Chapter 12

Question 1

Introduction to Segmentation

Answer 1

In order for a business to be successful its aim should not be to reach every consumer in the marketplace but rather to target specific consumer markets to promote its products more effectively.

Segmenting the market involves establishing consumers’ requirements.

It is critical for businesses to identify customers’ needs and wants and the benefits they require from a product or service and to subsequently create the product or service to meet that particular need.

Knowing what consumers need and want is fundamental to successful marketing.

Question 2

STP Process

Answer 2

This process begins by:

1. Segmenting the market into distinct groups that differ in terms of needs and preferences.
2. Target one or more of these specific groups by selecting one or more identified market segments
3. Positioning the product or service in such way that it communicates benefits to consumers

Question 3

Market segmentation

Answer 3

Market segmentation is the process by which a total market is divided into groups consisting of consumers who have relatively similar characteristics and product needs.

It is essential for marketers to understand that segmentation refers to aspects of the consumer and not the product or service.

• For example, Markhams is one of the largest men’s fashion retailers in South Africa, whereas Foschini is the largest women’s fashion retailer. These shops appeal and sell to different target customers.

Question 4

Market segmentation offers distinct advantages:

Answer 4

1. It helps to define and satisfy consumer needs more accurately.
2. It makes more effective use of scarce resources.
3. It provides opportunities for building long-term relationships with customers.
4. It helps to set more accurate goals and objectives, which enhance performance assessments.

Question 5

There are certain criteria necessary in order for segmentation to be feasible and effective.

Answer 5

1. Segments must have enough profit potential to justify developing and maintaining a marketing strategy.
2. Consumers must have heterogeneous (different) needs, and segmented consumer needs must be homogeneous (similar).
3. It is also essential for a business to reach a certain segment with a marketing strategy.

Question 6

Steps in Market Segmentation

Answer 6

• Step 1: Identify product-related need sets
• Step 2: Group consumers with similar needs
• Step 3: Describe each group
• Step 4: Select an attractive segment to serve

Question 7

Step 1: Identify product-related need sets

Answer 7

Most products satisfy more than one need and, therefore, marketing opportunities increase when customer groups with varying needs and wants are identified.

Question 8

Marketers can make use of the following segmentation bases: (1)

Answer 8

• Usage or behavioural segmentation
• Demographic segmentation
• Lifestyle and psychographic segmentation
• Geographic segmentation
• Needs or benefits segmentation

Question 9

• Usage or behavioural segmentation (1)

Answer 9

The market can be divided into segments according to:

• regular users
• potential users
• non-users
• heavy users
• moderate users
• light users.

It is essential for businesses to apply frequent user incentives in order to get heavy and regular users to continuously purchase their products.

It is up to five times more expensive to attract a new customer than it is to satisfy existing customers.

Question 10

• Demographic segmentation (1)

Answer 10

Marketers often segment markets on the basis of demographic information because it is widely available and often related to consumers’ buying and consuming behaviour.

This divides the market into segments according to

• age
• sex
• fertility rates
• migration patterns
• mortality rates
• ethnicity
• income
• education
• occupation
• family life cycle
• family size
• religion
• social class

Question 11

• Lifestyle and psychographic segmentation (1)

Answer 11

Marketers must be aware of changing lifestyles, social class, personality, activities, interest, opinions and motives and should market products accordingly. SABMiller is a South African company that uses psychographic and lifestyle segmentation particularly well to guide its entire marketing strategy.

Question 12

Lifestyle segment has identified the following seven personality segments: (1)

Answer 12

1. Belongers drink Castle Lager (positioned as the beer of the people) -
2. Reclusives drink Castle Milk Stout
3. Intellectuals drink Castle Lite
4. Macho braves drink Carling Black Label
5. Feminists drink Redds
6. Cool egocentrics drink Redds
7. Home makers are the beer drinkers’ wives and girlfriends and are concerned about family issues

Question 13

• Geographic segmentation (1)

Answer 13

This form of segmentation divides the market into segments according to geographical location and includes elements such as:

1. countries
2. regions
3. rural
4. urban
5. climate
6. terrain
7. natural resources
8. population density
9. sub-cultural values
10. different population growths in different areas

Question 14

• Needs or benefits segmentation (1)

Answer 14

When applying this kind of segmentation, marketers divide consumers according to their specific needs or the benefits they require from a product or service.

Question 15

Step 2: Group consumers with similar needs

Answer 15

Using the bases for segmenting the market, the next step is to group consumers with similar need sets.

• For example, sports cars appeal to many young single individuals, young couples with no children, and middle-aged couples whose children have left home. These consumers can be grouped into one segment as far as product features, and perhaps product image, are concerned.

Question 16

Step 3: Describe each group

Answer 16

Once consumers with similar need sets have been identified, they should be described in terms of their demographic location, lifestyle and media usage. In order to design an effective marketing programme, it is necessary to have a complete understanding of the potential consumers.

Question 17

Step 4: Select an attractive segment to serve

Answer 17

Once they have a thorough understanding of each segment, marketers must select the target market, which is a segment of a larger market on which they will focus their marketing effort.

Question 18

Targeting

Answer 18

A target market is a group of consumers for whom businesses design, implement and maintain a marketing mix in order to satisfy the target market’s needs.

Consumers in this group have the ability, willingness and authority to purchase the product or service offering.

Question 19

Criteria for evaluating market segments:

Answer 19

1. • Measurability
2. • Substance
3. • Accessibility
4. • Differentiability
5. • Actionable

Question 20

• Measurability

Answer 20

*

Question 21

• Substance

Answer 21

*

Question 22

• Accessibility

Answer 22

*

Question 23

• Differentiability

Answer 23

*

Question 24

• Actionable

Answer 24

*

Question 25

Strategies for selecting target markets

Answer 25

* Undifferentiated targeting * Concentrated targeting * Multisegment targeting

Question 26

• Undifferentiated targeting

Answer 26

This strategy views the market as one big market in which consumers have **similar needs,** and the business uses **a single marketing mix** for the **entire market**. This entails: 1. **one** **pricing** strategy and **promotional** programme 2. a **single** **product** with little or no variation 3. **one** **distribution** system aimed at the entire market. * Examples include staple foods such as sugar and salt. The original Coca-Cola soft drink was marketed to everyone and the focus was on what consumers have in common rather than how they differ.

Question 27

• Concentrated targeting

Answer 27

This strategy focuses on the needs of a **single segment** and develops a **highly specialised marketing mix.** This allows a business to **specialise** and **focus** all its energy on satisfying **one particular group’s needs.** * One example is Rolex watches, which aims its product at a single-market segment, more specifically consumers in the upper social class category. Rolex male watch

Question 28

• Multisegment targeting

Answer 28

This strategy serves **two or more well-defined segments** and develops a distinct marketing mix for **each**. This approach combines the best attributes of **undifferentiated** **marketing** and **concentrated** **marketing** * For example Marriott International is a company in the leisure industry that offers the following to its customers: Marriott Suites for permanent vacationers, Fairfield Inn for economy lodging, Residence Inn for extended stay and Courtyard hotels for business travellers. The core product is the same but the company uses different brand names, pricing and advertising to differentiate between the target groups.

Question 29

The following is a seven-step approach that can be used by an organisation to position its products or services:

Answer 29

Step 1: **Identify** a relevant **set of competitive products or services** Step 2: **Identify** **differentiation** **variables** Step 3: **Determine** consumers’ **perceptions** Step 4: **Analyse** the **awareness** level of a product or service Step 5: **Analyse** a product’s or service’s **current** **positioning** Step 6: **Determine** the most **preferred** combination of **attributes** Step 7: Select a **positioning strategy**

Question 30

Step 1: identify a relevant set of competitive products or services

Answer 30

**Identify** and **evaluate** the **competition** in terms of the _number of competitors_, as well as their _size, location, strengths_ and _weaknesses_. **Decide** how to **overcome** competitors’ strengths and take **advantage** of their weaknesses. Constantly **review** **marketing** **strategies** to determine if consumer needs are being met by analysing: * sales trends * consumer comments * the number of returns * requests for unavailable merchandise * repeat customers. This will assist a business in deciding whether to offer **new** **products**, seek **new** **markets** or **penetrate** current markets.

Question 31

Step 2: Identify differentiation variables

Answer 31

Offer a product with **competitive** **advantages** and select **variables** that will help consumers to **differentiate** between competitive offerings.

Question 32

The bases for differentiation include the following:

Answer 32

1. **Product** differentiation. 2. Differentiation based on **services** accompanying the product. 3. **Personal** differentiation. 4. **Image** differentiation.

Question 33

• Product differentiation.

Answer 33

Distinguish own products from competitors’ products by means of **features** such as: * performance * durability * reliability * reparability * style * brand * availability

Question 34

• Differentiation based on services accompanying the product.

Answer 34

Products that cannot be differentiated can make use of **superior** **service** delivery in terms of: * delivery * installation * consumer training * consulting services * repairs

Question 35

• Personal differentiation.

Answer 35

Staff can be **selected** and **trained** to be **_more competent_** than competitors’ staff by exhibiting: * competence * courtesy * credibility * reliability

Question 36

• Image differentiation.

Answer 36

Used to **attract** and **satisfy** customers.

Question 37

Step 3: Determine consumers’ perceptions

Answer 37

As soon as the marketer has determined the differentiation variables, he or she needs to find out **how consumers perceive various products or services** based on the variables selected. A lot of **research** needs to be done to establish consumer perceptions.

Question 38

Step 4: Analyse the awareness level of a product or service

Answer 38

The marketer has to establish the **intensity** of **awareness** of the particular product or service in the marketplace.

Question 39

Step 5: Analyse a product’s or service’s current positioning

Answer 39

**A positioning map** is developed to identify how strongly a particular product or service is **associated** with a variety of determinant **variables**. The positioning map has to **graphically** **display** the _two dimensions the product or service is measured against._ It also displays the **psychological distances** between products or brands and is an extremely useful tool for _developing a positioning strategy._

Question 40

Step 6: Determine the most preferred combination of attributes

Answer 40

To do this marketers have to look at the **factors that relate** to the position of a product or service that appeals to consumers.

Question 41

Step 7: Select a positioning strategy

Answer 41

This step involves the decision to select a positioning strategy: 1. that will **reflect** consumer **preferences** 2. the positioning of **competitive** products or services.

Question 42

(step 7) The following are various positioning methods that can be used (see the prescribed book for more detailed information):

Answer 42

* • attribute positioning * • benefit positioning * • price and quality positioning * • use or application positioning * • product-user positioning * • product-class positioning * • competitor positioning * • origin positioning

Question 43

Factors as possible reasons for an organisation to consider a repositioning strategy:

Answer 43

* The original positioning strategy is **inappropriate**. * Consumers’ demands have **changed**. * Service provider wants to **build** on its **strengths**. * Own brand **competition** exists. * There is an **overemphasis** on attributes.