Chapter 2

Question 1

Customer heterogeneity

Answer 1

All customers differ, which is a foundational assumption that customers vary widely in their needs and preferences, whether real or perceived.

Question 2

How to manage customer heterogeneity

Answer 2

1. Mass marketing (undifferentiated marketing)
2. Niche marketing
3. One-to-one marketing

Question 3

STP approach

Answer 3

1. Segmenting: the process of dividing the overall market into groups, such that potential customers in each group have similar needs and desires (basis of segmentation) for a particular product or service category (not based on demographic characteristics).
2. Targeting: deciding on which segment of customers you want to focus. There are two dimensions to aid the choice: Market attractiveness and Competitive strength
3. Positioning: entails changing both the actual offering (=innovating products or reducing manufacturing costs) and the perceived offering (=building a new brand image)

Question 4

Sources of customer heterogeneity

Answer 4

1. Individual differences: person’s stable and consistent way of responding to the environment in a specific domain
2. Life experiences: An individual’s life experiences capture events and experiences unique to their life that have a lasting impact on the value and preferences they place on
   products and services, which, in turn, affect preferences independent of individual differences
3. Functional needs: An individual’s personal decision weightings across functional attributes
   based on their personal circumstances
4. Self-image: Customers actively seek products that they feel will support or promote their desired self-image
5. Marketing activites: Firms’ attempts to build linkages between their brands and prototypical identities or meanings