this approach is that it: a. is hard for managers to understand. b. increases the costs of doing business. c. alerts competitors as to your strategy. d. is a poor strategy internationally. Answer: (b) Page: 256 60. The practice of going after a large share of a smaller market or subsets of a few markets is called: a. undifferentiated marketing. b. differentiated marketing. c. concentrated marketing. d. turbo marketing. Answer: (c) Page: 257, Figure 7-3 61. All of the following would be among the chief factors to consider when choosing a market-coverage strategy EXCEPT: a. organizational culture. b. product variability. c. product’s life-cycle. d. market variability. Answer: (a) Page: 258 62. The way the product is defined by consumers on important attributes is called ________________. a. market segmentation b. image psychology c. product position d. market targeting Answer: (c) Page: 260 63. The positioning task consists of three steps. Which of the following does not belong? a. Identifying a set of possible competitive advantages upon which to build a position. b. Choosing the right competitive advantages. c. Comparing the position with ethical and legal guidelines established by the trade. d. Selecting an overall positioning strategy. Answer: (c) Page: 260 64. The key to winning and keeping customers is to understand their needs and buying processes better than competitors do and: a. advertise constantly to let customers know about changes in products and services. b. hire the best sales people. c. have an updated Web presence. d. to deliver more value. Answer: (d) Page: 260 65. Product differentiation can be along all of the following lines EXCEPT: a. consistency. b. durability. c. reliability. d. competitive parity. Answer: (d) Page: 261 66. Gaining competitive advantage through speedy or careful delivery is an example of which type of differentiation? a. product b. services c. personnel d. image Answer: (b) Page: 261 67. The strategy of choosing one attribute to excel at to create competitive advantage is known as (the): a. unique selling proposition. b. underpositioning. c. overpositioning. d. confused positioning. Answer: (a) Page: 262 68. In general, a company needs to avoid three major positioning errors. Which of the following is NOT one of those errors? a. underpositioning b. repositioning c. overpositioning d. confused positioning Answer: (b) Page: 263 69. In determining which differences to promote, focusing on a difference that delivers a highly valued benefit to target buyers would mean selecting the difference that is most: a. important. b. distinctive. c. superior. d. communicable. Answer: (a) Page: 263 70. Choosing a product difference that competitors cannot easily copy would be which kind of differentiation criterion? a. important b. distinctive c. superior d. preemptive Answer: (d) Page: 263 71. A brand’s _____________ is the full positioning of the brand—the full mix of benefits upon which it is positioned. a. distinctive proposition b. preemptive proposition c. value proposition d. superior proposition Answer: (c) Page: 263 72. The text describes a series of value propositions. Of these propositions, Southwest Airlines has chosen to adopt the: a. more for less proposition. b. less for much less proposition. c. same for less proposition. d. more for more proposition. Answer: (b) Page: 263-269, Figure 7-4, Marketing at Work 7-3 TRUE/FALSE QUESTIONS 73. Companies today realize that they can appeal to all buyers in the marketplace by using concentrated marketing. Answer: (False) Page: 235 74. Because of profit pressures and the threat of the Internet, most companies have now moved away from market segmentation and targeting and toward mass marketing. Answer: (False) Page: 235 75. With respect to markets, the “shotgun” approach in marketing efforts seems to be better than the “rifle” approach. Answer: (False) Page: 235 76. Market segmentation is the process of taking a market and dividing the buyers into distinct groups for which marketing mixes can be constructed. Answer: (True) Page: 235 77. Today, most companies are rushing toward mass marketing because of the changing nature of the marketplace. Answer: (False) Page: 236 78. A good illustration of the niche marketing approach was when Henry Ford said (with respect to cars) “they can have any color they want as long as it’s black.” Answer: (False) Page: 236 79. Micromarketing is focusing on subsegments or niches with distinctive traits that may seek a special combination of benefits. Answer: (False) Page: 237 80. If a marketer were to tailor products and marketing programs to the needs and wants of specific individuals and local customer groups, the marketer would be practicing micromarketing. Answer: (True) Page: 238 81. One of the drawbacks for adopting a policy of local marketing is that it can drive up manufacturing and marketing costs by reducing economies of scale. Answer: (True) Page: 238 82. Because buyers have unique needs and wants, each buyer is potentially a separate market. Answer: (True) Page: 238 83. Customized marketing is often called individual marketing. Answer: (True) Page: 238 84. An example of a firm that practices individual marketing is Mattel, with its My Design page of its Barbie Web site. Answer: (True) Page: 240-242, Marketing at Work 7-1 85. The move toward individual marketing mirrors the trend in consumer concentration strategy. Answer: (False) Page: 239 86. The most popular base for segmenting markets and customer groups is geographic segmentation. Answer: (False) Page: 242, 243 87. Demographic variables are easier to measure than most other types of variables with respect to segmentation. Answer: (True) Page: 244 88. Income segmentation is used not only with the affluent, but also with the consumers with lower spending power. Answer: (True) Page: 247 89. Psychographic segmentation occurs when a market is divided into different groups based on social class, lifestyle, or personality characteristics. Answer: (True) Page: 247 90. One of the forms of behavioral segmentation would be lifestyle segmentation. Answer: (False) Page: 243, 247, Table 7-1 91. If a marketer were to link U.S. Census data with lifestyle patterns to better segment markets, this would be an example of geodemographic segmentation. Answer: (True) Page: 250 92. A common way to segment a business market would be to segment based on operating characteristics and situational factors. Answer: (True) Page: 250 93. Segmenting international markets on the basis of geographic, economic, political, cultural, and other factors is called international psychographics. Answer: (False) Page: 253 94. To be useful, a market segment must be substantial. Answer: (True) Page: 254 95. To be useful, a market segment must be conspicuous. Answer: (False) Page: 254 96. A market segment is a set of buyers sharing common needs or characteristics that the company decides to serve. Answer: (False) Page: 255 97. Concentrated marketing is a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. Answer: (False) Page: 255 98. If a firm decides to go after a large share of one or a few segments or niches, then the firm will probably be following a concentrated marketing strategy. Answer: (True) Page: 257 99. In market targeting, the issue is not how and for what, but who is targeted. Answer: (False) Page: 259 100. A product’s position is the way the product is defined by consumers on important attributes. Answer: (True) Page: 260 101. One of the major positioning errors that a company needs to avoid is that of confused positioning. Answer: (True) Page: 263 102. A difference is worth establishing to the extent that it satisfies the criterion of cultural imperative. Answer: (False) Page: 263 103. According to the nine cell matrix that describes possible value propositions, the cell that produces a higher price for reduced benefits should be pursued by the marketer. Answer: (False) Page: 264, Figure 7-4 104. According to the value proposition presented by Southwest Airlines, the customer gets “less for much less.” Answer: (True) Page: 267, Marketing at Work 7-3 ESSAY QUESTIONS 105. Proctor & Gamble makes eight brands of laundry detergent (Tide, Cheer, Bold, Gain, Era, Dreft, Febreze, and Ivory Snow). Each of these brands is directed toward a different segment of the vast laundry detergent market. Comment on Proctor & Gamble’s strategy for this market. Describe the company’s attitude toward intracompany brand competition and competition from other competitors. Finally, give examples of how the various laundry detergent brands are directed toward specific market segments by Proctor & Gamble. Answer: The various Proctor & Gamble brands compete with one another on the same supermarket shelves. Why would the company allow this to happen? The answer lies in the fact that different people want different mixes of benefits from the products that they buy. For example, laundry detergent customers want several different things: to get clothes clean, economy, bleaching power, fabric softening, fresh smell, strength or mildness (depending on the cleaning chore), and lots of suds. The various Proctor & Gamble products address these issues. The company will accept intracompany brand competition (and by doing so, it will keep all the money from the various brands in one common pocket rather than giving it to competition). The company has also developed a separate brand for each of the eight important laundry detergent segments. For example (for other information see the introductory comments in the chapter where all eight segments are identified): a) Tide—an all-purpose family detergent that is “tough on greasy stains.” b) Cheer—guards against fading, color transfer, and fuzzy build-up. c) Bold—has a built-in fabric softener. d) Gain—the “enzyme” fresh smelling detergent. e) Era—built-in stain removers. f) Dreft—removes baby stains. g) Febreze Clean Wash—gets out difficult odors. h) Ivory Snow—mild product for cleaning fine washables and baby clothes. Page: 233-235 106. Define market segmentation, market targeting, and market positioning. Demonstrate through the steps of a model how these concepts fit together to aid the decision maker in his or her attempt to use market segmentation in the marketing process. Answer: Market segmentation is the process of dividing a market into distinct groups of buyers with different needs, characteristics, or behavior who might require separate products or marketing mixes. Market targeting involves evaluating each segment’s attractiveness and deciding which segment(s) to enter. Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. The marketer formulates a competitive position for a product and a detailed marketing mix. A model that might show the relationships between these three terms is found in Figure 7-1 in the chapter. The steps shown in this model are: (1) Identify bases for segmenting the market, (2) Develop profiles of resulting segments—these two steps are related to market segmentation; (3) Develop measures of segment attractiveness, (4) Select the target segment(s)—these two steps are related to market targeting; (5) Develop positioning for each target segment, and (6) Develop marketing mix(es) for each target segment—these two steps are related to marketing positioning. Page: 235, Figure 7-1 107. Identify the differences between the mass marketing, segment marketing, niche marketing, and micromarketing strategies. Answer: For most of this century, businesses practiced mass marketing. They mass produced, mass distributed, and mass promoted the same product in almost the same ways to all consumers. The argument for this approach was that mass marketing creates the largest potential market, which leads to lower costs, which in turn can translate into either lower prices or higher margins. This approach has given way to segment marketing, where marketers isolate broad segments that make up a market and adapt the marketing to match the needs of one or more segments. The benefits of this approach are that the company can market more effectively and efficiently by creating programs that are directed only toward those consumers that can be most effectively served. In niche marketing, there is a focus on subsegments or niches with distinctive traits that may seek a special combination of benefits. Niche marketers presumably understand their niches’ needs so well that their customers willingly pay a price premium. The newest form of segmentation is called micromarketing, where the marketer tailors products and marketing programs to suit the tastes of specific individuals and locations. This can take the form of either local or individual marketing. Page: 236-243, Figure 7-2 108. List and briefly discuss the major bases for segmenting consumer markets. Demonstrate how these major bases would compare to the bases used in segmenting business markets (what are the differences and similarities?). Answer: The major bases for segmenting consumer markets are (1) geographic, (2) demographic, (3) psychographic, and (4) behavioral. Examples within these categories might be: geographic (country, region, density, or climate), demographic (age, gender, family size, income, occupation, or race), psychographic (social class, lifestyle, or personality), or behavioral (occasions, benefits, user status, usage rate, loyalty, readiness stage, or attitude toward the object). These bases are contrasted to the major bases for segmenting business markets, which include (1) demographics, (2) operating variables, (3) purchasing approaches, (4) situational factors, and (5) personal characteristics. Examples within these categories might be demographics (industry, company size, or location), operating variables (technology, user/nonuser status, or customer capabilities), purchasing approaches (purchasing function organization, power structure, nature of existing relationships, or purchasing policies), situational factors (urgency, specific application, or size of order), and personal characteristics (buyer-seller similarity, attitudes toward risk, or loyalty). Notice that similarities exist between some of the demographic and personal characteristics (behavioral) categories. Page: 243-254, Table 7-1 109. Consumer and business markets use many of the same variables to segment their markets. However, there are also differences. Using the approach suggested in the text, list and briefly describe the additional variables that would be important to the business marketer who wished to segment markets. Answer: Some additional variables would include: a). Operating characteristics—how does the customer operate within the industry? b). Purchasing approaches—are buying centers used? c). Situational factors—are there certain times of the year when the buyer is more likely to purchase? d). Personal characteristics—are there characteristics about the purchasing unit or the senior managers that might impact the purchase decision? Page: 250-252 110. Define and give a specific example of intermarket segmentation. Answer: To conduct intermarket segmentation, an international marketer forms segments of consumers who have similar needs and buying behavior even though they are located in different countries. The text uses the examples of MTV (who targets the world of the teen) and Mercedes-Benz (who targets the affluent no matter where they live). Page: 253-254 111. As demonstrated in the text, there are several ways to segment a market. However, not all of these ways are always effective. To be useful and effective, market segments should have five different characteristics. List these and briefly explain each. Answer: Market segments must be (1) measurable (in terms of size, purchasing power, and clear profiles), (2) accessible (can be effectively reached and served), (3) substantial (large or profitable enough), (4) differentiable (the segments are distinguishable and respond differently to different marketing mixes), and (5) actionable (can design programs for attracting customers effectively). Page: 254 112. A firm can adopt one of three market-coverage strategies when attempting to market its goods and services. List and describe each of these possible market-coverage strategies and provide and example of each. Answer: Undifferentiated marketing—a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. It relies on mass marketing techniques. Distributing salt might be an example of this form. Differentiated marketing—a market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. Automobiles might be examples of this strategy. Concentrated marketing—a market-coverage strategy in which a firm goes after a large share of one or a few sub-markets. A specialty truck producer might be an example of this strategy. Page: 255-258, Figure 7-3 113. What factors might a company need to consider when choosing a market-coverage strategy? Explain and justify your choices. Answer: The text suggests the following factors: a). company resources b). product variability c). the product’s life cycle d). market variability e). competitor’s marketing strategies If students present others, make sure they are justified. Page: 258 114. In general, a company needs to avoid three major positioning errors. What are these errors? Present a brief description and illustration of each. Answer: The major errors are: a). Underpositioning—failing to really position the company at all. b). Overpositioning—giving buyers too narrow a picture of the company. c). Confused positioning—leaving buyers with a confused image of a company. Students are free to suggest their own illustrations. If you would like more structure, suggest this structure prior to assigning this question. Page: 264 115. Companies are often faced with the problem of deciding which differences of a product or service to promote. This is especially relevant to product positioning. According to the text, a difference is worth promoting if it satisfies seven criteria. What are those criteria? Briefly explain each. Answer: The seven criteria suggested by the text include: a). Important—the difference delivers highly valued benefit to target buyers. b). Distinctive—competitors do not offer the difference, or the company can offer it in a more distinctive way. c). Superior—the difference is superior to other ways that customers might obtain the same benefit. d). Communicable—the difference is communicable and visible to buyers. e). Preemptive—competitors cannot easily copy the difference. f). Affordable—buyers can afford to pay for the difference. g). Profitable—the company can introduce the difference profitably. Page: 263 APPLICATION QUESTION 116. New Balance athletic shoe company has a difficult problem—how to compete in the highly competitive athletic shoe market against such industry giants as Nike and Reebok. The company does have certain advantages (it makes a quality product, has a good reputation with distributors, and is the only athletic shoe that offers width sizes as well as length sizes) that it hopes will help meet the challenges of the industry giants. Your job as a strategic planning consultant is to formulate a market-coverage strategy for New Balance. You have three options—undifferentiated marketing, differentiated marketing, and concentrated marketing. Choose one of these methods and support your choice with a logical explanation. Answer: Students are free to pick any method they wish, however, considering the competition, the undifferentiated marketing method would be hard to support. This mass-marketing strategy focuses on what is common in the needs of consumers, rather than what is different. The company designs a product and a marketing program that will appeal to the largest number of buyers. It relies on mass distribution and mass advertising, and it aims to give the product a superior image in people’s minds. With the differentiated approach (the method most likely chosen by Nike and Reebok), a firm decides to target several market segments or niches and designs separate offers for each. By offering product and marketing variations, the company using this method hopes for higher sales and a stronger position within each market segment. The student could make a case for this method, however, this method requires expensive outlays such as extra marketing research, forecasting, sales analysis, promotion planning, and channel management. With the concentrated approach (which generally appeals to companies with limited resources), the company goes after a large share of a small market rather than a small share of a large market. This method allows small companies to get a foothold against larger, more resourceful competitors. The company is usually able to achieve a strong market position because of its greater knowledge of the segment’s needs and special requirements. The company may also achieve economies in the various 4P areas. However, the segment that the company selects for attention must be carefully chosen because “all the eggs are in one basket.” New Balance currently sells well in specialized shoe stores (such as orthopedic stores) because of their width feature, their response to dealer needs, and a limited but quality line. Mass merchandisers do not tend to carry this brand. Lastly, students should consider (when selecting the strategy) a company’s resources, the degree of product variability, the stage in the product’s lifecycle, market variability, and competitor’s marketing strategies when making a final selection. Page: 255-259, Figure 7-3