Chapter 4 Market Segments
1) Why is market segmentation more effective than treating a large market as a single entity?
A) Products do not need to be differentiated if the markets they serve are segmented.
B) Segmentation allows a company to cater to the unique needs of each segment.
C) Measurement of sales becomes easier in a segmented market.
D) The cost involved in transportation and manufacturing is greatly reduced in a segmented
market.
Answer: B
Rationale:
Market segmentation allows companies to identify and understand the diverse needs and
preferences of different consumer groups within a larger market. By tailoring products,
marketing messages, and strategies to specific segments, companies can better meet the needs
of their customers, leading to increased customer satisfaction and loyalty. This targeted
approach often results in higher sales and profitability compared to treating the entire market
as a homogeneous entity.
2) Which of the following is the best example of the use of demographic segmentation?
A) Waveforms markets its surfboards to cities in coastal regions.
B) Iron Horse designs custom motorcycle accessories for bikers.
C) Orchard Fresh sells its fruit-based ice-creams only in summer.
D) Wonderla, a chain of amusement theme parks, targets families with children.
Answer: D
Rationale:
Demographic segmentation involves dividing the market based on demographic variables
such as age, gender, income, education, family size, occupation, and more. Wonderla
targeting families with children exemplifies demographic segmentation because it focuses on
a specific demographic group—families with children—to tailor its products and experiences
to their needs and preferences.
3) Market division on the basis of age is a type of ________ segmentation.
A) geographic
B) psychographic
C) demographic
D) scientific
Answer: C
Rationale:
Age-based segmentation is a form of demographic segmentation, where the market is divided
based on age groups. This segmentation strategy recognizes that different age groups may
have distinct needs, preferences, and behaviors, making it an effective way to target and
customize marketing efforts.
4) An upmarket travel company promoting luxury cruise liner holidays would most likely
segment a market based on ________.
A) distribution channel
B) sex
C) population density
D) income
Answer: D
Rationale:
Income is a key demographic variable that correlates strongly with the ability and willingness
to purchase luxury goods and services. For an upmarket travel company offering luxury
cruise liner holidays, segmenting the market based on income levels allows them to target
affluent consumers who are more likely to afford and desire high-end travel experiences.
5) Which category of demographic segmentation is most relevant for a company marketing a
brand of cosmetics?
A) climate
B) household type
C) sex
D) income
Answer: C
Rationale:
Sex or gender is a crucial demographic factor for companies marketing cosmetics because
consumer preferences, buying behaviors, and product needs often vary between males and
females. By segmenting the market based on sex, cosmetics companies can develop products
and marketing strategies tailored to the specific preferences and needs of each gender,
maximizing their appeal and effectiveness.
6) Which of the following segmentation techniques segments markets according to their
physical location?
A) demographic
B) geographic
C) psychographic
D) behavioral
Answer: B
Rationale:
Geographic segmentation divides markets based on physical locations such as region,
country, city, or climate. This approach recognizes that consumer needs, preferences, and
behaviors can vary significantly based on where they live or operate, making it essential for
businesses to tailor their marketing strategies accordingly.
7) Which of the following categories of segmentation would be most relevant to a boat
manufacturer?
A) behavioral
B) geographic
C) climate
D) gender
Answer: B
Rationale:
Geographic segmentation is most relevant to a boat manufacturer because consumer demand
for boats can vary greatly depending on factors such as proximity to water bodies, coastal
regions, or areas with recreational boating facilities. Understanding the geographical
distribution of potential customers helps the manufacturer target its marketing efforts more
effectively.
8) Which of the following categories of geographic segmentation is most relevant to an
agency offering maintenance services for electrical appliances?
A) density
B) geographic feature
C) climate
D) activities
Answer: A
Rationale:
Density-based geographic segmentation categorizes markets based on the concentration of
population within a specific area, such as urban, suburban, or rural areas. For an agency
offering maintenance services for electrical appliances, targeting areas with high population
density may yield more customers due to increased demand for such services in densely
populated areas.
9) PRIZM is a commercial segmentation tool which combines ________ to provide richer
descriptions of consumer segments.
A) psychographic data with geographic data
B) demographic data with behavioral data
C) behavioral data with psychographic data
D) geographic data with demographic data
Answer: D
Rationale:
PRIZM (Potential Rating Index by Zip Markets) is a widely used segmentation tool that
combines geographic data with demographic data to categorize consumers into distinct
segments based on their location and demographic characteristics. By integrating these two
types of data, PRIZM provides deeper insights into consumer behavior and preferences,
enabling businesses to develop more targeted marketing strategies.
10) Which of the following categories of segmentation is most relevant for a television
channel based on motoring?
A) metro size
B) interests
C) climate
D) price
Answer: B
Rationale:
Interest-based segmentation focuses on dividing markets according to consumers' specific
interests, hobbies, or activities. For a television channel catering to motoring enthusiasts,
segmenting the market based on interests allows the channel to target individuals who have a
keen interest in automobiles, motorsports, or related topics, thereby maximizing viewership
and engagement.
11) A juice company promotes its product as an alternative to a full breakfast, which many
people skip in their hurry to reach work in the morning. What sort of segmentation would the
juice manufacturer benefit from?
A) lifestyle
B) age
C) household type
D) gender
Answer: A
Rationale:
The juice company would benefit from lifestyle segmentation because it targets consumers
based on their attitudes, interests, values, and behaviors related to their daily routines and
dietary habits. By positioning the product as a convenient alternative to a full breakfast for
busy individuals, the company appeals to a specific lifestyle segment that values quick and
healthy options.
12) Which of the following criteria does Strategic Business Insights' VALS framework use to
segment potential adult customers?
A) climate
B) population density
C) motivation
D) sex
Answer: C
Rationale:
The VALS (Values and Lifestyles) framework developed by Strategic Business Insights
segments potential adult customers based on their motivations, values, attitudes, and
lifestyles. This segmentation approach categorizes consumers into distinct groups or
segments according to their psychographic characteristics and preferences, helping businesses
tailor their marketing strategies effectively.
13) ________ segmentation segments consumers based on their knowledge of a brand, their
attitude toward it, their use of the brand, and their response to it.
A) Demographic
B) Behavioral
C) Geographic
D) Distribution channel
Answer: B
Rationale:
Behavioral segmentation categorizes consumers based on their behaviors, such as their
interactions with a brand, their usage patterns, their loyalty, and their responses to marketing
stimuli. By understanding how consumers engage with a brand and their attitudes toward it,
businesses can customize their marketing efforts to better meet consumer needs and
preferences.
14) People in the south of France like to give high-quality wines to guests during New Year
celebrations. Chantelle Noir is an organization which exploits this tradition to market its
premium champagne. Which of the following types of segmentation does Chantelle Noir use?
A) geographic segmentation
B) demographic segmentation
C) time segmentation
D) lifestyle segmentation
Answer: C
Rationale:
Chantelle Noir utilizes time segmentation by targeting consumers based on specific occasions
or events, such as New Year celebrations. By recognizing the tradition of giving high-quality
wines during such events in the south of France, the organization strategically markets its
premium champagne to capitalize on this seasonal demand.
15) Though other similar cookie brands are widely available in Newport, Lynn's favorite
cookie brand is available only in the outlets of a certain chain of coffee shops. This is an
example of ________.
A) usage rate segmentation
B) price segmentation
C) occasion segmentation
D) distribution channel segmentation
Answer: D
Rationale:
This scenario illustrates distribution channel segmentation, where a specific brand of cookies
is exclusively available through a certain distribution channel—in this case, a chain of coffee
shops. By limiting availability to specific outlets, the brand targets consumers who frequent
those particular locations, potentially enhancing brand loyalty and differentiation.
16) Which of the following is the best example of price segmentation of a market?
A) Nokia offering a range of mobile phones differing in cost and functionality
B) Playstation offering its gaming console at bargain prices on Black Friday
C) AT&T offering Sidekick mobile phones on its network at discounted rates
D) Iberia Air offering ticket discounts to frequent flyers
Answer: A
Rationale:
Price segmentation involves offering products or services at different price points to target
different segments of the market. Nokia offering a range of mobile phones differing in cost
and functionality exemplifies price segmentation as it caters to various consumer segments
with different budget constraints and feature preferences.
17) What is the advantage of using information provided by demographic data market
research firms rather than government sources?
A) Information from government sources is subjective and biased.
B) The information obtained from government sources is less accurate than that from market
research firms.
C) Market research firms can provide more detailed information than government sources.
D) Market research firms provide data for free, unlike government research sources.
Answer: C
Rationale:
Market research firms specialize in collecting and analyzing detailed consumer data,
including demographic information, through various research methodologies. Unlike
government sources, which may provide broader data sets, market research firms can offer
more granular and specific insights tailored to the needs of businesses, enabling them to make
more informed decisions in areas such as product development, marketing, and targeting
specific consumer segments.
18) Which of the following segmentation types most likely requires the use of in-depth
qualitative research techniques in order to determine market segments?
A) age
B) climate
C) loyalty
D) price
Answer: C
Rationale:
Loyalty segmentation involves understanding consumers' attitudes, behaviors, and
preferences towards brands or products, which often requires in-depth qualitative research
techniques such as focus groups, interviews, or observation. Quantitative data alone may not
capture the nuances of consumer loyalty and the underlying motivations driving their
purchasing decisions, making qualitative research essential for effectively segmenting
markets based on loyalty.
19) Which of the following best describes the use of focus groups in market research?
A) These are research instruments to gather data (generally quantitative) over a large
population of potential customers.
B) These are research techniques in which researchers immerse themselves into consumers'
lives to understand them better.
C) These are research techniques used to watch people's actual behaviors in the context of
their natural environment.
D) These are research techniques used to gather opinions of carefully chosen individuals
about a topic.
Answer: D
Rationale:
Focus groups involve gathering opinions, attitudes, and perceptions from carefully selected
individuals in a facilitated group discussion setting. This qualitative research technique
allows researchers to explore a topic in depth, uncovering insights, motivations, and
preferences that may not emerge through quantitative methods alone. Focus groups provide
rich, detailed feedback that can inform various aspects of marketing strategy, product
development, and customer experience.
20) Which of the following market research techniques requires that researchers personally
experience the lives of consumers in order to understand them better?
A) focus groups
B) observational research
C) ethnographic research
D) surveys
Answer: C
Rationale:
Ethnographic research involves immersing researchers in the natural environment of
consumers to observe their behaviors, routines, and interactions firsthand. By experiencing
the lives of consumers directly, researchers gain deep insights into their needs, preferences,
and decision-making processes, which can inform product development, marketing strategies,
and overall business decisions. Ethnographic research provides a holistic understanding of
consumer behavior that may not be fully captured through other research methods like
surveys or focus groups.
21) In which of the following market research techniques do researchers watch what people
actually do with products in the context of their natural environment?
A) focus groups
B) observational research
C) translational research
D) surveys
Answer: B
Rationale:
Observational research involves directly observing individuals in their natural environment to
understand their behaviors, preferences, and interactions with products or services. This
technique allows researchers to gain insights into real-world scenarios without influencing
participants' behaviors through artificial settings like focus groups or surveys.
22) Which of the following best describes the use of surveys in market research?
A) These are research instruments to gather data (generally quantitative) over a large
population of potential customers.
B) These are research techniques in which researchers immerse themselves into consumers'
lives to understand them better.
C) These are research techniques used to watch people's actual behaviors in the context of
their natural environment.
D) These are research techniques used to gather opinions of carefully chosen individuals
about a topic.
Answer: A
Rationale:
Surveys are structured questionnaires or interviews designed to collect data from a large
sample of respondents. Surveys are particularly useful for gathering quantitative data, such as
demographics, preferences, and opinions, from a wide range of individuals in a cost-effective
manner.
23) Which of the following is a disadvantage of using focus groups to conduct primary
research?
A) Participants in focus groups are chosen at random, without considering their relevance to
the subject.
B) The method does not attempt to discover the motives behind consumer behavior.
C) The setting in a focus group is considered by many to be artificial.
D) Observations made in focus groups must be augmented by detailed surveys over larger
populations.
Answer: C
Rationale:
The artificial setting in focus groups, often conducted in a controlled environment with
strangers, can lead to participants behaving differently than they would in their natural
environment. This can potentially bias the data collected and limit the generalizability of
findings to real-world scenarios.
24) A researcher videotapes shoppers in a shop and uses a structured checklist to record
behavior such as directions that shoppers take, browsing behavior, and attention to point-ofsale promotions. Identify the research method used by the researcher.
A) focus group
B) survey
C) observational research
D) ethnographic research
Answer: C
Rationale:
Observational research involves directly observing and recording behaviors, interactions, and
responses of individuals in their natural environment. In this scenario, the researcher is
observing shoppers in a real-world setting without directly interacting with them, which
aligns with the principles of observational research.
25) Which of the following research techniques is best suited for conducting both qualitative
and quantitative research?
A) surveys
B) focus groups
C) observational research
D) ethnographic research
Answer: A
Rationale:
Surveys can be designed to collect both quantitative data (e.g., numerical ratings,
demographic information) and qualitative data (e.g., open-ended responses, comments). By
including a mix of closed-ended and open-ended questions, surveys can provide researchers
with a comprehensive understanding of both numerical trends and detailed insights into
participants' opinions and experiences.
26) Which of the following is true for focus groups and surveys?
A) Surveys are used in service industries while focus groups are used for product-based
industries.
B) Surveys provide greater insight into individual motivation, while focus groups provide
general data about buying habits.
C) Surveys provide more quantitative data, while focus groups provide more in-depth data.
D) Surveys and focus groups are alternate ways of gathering the same information and only
one or the other is used at a time.
Answer: C
Rationale:
Surveys typically gather quantitative data through structured questionnaires, allowing for
statistical analysis and numerical insights. On the other hand, focus groups, while also
providing valuable data, offer more qualitative, in-depth insights into participants' attitudes,
opinions, and perceptions, which may not be as easily quantifiable.
27) Which of the following is a characteristic of business-to-business transactions as
compared to business-to-consumer transactions?
A) fewer buyers
B) smaller orders
C) shorter sales cycles
D) less customer involvement with sellers
Answer: A
Rationale:
Business-to-business transactions often involve fewer buyers compared to business-toconsumer transactions, where the customer base can be significantly larger. B2B transactions
typically occur between companies, and the number of buyers tends to be limited compared
to the vast number of individual consumers in B2C transactions.
28) Which of the following is characteristic of B2C transactions as opposed to B2B
transactions?
A) Businesses sell to only a few large buyers.
B) Customer orders tend to be much larger.
C) There is a close buyer-seller relationship.
D) Sales cycles are shorter, usually under a month.
Answer: D
Rationale:
B2C transactions typically involve shorter sales cycles, as consumers often make purchasing
decisions more quickly compared to businesses in B2B transactions, which may require
longer negotiation and decision-making processes. B2C transactions can often be completed
within a shorter timeframe, sometimes within a single interaction.
29) In which of the following scenarios can segmentation on the basis of customer industries
be used?
A) A manufacturer makes several products bought by two or more competing companies
within the same industry.
B) Many manufacturers make a single product bought by a single large company which
operates in different industries.
C) A manufacturer makes a product bought by many small or large companies operating in
different industries.
D) Many manufacturers make many products bought by a single large company operating in
a number of industries.
Answer: C
Rationale:
Segmentation based on customer industries is applicable when a manufacturer produces a
product that is purchased by numerous companies operating in various industries. This
approach allows the manufacturer to tailor marketing strategies and offerings to the specific
needs and characteristics of different industries served by their product.
30) Which of the following markets has characteristics which most favor the use of
demographic segmentation techniques?
A) small, niche markets which are stagnant
B) mature, easily recognizable markets
C) unestablished, new markets
D) markets which frequently experience unique situations
Answer: B
Rationale:
Demographic segmentation techniques are most effective in mature, well-established markets
where consumer characteristics such as age, gender, income, and education level are stable
and easily recognizable. In such markets, demographic data can provide valuable insights for
targeting specific consumer groups with tailored marketing messages and offerings.
31) A provider of assembly line solutions has some old, some new, and some potential
customers who are all involved in automobile manufacture in the same national market. If the
size, location, and operating procedure of these companies are more or less the same, which
of the following segmentation techniques must be employed?
A) demographic segmentation
B) operating variables segmentation
C) purchasing approaches segmentation
D) situational factors segmentation
Answer: C
Rationale:
Since the characteristics such as size, location, and operating procedure are similar among the
customers, segmenting based on purchasing approaches would be most appropriate. This
segmentation approach focuses on how customers make buying decisions, which can vary
even among similar companies.
32) A construction company providing eco-friendly housing solutions furnishes houses with a
furniture brand that uses only eco-friendly materials in manufacturing, while avoiding brands
that are not green. This approach to identifying suppliers best illustrates ________.
A) demographic segmentation
B) operating variables segmentation
C) personal characteristics segmentation
D) situational factors segmentation
Answer: C
Rationale:
The decision to choose suppliers based on their eco-friendly practices reflects a consideration
of personal characteristics such as values, beliefs, and attitudes. This aligns with personal
characteristics segmentation, where companies target consumers or suppliers based on their
individual characteristics or preferences.
33) Government sources of market research regarding B2B markets are most likely to
provide relevant information when a company requires information on ________.
A) purchasing
B) customer finance
C) demographics
D) customer operating variables
Answer: C
Rationale:
Government sources of market research often provide data related to demographics, such as
population statistics, industry distributions, and regional economic trends. While information
on purchasing, finance, and operating variables may also be available, demographics are
typically more widely covered and relevant across various B2B contexts.
34) Royalty Chocolates plans to bring out an ad campaign to promote a new range of
products, with flavors targeted to older market segments. The company decides to change its
tagline to better reflect its product offerings. Which of the following slogans should Royalty
Chocolates adopt to position itself based on attributes?
A) Royalty Chocolates: For those who want the best
B) Royalty Chocolates: A taste of heaven
C) Royalty Chocolates: It's not just candy
D) Royalty Chocolates: Bittersweet temptation
Answer: D
Rationale:
"Royalty Chocolates: Bittersweet temptation" reflects an attribute-based positioning strategy
by emphasizing the unique flavors of the chocolates targeted to older market segments. The
phrase "bittersweet temptation" suggests sophistication and indulgence, aligning well with
the desired product positioning.
35) A restaurant, noticing that many customers frequently ordered only desserts, opened a
dessert buffet and used this feature as its main selling point in its promotional messages. The
restaurant is positioning itself based on ________.
A) product usage
B) demographics
C) classes of users
D) psychographics
Answer: A
Rationale:
By focusing on the dessert buffet as its main selling point, the restaurant is positioning itself
based on product usage. It recognizes a specific behavior among its customers (ordering
desserts frequently) and tailors its offering to meet that need, leveraging the popularity of
desserts to attract and retain customers.
36) In which of the following cases is Royalty Chocolates repositioning its products?
A) Royalty Chocolates decided to sell its chocolates in the familiar bar form as consumers
associate this form with chocolate.
B) When sales fell due to a product safety scare, Royalty Chocolates embarked on an
extensive ad campaign to reinforce its brand identity in the minds of consumers.
C) Royalty Chocolates publicized its use of free-trade and organic ingredients to distinguish
itself from competitors.
D) When sales fell due to concerns about chocolate's high calorie count, Royalty Chocolates
advertised its products as decadent gifts for bridal showers and weddings.
Answer: D
Rationale:
Repositioning involves changing consumers' perceptions of a product or brand. Option D
indicates that Royalty Chocolates is adjusting its marketing strategy in response to declining
sales due to concerns about high calorie content. By advertising its chocolates as decadent
gifts for bridal showers and weddings, Royalty Chocolates is attempting to shift consumer
perceptions away from viewing its products solely as indulgent treats, instead positioning
them as luxurious gifts suitable for special occasions.
37) A new entrant into the sports footwear market wants to be viewed as being in the same
category as the brand leaders in the segment. Which of the following is a point of parity that
the company can use to achieve this?
A) the use of a distinctive design, unique to the particular brand
B) the use of sole moulding technology not seen in any other brand
C) the use of cushioning technology common to top sports brands
D) the use of an unusual logo to mark all products of the company
Answer: C
Rationale:
Point of parity refers to attributes or benefits that are shared with other brands in the category
and are necessary for a brand to be considered a legitimate competitor. Option C, which
mentions the use of cushioning technology common to top sports brands, represents a point
of parity. This technology is expected by consumers in the sports footwear market, and by
incorporating it, the new entrant can establish itself as a credible competitor alongside
established brands.
38) In which of the following cases does Royalty Chocolates use a point of parity to promote
its products in the market?
A) Royalty Chocolates bases its sales messages on its exotic ingredients and varieties of
chocolates from all over the world.
B) Royalty Chocolates uses distinctive packaging to emphasize its position as a luxury
product offering in the market.
C) Royalty Chocolates publicizes its use of free-trade and organic ingredients to distinguish
itself from competitors.
D) Royalty Chocolates decides to sell its chocolates in the familiar bar form as consumers
associate this form with chocolate.
Answer: D
Rationale:
Option D describes Royalty Chocolates selling its chocolates in the familiar bar form, a
characteristic shared by many other chocolate brands. By adopting this packaging format,
Royalty Chocolates aligns itself with the industry norm, thus leveraging a point of parity to
promote its products. This strategy helps ensure that consumers perceive Royalty Chocolates
as a legitimate player in the chocolate market.
39) ________ are attributes or benefits that a brand shares with other brands in the category.
A) Points of parity
B) Pivot points
C) Points of order
D) Basis points
Answer: A (Points of parity)
Rationale:
Points of parity are essential attributes or benefits that are necessary for a brand to be
considered a legitimate competitor within its product category. These points establish basic
credibility and relevance for the brand in the eyes of consumers. They represent areas where
brands must match competitors to be accepted by consumers as a viable choice within the
category.
40) Attributes or benefits that customers strongly associate with a brand, that they feel are
favorable, and that make the brand unique or special are known as ________.
A) points of difference
B) pivot points
C) points of parity
D) basis points
Answer: A (points of difference)
Rationale:
Points of difference are attributes or benefits that set a brand apart from its competitors and
are perceived as unique and favorable by consumers. These points of differentiation are
crucial for building a brand's competitive advantage and fostering brand loyalty among
consumers. They help to create a distinct identity for the brand in the marketplace.
41) The technique used for market segmentation depends only on the characteristics of the
target market.
Answer: False
Rationale:
Market segmentation techniques consider various factors, including characteristics of the
target market, but also take into account factors such as product attributes, consumer
behavior, and market dynamics.
42) Demographic segmentation techniques segment the population using personal attributes
such as age, income, sex, occupation, and education.
Answer: True
Rationale:
Demographic segmentation involves dividing the market based on demographic variables
such as age, gender, income, education, occupation, and other quantifiable factors related to
population characteristics.
43) Geographic segmentation is based on the fact that distinctive features of an area influence
the types of services or products in the market there.
Answer: True
Rationale:
Geographic segmentation divides the market based on physical locations, such as regions,
countries, cities, or neighborhoods, recognizing that different areas may have unique
characteristics and demand patterns.
44) Distinctive features of a geographical area influence the types of services or products to
market there.
Answer: True
Rationale:
Geographic features such as climate, culture, population density, and economic conditions
can significantly impact consumer preferences and needs, thus influencing the types of
products or services that are viable and successful in a particular area.
45) The Strategic Business Insights' VALS is a commercial segmentation tool that combines
geographic data with demographic data.
Answer: False
Rationale:
VALS (Values, Attitudes, and Lifestyles) is a segmentation tool developed by Strategic
Business Insights, but it primarily focuses on psychographic factors such as values, attitudes,
lifestyles, and personality traits, rather than combining geographic and demographic data.
46) Demographic segmentation takes into consideration personality traits, lifestyles, and
personal values to group customers into segments.
Answer: False
Rationale:
Demographic segmentation primarily focuses on quantifiable characteristics such as age,
gender, income, occupation, and education, rather than psychological or lifestyle factors,
which are more commonly addressed in psychographic segmentation.
47) Heavy users are those consumers who make up a small percentage of the market but
account for most of the consumption.
Answer: True
Rationale:
Heavy users, also known as heavy buyers or heavy consumers, are a segment of consumers
who may represent a small percentage of the overall market but contribute disproportionately
to sales volume or consumption of a product or service.
48) Government sources of information provide more detailed information than market
research firms do.
Answer: False
Rationale:
While government sources may provide valuable data on demographics, economics, and
other aspects of society, they often do not delve into specific consumer behavior or
preferences as comprehensively as market research firms, which specialize in gathering
consumer insights.
49) Focus groups offer more insights into individual motivation than observational research.
Answer: True
Rationale:
Focus groups involve direct interaction with participants, allowing researchers to probe
deeper into individual motivations, perceptions, attitudes, and opinions. Observational
research, on the other hand, focuses on observing behavior without direct interaction,
providing less insight into individual motivations.
50) Focus groups create a realistic setting in which consumer behavior can be studied.
Answer: False
Rationale:
Focus groups involve a controlled environment with a moderator guiding discussions, which
may not always reflect real-life situations. While focus groups provide valuable qualitative
data, they may not replicate real-world settings where consumer behavior naturally occurs.
51) Research using focus groups involves observing buyer behavior in real-world scenarios.
Answer: False
Rationale:
Focus groups typically involve controlled discussions in a facilitated environment, where
participants express their opinions, attitudes, and perceptions about products or services. It
does not involve direct observation of buyer behavior in real-world scenarios.
52) Government sources of market information are the best resources for psychographic
segmentation.
Answer: False
Rationale:
Government sources primarily provide demographic and economic data, which are more
suitable for demographic and geographic segmentation. Psychographic segmentation relies on
understanding consumer values, lifestyles, and attitudes, which are typically obtained through
market research studies, surveys, or specialized psychographic segmentation tools.
53) B2B transactions are always more profitable than B2C transactions.
Answer: False
Rationale:
The profitability of B2B (business-to-business) transactions versus B2C (business-toconsumer) transactions depends on various factors, including the nature of the products or
services, the size of the transactions, the bargaining power of the parties involved, and the
efficiency of operations. Both B2B and B2C transactions can be profitable depending on the
circumstances.
54) B2C transactions involve longer sales cycles than B2B transactions.
Answer: False
Rationale:
B2B transactions often involve longer sales cycles compared to B2C transactions. In B2B
transactions, decision-making typically involves multiple stakeholders, complex negotiations,
and longer evaluation periods due to the higher stakes involved. B2C transactions, on the
other hand, usually have shorter sales cycles as they involve individual consumers making
purchasing decisions for themselves.
55) Segmentation techniques used for consumers can be used for business markets as well.
Answer: True
Rationale:
Many segmentation techniques, such as demographic, geographic, psychographic, and
behavioral segmentation, can be applied to both consumer and business markets. However,
the specific variables and considerations within each segmentation approach may differ
slightly depending on the target market.
56) Business directories, full-service market research firms, and business publications are all
free sources of information regarding business markets.
Answer: False
Rationale:
Business directories, full-service market research firms, and business publications often
charge fees for access to their information and services. While there may be some free
resources available, such as government databases or certain industry reports, many valuable
sources of information regarding business markets require payment or subscription.
57) To maximize profits from a certain product, one must target every segment present in a
particular market.
Answer: False
Rationale:
Targeting every segment in a market may not be the most efficient strategy for maximizing
profits. Instead, focusing on key segments that are most profitable or align with the product's
value proposition and marketing strategy can lead to more effective resource allocation and
better returns on investment.
58) PODs are attributes or benefits that consumers strongly associate with a particular brand
rather than with all products in the category.
Answer: True
Rationale:
Points of difference (PODs) are unique attributes or benefits that distinguish a brand from its
competitors and are strongly associated with that brand in consumers' minds. These
characteristics help differentiate the brand and create a competitive advantage in the
marketplace.
59) Increasing the accessibility of a market leads to an increase in marketability.
Answer: True
Rationale:
Improving the accessibility of a market, such as by enhancing distribution channels, reducing
barriers to entry, or expanding reach to new customer segments, can indeed increase
marketability. By making products or services more readily available and accessible to
consumers, businesses can potentially increase demand and sales.
60) The distinctive three stripes on almost all products made by Adidas are an example of a
point of parity.
Answer: False
Rationale:
The distinctive three stripes on Adidas products are an example of a point of difference
(POD), as they are unique to the Adidas brand and serve as a recognizable symbol associated
with Adidas. Points of parity (POPs) refer to attributes or benefits shared with competitors in
the same product category, which may include features like product functionality, packaging,
or pricing.
61) Why is it a good strategy to segment a potential market?
Answer: Through market segmentation, companies divide large markets into smaller
segments. The smaller segments can be reached more efficiently and effectively with services
and products that meet their unique needs.
62) What is the basis for demographic segmentation? What types of markets must be
segmented based on demographic qualities?
Answer: Demographic segmentation techniques segment the population using personal
attributes such as age, income, sex, occupation, and education. Demographic segmentation is
very popular, especially for mature markets.
63) When do marketers use geographic segmentation to segment a market?
Answer: Geographic segmentation, where companies segment the market according to
physical location characteristics, is a popular segmentation technique. The technique works
well when geographic areas possess unique traits that are relevant to the service or product
offering that the company provides, such as surfboards or food seasoned to satisfy local
tastes.
64) What is PRIZM? How does it provide a richer description of consumer segments?
Answer: PRIZM (Potential Rating Index by ZIP Markets), developed by Claritas, is an
example of a commercial segmentation tool that combines geographic data with demographic
data to provide richer descriptions of consumer segments. The tool considers multiple factors,
such as education, income, urbanization, mobility, and family life cycle, and then breaks
down the data by ZIP code. Segments have their own demographic traits, lifestyle
preferences, and consumer behaviors—as well as catchy names.
65) Explain how businesses segment markets on the basis of loyalty.
Answer: Companies group markets into four segments based on loyalty: Faithfully loyal
(would never switch brands), losable (generally loyal to the brand, but might switch),
winnable (generally loyal to a competitor's brand, but might switch to another brand), and
lost (faithfully loyal to another brand).
66) What are demographic data market research firms? What advantage do these firms have
over government sources of market information?
Answer: When government sources do not offer the detail needed, private firms are available
to drill down to the next level. Some firms offer census and demographic data to study
thousands of variables on a large- and small-scale basis. The services are especially useful for
areas where it is more difficult to find information, such as international markets.
67) Explain the focus group approach to primary market research.
Answer: Focus groups are a traditional approach to primary research. In focus groups, a
professional moderator asks a group of carefully chosen individuals about a topic. The goal is
to understand consumers' motives behind their behaviors—why they do what they do. Many
see focus groups as artificial, however, and they are not as popular now as they were in the
past.
68) Explain business market segmentation on the basis of operating variables.
Answer: Business markets can be segmented using the operating variables approach, which
segments markets according to the way that customers run their organizations. The operating
variables approach is useful when the business sells tools to increase operational efficiencies
of companies.
69) Explain how trade associations are a source of business market information.
Answer: Virtually every industry is represented by some type of trade association. Often, the
association publishes studies of that industry's market characteristics. The data published are
useful for demographic segmentation, but can be used for a host of other research activities as
well. Some sources are free and available online. Thousands of trade associations exist. They
can be found by accessing association directories, such as the Gale Encyclopedia of
Associations, the Google Directory of Industry Associations, and the Yahoo! Business Trade
Associations index.
70) Explain points of parity in a business market with an example.
Answer: POPs are attributes or benefits that the brand shares with other brands in the
category. POPS help the brand claim membership in a particular category. For business-tobusiness products, an important point of parity is the availability of dealers for parts and
service.
71) What are the different geographic segmentation techniques available for a consumer
market?
Answer: Geographic segmentation, where companies segment the market according to
physical location characteristics, is another popular segmentation technique. The technique
works well when geographic areas possess unique traits that are relevant to the service or
product offering that the company provides, such as surfboards or food seasoned to satisfy
local tastes. Here are several geographic segmentation examples:
• International: Companies can choose to market their brands in certain countries, but not
others. For example, Nike improved its brand associations around soccer when it chose to
market its shoes to the European market.
• Geographic Feature: Distinctive features of a geographical area can influence the types of
services or products to market there. For example, Southern California boasts long stretches
of coastline, making it ideal for the sales of personal watercraft and surfboards, and providing
boating repair services.
• Climate: Typical climates of a geographical area can also be used to the company's
advantage. For example, the cold climate of the Rocky Mountains makes the area well suited
for skiing and snow boarding.
• Metro Size: The size of a particular region can impact marketing. For example, some
businesses select larger cities because of greater available market sizes. A concept often used
in metro size geographic segmentation is the Metropolitan Statistical Area (MSA), defined by
the U.S. Census Bureau as a concentrated core area (like a major city) surrounded by adjacent
communities tightly integrated socially and economically with that core. For example,MSA
#16980, the Chicago-Joliet-Naperville MSA (sometimes called Chicagoland) centers on
Chicago, Illinois, with 9.5 million people in 14 counties over three states.
• Density: The density of an area, or the number of people packed into the area, can also aid
marketing. For example, dog walking services are popular in large cities like New York
because so many people with dogs live fairly close together, making it relatively easy for a
dog walking service to prosper there.
•Local Area: Companies can choose to only serve restricted areas within a community. For
example, a pizzeria offering delivery services might choose to specialize in a specific area to
keep delivery times low.
72) Explain the VALS framework.
Answer: The Strategic Business Insights' VALS (values, attitudes, and lifestyles) framework
is an example of a commercially available psychographic segmentation tool. The VALS
framework segments U.S. adult consumers into one of eight segments (called "mindsets")
based on their responses to the VALS questionnaire. The framework segments consumers in
two dimensions: their degree of resources and innovation (the vertical dimension) and their
primary motivations (the horizontal dimension). The combination of resources and
motivations predicts how a consumer will behave in the marketplace. For example, VALS
defines Innovators as "successful, sophisticated, take-charge people with high self-esteem."
73) What are the differences between business markets and consumer markets?
Answer: Business markets consist of companies involved in business-to-business (B2B)
transactions. In business markets, businesses sell products and services to other businesses,
instead of consumers. As a result, business markets differ from consumer markets in several
important areas:
• Fewer Buyers: Business-to-business companies sell their products to fewer buyers than their
business-to-consumer (B2C) counterparts. In fact, some B2B companies target their sales to
only one, large buyer, like General Motors or the U.S. government.
• Larger Orders: B2B orders are generally larger, and worth more than B2C orders. For
example, a medical supply company selling to a hospital might process orders worth
hundreds of thousands of dollars, much more than consumers would spend on such supplies.
• Multiple Sales Calls: B2B salespeople often visit prospects ten times or more to close a
major sale. It is rare to find such a large number of visits for consumer items.
• Longer Sales Cycles: Sales cycles for complex B2B products can take six months or more
to close. Sales cycles for consumer items, even big-ticket items like houses, are rarely longer
than 30 days.
• Close Seller–Buyer Relationship: B2B companies that sell to other businesses form a close
relationship with their buyers over many years. Consumers, on the other hand, have a limited
involvement with sellers.
• Professional Purchasing Role: Most B2B companies appoint a purchasing agent to manage
purchase negotiations and contracts for the firm. Consumers typically represent themselves.
• Multiple Buying Roles: B2B companies involve multiple people, with multiple roles, in the
buying process. Except for some major decisions, like buying a house, most consumer buying
decisions are made alone.
74) Explain potential, alignment, and marketability with respect to targeting consumer
markets.
Answer: Once the segments of a market have been identified by a company, the next step is
to decide which of the segments the company should target. Targeting every segment is
generally not profitable. The following three factors must be considered while targeting a
market:
Potential: To extract financial benefit from a segment, it should be large, growing, and
profitable to serve.
Alignment: The segment should align with the mission, resources, and competitive
advantages of the organization. We need to determine if consumers perceive a fit between the
technological capabilities of the company and the needs of the segment.
Marketability: Segments should also have certain characteristics to facilitate marketability,
the ability to market effectively to that segment. We need to consider accessibility—the ease
of reaching our target market. We also need to ensure that the segments are distinct from each
other. Another characteristic is the ease of creating a value proposition that clearly
differentiates our service or product from others in that segment.
75) What are the different positioning approaches in a consumer market? Mention the
different approaches available to consumer marketers.
Answer: Positioning a product or service is more than just differentiating it from other
offerings. It is ensuring that the differences occupy a distinct position in the minds of
consumers. Companies can use a variety of positioning approaches, even within a single
market. Several different positioning approaches are available to consumer marketers:
Usage: This approach positions a company on the basis of the way the product or service is
used or consumed.
Attributes: Here, the company is positioned on the basis of a key attribute, such as speed,
size, or price.
Classes of Users: In this approach, the company is positioned on the basis of the classes of
people who will be using the product or service.
Away from Competitors: This approach positions a company as being distinct from the
leading competitors in the market.
Niche: Here, the company is positioned on the basis of offering highly unusual varieties of
products and services.
Geography: In this approach, the company is positioned on the basis of being associated with
a famous place.
Benefits: This approach positions a company on the basis of providing a distinct benefit, such
as quality, reliability, or taste.
Test Bank for Marketing Planning
Stephan Sorger
9780132544702
