Chapter 9 IDENTIFYING MARKET SEGMENTS AND TARGETS Test Item Table Major Section of the Chapter
Level of Learning Level 1: Definition (Knows Basic Terms & Facts)
Level 2: Conceptual (Understands Concepts & Principles) 1, 2
3, 4, 6, 7, 23, 24, 35, 39, 41, 43
5, 8, 9, 16, 17, 18, 19, 20, 21, 22, 25, 26, 27, 29, 30, 32, 42, 44, 45, 148, 149, 150, 151, 152
10, 11, 12, 13, 14, 15, 28, 31, 33, 34, 36, 37, 38, 40
Steps in Segmenting and Targeting Markets (pp. 191-201)
46, 47, 55, 63, 64, 71, 74, 75, 76, 84, 90, 92, 94, 95, 96, 97, 99, 100, 108, 129, 131
49, 50, 51, 52, 53, 54, 56, 106, 112, 113, 114, 115, 118, 119, 120, 132, 153, 155, 156, 158, 159, 160, 161, 162
48, 57, 58, 59, 60, 61, 62, 65, 66, 67, 68, 69, 70, 72, 73, 77, 78, 79, 80, 81, 82, 83, 85, 86, 87, 88, 89, 91, 93, 98, 101, 102, 103, 104, 105, 107, 109, 110, 111, 116, 117, 121, 122, 123, 124, 125, 126, 127, 128, 130, 154, 157
Positioning the Product (pp. 201-202)
133, 134, 137, 139, 140, 141
138, 142, 163, 164
135, 136, 143
Sneakers Marketing Wars: Heelys, Air Pumps, and Three Billion Trillion Choices (pp. 185-186) Why Segment Markets? (pp. 186-191)
Video Case: Nokia (pp. 203-205) Note: Bold numbers indicate short essay questions.
Level 3: Application (Applies Principles)
144, 145, 146, 147
CHAPTER 9 IDENTIFYING MARKET SEGMENTS AND TARGETS MULTIPLE CHOICE QUESTIONS 9-1 CHAPTER OPENING EXAMPLE: SNEAKERS
CONCEPTUAL
Heely Sports Ltd. used __________ in its search for a market for the latest sneaker craze. a. b. c. d. e.
market segmentation financial analysis geographic segmentation organizational marketing sales forecasting
Answer: a Page: 186 Rationale: All sneaker manufacturers search for new market segments of consumers and ways to differentiate their products from the competition. 9-2 CHAPTER OPENING EXAMPLE: SNEAKERS
CONCEPTUAL
Which of the following statements about U.S. trends for sneakers is true? a. b. c. d. e.
Teenagers are 31 percent of total sales and are willing to spend more for sneakers than older consumers. The average price paid for a pair of sneakers is over $100 and expected to increase. Baby boomers are the largest market for sneakers. Most sneakers bought for use in some sport are bought for tennis. In the sneakers market, the growth potential for women is lower, but women will pay a higher average price for a pair.
Answer: a Page: 186 Rationale: Over 60 percent of sneakers purchased in 2000 cost less than $50 per pair. Teenagers are the largest market for sneakers and are willing to pay more for them. Most sneakers that are bought for use in some sport are bought for running. Women are buying more and more sneakers, but men on average buy more and are willing to pay more than women. 9-3 MARKET SEGMENTATION
DEFINITION
Aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action is called: a. b. c. d. e.
consumer differentiation. psychographics. market segmentation. market delineation. aggregation marketing.
Answer: c Page: 187 Rationale: Key term definition—market segmentation
9-4 MARKET SEGMENTATION
DEFINITION
Market segmentation involves aggregating prospective buyers into groups that have common needs and will: a. b. c. d. e.
pay attention to marketing messages. respond similarly to a marketing action. be responsive to marketing research. use the same payment methods. go shopping on a regular basis.
Answer: b Page: 187 Other Location: web Rationale: Key term definition—market segmentation 9-5 MARKET SEGMENTATION
CONCEPTUAL
To be identified as a market segment, its members must: a. b. c. d. e.
represent a large share of the entire market and have critical buying power. have common needs and respond similarly to market actions. have different needs and have potential for future growth. have different needs and respond similarly to market actions. have potential for future growth and have potential for increased profit or ROI.
Answer: b Page: 187 Rationale: An organization develops its segments by aggregating prospective buyers on the basis of common needs and similar response to a marketing action. 9-6 MARKET SEGMENTATION
DEFINITION
__________ involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marking action. a. b. c. d. e.
Diversification Divestment Market segmentation Market augmentation Repositioning
Answer: c Page: 187 Rationale: Key term definition—market segmentation.
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9-7 MARKET SEGMENTS
DEFINITION
The phrase “relatively homogeneous groups of prospective buyers” is most descriptive of: a. b. c. d. e.
market segments. demographic clusters. organizational buyers. ultimate consumers. qualified prospects.
Answer: a Page: 187 Rationale: Key term definition—market segments 9-8 MARKET SEGMENTS
CONCEPTUAL
Each __________ consists of people who are relatively similar to each other in terms of their consumption behavior. a. b. c. d. e.
market segment demographic cluster organizational buyer ultimate consumer qualified prospect
Answer: a Page: 187 Rationale: A market segment is a relatively homogeneous group of prospective buyers, consisting of people who are relatively similar to each other in terms of their consumption behavior. 9-9 PRODUCT DIFFERENTIATION
CONCEPTUAL
A firm strategy of using different marketing mix activities, such as product features or advertising, to help consumers perceive a product as being different and better than competing products is called: a. b. c. d. e.
dual distribution. market differentiation. product differentiation. market penetration. full coverage marketing.
Answer: c Page: 187 Other Location: web Rationale: Key term definition—product differentiation
9-10 PRODUCT DIFFERENTIATION
APPLICATION
When Procter & Gamble introduced Crest toothpaste, the first fluoride toothpaste, it was intended for use by children and was therefore given a child-appealing bubblegum flavor. Some time later the same basic formula was given a fresh, minty flavor to appeal to adults. What is this marketing strategy called? a. b. c. d. e.
product sampling product extrapolation product differentiation usage segmentation psychographic segmentation
Answer: c Page: 187 Rationale: Product differentiation is a strategy of using different marketing mix activities, such as product features (in this case the toothpaste flavor) or advertising, to help consumers perceive a product as being different and better than competing products. 9-11 PRODUCT DIFFERENTIATION
APPLICATION
At a Hallmark store you can find several different brands of greeting cards, including Fresh Ink, Nature's Sketchbook, Shoebox, Maxine, Mahogany, and Tree of Life cards—all made by Hallmark for sale in its stores. Hallmark uses a __________ strategy to reach several different market segments. a. b. c. d. e.
product sampling product extrapolation product differentiation usage segmentation behavioral segmentation
Answer: c Page: 187 Rationale: Product differentiation is a strategy of using different marketing mix activities, such as product features (in this case the brand of card) or advertising, to help consumers perceive a product as being different and better than competing products.
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9-12 PRODUCT DIFFERENTIATION
APPLICATION
Alka-Seltzer was made originally as a hangover remedy that cured the headache and settled the stomach. Today you can buy Original Alka-Seltzer, Extra Strength Alka-Seltzer, Alka-Seltzer Morning Relief (for morning headaches and fatigue, and Alka-Seltzer Heartburn Relief. Each Alka-Seltzer product is targeted to a slightly different market segment. The maker of AlkaSeltzer is using: a. b. c. d. e.
product segmentation. market sectioning. product differentiation. product segmentation. product base development.
Answer: c Page: 187 Rationale: Product differentiation is a strategy of using different marketing mix activities, such as product features (in this case the various types of Alka-Seltzer) or advertising, to help consumers perceive a product as being different and better than competing products. 9-13 PRODUCT DIFFERENTIATION
APPLICATION
KFC is a popular fast-food restaurant in the U.S. In opened its 500th restaurant in China in 2001 and is more popular than McDonald's in that country. One of the reasons is that when the company entered the Chinese market, it recruited its managers from Taiwan and the Chinese communities in the U.S. and Canada. This has been useful in coping with local Chinese governments and developing a distinctly different Chinese strategy, which includes Chicky, a friendly chicken character that has a strong appeal for children. To succeed in China, KFC used: a. b. c. d. e.
product positioning. market sectioning. product differentiation. market segmentation. product base development.
Answer: c Page: 187 Rationale: Product differentiation is a strategy of using different marketing mix activities, such as product features or advertising (in this case, Chicky, a friendly chicken character) to help consumers perceive a product as being different and better than competing products.
9-14 PRODUCT DIFFERENTIATION
APPLICATION
KFC has modified its product to satisfy different market segments. In Holland the mashed potatoes are replaced with a potato-and-onion croquette, and in Thailand, a customer gets fresh rice with soy or sweet chili sauce with his or her chicken. KFC uses: a. b. c. d. e.
product positioning. market sectioning. product differentiation. market segmentation. product base development.
Answer: c Page: 187 Rationale: Product differentiation is a strategy of using different marketing mix activities, such as product features (in this case the type of starchy food offered) or advertising, to help consumers perceive a product as being different and better than competing products. 9-15 PRODUCT DIFFERENTIATION
APPLICATION
Some Timex wristwatches can be purchased for less than $30; some Rolex wristwatches carry a price tag of several thousand dollars. In general, consumers view Timex watches as being dependable, relatively accurate, and inexpensive. The Rolex brand tends to be perceived as an expensive status symbol. Timex watches can be purchased in drug stores, discount stores, and department stores in all sizes of communities. Rolex watches are distributed more selectively, and are often available only in fine jewelry stores or specialty shops. By using distinctly different pricing and distribution strategies, the marketers of Timex and Rolex watches have attempted to: a. b. c. d. e.
compete for the same segment. develop similar products. use a product differentiation strategy. build customer loyalty through direct competition. create cognitive dissonance in consumers who are considering the purchase of a wristwatch.
Answer: c Page: 187 Rationale: In today's market place, competition is extreme. For most products, many comparable alternatives are available to the consumer. In this example, both the Timex and the Rolex wristwatches will satisfy the consumer's need to know the time of day. However, in order to compete in the wristwatch market, each marketer has attempted to create a distinct product image in the mind of the consumer. The image of the Timex is very different from that of Rolex.
520
9-16 MARKET SEGMENTATION
CONCEPTUAL
The process of segmenting a market and selecting specific segments as targets is the link between __________ and the organization's marketing program. a. b. c. d. e.
self-regulatory industry standards government regulations top-level management market needs controllable environmental factors
Answer: d Page: 187; Figure 9-1 Rationale: Figure 9-1 illustrates how the process of segmenting and targeting markets links market needs to the organization’s marketing program. 9-17 MARKET SEGMENTATION
CONCEPTUAL
The process of segmenting a market and targeting specific segments is the link between various buyers' needs and: a. b. c. d. e.
self-regulatory industry standards. government regulations. the organization's marketing program. top-level management. controllable environmental factors.
Answer: c Page: 187; Figure 9-1 Rationale: Figure 9-1 illustrates how the process of segmenting and targeting markets links market needs to the organization’s marketing program. 9-18 MARKET SEGMENTATION
CONCEPTUAL
Market segmentation is only a means to an end. In economist's terms, it relates supply (__________) to demand (the customer needs). a. b. c. d. e.
self-regulatory industry standards government regulations the organization's actions strategic objectives tactical goals
Answer: c Page: 187; Figure 9-1 Rationale: Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to marketing action (in this case, the organization’s marketing program).
9-19 MARKET SEGMENTATION
CONCEPTUAL
Market segmentation is only a means to an end. In economist's terms, market segmentation relates supply (the organization's actions) to demand (__________). a. b. c. d. e.
tactical goals government regulations customer needs strategic objectives product positions.
Answer: c Page: 187; Figure 9-1 Rationale: Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to marketing action on the part of the organization. 9-20 MARKET SEGMENTATION
CONCEPTUAL
A basic test of the usefulness of the segmentation process is whether it leads to tangible marketing actions that: a. b. c. d. e.
increase sales and profitability. are legal. are socially responsible. differentiate shareholders. create innovation.
Answer: a Page: 187 Rationale: A basic test of the usefulness of the segmentation process is whether it leads to tangible marketing actions to increase sales and profitability. 9-21 MARKET SEGMENTATION
CONCEPTUAL
Marketers use market segmentation to: a. b. c. d. e.
link market needs to an organization's marketing program. relate supply to demand in economic terms. develop specific marketing actions related to the 4 Ps. increase overall sales, profits and/or other organizational goals. do all of the above.
Answer: e Page: 187 Other Location: web Rationale: Market segmentation is used to link market needs to marketing programs, to relate supply to demand, to develop marketing actions related to the 4Ps, and to increase sales and profitability.
522
9-22 MARKETING NEWSNET
CONCEPTUAL
Small athletic shoe manufacturers such as Vans and Customatix have targeted niche markets and made shoes designed to satisfy needs of different customers. This strategy is an example of: a. b. c. d. e.
mass customization. MSA and NAICS. market segmentation. synergy. sales forecasting.
Answer: c Page: 188 Rationale: Vans targets the rising wave of skateboard, snowboard, biking, and outdoor enthusiasts. Customatix targets those who wish to design their own shoes. 9-23 MARKET-PRODUCT GRID
DEFINITION
A __________ is a framework to relate the segments of a market to products offered or potential marketing actions by the firm. a. b. c. d. e.
growth-share matrix payoff table market-product grid product differentiation table cross tabulation
Answer: c Page: 188 Rationale: Key term definition—market-product grid 9-24 MARKET-PRODUCT GRID
DEFINITION
A market-product grid is a framework to relate: a. b. c. d. e.
estimated expenses for products sold to various market segments. total anticipated revenue for each product to market segments. total anticipated profit for each product to segments. the segments of a market to products offered or potential marketing actions by the firm. the segments of a market to relative market share compared to closest competitor.
Answer: d Page: 188 Other Location: web Rationale: Key term definition—market-product grid
9-25 MARKET-PRODUCT GRID
CONCEPTUAL
One advantage of a market-product grid is that it can be used to: a. b. c. d. e.
make optimal decisions under conditions of uncertainty. screen many new product ideas in order to select the one with best long-run market potential. relate likely sales of products to prospective market segments. select representative samples of consumers for marketing research studies. relate the product life cycle to consumer demand.
Answer: c Page: 188 Rationale: A market-product grid is a framework to relate the segments of a market to the products offered or potential marketing actions by the firm. 9-26 MARKET SEGMENTATION
CONCEPTUAL
A business firm would segment its market when this strategy increases its sales revenue, profit, and return on investment. When its increases in expenses more than offset the potentially increased revenues from segmentation, it should: a. b. c. d. e.
terminate as many employees as possible to save money. reduce production costs, which will lower quality. act as its own distributor. not attempt to segment its market. discontinue manufacturing any products that are not in the mature stage of their product life cycle.
Answer: d Page: 189 Rationale: A business firm goes to the trouble and expense of segmenting its market when it expects that this will increase its sales, profit, and return on investment. When expenses are greater than the potentially increased sales from segmentation, a firm should not attempt to segment its market. 9-27 ONE PRODUCT, MULTIPLE MARKET SEGMENTS
CONCEPTUAL
When a firm produces only a single product or service and attempts to sell it to two or more market segments, it avoids __________, which often results extremely high research, engineering, and manufacturing expenses. a. b. c. d. e.
the extra cost of developing and producing additional versions of the product creating a service gap indirect distribution and logistics problems strategic planning amortization costs
Answer: a Page: 190 Other Location: web Rationale: The incremental costs of taking a product to new product segments are rarely as large as those for developing an entirely new product.
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9-28
ONE PRODUCT, MULTIPLE MARKET SEGMENTS
APPLICATION
Which of the following is an example of a single product with multiple market segments? a. b. c. d. e.
Reebok shoes makes tennis shoes, running shoes, walking shoes, and Weeboks. Reach Toothbrush makes several versions of its toothbrush, which are available in a soft, medium, and hard bristle and a short or normal length head. Johnson's Baby Oil is advertised as a skin softener for babies and as a makeup remover for women. Kellogg's and Post both make bran cereals with raisins. Quaker Oats oatmeal sells both its hot cereals and cold cereals to people of all ages.
Answer: c Page: 190 Rationale: A one product and multiple market segment strategy simply involves producing a single product and selling it to two or more market segments, as is the case with Johnson's Baby Oil. 9-29 ONE PRODUCT, MULTIPLE MARKET SEGMENTS
CONCEPTUAL
When compared to a multiple-products-multiple-market segments strategy, a one-product-andmultiple-market-segment strategy: a. b. c. d. e.
is a much more effective means of meeting consumers' individual needs. is much more profitable. creates greater economies of scale (cost savings) in manufacturing costs. is a more effective way of meeting organizational objectives. has significantly higher distribution costs.
Answer: c Page: 190 Rationale: When a firm produces only a single product or service and attempts to sell it to two or more market segments, it avoids the extra cost of developing and producing additional versions of the product, which often entails higher research, engineering, and manufacturing expenses. 9-30 ONE PRODUCT, MULTIPLE MARKET SEGMENTS
CONCEPTUAL
What is the most likely way for consumers to benefit because a firm uses a strategy of one product for multiple market segments? a. b. c. d. e.
increased satisfaction of consumer wants and needs increased number of choices lower retail prices because of lower production costs improved service lower retail prices because of lower marketing costs
Answer: c Page: 190 Rationale: Producing a single product and selling it to multiple market segments gives important production economies of scale that may be passed on to consumers as lower prices (alternative c).
9-31 ONE PRODUCT, MULTIPLE MARKET SEGMENTS
APPLICATION
Seventh Heaven is a television show that is designed to have a broad appeal to a wide number of groups. It is a show that is appropriate to watch with young children without having to worry about being embarrassed. It is a show that teaches the importance of moral values by showing teens on the show learning to cope with real-life problems without being too moralistic. It appeals to an older market because it is reminiscent of TV dramas of previous decades. This WB television show is an example of: a. b. c. d. e.
one product with multiple market segments. multiple products with multiple market segments. synergy. mass customization. none of the above.
Answer: a Page: 190 Rationale: Television shows are single products frequently directed to two or more distinct market segments. 9-32 MULTIPLE PRODUCTS, MULTIPLE MARKET SEGMENTS
CONCEPTUAL
Which of the following is an example of a multiple products and multiple markets strategy? a. b. c. d. e.
College Football Magazine selects different covers for essentially the same magazine in order to appeal to different geographic markets in the U.S. A new movie used several different advertisements. One set of previews showed the action scenes in order to attract one audience, and the other set showed romantic scenes to attract another audience. Betty Crocker carries one line of cake mixes for people with conventional ovens, and another line of cake mixes for people with microwave ovens. Arm and Hammer Baking Soda can be used for baking and to remove odors from refrigerators and litter boxes. Johnson's Baby Oil is advertised as a skin softener for babies and as a makeup remover for women.
Answer: c Page: 189 Rationale: A multiple products and multiple markets strategy has a number of distinct products each targeted to a different type of user. Only alternative c does not involve only one product.
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9-33 MULTIPLE PRODUCTS, MULTIPLE MARKET SEGMENTS
APPLICATION
Kellogg's different types of cereals, each targeted at a different type of user, are an example of multiple products aimed at multiple markets. Manufacturing these different cereals is clearly more expensive than producing one but seems worthwhile if it serves customers' needs better, doesn't reduce quality or increase price, and: a. b. c. d. e.
conforms to all union regulations. reduces the number of employees required. decreases the cost of the physical plant. stabilizes the sales revenues and profits. adds to the manufacturer's sales revenues and profits.
Answer: e Page: 190 Rationale: Manufacturing multiple products for multiple market segments is worthwhile under the conditions described if sales revenue and profits increase. 9-34 MULTIPLE PRODUCTS, MULTIPLE MARKET SEGMENTS
APPLICATION
You can go to your nearest Hallmark card store and buy a birthday greeting card for a friend and pay $4.50, or you can buy a card that's not quite as nice but just as sentimental from the store's new $.99 line of greeting cards. This is an example of: a. b. c. d. e.
mass customization. synergy. one product and multiple market segments. price discrimination. multiple products and multiple segments.
Answer: e Page: 190 Rationale: This is an example of multiple products (greeting cards at different price points) offered to multiple segments. Many firms are now offering different product or services to highend or low-end segments. 9-35 MASS CUSTOMIZATION
DEFINITION
__________ is tailoring goods or services to the tastes of individual customers on a high-volume scale. a. b. c. d. e.
Mass customization. Synergy. One product and multiple market segments. Price discrimination. Multiple products in multiple segments.
Answer: a Page: 190 Rationale: Text term definition—mass customization
9-36 MASS CUSTOMIZATION
APPLICATION
Custom Foot runs six retail locations. At first glance none look any different from your basic old-fashioned shoe store, but the only shoes on hand are display models. There's no inventory for sale, and customers go home empty-handed—at least initially. Customers browse the store, mixing and matching design components such as style, color, and leather type. About 100 display shoes provide style guidelines. Once you choose a shoe style, you select materials, colors, textures and a style of sole. The retailer sells 10,000 variations in women's shoes and 7,800 in men's. Custom Foot guarantees your shoes will be ready within three weeks. This is an example of: a. b. c. d. e.
mass customization. synergy. one product and multiple market segments. price discrimination. multiple products in multiple segments.
Answer: a Page: 190 Rationale: Mass customization is tailoring goods or services (the style, color, and leather type of the shoes) to the tastes of individual customers on a high volume scale. 9-37 MASS CUSTOMIZATION
APPLICATION
Yahoo's shopping portal recently began to offer people who visited the site the ability to buy songs from Imix's collection of more than 200,000 tracks from record labels that include BMG and Sony Music Group. Customers can choose up to 70 minutes of music for around $1 per song. Then they can choose an art design and a title for each CD and have a disc shipped for $2.50. This is an example of: a. b. c. d. e.
mass customization. how the 80/20 rule is implemented. market augmentation. market melding. repositioning.
Answer: a Page: 190 Rationale: Mass customization is tailoring goods or services ( the CD art, title, and contents) to the tastes of individual customers on a high volume scale.
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9-38 MASS CUSTOMIZATION
APPLICATION
Paris Miki enables customers to help design their own eyeglasses, using a system that eliminates the need to try on countless pairs of eyeglasses to find the right one. This is an example of: a. b. c. d. e.
mass customization. synergy. target marketing. how the 80/20 rule is implemented. repositioning.
Answer: a Page: 190 Rationale: Mass customization is tailoring goods or services (their eyeglasses) to the tastes of individual customers on a high volume scale. 9-39 BUILD-TO-ORDER
DEFINITION
__________ is manufacturing a product only when there is an order from a customer. a. b. c. d. e.
Mass customization Synergy Build-to-order Price discrimination Multiple products in multiple segments
Answer: c Page: 190 Rationale: Text term definition—build-to-order 9-40 BUILD-TO-ORDER
APPLICATION
Model E is a new type of car manufacturer that relies on the Internet to build new car designs for an individual from prototypes to marketable vehicles much faster than ever before possible. "Think of Model E as the Dell of the auto industry, designing products based on what consumers truly want and leveraging best-in-class components and micro-factory approaches for rapid design, launch, and direct delivery," said William Santana Li, president and CEO of Model E. From this quote, you should recognize that Model E relies on: a. b. c. d. e.
mass aggregation. a one-product-one-market-segment strategy. repositioning. perceptual mapping. built-to-order (BTO).
Answer: e Page: 190 Rationale: The comparison of the Model E to Dell is the phrase that should remove any doubt from students' minds about what kind of business this is. It is very similar to mass customization, but because of production issues, a customer does not have the ability to specify an unlimited number of features.
9-41 SYNERGY
DEFINITION
Marketing strategies provide the organization with __________, the increased customer value achieved through performing organizational functions more efficiently. a. b. c. d. e.
utopianization innovation dichotomy transmogrification synergy
Answer: e Page: 190 Rationale: The key to successful product differentiation and market segmentation strategies is finding the ideal balance between satisfying a customer’s individual wants and achieving organizational synergy, the increased customer value achieved through performing organizational functions more efficiently. 9-42 SYNERGY
CONCEPTUAL
The ultimate criterion in segmenting markets is that__________ as a result of increased synergy. a. b. c. d. e.
investors should make more money executives should get larger salaries products should be made more cheaply customers should be better off the government should collect more taxes
Answer: d Page: 190 Other Location: web Rationale: The synergy called “increased customer value” can take the form of more products, improved quality on existing products, lower prices, easier access to product through improved distribution, and so on, but the ultimate criterion is that customers should be better off as a result of increased synergies. 9-43 SYNERGY
DEFINITION
Synergy is the increased customer value achieved through: a. b. c. d. e.
performing organizational functions more efficiently. larger rebates at the point of sale. higher trade-in values for older model cars. the ability to be exposed to more informative advertising messages. more tax revenues for government.
Answer: a Page: 190 Rationale: Key term definition—synergy
530
9-44 MARKETING NEWSNET
CONCEPTUAL
To create a _________ strategy, cmax.com allows customers to visit its website and design a sneaker to their own personal specifications. a. b. c. d. e.
product sampling product extrapolation mass customization usage segmentation psychographic segmentation
Answer: c Page: 191 Rationale: Today’s Internet ordering and flexible manufacturing and marketing processes have made mass customization possible, tailoring goods or services to the tastes of individuals on a high-volume scale. 9-45 MARKETING NEWSNET
CONCEPTUAL
Cmax.com allows customers to visit its website and design a sneaker to their own personal specifications. This website would particularly appeal to people who exercise regularly and are very aware of what shoe styles fit comfortably on their feet. This would be descriptive of which type of market segmentation variable? a. b. c. d. e.
psychographic demographic socioeconomic usage behavior
Answer: a Page: 192 Other Location: web Rationale: Psychographic segmentation is used to divide people according to activities (exercise) and interests (comfort and technology). 9-46 SEGMENTING AND TARGETING MARKETS
DEFINITION
The first step in segmenting and targeting markets is to: a. b. c. d. e.
recognize a need. form prospective buyers into groups. create product groupings. estimate size of the overall market. develop a market-product grid
Answer: b Page: 191; Figure 9-3 Rationale: The process of segmenting and targeting markets involves five key steps: (1) form prospective buyers into segments, (2) form products to be sold into groups, (3) develop a marketproduct grid and estimate size of markets, (4) select target markets, and (5) take marketing actions to reach target markets.
9-47 SEGMENTING AND TARGETING MARKETS
DEFINITION
There are five steps involved in segmenting and targeting a market. What should a marketer do once he or she has selected a target market? a. b. c. d. e.
create product groupings develop a market-product grid estimate size of market take marketing actions to reach that target market form prospective buyers into market segments
Answer: d Page: 192; Figure 9-3 Rationale: The process of segmenting and targeting markets involves five key steps: (1) form prospective buyers into segments, (2) form products to be sold into groups, (3) develop a marketproduct grid and estimate size of markets, (4) select target markets, and (5) take marketing actions to reach target markets. 9-48 CRITERIA FOR FORMING SEGMENTS
APPLICATION
Between two and three percent of the population have some degree of allergic reaction, usually mild, to preservatives used in salad bars. Restaurants might consider people with these "allergies" as a separate segment. So these restaurants will need to have their regular salad bar plus a special salad bar for the allergies segment. This multiple product and multiple market segment strategy would have the greatest difficulty meeting which of the following criteria used to form market segments? a. b. c. d. e.
instrumentality of sufficient marketing objectives to ignore that segment different needs of buyers among different segments similarity of needs of potential buyers within a segment simplicity and cost of assigning potential buyers to segments potential for increased profit and ROI
Answer: e Page: 192 Rationale: The segment would probably not be profitable—given the size of the market, the limited benefit to consumers in the segment, and the high cost of running a duplicate salad bar. 9-49 CRITERIA FOR FORMING SEGMENTS
CONCEPTUAL
The best segmentation approach is the one that: a. b. c. d. e.
makes it easiest to reach the segment. recognizes different needs of buyers among different segments. recognizes similarities of needs of potential buyers within a segment. is simplest and least costly in assigning potential buyers to segments. maximizes the opportunity for future profit and return on investment.
Answer: e Page: 192 Rationale: One of the best criteria to use in forming segments is the opportunity for increased profits and ROI.
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9-50 CRITERIA FOR FORMING SEGMENTS
CONCEPTUAL
A different market segment usually requires a different marketing action that in turn means greater costs. If increased revenues don't offset extra costs, a marketer should __________ to reduce the number of marketing actions. a. b. c. d. e.
increase the advertising budget try direct mail instead of broadcast advertising cancel current activities combine segments discontinue offering the good or service
Answer: d Page: 192 Rationale: There should be a difference of needs of buyers among segments. If the needs of the various segments aren’t very different, combine them into fewer segments. A different segment usually requires a different marketing action that means greater costs. If increased sales don’t offset extra costs, it is best to combine segments and reduce the number of marketing actions. 9-51 CRITERIA FOR FORMING SEGMENTS
CONCEPTUAL
When Mikki asked her father for his advice about marketing software for the disabled, he told her, “Reaching a segment requires a simple but effective marketing action. If no such action exists, don't segment.” Mikki's father is expressing concern about the: a. b. c. d. e.
feasibility of marketing actions to reach the segment. different needs of buyers among different segments. similarity of needs of potential buyers within a segment. simplicity and cost of assigning potential buyers to segments. potential for increased profit and ROI.
Answer: a Page: 192 Rationale: One of the five criteria to use in forming segments is the potential of a marketing action to reach a segment. Reaching a segment requires a simple but effective marketing action. If no such action exists, don’t segment. 9-52 FORMING SEGMENTS
CONCEPTUAL
Which of the following is NOT a criterion used in forming segments? a. b. c. d. e.
potential for increased profit similarity of needs of potential buyers within a segment competitive position potential of a marketing action to reach a segment simplicity and cost of assigning potential buyers to segments
Answer: c Page: 192 Rationale: Competitive position is a reason for selecting a market, not for segmenting it.
9-53 FORMING SEGMENTS
CONCEPTUAL
Which of the following is NOT a criterion used in forming market segments? a. b. c. d. e.
potential for increased profit similarity of needs of potential buyers within a segment difference of needs of buyers among segments cost of reaching the segment simplicity and cost of assigning potential buyers to segments
Answer: d Page: 192 Rationale: Cost of reaching the segment is a reason for selecting a market, not for segmenting it. 9-54 FORMING SEGMENTS
CONCEPTUAL
A marketing manager must be able to put a market segmentation plan into effect. This means being able to recognize the characteristics of potential buyers and __________ without encountering excessive costs. a. maximize internal considerations b. diversify their interests c. optimize their different needs d. assign them to a segment e. ignore any and all similarities Answer: d Page: 192 Rationale: A marketing manager must be able to put a market segmentation plan into effect. This means being able to recognize the characteristics of potential buyers and then assigning them to a segment without encountering excessive costs. 9-55 CONSUMER SEGMENTATION VARIABLES
DEFINITION
Two general categories used to segment consumer markets are __________ and buying situations. a. b. c. d. e.
demand frequency demand volume demand characteristics customer characteristics customer lifestyles
Answer: d Page: 192 Rationale: Two kinds of variables are generally used to segment consumer markets: (1) customer characteristics and (2) buying situations.
534
9-56
CONSUMER SEGMENTATION VARIABLES
CONCEPTUAL
Variables used to segment markets can be divided into two general categories. They are: a. b. c. d. e.
psychographic variables and buying power. psychographics and demographics. buying products and customer characteristics. customer characteristics and buying situations. demographics and buying situation.
Answer: d Page: 192 Rationale: Two kinds of variables are generally used to segment consumer markets: (1) customer characteristics and (2) buying situations. 9-57 SEGMENTATION BY REGION
APPLICATION
Which of the following statements demonstrates the formation of a segment based on region? a. b. c. d. e.
In China KFC sells a much spicier chicken the farther away its restaurants are from the coastal areas. GE built a downsized microwave oven to hang under kitchen cabinets. Del Monte offers a line of canned fruit with no added sugar or artificial sweeteners. A fast food hamburger restaurant is open for breakfast on Sunday mornings but not on weekdays. A gourmet grocer advertises its services on a small-audience classical music station even though there is a much larger-audience rock station in the area.
Answer: a Page: 192 Rationale: KFC has discovered that to be successful in globalization it must be willing to adapt to the taste preferences of different regions. 9-58 SEGMENTATION BY REGION
APPLICATION
Doris Lewis owns Lewis Edibles, Inc., a company that makes Tongue Tinglin' B.B.Q. Sauce. She wants to target local people who like the special blend of flavors found only in North Carolina mustard-based barbecue sauce. The easiest method for segmenting her market is to use __________ segmentation variables. a. b. c. d. e.
age behavior socioeconomic geographic perceptual
Answer: d Page: 247 Other Location: web Rationale: The key phrase is North Carolina barbecue sauce, which would mean that the easiest market to target would be North Carolinians.
9-59 SEGMENTATION BY REGION
APPLICATION
Universal Concerts is planning on bringing a series of concerts to Canada next year. In order for its concerts to be a success it needs to know that Western Canadians like country music and that a country music event in Eastern Canada is much more likely to have empty seats. This consumer behavior requires Universal Concerts to segment its Canadian market according to: a. b. c. d. e.
geographic and psychographic characteristics. demographic characteristics. lifestyle and demographic characteristics. usage rate and demographic characteristics. demographic and geographic characteristics.
Answer: a Page: 192 Rationale: Psychographic includes consumer activities and interests—country music. There are different music preferences in east and west Canada. 9-60 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
Modern Maturity magazine is a publication that is sent to all AARP members who by organization definition have to be at least 50-years-old to join. The market segment for Modern Maturity magazine was defined by: a. b. c. d. e.
usage rates. usage patterns. buyer situations. demographic characteristics. psychographic characteristics.
Answer: d Page: 192 Other Location: web Rationale: Age is a commonly used demographic segmentation variable. 9-61 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
When the Benihana Frozen Foods Corporation began to offer its Famous Restaurant Classics meals in single serving packages, it was relying on a __________ segmentation variable to define a market based on serving size. a. b. c. d. e.
regional demographic lifestyle geographic psychographic
Answer: b Page: 192 Rationale: Household size is a demographic variable.
536
9-62 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
When a telemarketer calls to sell a consumer vinyl siding for his or her home, the first question the telemarketer asks is if the person answering the phone is a homeowner. Whether the prospect is a homeowner indicates the use of which type of consumer segmentation variable? a. b. c. d. e.
usage behavior demographic buying situation psychographic
Answer: c Page: 192 Rationale: Residence tenure is a demographic variable. 9-63 SEGMENTATION BY DEMOGRAPHICS
DEFINITION
Which of the following is a demographic variable? a. b. c. d. e.
personality gender usage state needs MSA
Answer: b Page: 192 Rationale: Demographics are observable differences among people, such as gender, age, race, household size, and so on. 9-64 SEGMENTATION BY DEMOGRAPHICS
DEFINITION
All of the following are consumer demographic variables EXCEPT: a. b. c. d. e.
gender. age. NAIC code. household size. race.
Answer: c Page: 192 Rationale: Alternative c is a segmentation variable for organizational, not consumer markets.
9-65 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
The State of Alabama Board of Tourism ran a series of ads showing traditional families enjoying various attractions in the state. Since the apparent target of these is traditional families, it appears the State of Alabama Board of Tourism has segmented the market using __________ variables. a. b. c. d. e.
regional demographic socioeconomic geographic psychographic
Answer: b Page: 192 Rationale: Demographics are observable differences among people, such as gender, age, race, household size, and so on. 9-66 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
Which of the following statements demonstrates the formation of a segment based on household size? a. b. c. d. e.
Campbell's makes spicier nacho cheese sauce for its distributors in Texas than it does in Maine. GE built a downsized microwave oven to hang under kitchen cabinets. Del Monte offers a line of canned fruit with no added sugar or artificial sweeteners. A fast food hamburger restaurant is open for breakfast on Sunday mornings but not on weekdays. A gourmet grocer advertises its services on a small-audience classical music station even though there is a much larger-audience rock station in the area.
Answer: b Page: 192 Rationale: Household size is a demographic customer characteristic. Because smaller households have smaller kitchens, GE downsized its microwave oven, and restyled it to hang under cabinets.
538
9-67 SEGMENTATION BY DEMOGRAPHICS
APPLICATION
At a Hallmark store you can find several different product lines of greeting cards, including Fresh Ink, Nature's Sketchbook, Shoebox, Maxine, Mahogany, and Tree of Life cards—all made by Hallmark for sale in its stores and intended to appeal to different target markets. The Mahogany line is designed to appeal to African-Americans. This is an example of __________ segmentation. a. b. c. d. e.
regional demographic lifestyle geographic psychographic
Answer: b Page: 192 Rationale: Demographics are observable differences among people, such as gender, age, race, household size, and so on. 9-68 SEGMENTATION BY DEMOGRAPHICS; PSYCHOGRAPHICS
APPLICATION
Ford Motor Company uses the slogan “No Boundaries” for its ad campaigns for Ford SUVs. It invites people who want ultimate people-carrying and gear-storing capabilities “to be outfitted with the most far-reaching sports utility vehicle on earth.” If the SUV campaign were simply geared to household size, it would be using __________ segmentation, but because the campaign is trying to appeal to people who don't like the restrictions of a sedan, who want to be able to pack up and leave at a moment's notice, and who enjoy freedom and independence, it is relying on __________ segmentation. a. b. c. d. e.
socioeconomic; demographic psychographic; lifestyle geographic; usage rate demographic; usage rate demographic; psychographic
Answer: e Page: 192 Rationale: Household size is a demographic variable. The attitude that sedans are inadequate and that freedom and independence are desirable reflect psychographic segmentation variables.
9-69 SEGMENTATION BY PSYCHOGRAPHICS
APPLICATION
Magazines like Fitness, Field & Stream, Golf Digest, and Health all use a ____________________ segmentation strategy. a. b. c. d. e.
demographic. age. geographic. sociocultural. psychographic.
Answer: e Page: 192 Rationale: Lifestyle is a psychographic variable. These magazines are designed to appeal to people who enjoy certain lifestyles. 9-70 SEGMENTATION BY PSYCHOGRAPHICS
APPLICATION
Nike recently debuted the Air Jordan XVII with a price tag of $200. The shoes arrived at shoe stores in a metallic silver briefcase instead of a shoebox. Nike is targeting a market it identifies as “keepers,” people who buy the shoes, keep them under their bed and when friends come over, show them the shoes. Selling to the market segment called “keepers” probably means that Nike is using which of the following types of customer characteristic variables to segment this market? a. b. c. d. e.
demographics psychographics usage benefits sought behavior
Answer: b Page: 192 Other Locations: web Rationale: Alternative a refers to gender, age, race, and household size, for example. Alternatives c, d, and e describe buying situation variables. Psychographic characteristics like personality (gregarious, introverted, compulsive) and lifestyle (consumer activities, interests, opinions) describe this segmentation variable Nike is using. 9-71 SEGMENTATION BY PSYCHOGRAPHICS
DEFINITION
Consumer activities, interests, and opinions are considered: a. b. c. d. e.
psychological variables. consumer behavior. attitudes. psychographic variables. demographic variables.
Answer: d Page: 192 Rationale: Psychographic characteristics include personality (gregarious, introverted, compulsive) and lifestyle (consumer activities, interests, opinions).
540
9-72 SEGMENTATION BY SOCIOECONOMIC
APPLICATION
At a Hallmark store you can find several different product lines of greeting cards, including Fresh Ink, Nature's Sketchbook, Shoebox, Maxine, Mahogany, and Tree of Life cards—all cards made by Hallmark for sale in its stores and intended to appeal to different target markets. The Shoebox line sells for $.99, which is a significantly lower price than some of the other Hallmark brands sell for. The Shoebox line is designed to appeal to people on limited budgets and is an example of __________ segmentation. a. b. c. d. e.
psychographic behavior buying situation socioeconomic geographic
Answer: d Page: 192 Rationale: Socioeconomic variables include income, education and occupation. 9-73 SEGMENTATION BY SOCIOECONOMIC
APPLICATION
At the Daniels College of Business many different degrees are offered such as the Bachelor of Science, the MBA, the MS-Marketing Strategy, the MS-Integrated Marketing Communication, and each is intended to appeal to different target markets. The MBA and MS degrees are targeted to people who already have a bachelor’s degree and are examples of __________ segmentation. a. b. c. d. e.
psychographic behavior buying situation socioeconomic geographic
Answer: d Page: 192 Rationale: Socioeconomic variables include income, education and occupation. 9-74 SEGMENTATION BY CUSTOMER CHARACTERISTICS
DEFINITION
Several customer characteristics used in segmenting consumer markets are based on those from the 2000 U.S. Census and include: a. b. c. d. e.
psychographics. usage rate. buying situation. time of purchase. type of retail store used.
Answer: a Page: 192 Rationale: Customer characteristics used in segmenting consumer markets include geographic, demographics, socioeconomic variables, and psychographic characteristics.
9-75 SEGMENTATION BY CUSTOMER CHARACTERISTICS
DEFINITION
Several customer characteristics used in segmenting consumer markets are based on those from the 2000 U.S. Census and include: a. b. c. d. e.
usage rate. geographic variables. buying situation. time of purchase. type of retail store used.
Answer: b Page: 192 Rationale: Customer characteristics used in segmenting consumer markets include geographic, demographics, socioeconomic variables, and psychographic characteristics. 9-76 SEGMENTATION BY CUSTOMER CHARACTERISTICS
DEFINITION
Several customer characteristics used in segmenting consumer markets are based on those from the 2000 U.S. Census and include: a. b. c. d. e.
buying situation usage rate demographics time of purchase type of retail store used
Answer: c Page: 192 Rationale: Customer characteristics used in segmenting consumer markets include geographic, demographics, socioeconomic variables, and psychographic characteristics. 9-77 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
Nike recently debuted the Air Jordan XVII with a price tag of $200. The shoes arrived at shoe stores in a metallic silver briefcase instead of a shoebox. Nike is targeting a market it identifies as “keepers,” people who buy the shoes, keep them under their bed and when friends come over, show them the shoes. Selling to the market segment called “keepers” probably means that Nike is using which of the following types of buying situation variables to segment this market? a. b. c. d. e.
demographics psychographics geographic benefits sought socioeconomic
Answer: d Page: 193 Rationale: Alternatives a, b, c, and e describe customer characteristics. The benefit would be the ability to show the shoes and hopefully to have something that no one else did.
542
9-78 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
The headline of the ad for the Sleep Number bed by Select Comfort read, “5 Reasons Why You'll Sleep Better on a Sleep Number Bed.” From this information, you know that Select Comfort uses __________ segmentation. a. b. c. d. e.
benefits sought psychographic demographic socioeconomic behavior
Answer: a Page: 193 Other Location: web Rationale: Benefits sought includes product features and customer needs. Customers and prospects for the Sleep Number bed are seeking the benefit of a better night's sleep. 9-79 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
The slogan for General Foods International Coffee is “It Stirs the Soul.” Based on that trademarked slogan, you should realize the product is using a __________ segmentation strategy. a. b. c. d. e.
geographic socioeconomic benefits sought product knowledge demographic
Answer: c Page: 193 Rationale: Benefits sought is a situational characteristic. General Foods was trying to get consumers to think about how drinking a cup of rich-flavored coffee is indulgent. 9-80 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
Nyquil advertises that it alleviates “the nighttime, sniffling, sneezing, coughing, aching, stuffy head, fever” and helps you get the rest you need to get better. Nyquil uses a segmentation strategy based on __________ variables. a. b. c. d. e.
geographic socioeconomic benefits sought product knowledge demographic
Answer: c Page: 193 Other Location: web Rationale: Nyquil is appealing to people who suffer from colds and who would really like to sleep and feel better.
9-81 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
Many families today hold potluck meals during holidays or special events. Participants bring casseroles, vegetables, breads, and desserts and all share the food. It is easy to forget to take the bowl that you brought to the dinner home with you. Reynolds responded to this problem by creating Pot Lux cookware, attractive and inexpensive disposable dishes for transporting food. Reynolds has recognized how to use _________ variables to segment its market. a. b. c. d. e.
user status benefits sought demographics family size geographic
Answer: b Page: 193 Rationale: Understanding what benefits are important to different customers is often a useful way to segment markets because it can lead directly to specific marketing actions. The slogan Reynolds uses with this new product says it all, “Make every dish forgettable.” 9-82 SEGMENTATION BY BENEFITS SOUGHT
APPLICATION
Many companies have cut travel budgets, so that very few business people are authorized to fly first class. Despite the shrinking pool of business-class travelers, British Airways (BA) has grown market share for its transatlantic business class by offering greater comfort. Promotions to frequent fliers stress that passengers can sleep in fully reclining seats and arrive refreshed to carry out a full day's schedule. BA's strategy is an example of segmenting the market by: a. b. c. d. e.
life stage. lifestyle. industry sector. benefits sought. psychographics.
Answer: d Page: 193 Rationale: British Airways is offering customers important benefits in time. They are able to rest during the flight and to work more effectively upon arrival. Other airlines are rushing to compete because BA has captured market share in this profitable segment at their expense.
544
9-83 SEGMENTATION BY USAGE
APPLICATION
Pepperidge Farm has developed a new thick-sliced French Toast Swirl bread. The company realizes most people who eat toast for breakfast, see it as a side dish. Pepperidge Farm's ads advise consumers of this bread that this new product, “doesn't go with breakfast. It is breakfast.” Which segmentation variable is being used in this example? a. b. c. d. e.
usage benefits sought demographics family size geographic
Answer: a Page: 193 Rationale: Pepperidge Farm is trying to change light users into medium users and medium users into heavy users. 9-84 SEGMENTATION BY USAGE
DEFINITION
The quantity consumed or patronage (store visits) during a specific period is called: a. b. c. d. e.
trial. inventory. usage rate. consumption rate. turnover.
Answer: c Page: 193 Rationale: Key term definition—usage rate 9-85 SEGMENTATION BY USAGE
APPLICATION
Miller beer once called itself "the champagne of bottled beer," and ads showed elegant women in long white dresses sipping beer from crystal goblets. Then the company discovered that most beer in the U.S. is consumed by men 18 to 30 years of age, and it changed the thrust of its marketing message to reflect the more productive target market. What segmentation variable has it focused on with the newer approach? a. b. c. d. e.
benefits sought usage product awareness buyer intentions buying condition
Answer: b Page: 193 Rationale: The quantity consumed or patronage (store visits) during a specific period is called usage rate. In this case, the quantity of beer consumed caused Miller to change its marketing message to appeal to the men 18 to 30 years of age—the heavier users.
9-86 SEGMENTATION BY USAGE
APPLICATION
Which of the following statements demonstrates the formation of a segment based on usage? a. b. c. d. e.
Campbell's soup makes spicier nacho cheese sauce for its distributors in Texas than it does in Maine. GE built a downsized microwave oven to hang under kitchen cabinets. Del Monte offers a line of canned fruit with no added sugar or artificial sweeteners. A fast food hamburger restaurant is open for breakfast on Sunday mornings but not on weekdays. A gourmet grocer advertises its services on a small-audience classical music station even though there is a much larger-audience Top 40 station in the area.
Answer: d Page: 193 Rationale: The quantity consumed or patronage (store visits) during a specific period is called the usage rate. In this case, the restaurant appears to have insufficient usage (patronage. during weekdays), and more potential usage for breakfast on weekends. 9-87 SEGMENTATION BY USAGE
APPLICATION
Post Grape-Nuts cereal has been marketed since early in the 20th century. Its market share has been steadily declining as consumers began associating it with something their grandfather ate. Post recently launched a campaign to increase consumption of the cereal by inviting consumers to try the crunchy cereal on top of their yogurt, their salad, or their bowl of soup as a delicious addition. Post was trying to convince people who had never tried the cereal to try, and people who were familiar with the product to use it a variety of different ways. Post is using which segmentation variable to define its target market? a. b. c. d. e.
usage demographic behavior lifestyle life stage
Answer: a Page: 193 Rationale: Usage rate refers to the quantity consumed, which Post is trying to increase by suggesting other product uses.
546
9-88 SEGMENTATION BY USAGE
APPLICATION
A national car rental firm targets 50 percent of its advertising to salespeople who travel more than 1,000 miles per week. Its market is segmented by: a. b. c. d. e.
usage. benefits offered. demographics. family size. psychographics.
Answer: a Page: 193 Rationale: The quantity consumed or patronage—store visits—during a specific period is the usage rate. In this case, "more than 1,000 miles per week" is a measure of usage rate. 9-89 SEGMENTATION BY USAGE
APPLICATION
Golden Gallon convenience stores sell Golden Gallon brand milk. Every time a customer purchases a gallon of this brand and gives the clerk his or her Golden Gallon card, the card is punched. When the customer has accumulated enough marks, then he or she gets a free gallon of milk. This is an example of segmentation by: a. b. c. d. e.
usage. benefits offered. demographics. family size. psychographics.
Answer: a Page: 193 Rationale: The quantity consumed or patronage—store visits—during a specific period is the usage rate. In this case, the heavier users are those that get the Golden Gallon card punched enough to obtain a free gallon of milk. 9-90 80/20 RULE
DEFINITION
The 80/20 rule is a concept, which suggests: a. b. c. d. e.
eighty percent of a firm's inventory should be readily available, and twenty percent should be reserved for emergency demand. eighty percent of a firm's first time users will become brand loyal and twenty percent of the firm's first time users will use the product only once. eighty percent of a firm's sales are obtained from twenty percent of its customers. eighty percent of a firm's expenditures are tax deductible and twenty percent are not. eighty percent of a firm's products will ultimately be sold at the original markup price, and twenty percent will not.
Answer: c Page: 194 Other Location: web Rationale: Key term definition—80/20 rule
9-91 80/20 RULE
APPLICATION
Todd Harris and Associates, a New York sales promotion agency, discovered from analysis of its files that one-fifth of its clients accounted for more than three-quarters of its fees and commissions. This is an example of what classic concept? a. b. c. d. e.
the law of inverse proportions the 80/20 rule the survival of the fittest the law of eminent domain the primogeniture rule
Answer: b Page: 194 Rationale: The 80/20 rule is a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers. 9-92 80/20 RULE
DEFINITION
The 80/20 rule is most closely related to which consumer segmentation variable? a. b. c. d. e.
geographic psychographic benefits sought behavior usage
Answer: e Page: 194 Other Locations: web Rationale: According to the 80/20 rule, eighty percent of a firm's sales are obtained from twenty percent of its customers. 9-93 80/20 RULE
APPLICATION
If the owners of a bakery want to increase sales of its baked goods by directing its marketing efforts towards the relatively small number of consumers who are responsible for the majority of the baked goods sold, it would be: a. b. c. d. e.
augmenting its market. segmenting its market based on the 80/20 rule. segmenting its market based on family size. segmenting its market according to consumer interest. segmenting its market according to consumer needs.
Answer: b Page: 194 Rationale: Research has shown that approximately 80 percent of an organization's sales are accounted for by 20 percent of its customers. While the percentages are merely meant as a guideline, the rule is accurate in that there are heavy users of some products and services and a relatively small proportion of the buying public is responsible for a majority of the sales of those products.
548
9-94 FREQUENCY MARKETING
DEFINITION
Airlines have developed frequent-flier programs to encourage passengers to use the same airline repeatedly—a technique sometimes called__________. a. b. c. d. e.
convenience marketing quality marketing frequency marketing quantity marketing benefit marketing
Answer: c Page: 193 Rationale: Text term definition—frequency marketing 9-95 SEGMENTATION BY BUYING SITUATION
DEFINITION
One buying situation used in segmenting consumer markets is: a. b. c. d. e.
psychographics. usage rate. demographics. geographic. socioeconomic.
Answer: b Page: 194 Rationale: Buying situations include benefits sought (product features, quality, service, warranty) and usage (heavy user, light user, nonuser). 9-96 SEGMENTATION BY BUYING SITUATION
DEFINITION
One buying situation used in segmenting consumer markets is: a. b. c. d. e.
psychographics. benefits sought. demographics. geographic. socioeconomic.
Answer: b Page: 194 Rationale: Buying situations include benefits sought (product features, quality, service, warranty) and usage (heavy user, light user, nonuser).
9-97 NONPROSPECTS
DEFINITION
People who do NOT use a firm's product or service, and most likely never will, are called: a. b. c. d. e.
nonqualified prospects. leads. undefined prospects. nonprospects. disenfranchised prospects.
Answer: d Page: 194 Rationale: Among nonusers of a product, people who might become users are prospects and people who are never likely to become users are nonprospects. 9-98 NONPROSPECTS
APPLICATION
The 11 percent of adult Americans who don't go to fast-food restaurants in a typical month, and are never likely to become users, are __________. a. b. c. d. e.
cold leads nonqualified prospects remote chances undefined prospects nonprospects
Answer: e Page: 194 Rationale: Among nonusers of a product, people who might become users are prospects and people who are never likely to become users are nonprospects. 9-99 PROSPECTS
DEFINITION
People who use the type of good or service your firm sells although they do NOT use your firm's product now are called: a. b. c. d. e.
ultimate consumers. leads. prospects. non-prospects. undefined prospects.
Answer: c Page: 194 Rationale: Consumers who use a product category but not a particular brand are viewed as prospects.
550
9-100 ORGANIZATIONAL MARKET SEGMENTATION
DEFINITION
Variables such as location, the North American Industry Classification System (NAICS) code, and number of employees are examples of ways to: a. b. c. d. e.
get around gatekeepers and reach buyers. forecast sales to a consumer market. segment an organizational market. segment a consumer market. promote buyer loyalty.
Answer: c Page: 195 Rationale: There are a number of variables that might be used to segment organizational markets including location, NAICS code, number of employees (related to usage), and benefits sought. 9-101 ORGANIZATIONAL MARKET SEGMENTATION
APPLICATION
Evergreen Air Center in Marana, Arizona, is the world's biggest parking lot for unwanted commercial aircraft. Airlines pay from $750 to $5,000 a month for its storage service. The warm, dry air where the operation is located serves as a cheap and effective airplane preservative. Which organizational segmentation variable might Evergreen use to segment its market? a. b. c. d. e.
NAICS codes and benefits sought number of locations and benefits sought location and demographics NAICS sectors and number of locations number of employees and population density
Answer: a Page: 195 Rationale: The NAICS sectors would reveal other companies that fly commercial planes that might be interested in Evergreen's services. Also, the companies storing their planes at the facility want the planes preserved—a benefit sought. 9-102 ORGANIZATIONAL MARKET SEGMENTATION
APPLICATION
William Morris talent agency represents country singer Trace Adkins in negotiations with various venues in which he could perform. Imagine that the agency decided the singer would not perform at venues located in communities that had less than 100,000 people. This would be segmenting the market by __________ variables. a. b. c. d. e.
nature of good psychographic location usage buying condition
Answer: c Page: 195 Rationale: Population density is closely related to MSA classifications, the location segmentation variable.
9-103 ORGANIZATIONAL MARKET SEGMENTATION
APPLICATION
Australia-based Renewable Energy Ltd. sells a device that converts manure into energy. One of the $10 million devices is capable of generating energy equal to $2 million of natural gas per year. The company believes its target market is businesses that use a lot of energy like its first customer, a fertilizer manufacturer, and that are located in rural areas. It will use which of the following strategies to segment its market: a. b. c. d. e.
benefits sought and geographic. number of employees and benefits sought. purchase location and purchase type. NAICS codes and location. benefits sought and NAICS codes.
Answer: d Page: 195 Rationale: Renewable Energy could use NAICS codes to locate other fertilizer manufacturers and location segmentation because prospects need to be in rural areas where there is a ready supply of manure. 9-104 ORGANIZATIONAL SEGMENTATION BY LOCATION
APPLICATION
When evaluating entry into the large Boston market, Seattle-based Starbucks Coffee Company found that Coffee Connection, a well-established local chain, already occupied many prime locations. Starbucks entered the market anyway because it based its decision on: a. b. c. d. e.
number of employees, a geographic variable. the NAICS code, a demographic variable. population density, a location variable. nature of good, a customer characteristic variable. buying conditions, a demographic variable.
Answer: c Page: 195 Rationale: Coffee Connection was a strong competitor: well-established, locally owned, and occupying excellent locations. However, Starbucks' criteria still favored entry. Boston is a large market (population density-a location variable), with potential for growth in coffeehouses owing to many students and young professionals. Starbucks bought Coffee Connection and converted its locations to reach the segment faster and more effectively. None of the pairings in the alternatives is a correct combination except alternative c.
552
9-105 ORGANIZATIONAL MARKET SEGMENTATION
APPLICATION
Harmony Products makes fertilizers used on golf courses. Which organizational market segmentation variable would provide the greatest benefit to the organization? a. b. c. d. e.
NAICS codes annual sales buying condition nature of good number of locations
Answer: a Page: 195 Rationale: Organizational market segmentation variables include location, NAICS code, number of employees, and benefits sought. In this case, Harmony could use the NAICS codes to find golf courses to sell its fertilizers to. 9-106 ORGANIZATIONAL MARKET SEGMENTATION
CONCEPTUAL
Which of the following is NOT a basis used to segment organizational markets? a. b. c. d. e.
location psychographic NAICS code number of employees benefits sought
Answer: b Page: 195 Rationale: Organizational market segmentation variables include location, NAICS code, number of employees, and benefits sought. Alternative b is a segmentation variable for consumer markets. 9-107 ORGANIZATIONAL MARKET SEGMENTATION
APPLICATION
Best Foods Company is considering expanding beyond the regional market segments now served by its Hellmann's mayonnaise. One criterion management wants to use to evaluate potential new geographic market segments is whether new equipment must be bought to serve each new segment. This is an example of which criterion used to pick new target market segments? a. b. c. d. e.
Best Food's competitive position in the segment Best Food's created product groupings expected growth of the market segment size of the market segment compatibility with Best Food's objectives and resources
Answer: e Page: 195 Rationale: New equipment to reach a new market segment relates to the organization's resources.
9-108 PRODUCT GROUPING
DEFINITION
__________ occur(s) when products are put into meaningful categories so buyers can relate to them. a. b. c. d. e.
Market-product combinations Categorical marketing 80/20 grouping Product groupings Organizational segmentation
Answer: d Page: 195 Rationale: Products are put into meaningful categories using product grouping, so buyers can relate to them. 9-109 PRODUCT GROUPING
APPLICATION
Hallmark groups its products into five categories. They are flowers and gifts, cards and e-cards, Hallmark collectibles, gift wrappings, and photo albums and scrapbooks. Why does Hallmark use product groupings? a. b. c. d. e.
The groupings increase the number of market-product combinations on the market-product grid into a more manageable framework for subsequent analysis. Consumers buy more in illogically organized environments. The products are grouped into meaningful categories using product grouping so buyers can relate to these products. Product groupings can be generated quantitatively to show which adhere to the 80/20 rule. All of the above are reasons why Hallmark would use product groups.
Answer: c Page: 195 Rationale: Products are put into meaningful categories using product grouping, so buyers can relate to them. 9-110 PRODUCT GROUPING
APPLICATION
In developing a marketing strategy for Hallmark the company decides that what it was really selling was memory keeping, and not photo albums, scrapbooks, and related supplies. Thus, store layouts are defined to reflect this buyer experience, rather than a collection of books and related supplies. This is an example of: a. b. c. d. e.
target market selection. product grouping. market-product grid development. taking marketing actions to reach target markets. market segmentation of prospects.
Answer: b Page: 195 Rationale: Products are put into meaningful categories (memory keeping) using product grouping (putting the photo albums, scrapbooks, and related supplies together in the store), so buyers can relate to them.
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9-111 PRODUCT GROUPINGS
APPLICATION
Hallmark grouped its scrapbook supplies, photo albums and such into one product group because: a. b. c. d. e.
competitors relate to them better for benchmarking purposes. customers relate to them better since all of these products may be used to record memories. it is easier to estimate the industry sales for fewer market-product combinations. it is more profitable to define product groupings in terms of large market segment because it reduces manufacturing and marketing costs. its competitors engage in no product groupings.
Answer: b Page: 195 Other Location: web Rationale: Products are put into meaningful categories (items used to record memories) using product grouping (the scrapbook supplies and photo albums), so buyers can relate to them. 9-112 MARKET-PRODUCT GRID
CONCEPTUAL
In developing a marketing strategy for your Wendy's restaurant, you determine that as many as 400 lunches per day are purchased by local college students who commute and eat at your restaurant. This is part of the process for: a. b. c. d. e.
implementing the 80-20 rule. forming products to be sold into groups. developing a market-product grid and estimating size of markets. implementing a harvesting strategy. repositioning a product.
Answer: c Page: 196 Rationale: Estimating how many lunches (product) per day a market (commuter students) will eat at your restaurant is one of the activities in the process of developing a market-product grid and estimating the size of markets in each of the cells in the grid. In this case, the commuter student-lunch cell is being estimated. 9-113 SELECTING TARGET SEGMENTS
CONCEPTUAL
Which of the following is a criterion used for selecting a target segment? a. b. c. d. e.
size of the market expected growth cost of reaching the segment compatibility with the organization’s objectives and resources All of the above are used for selecting a target segment.
Answer: e Page: 197 Rationale: The five criteria to use in actually selecting the target segments are: (1) market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, (5) compatibility with the organization’s objectives and resources.
9-114 SELECTING TARGET SEGMENTS
CONCEPTUAL
Which of the following is NOT a criterion used for selecting a target segment? a. b. c. d. e.
size of the market similarities of needs of potential buyers competitive position cost of reaching the segment compatibility with the organization’s objectives
Answer: b Page: 197 Rationale: Similarities of needs of buyers within a segment is a criterion for segmenting a market, not for selecting one. 9-115 SELECTING TARGET SEGMENTS
CONCEPTUAL
Five general criteria are often used to pick target segments. They include the size of the market, expected growth of the market, competitive position of the firm with respect to the market, and compatibility with the organization's objectives and resources. What is the fifth criterion? a. b. c. d. e.
cost of reaching the segment time required to create awareness need to conform to government regulations how long target market members have been customers amount of publicity likely to result
Answer: a Page: 197 Other Location: web Rationale: There are two different kinds of criteria present in the market segmentation process: (1) those used to divide the market into segments; and (2) those used in picking the target segments. The five criteria to use in actually selecting the target segments are: (1) market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, (5) compatibility with the organization’s objectives and resources. 9-116 SELECTING TARGET SEGMENTS
APPLICATION
A rehabilitation center wants to target women in their 20s who have received some permanent disability as the result of a skiing accident. In terms of the criteria used for selecting a target segment, this market would: a. b. c. d. e.
have no expected growth. not be compatible with the company's current resources. be very small. be readily accessible to the firm's marketing programs. be accurately described by all of the above.
Answer: c Page: 197 Rationale: The market would grow as people continue skiing—although it may be slow growth. This market would use the rehabilitation services that the company now provides. Because it would be so small, it would not be readily accessible by marketing programs.
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9-117 SELECTING TARGET SEGMENTS
APPLICATION
In developing a marketing strategy for the newly released Nike Air Jordan XVII with a price tag of $200, Nike decided to concentrate on affluent teens rather than members of high school basketball teams. This is an example of: a. b. c. d. e.
selecting target market segments to reach. forming products to be sold into groups. developing a market-product grid and estimating size of markets. taking marketing actions to reach target markets. forming prospective buyers into segments.
Answer: a Page: 197 Rationale: A decision to concentrate on affluent teenagers is the selection of a target market segment. 9-118 SELECTING TARGET SEGMENTS
CONCEPTUAL
Which of the following is a criterion for selecting a target segment? a. b. c. d. e.
similarity of needs of potential buyers within a segment difference of needs of sellers between segments feasibility of a marketing action to reach a segment amount of competition in the segment simplicity and cost of assigning potential buyers to segments
Answer: d Page: 197 Rationale: There are two different kinds of criteria present in the market segmentation process: (1) those used to divide the market into segments; and (2) those used in picking the target segments. The five criteria to use in actually selecting the target segments are: (1) market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, (5) compatibility with the organization’s objectives and resources. Competitive position is a criterion for selecting a target market. The less the competition, the more attractive the segment is.
9-119 SELECTING TARGET SEGMENTS
CONCEPTUAL
Which of the following is a criterion for selecting a target market? a. b. c. d. e.
similarity of needs of potential buyers within a segment difference of needs of buyers between segments feasibility of a marketing action to reach a segment simplicity and cost of assigning potential buyers to segments expected growth of segment
Answer: e Page: 197 Rationale: There are two different kinds of criteria present in the market segmentation process: (1) those used to divide the market into segments; and (2) those used in picking the target segments. The five criteria to use in actually selecting the target segments are: (1) market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, (5) compatibility with the organization’s objectives and resources. Expected growth is a criterion for selecting a target market. Although the size of market in the segment may be small now, perhaps it is growing significantly or is expected to grow in the future. 9-120 SELECTING TARGET SEGMENTS
CONCEPTUAL
Which of the following is NOT a criterion for selecting a market segment? a. b. c. d. e.
similarity of needs of potential buyers expected growth competitive position cost of reaching the segment compatibility with the company's objectives
Answer: a Page: 197 Rationale: There are two different kinds of criteria present in the market segmentation process: (1) those used to divide the market into segments; and (2) those used in picking the target segments. The five criteria to use in actually selecting the target segments are: (1) market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, (5) compatibility with the organization’s objectives and resources. Similarity of needs is a criterion for segmenting a market, not for selecting one.
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9-121 TAKING MARKETING ACTIONS
APPLICATION
Doris Lewis owns Lewis Edibles, Inc., a company that makes Tongue Tinglin' B.B.Q. Sauce. She wants to target local people who like the special blend of flavors found only in North Carolina barbecue sauce. In developing a marketing strategy to sell the sauce, Lewis decided to join Goodness Grows in North Carolina, a specialty food association, that advertises local products and distributes them to local supermarkets and gourmet shops. Lewis has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets. 9-122 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to buy an ad in the local shopper's newspaper that is well-read in her region of the country. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Other Locations: web Rationale: Alternative d is the final result in the process of segmenting and targeting markets. 9-123 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to package her jams and jellies with a tag that indicates the products have been hand-made. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets.
9-124 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to hire an independent sales agent to sell her product on the East coast. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets. 9-125 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to sell her product not only to retailers, but also to ultimate consumers using a website. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets. 9-126 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to develop a website so that she could sell her product all across the United States. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets.
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9-127 TAKING MARKETING ACTIONS
APPLICATION
Kellie Johnson makes jams and jellies that sell under the brand name of Yesterday's Kitchen. In developing a marketing strategy to sell her product line, she decided to use overnight shipping during the holidays so that customers would receive her products in time. Johnson has just: a. b. c. d. e.
selected target market segments to reach. formed products to be sold into groups. developed a market-product grid and estimating size of markets. taken marketing actions to reach target markets. formed prospective buyers into segments.
Answer: d Page: 197 Rationale: Alternative d is the final result in the process of segmenting and targeting markets. 9-128 APPLE'S SEGMENTATION STRATEGY
APPLICATION
In 1998 Apple re-focused on the consumer and education markets, introducing the iMac—the most innovative PC ever created according to many PC and business analysts. By the end of the year, 800,000 units had been sold, making the iMac the greatest PC product launch ever. This strategy was successful primarily because it identified: a. b. c. d. e.
innovative distributors. competitive advertising. important corporate computer needs. target market segments. usage rates among younger consumers.
Answer: d Page: 199 Rationale: Steve Jobs returned to Apple in 1997 and changed its segmentation strategy. In 1998 Apple re-targeted the consumer and education markets, delivering a powerful new PC at a lower price. Introducing colorful iMac in five fruit flavors in 1999 enhanced appeal to these target market segments. 9-129 MARKETING NEWSNET
DEFINITION
In the early 1980s Apple Computer Company was often called "Camp Runamok" because the innovative company had no: a. b. c. d. e.
profits. coherent product lines targeted to identifiable market segments. distributors. investment capital. competitors.
Answer: b Page: 199 Rationale: Apple’s lack of a segmentation strategy in the early 1980s has been replaced by one which Steve Jobs is using to compete in what he sees as the Age of the Digital Lifestyle.
9-130 APPLE'S REPOSITIONING STRATEGY
APPLICATION
In 2001, Steve Jobs believed that the personal computer entered the Age of the Digital Lifestyle. Jobs proclaimed that “the Mac can become the digital hub of this new digital lifestyle.” By __________ Apple as the “digital hub” with “killer apps,” such as iTunes, iMovie, iDVD, and iPhoto, bundled as iLife, Jobs believe consumers can take full advantage of the new digital lifestyle era. a. b. c. d. e.
repositioning distributing targeting using underestimating
Answer: a Page: 201; Figure 9-8 Rationale: Steve Jobs returned to Apple in 1997 and changed its segmentation strategy. In 1998 Apple re-targeted the consumer and education markets, delivering a powerful new PC at a lower price. Introducing colorful iMac in five fruit flavors in 1999 enhanced appeal to these target market segments. 9-131 MARKET-PRODUCT SYNERGIES
DEFINITION
__________ are opportunities for efficiency in terms of market segments and research and development and production. a. b. c. d. e.
Product perceptions Relative positionings Competitive positionings Market-product synergies Selective perceptions
Answer: d Page: 200 Rationale: Marketing synergies are opportunities for efficiency in terms of a market segment; one example is focusing on a single consumer segment. Product synergies are opportunities for efficiency in terms of research and development and production; one example is focusing on a single product. Both of these minimize costs but do not take into account synergies, which may come about by overlap in positioning several products to one or more market segments or selling one product to multiple segments.
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9-132 MARKET-PRODUCT SYNERGIES
CONCEPTUAL
Market-product synergies are: a. b. c. d. e.
opportunities for efficiency in terms of market segments. opportunities for efficiency in terms of research and development and production. vital to success in selecting target market segments. vital to success in making marketing decisions. described by all of the above statements.
Answer: e Page: 200 Rationale: Marketing synergies are opportunities for efficiency in terms of a market segment; one example is focusing on a single consumer segment. Product synergies are opportunities for efficiency in terms of research and development and production; one example is focusing on a single product. Both of these synergies are vital to success in both selecting target market segments and making marketing decisions. 9-133 PRODUCT POSITIONING
DEFINITION
The place an offering occupies in consumers' minds on important attributes relative to competitive offerings is called: a. b. c. d. e.
product perception. relative positioning. competitive positioning. product positioning. selective perception.
Answer: d Page: 201 Rationale: Key term definition—product positioning 9-134 PRODUCT POSITIONING
DEFINITION
What does the term product positioning refer to? a. b. c. d. e.
a careful analysis of cross tabulations shelf locations in major chain, grocery, and department stores geographic segmentation, often within major metropolitan areas the place a product offering occupies in consumers' minds on important attributes an old and outdated concept no longer worthy of consideration in marketing planning
Answer: d Page: 201 Rationale: Key term definition—product positioning
9-135 PRODUCT POSITIONING
APPLICATION
Children's Advil pain reliever positioned itself against Children's Tylenol pain reliever by running ads, which claimed that the Advil brand is superior because it works faster and longer than the Tylenol brand. This is an example of: a. b. c. d. e.
product positioning. lateral positioning. differentiation. consumer positioning. cognitive positioning.
Answer: a Page: 201 Rationale: Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive offerings. In this case Advil is positioned as faster and longer-lasting than Tylenol. 9-136 PRODUCT POSITIONING
APPLICATION
There are a lot of skateboard manufacturers on the market, but the BMW Streetcarver is the only one with stabilizers and wheel design based on BMW's automobile. This technology gives the BMW Streetcarver better control at high speeds and around sharp turns than any other brand. What type of positioning is BMW using with its $495 skateboard? a. b. c. d. e.
parallel market positioning distinction positioning competitive positioning product positioning head-to-head positioning
Answer: d Page: 201 Other Location: web Rationale: Product positioning refers to the place an offering occupies in consumers’ minds on important attributes relative to competitive offerings. In this case BMW has positioned their skateboard as having important attributes (better control at high speeds and around sharp turns) relative to competitive offerings. 9-137 PERCEPTUAL MAP
DEFINITION
Marketers use perceptual maps as a means to display or graph in two dimensions the location of products or brands: a. b. c. d. e.
with respect to the geographic areas in which they are manufactured. as they are clustered by type of outlet, normally in major metropolitan areas. within selected retail outlets, indicating accessibility by consumers. in the minds of consumers. within distribution channels.
Answer: d Page: 201 Rationale: Key term definition—perceptual map
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9-138 PERCEPTUAL MAP
CONCEPTUAL
A perceptual map is most like a: a. b. c. d. e.
consumer map of likes and dislikes. database. two-dimensional graph. pyramid design. three-dimensional cube.
Answer: c Page: 201 Other Location: web Rationale: Key term definition—perceptual map 9-139 PERCEPTUAL MAP
DEFINITION
A perceptual map can be used to identify a firm's product in terms of how closely it fits the "ideal" and where it fits in relationship to competitors. The map is based on perceptions of: a. b. c. d. e.
intermediaries. competitors. consumers. competitors, consumers, and the firm itself. independent rating organizations such as Consumer Reports.
Answer: c Page: 201 Rationale: Key term definition—perceptual map 9-140 PERCEPTUAL MAP
DEFINITION
A graph displaying consumers' perceptions of product attributes across two or more dimensions is a: a. b. c. d. e.
payoff table. growth matrix. market-product grid. perceptual map. consumer preference matrix.
Answer: d Page: 201 Rationale: A perceptual map is 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 and then take marketing actions.
9-141 REPOSITIONING
DEFINITION
Changing a the product's position in consumers' minds is called: a. b. c. d. e.
perceptual mapping. product positioning. product differentiation. repositioning. psychographics.
Answer: d Page: 201; Figure 9-8 Rationale: Repositioning is changing the position a product holds in the consumer’s mind. 9-142 REPOSITIONING
CONCEPTUAL
SwissAir recently tried to expand, but because of a variety of reasons, it failed and had to declare bankruptcy. Prior to declaring bankruptcy, SwissAir engaged in several cost-cutting efforts, which alienated its customer base. After much effort, the company began operations again with the hope of attracting its previous customers back. Because it feared that a __________ strategy would not undo the damage to the brand name, the company opted for a totally new name and new look. a. b. c. d. e.
segmentation differentiation repositioning probability inference
Answer: c Page: 201 Other Location: web Rationale: SwissAir did not believe that its customers would forgive it for the cutbacks it made and, more importantly because it wanted to target the same customers, a repositioning strategy was inappropriate. 9-143 REPOSITIONING
APPLICATION
Post Grape-Nuts cereal has been marketed since early in the 20th century. Its market share has been steadily declining as consumers began associating it with something their grandfather ate. Post recently launched a campaign which invited consumers to try the crunchy cereal on top of their yogurt, their salad, or their bowl of soup as a delicious addition. This is an example of a __________ strategy. a. b. c. d. e.
perceptual mapping product positioning product differentiation repositioning psychographics
Answer: d Page: 201; Figure 9-8 Rationale: Repositioning is changing a product's place in consumers' minds. In this case, expanding the use of the product from breakfast time to all day is the repositioning strategy.
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9-144 VIDEO CASE: NOKIA
APPLICATION
The segmentation strategy used by first generation cellular phones was based on: a. b. c. d. e.
geography. demography. lifestyles. socioeconomics. buying situations.
Answer: a Page: 204 Rationale: Although market segmentation began with geography, Nokia’s strategy later changes to focus on different types of customers, since over time, penetration rates were different for different areas of the world. 9-145 VIDEO CASE: NOKIA
APPLICATION
By dividing its market into categories, which it labels Basic, Expression, Classic, Fashion, Premium, and Communicator, Nokia is using: a. b. c. d. e.
consumer differentiation. behavioral segmentation variables. market delineation. market segmentation. aggregation marketing.
Answer: d Page: 204 Rationale: Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action. Market segmentation helps Nokia best service different consumers’ needs. 9-146 VIDEO CASE: NOKIA
APPLICATION
By developing and introducing a communication device, which includes a built-in stopwatch, a thermometer, downloaded game packs, a personalized logo, a personal information manager and a cellular phone that appeals to young adults, Nokia is taking advantage of __________. a. b. c. d. e.
product sampling strategy. product extrapolation strategy. market-product synergy. usage segmentation. market differentiation.
Answer: c Page: 204 Rationale: Marketing synergies represent efficiency in terms of reaching a market segment such as young adults. Product synergies represent efficiency in terms of developing the device, which includes a built-in stopwatch, a thermometer, downloaded game packs, a personalized logo, a personal information manager and a cellular phone. Since Nokia is considering both, they are taking advantage of market-product synergy.
9-147 VIDEO CASE: NOKIA
APPLICATION
By developing and introducing a communication device, which includes a built-in stopwatch, a thermometer, downloaded game packs, a personalized logo, a personal information manager and a cellular phone, Nokia is using a __________.strategy. a. b. c. d. e.
product sampling strategy product extrapolation strategy product differentiation usage segmentation market differentiation
Answer: c Page: 204 Rationale: Product differentiation involves a firm’s using different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. In this case Nokia is using physical product features to differentiate their product.
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CHAPTER 9 IDENTIFYING MARKET SEGMENTS AND TARGETS SHORT ESSAY QUESTIONS 9-148 MARKET SEGMENTATION
CONCEPTUAL
Define market segmentation. How does it link needs with marketing actions? Answer: Market segmentation is aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action. Segmentation links needs to actions. It stresses the importance of aggregating—or grouping—people or organizations in a market according to the similarity of their needs and the benefits they are looking for in making a purchase. Such needs and benefits must be related to specific, tangible marketing actions the firm can take. Page: 187; Figure 9-1 9-149 PRODUCT DIFFERENTIATION
CONCEPTUAL
What is product differentiation? How does it relate to market segmentation? How does it potentially improve a firm's revenues? Answer: Product differentiation is a strategy that has come to have two different but related meanings. In its broadest sense it involves a firm's using different marketing mix activities, such as product features and advertising, to help consumers perceive the product as being different and better than competing products. Differences may involve nonphysical features as well, such as image or price. Thus, product differentiation relates to competitive positioning, where perhaps the same or similar target markets are more likely to buy the product differentiated as having greater reliability or lower price. In a narrower sense, product differentiation involves a firm's selling two or more products with different features targeted to different market segments, because clearly defined and different target markets have different needs that can be satisfied with different products of the same general type, as the text points out in connection with Reebok. As long as a new product does not take a significant amount of sales away from an existing product, though, it can contribute to increased revenues for the firm. Page: 187
9-150 SINGLE PRODUCT, MULTIPLE MARKETS
CONCEPTUAL
Why would an organization produce a single good or service and then attempt to sell it to two or more market segments? Answer: An organization would produce a single good or service and then attempt to sell it to two or more market segments to avoid the added cost of developing additional versions of the product, which often entails high research, engineering, and manufacturing expenses. The additional marketing costs of a single-product, multiple-market strategy—primarily in connection with promotion and distribution—are usually relatively low. Page: 189 9-151 MULTIPLE PRODUCTS, MULTIPLE MARKETS
CONCEPTUAL
Why would an organization produce multiple products or services and then attempt to sell them to two or more market segments? Answer: 1) The additional profits derived from increased sales would exceed the additional research, engineering, manufacturing, and marketing expenses; and/or 2) the marginal production costs could be lowered because of increased economies of scale (if existing excess capacity rather than new plant capacity were used.. Page: 189 9-152 SYNERGY
CONCEPTUAL
Explain the segmentation trade-off: customer relationship management (CRM) versus synergies. Be sure to define CRM and synergy in your answer. Answer: CRM recognizes that every customer is unique, has unique wants and needs, and desires exceptional service from the seller. Synergy is the increased customer value achieved through performing organizational functions more efficiently. The trade off is finding the ideal balance between these two concepts. The “increased customer value” can take many forms: more products, improved quality of existing products, lower prices, easier access to product through improved distribution, and so on. The ultimate criterion for an organization’s marketing success is that customers should be better off as a result of the increased synergies. Page: 190
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9-153 CRITERIA FOR FORMING SEGMENTS
CONCEPTUAL
A marketing manager should develop segments for a market that meet five principal criteria. List these important factors in marketing planning. Answer: The five criteria are: 1) potential for increased profit and ROI 2) similarity of needs of potential buyers within a segment 3) difference of needs of buyers among segments 4) feasibility of a marketing action to reach a segment 5) simplicity of cost of assigning potential buyers to segments. Each relates to efficiency and productivity with respect to allocation of the firm's resources. Page: 192 9-154 CRITERIA FOR FORMING SEGMENTS
APPLICATION
A nonprofit food bank was gathering and handing out food to anyone who requested it. It now wants to only give free food to people who go hungry on a regular basis. This will be the market segment it targets. How will the evaluation of its market segment strategy differ from that used for a retail store? Answer: There is one difference between for-profit and nonprofit criteria. The potential for increased profit and ROI is replaced by the potential for serving client users more effectively. Based on the food bank's previous policy, it is much more likely to serve its clients more effectively with the new segmentation strategy. Page: 192 9-155 SEGMENTING AND TARGETING A MARKET
CONCEPTUAL
What are the steps needed to segment and target a market? Answer: The process of segmenting and targeting a market includes five steps. 1) Form prospective buyers into segments. 2) Form products to be sold into groups. 3) Develop a market-product grid to relate the market segments to the firm's products and estimate the size of the market in each cell. 4) Select the target market segments toward which the firm will direct its marketing actions. 5) Take marketing actions to reach target markets. Page: 192; Figure 9-3
9-156 CONSUMER SEGMENTATION VARIABLES
CONCEPTUAL
What are the dimensions by which consumer markets can be segmented? Answer: Major divisions are customer characteristics and buying situations, under which consumer markets are segmented according to the following factors: geographic, demographic, socioeconomic and psychographic customer characteristics; and benefits sought, and usage buying situations. Page: 192 9-157 SEGMENTATION VARIABLES
APPLICATION
Assume you are manager of The Outback Steak House, a franchised restaurant that has opened in St. Louis. Describe how you would segment the market according to dimension, using as many segmentation variables as you can, and explaining why each variable is appropriate. Answer: Students might select any segmentation variables described on pages 192-193. However, the most likely include these: The first dimension would be geographic with segmentation variables designed to describe those people within a reasonable draw area around the restaurant. They could be defined by ZIP Code, census tract, or subdivision. The next dimension should be demographics, including homeowners, young adults, married, probably with children. Also important would be household income, perhaps related to occupations. The Outback manager would seek those people who had not only the need, but also the means to dine at the restaurant, and demographic correlations can be rather easily made with regard to those factors. The psychographic dimension would include variables such as extroverted, gregarious, and those fond of pleasures such as eating out. Segmentation according to the benefits dimension could include convenience, and economy relative to more expensive restaurants. As for the usage dimension, it would be well to seek medium and heavy users including, perhaps, those people who might dine at The Outback more than once a month, since repeat business is the key to success in this sort of venture. Page: 192-193 9-158 CHOOSING TARGET MARKET SEGMENTS
CONCEPTUAL
Why is it important for a firm to choose its target market segments carefully? Answer: A firm must choose its target market segments carefully because, if it picks too narrow a group of segments, it may fail to reach the volume of sales and profits it needs. On the other hand, if it selects too broad a group of segments, it may spread its marketing efforts so thin that the extra expenses more than cancel out the increased sales and profits. Page: 192
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9-159 80/20 RULE
CONCEPTUAL
Explain the 80/20 rule and explain how it is used in market segmentation. Answer: The 80/20 rule suggests that 80 percent of a firm’s sales are obtained from 20 percent of its customers. The percentages in the 80/20 rule are not really fixed at exactly 80 percent and 20 percent but suggest that a small fraction of customers provide a large fraction of a firm’s sales. One of the segmentation variables is buying situation. Under this are included benefits sought and usage in terms of a heavy user, a light user, and nonusers. Clearly the 20 percent of customers referred to above in the description of the 80/20 rule are heavy users and are important to any company. Page: 193-194 9-160 WAYS TO SEGMENT ORGANIZATIONAL MARKETS
CONCEPTUAL
What are the variables that may be used to segment organizational markets? Answer: There are 4 variables that may be used to segment organizational markets: (1)location, (2) NAICS code, (3) number of employees, (4) benefits sought. Page: 195 9-161 CHOOSING TARGET MARKET SEGMENTS
CONCEPTUAL
What are the criteria to be used in selecting target segments? Answer: The five criteria to be used in actually selecting the target segments are size of market, expected growth, competitive position, cost of reaching the segment, and compatibility with the organization's objectives and resources. As is often the case in marketing decisions, a particular segment may appear attractive according to some criteria, and unattractive according to others. Page: 197
9-162 APPLE’S MARKET-PRODUCT GRID
CONCEPTUAL
Explain how Apple Computer uses a market-product grid to target its various lines of Macintosh computers at specific market segments. Answer: A market-product grid is a figure that is developed labeling the horizontal rows as the markets and the vertical rows as the product offerings. The market-product combination is then shown in each cell and evaluated for use in the segmentation strategy. In Apple’s case, the markets served are the consumer and professional markets, while the products include the Power Macintosh G4, the PowerBook G4, the iMac, the iBook, the eMac, and the iPod (as of mid-2003). A consumer or small home office might be targets for all of the products except the iPod, whereas the iMac could be positioned in the mind of both the consumer and the professional as meeting their respective needs. Page: 199 9-163 MARKET-PRODUCT SYNERGIES
CONCEPTUAL
Why is it that achieving market-product synergies may be something of a balancing act? Answer: A choice to take advantage of marketing synergies can often come at the expense of production synergies because a single consumer segment will likely require a variety of products—each of which will have to be designed and manufactured. The company saves money on marketing, but spends more in production. Conversely, if product synergies are emphasized, marketing will have to address the concerns of a wide variety of consumers, which costs more time and money. Marketing managers responsible for developing a company’s product line must thus balance both product and marketing synergies as they try to increase the company’s profits. Page: 200-201 9-164 DATA NEEDED FOR PERCEPTUAL MAP
CONCEPTUAL
What are the three types of data needed from consumers to develop a perceptual map? Answer: In determining a brand's position and the preferences of consumers, companies obtain three types of data from consumers. They are: 1) the important attributes for a product class 2) judgments of where existing products or brands are located on these attributes 3) the location of the firm’s own product or brand on these attributes Page: 201
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