Chapter 07 Segmentation, Target Marketing, Positioning True/False Questions 1. Dividing a market into meaningful smaller markets or submarkets based on common characteristics is called market segmentation. Answer: True Rationale: Market segmentation is used to divide a market into meaningful smaller markets or submarkets based on common characteristics. These segments are then evaluated to identify the target market. 2. Occupation segmentation is very closely related to income segmentation although the two are not perfectly correlated. Answer: True Rationale: Occupation segmentation and income segmentation are highly correlated but they are not perfectly correlated. For instance, many traditionally blue-collar jobs may pay higher wages than white-collar positions depending in part on the strength of the union within the firm and industry. 3. Geodemographic segmentation is a technique that combines where a person lives with his or her lifestyle in a way that allows marketers to fine tune local consumer offerings. Answer: True Rationale: Geodemographic segmentation is a hybrid form of segmentation that considers both geographic and demographic factors. 4. For many marketing managers, segmentation by benefit sought is the best place to start the process of market segmentation. Answer: True Rationale: Marketing managers may begin by identifying groups interested in the specific bundle of benefits afforded by their offering and then move toward utilizing the other segmentation variables to further hone the profile of the core group that is attracted to the product's benefits. 5. Firms generally only use one method of segmentation at a time. Answer: False Rationale: Geographic, demographic, psychographic, and behavioral approaches can be used for segmentation. In practice, these approaches are not applied one at a time. Firms develop a profile of a segment that might include aspects of any or all of the segmentation approaches. 6. In general, B2B segmentation is more straightforward than B2C segmentation. Answer: True Rationale: B2B segmentation is more straightforward than B2C segmentation partly because there is often a more defined universe of potential customers. 7. Target marketing is the process of evaluating market segments and deciding which among them shows the most promise for development. Answer: True Rationale: Target marketing is the process of picking out the best segments from among alternatives. The three steps in target marketing are: (1) analyze market segments, (2) develop profiles of each potential target market, and (3) select a target marketing approach. 8. With reference to the VALS™ framework, makers are active and impulsive, seeking stimulation from the new, offbeat, and risky. Answer: False Rationale: With reference to the VALS™ framework, experiencers (and not makers) are active and impulsive, seeking stimulation from the new, offbeat, and risky. 9. If a firm chooses more than one segment to attack, it should approach them sequentially, not all at the same time. Answer: False Rationale: Target markets are often attacked at the same time. 10. With reference to the VALS™ framework, the primary motivation for thinkers is self-expression. Answer: False Rationale: With reference to the VALS™ framework, the primary motivation for thinkers is ideals (and not self-expression). 11. Differentiation means developing different value offerings for different targeted segments. Answer: True Rationale: Differentiation means developing different value offerings for different targeted segments. Possible sources of differentiation are many and include innovation/R&D, product quality, service leadership, corporate social responsibility, and many others. 12. Generation Y, people born between 1978-1994, tend to be pragmatic, optimistic, good team players, savvy, and edgy in nature. Answer: True Rationale: Generation Y people are those individuals who are born between 1978-1994. They tend to be pragmatic, optimistic, good team players, savvy, and edgy in nature. 13. Gen Y is often referred to as the "baby bust" because it represents a natural cyclical downturn in birthrate. Answer: False Rationale: Gen X is often referred to as the "baby bust" because it represents a natural cyclical downturn in birthrate. 14. Family and household segmentation have become more complex than ever as a result of non-traditional households and different standards of morality in the population. Answer: True Rationale: In years past, the concepts of family and household were fairly easy for marketers to define — a married man and woman, likely with children, and sometimes with other relatives such as a grandparent who had moved back in. Now, family and household segmentation can be more complex with all kinds of different family arrangements. 15. Over positioning occurs when consumers have only a vague idea about the company and its products, and do not perceive any real differentiation. Answer: False Rationale: Under positioning (and not over positioning) occurs when consumers have only a vague idea about the company and its products, and do not perceive any real differentiation. 16. With respect to the US minority population, the fastest growing population is the Asian community. Answer: False Rationale: With respect to the US minority population, the fastest growing population is the Hispanic community. 17. Segmentation is required only for the consumer market. Answer: False Rationale: Segmentation is carried out in both business and consumer markets. In some ways, business market segmentation is more straightforward than that of consumer markets. 18. In case of consumer markets, there is often a more defined universe of potential customers. Answer: False Rationale: In some ways, business market segmentation is more straightforward than that of consumer markets. This is partly because there is often a more defined universe of potential customers for business markets. 19. A company that uses positioning often uses a price-quality perceptual map in order to show where it is positioned versus the competition. This helps it understand if it needs to either change pricing strategy or quality standards. Answer: True Rationale: Companies often use simple perceptual maps to determine where they stand and how they may want to change. Such perceptual maps display paired attributes in order to compare consumer perceptions of each competitor's delivery against those attributes. 20. The concept of differentiation implies that consumers perceive the value of companies differently and that they are willing to pay a premium for goods and services that they see as unique. Answer: True Rationale: When employing a differentiation strategy, the organization competes on the basis of providing unique goods or services with features that customers value, perceive as different, and for which they are willing to pay a premium. 21. Doubtful positioning occurs when consumers have too narrow an understanding of the company, product, or brand. Answer: False Rationale: Over positioning occurs when consumers have too narrow an understanding of the company, product, or brand. 22. A price leadership position (example: Walmart) implies that a company that assumes this position has superior operational elements in order to maintain the low price position. Answer: True Rationale: Companies with superior operational elements tend to have a price leadership position. Walmart is an example of price leadership where efficiencies in cost of labor, materials, supply chain, or other operational elements enable the price leader to charge less. 23. Utilization of symbols, atmosphere, and creative media to create differentiation leads to convenience leadership. Answer: False Rationale: Utilization of symbols, atmosphere, and creative media to create differentiation leads to image leadership. 24. Companies like Apple that are constantly developing the next new thing employ a strategy called service leadership. Answer: False Rationale: Apple is using innovation leadership rather than service leadership. Service leadership emphasizes an unusual and notable commitment to providing service to customers. 25. Doubtful positioning occurs when frequent changes and contradictory messages confuse consumers regarding the positioning of the brand. Answer: False Rationale: Confused positioning occurs when frequent changes and contradictory messages confuse consumers regarding the positioning of the brand. 26. Under positioning occurs when consumers have a vague idea about the company and its products, and do not perceive any real differentiation. Answer: True Rationale: Under positioning occurs when consumers have a vague idea about the company and its products, and do not perceive any real differentiation. Until recently, both Audi and Volkswagen suffered from under positioning as many consumers struggled to identify salient points of differentiation between those brands and their competitors. Multiple Choice Questions 27. The sequential steps to successful segmentation are: A. Positioning, targeting, and segmenting B. Research, fulfillment analysis, and churn rate C. Segmenting, targeting, and positioning D. Need identification, qualitative research, and positioning E. Consumer analysis, content analysis, and segmenting Answer: C. Segmenting, targeting, and positioning Rationale: Market segmentation divides a market into meaningful smaller markets or submarkets based on common characteristics. This allows marketing managers engage in target marketing. Finally, the way the firm ultimately connects its value proposition to a target market is through its positioning. 28. Segmenting means _______________. A. Dividing the market into meaningful smaller markets based on common characteristics B. Selecting the markets to attract in the market place C. Selecting a corporate position to communicate to potential customers D. Identifying and calculating the churn rate in different markets E. None of the above Answer: A. Dividing the market into meaningful smaller markets based on common characteristics Rationale: Segmenting means dividing the market into meaningful smaller markets based on common characteristics. Once a segmentation approach is developed, marketing managers engage in target marketing. 29. Target marketing is the process by which _______________. A. The market is divided up into cohesive groups B. The company evaluates segments and decides which ones have the most potential for development C. The company decides on which message can be used to attack each segment D. Companies decide the unique combination of the marketing mix variables. E. None of the above Answer: B. The company evaluates segments and decides which ones have the most potential for development Rationale: Selecting target markets is truly an investment decision, i.e. a company must decide where to best invest its limited resources in developing markets for future growth. 30. The way a company ultimately connects its value proposition to a target market is through its _______________. A. Targeting B. Market segmentation C. Churn analysis D. Positioning E. None of the above Answer: D. Positioning Rationale: Positioning relies on the communication of one or more sources of value to customers in a way that the customer can easily make the connection between his or her needs and wants and what the product has to offer. 31. Positioning relies upon the communication of one or more sources of value to customers in a way that the customer can easily make the connection between _______________. A. The cost of the product and the quality B. Various marketing mix variables C. The customer's needs and wants and what the product has to offer D. The brand of the product and its quality E. None of the above Answer: C. The customer's needs and wants and what the product has to offer Rationale: Positioning relies on the communication of one or more sources of value to customers in a way that the customer can easily make the connection between his or her needs and wants and what the product has to offer. 32. Having a product whose value proposition is a well kept secret _______________. A. Is a good idea B. Is not a good thing in marketing C. Is a concept that uses subliminal messages D. Is a superior concept used in targeting E. Is a well accepted idea in market segmentation Answer: B. Is not a good thing in marketing Rationale: Marketing managers want the right customers to clearly recognize their products' value-adding capabilities. Having a product whose value proposition is a well-kept secret is not a good thing in marketing. 33. While moving out of the 1990's, McDonald's had tried (and failed) at so many diverse new product launches in its restaurants that many customers lost track of what the core of the brand was. This represents which positioning error? A. Over positioning B. Under positioning C. Doubtful positioning D. Confused positioning E. None of the above Answer: D. Confused positioning Rationale: Confused positioning occurs when frequent changes and contradictory messages confuse consumers regarding the positioning of the brand. In this example customers lost track of what the core of McDonald's brand was. Hence, this represents confused positioning. 34. When Bernard, a marketer, says that a segment has sufficient size, he means _______________. A. The segment has a return-on-invest which is very close to the expected value B. The segment is too large to be worth considering C. Positive return on investment is expected from the segment D. The segment has many customers in it E. The segment has at least one customer in it Answer: C. Positive return on investment is expected from the segment Rationale: Each segment that is chosen needs to have the potential for positive return on investment. The size of a segment doesn't necessarily mean number of customers — when Bombardier markets its small Learjets, it knows the number of potential buyers is limited. 35. A _______________ approach is also popularly called a niche strategy. A. Customized marketing B. Differentiated target marketing C. Concentrated target marketing D. Mass marketing E. One-to-one marketing Answer: C. Concentrated target marketing Rationale: A concentrated target marketing approach, which Michael Porter refers to as a focus strategy and is also popularly called a niche strategy, involves targeting a large portion of a small market. 36. With reference to the VALS™ framework, _______________ are fundamentally conservative and they choose familiar products and established brands. A. Makers B. Survivors C. Believers D. Achievers E. Thinkers Answer: C. Believers Rationale: Believers are strongly traditional and respect rules and authority. Because they are fundamentally conservative, they are slow to change and technology averse. They choose familiar products and established brands. 37. When it is said that a market can be reached, it means that _______________. A. The market can be reached by transportation B. The market can be reached by language C. The market can be reached by technology D. The market can be reached by communication E. All of the above Answer: E. All of the above Rationale: The segment needs to be reached (both in terms of communication and physical product) in order to deliver the value of the product. Barriers to reaching a segment might include language, physical distance, or as in the case of some developing markets, transportation, technology, and infrastructure challenges. 38. All of the following techniques are used for geographic segmentation EXCEPT: A. Region B. Density of population C. Size of population D. Sensitivity of population E. All of the above are used Answer: D. Sensitivity of population Rationale: Sensitivity does not refer to geographic segmentation. Some of the more popular approaches to geographic segmentation within the United States are, by region, density of population, size of population, growth in population, and climate. 39. Some insurance and credit card companies would like to target students as a segment but find it hard to capture their attention. This is an example of a market lacking one of the criteria for segmentation and it is _______________. A. The ability to reach the segment in terms of communication B. The ability of identifying the market C. The size of the market D. The ability of obtaining information about the market E. None of the above Answer: A. The ability to reach the segment in terms of communication Rationale: Barriers to reaching a segment might include language, physical distance, or as in the case of some developing markets, transportation, technology, and infrastructure challenges. In this example, it is difficult to capture the attention of the students, so the problem is related to communication required to reach the segment. 40. The region, the density of the population, and the size of the population are techniques used in _______________. A. Positioning B. Differentiation C. Democratic segmentation D. Population parameter estimation E. Geographic segmentation Answer: E. Geographic segmentation Rationale: Some of the popular approaches to geographic segmentation within the United States are, by region, density of population, size of population, growth in population, and climate. 41. If secondary and/or primary data on a market being considered for segmentation is available, then it means _______________. A. The market is clearly differentiated B. The market has sufficient size C. The market is reachable D. The market is readily identifiable and can be measured E. None of the above Answer: D. The market is readily identifiable and can be measured Rationale: If it is possible to get either secondary and/or primary data on a market being considered for segmentation then it means the market is readily identifiable and can be measured. Segmentation most often requires data and if secondary data on the markets of interest is not available or if primary data can't be easily collected, it may not be possible to do segmentation. 42. If geographic segmentation is carried out, it means _______________. A. The variables like social class and education are used to identify markets B. The statistical characteristics of human populations such as age or income are used to identify markets C. Consumers respond differently to marketing strategies and programs based on where they live D. The East Coast, West Coast, and Midwest are the most important market segments based upon size E. None of the above Answer: C. Consumers respond differently to marketing strategies and programs based on where they live Rationale: Consumers respond differently to marketing strategies and programs based on where they live. Thus, geographic segmentation divides consumer groups based on physical location. 43. When JC Penney orders winter coats, it sends them to stores at different times of the year. This is an example of _______________. A. Demographic segmentation B. Geographic segmentation based on climate C. Behavioral segmentation D. Psychographic segmentation E. Demographic segmentation based on social class Answer: B. Geographic segmentation based on climate Rationale: JC Penney segments its target market by geographic climate. It wisely recognizes different customer needs across different climates and builds its marketing plans accordingly. 44. Which of the following variables is NOT used for demographic segmentation? A. Age B. Personality C. Income D. Gender E. Education Answer: B. Personality Rationale: Differences in personality are used for psychographic segmentation. 45. Demographic segmentation is one of the most popular segmentation approaches because _______________. A. It is readily measurable B. Customer needs and wants tend to vary with some degree of regularity based on demographic differences C. It uses the statistical characteristics of human populations such as age or income D. All of the above E. None of the above Answer: D. All of the above Rationale: Demographic segmentation divides consumer groups based on a variety of readily measurable descriptive factors about the group. It is one of the most popular segmentation approaches because customer needs and wants tend to vary with some degree of regularity based on demographic differences and because of the relative ease of measurement of the variables. 46. With reference to the VALS™ framework, _______________ are primarily concerned about safety and security, so they tend to be brand loyal and buy discounted merchandise. A. Makers B. Survivors C. Believers D. Achievers E. Thinkers Answer: B. Survivors Rationale: Survivors lead narrowly focused lives. Because they have the fewest resources, they do not exhibit a primary motivation and often feel powerless. They are primarily concerned about safety and security, so they tend to be brand loyal and buy discounted merchandise. 47. Demographic segmentation uses _______________. A. Characteristics of human populations to segment the market B. Characteristics of geography to segment the market C. Characteristics of personality to segment the market D. Characteristics of virtual communities to segment the market E. All of the above Answer: A. Characteristics of human populations to segment the market Rationale: Demographic segmentation divides consumer groups based on a variety of readily measurable descriptive factors such as age, generational group, gender, family, race and ethnicity, income, occupation, education, and social class. 48. All of the following are basic principles behind segmentation EXCEPT: A. Not all customers are alike. B. Subgroups of customers can be identified on some basis of similarity. C. Segmentation of the market leads to effective inventory management D. Subgroups will be smaller and more homogeneous than the overall market. E. Needs and wants of a subgroup are more efficiently and effectively addressed than would be possible within the heterogeneous full market. Answer: C. Segmentation of the market leads to effective inventory management Rationale: Segmentation seeks to find one or more factors about members of a heterogeneous market that allow for dividing the market into smaller, more homogeneous subgroups for the purposes of developing different marketing strategies to best meet the segments' distinct needs and wants. Segmentation is not related to inventory management. 49. Sociologists look for defining events such as wars, major economic upheaval, and social cultural revolution to create _______________. A. Social movements B. Marketing opportunities C. Generational groups for segmentation purposes D. New product ideas E. None of the above Answer: C. Generational groups for segmentation purposes Rationale: Generational groups are created by significant events that lead to the group having similar needs and wants. Different marketing strategies and programs that can be developed and executed for different generational groups assume some degree of homogeneity among the generational cohort. 50. _______________ represent(s) a huge segment of the population. There is some evidence that they, in their own minds, do not think they age. A. Generation X B. Generation Y C. Millennials D. Baby boomers E. The silent generation Answer: D. Baby boomers Rationale: Baby boomers are born between 1946 to 1964. Much of the research on baby boomers indicates that—at least in their minds—they don't age. 51. _______________ is/are often referred to as the "baby bust" because it represents a natural cyclical downturn in birthrate. A. Millennials B. Generation X C. Generation Y D. The silent generation E. Baby boomers Answer: B. Generation X Rationale: Gen X is often referred to as the "baby bust" because it represents a natural cyclical downturn in birthrate. 52. When a company makes frequent changes in its positioning and sends out contradictory messages, such positioning error is called as _______________. A. Doubtful positioning B. Over positioning C. Under positioning D. Confused positioning E. None of the above Answer: D. Confused positioning Rationale: When frequent changes and contradictory messages confuse consumers regarding the positioning of the brand, it is known as confused positioning. 53. Walter was born in 1925. He is a member of the _______________ generation. A. Baby boomer B. GI C. Silent D. Gen X E. Millennial Answer: C. Silent Rationale: The silent generation consists of individuals born between 1925 and 1945. 54. With reference to the VALS™ framework, _______________ appreciate the unconventional. They are active and impulsive, seeking stimulation from the new, offbeat, and risky. A. Makers B. Survivors C. Believers D. Experiencers E. Thinkers Answer: D. Experiencers Rationale: With reference to the VALS™ framework, experiencers appreciate the unconventional. They are active and impulsive, seeking stimulation from the new, offbeat, and risky. They spend a comparatively high proportion of their income on fashion, socializing, and entertainment. 55. All of the following are criteria for effective segmentation EXCEPT: A. The segment is of sufficient size B. The segment is readily identifiable C. The segment is clearly differentiated on one or more important dimensions D. The segment can be reached, both in terms of communication and physical product E. The segment has at least 10000 potential consumers Answer: E. The segment has at least 10000 potential consumers Rationale: The size of a segment is related to its ability to generate positive return on investment and it doesn't necessarily mean the number of customers. Hence, having at least 10000 potential consumers is not a criterion for effective segmentation. 56. _______________ would not be a good product for using gender segmentation. A. Clothes B. Perfume C. Toothpaste D. Wrist watches E. Shoes Answer: C. Toothpaste Rationale: Toothpaste is not associated with maleness or femaleness. But the other products mentioned in this example are clearly marketed for the primary consumption of either men or women. 57. Google uses stored browsing histories to trigger ads aimed at selling specific products for which a Google user has shown potential interest. This shows that Google is using _______________ segmentation. A. Behavioral B. Social class C. Demographic D. Geodemographic E. Education Answer: A. Behavioral Rationale: Google uses behavioral targeting that tailors ads to people's interests and online behavior. The company uses stored browsing histories to trigger ads aimed at selling specific products for which a Google user has shown potential interest. 58. Family life cycle segmentation factors includes all of the following EXCEPT _______________. A. Income B. Age C. Marital status D. Number of children E. Cohabitation Answer: A. Income Rationale: Family life cycle represents a series of life stages defined by age, marital status, number of children, and other factors such as cohabitation. Income is not generally used in the definition of family. 59. Back when Listerine was marketed as just a mouthwash, it tended to be used sporadically or in the morning as part of the day's hygiene routine. But now that the product also addresses such oral concerns as gingivitis and gum disease, the usage rate is way up with many people developing a regular, twice-a-day regimen. Listerine is an example of _______________ segmentation. A. Age B. Income C. Usage-based D. Psychographic E. Social class Answer: C. Usage-based Rationale: Segmentation by usage patterns includes usage occasions, usage rate, and user status. Since this example talks about change in the usage rate of Listerine, this becomes an example of usage-based segmentation. 60. Dell became so entrenched as a brand of PCs that it has been a bit of a struggle to extend the brand into other lucrative product lines. This is an example of _______________. A. Doubtful positioning B. Confused positioning C. Over positioning D. Under positioning E. None of the above Answer: C. Over positioning Rationale: Over positioning occurs when consumers have too narrow an understanding of the company, product, or brand. Since Dell became entrenched as a brand of PCs, this indicates an over positioning error. 61. With reference to the VALS™ framework, _______________ are mature, satisfied, comfortable, and reflective. They favor durability, functionality, and value in products. A. Makers B. Survivors C. Believers D. Achievers E. Thinkers Answer: E. Thinkers Rationale: Thinkers are mature, satisfied, comfortable, and reflective. They tend to be well-educated and actively seek out information in the decision-making process. They favor durability, functionality, and value in products. 62. Social class is a variable used in _______________ segmentation. A. Geographic B. Behavioral C. Psychographic D. Demographic E. None of the above Answer: D. Demographic Rationale: Social class is a variable used in demographic segmentation. Social class segmentation involves grouping consumers by a standardized set of social strata around the familiar lower class, middle class, and upper class. 63. Winner's Circle, Money and Brains, and Executive Suites are examples of _______________. A. PRIZM clusters B. VALS™ types C. Behavioral segments D. Geographic segments based on climate E. None of the above Answer: A. PRIZM clusters Rationale: Winner's Circle, Money and Brains, and Executive Suites are examples of PRIZM clusters. PRIZM profiles every zip code in the United States by both demographic and lifestyle (psychographic) variables. 64. The fastest growing minority group in the United States is _______________. A. Asians B. African Americans C. Hispanics D. American Indians E. None of the above Answer: C. Hispanics Rationale: Hispanics have become the fastest growing minority group in the United States. They represented 15.1% of US population in 2008. 65. One of the problems faced while using income as a variable of segmentation is: A. Many people either purposely misstate or refuse to reveal their income B. It is too simple to use C. It is confusing because of its interaction with gender and age D. It is time consuming to study consumer's buying habits based upon their income E. None of the above Answer: A. Many people either purposely misstate or refuse to reveal their income Rationale: Many people either purposely misstate or refuse to reveal their income on questionnaires and in interviews used in collecting data for identifying segments. Hence, identifying segments based on income becomes difficult. 66. Which of the following is true about demographic segmentation? A. Social class is one of the variables used for demographic segmentation B. Demographic segmentation leads to VALS™ types C. Age is not a factor used in demographic segmentation D. Personality is a demographic segmentation variable E. All of the above are true Answer: A. Social class is one of the variables used for demographic segmentation Rationale: Social class segmentation involves grouping consumers by a standardized set of social strata around the familiar lower class, middle class, and upper class. It is one of the variables used for demographic segmentation. 67. As compared to psychographic segmentation, geographic and demographic segmentations are relatively _______________. A. Time consuming B. Difficult to carry out C. Subjective in nature D. Objective in nature E. None of the above Answer: D. Objective in nature Rationale: An important challenge of using psychographic segmentation involves the reliability and validity of its measurement. Unlike geographic and demographic measures, which are relatively objective in nature, psychographic measures attempt to "get into the head" of the consumer. 68. Offering credit cards to college-bound high school seniors is an example of _______________ segmentation. A. Income segmentation B. Occupation segmentation C. Education segmentation D. Life style segmentation E. All of the above Answer: C. Education segmentation Rationale: Offering credit cards to college-bound high school seniors is an example of education segmentation. Credit-card providers are eager to market themselves to college-bound high school seniors because they know that, even with low beginning credit limits, gaining usage early increases the chances of loyalty to the card over the long run. 69. Social class as a segmentation tool takes into account _______________. A. Income B. Education C. Occupation D. None of the above E. A, B, and C Answer: E. A, B, and C Rationale: The composition of social classes takes into account several important demographic variables including income, occupation, and education. 70. AIOs (activities, interests, and opinions) are used for _______________ segmentation. A. Psychographic B. Demographic C. Behavioral D. Geographic E. None of the above Answer: A. Psychographic Rationale: Psychographic segmentation relies on consumer variables such as personality and AIOs (activities, interests, and opinions) to segment a market. 71. Every zip code in the United States falls into profiles provided by Claritas in its database called _______________. A. GEO-FIX B. PRIZM-NE C. AIO D. Nielsen ratings E. None of the above Answer: B. PRIZM-NE Rationale: Nielsen's Claritas continually updates a large database called PRIZM-NE that is zip-code driven. PRIZM profiles every zip code in the United States by both demographic and lifestyle (psychographic) variables. 72. With reference to the VALS™ framework, the primary motivation for thinkers is _______________. A. Self-expression B. Achievement C. Ideals D. Money E. Recognition Answer: C. Ideals Rationale: With reference to the VALS™ framework, the primary motivation for thinkers is ideals. 73. A marketing manager using VALS™ is interested in _______________ segmentation. A. Geographic B. Psychographic C. Geodemographic D. Demographic E. Behavioral Answer: B. Psychographic Rationale: A marketing manager using VALS™ is interested in psychographic segmentation. VALS™ divides U.S. adults into eight groups that are determined both by primary motivation and by resources. 74. AIOs are used for psychographic segmentation. AIO stands for _______________. A. Archives, intellect, and opinions B. Activities, interests, and opinions C. Archives, intellect, and orientation D. Activities, intellect, and orientation E. None of the above Answer: B. Activities, interests, and opinions Rationale: AIO stands for activities, interests, and opinions. AIOs are used for psychographic segmentation. 75. With reference to the VALS™ framework, _______________ have goal-oriented lifestyles that center on family and career. A. Makers B. Survivors C. Believers D. Achievers E. Thinkers Answer: D. Achievers Rationale: With reference to the VALS™ framework, achievers have goal-oriented lifestyles that center on family and career. They avoid situations that encourage a high degree of stimulation or change. 76. When a marketer groups customers according to their desire for the crucial value-adding properties of an offering, the marketer is using _______________. A. Psychographic segmentation B. Social class segmentation C. Income segmentation D. Benefit sought segmentation E. Geodemographic segmentation Answer: D. Benefit sought segmentation Rationale: When a marketer groups customers according to their desire for the crucial value-adding properties of an offering, the marketer is using benefit sought segmentation. 77. When FedEx promises 8 a.m. next-day delivery, it has to be sure its systems can actually produce such a level of performance all the time. Failure to do so will lead to _______________. A. Doubtful positioning B. Confused positioning C. Over positioning D. Under positioning E. None of the above Answer: A. Doubtful positioning Rationale: Doubtful positioning occurs when the claims made for the product or brand are not regarded as credible by consumers. If FedEx fails to deliver on its promise, then eventually consumers will lose their trust in FedEx which will lead to doubtful positioning. 78. Efficiencies in cost of labor, materials, supply chain, or other operational elements lead to _______________ leadership. A. Innovative B. Product C. Price D. Service E. Personnel Answer: C. Price Rationale: Efficiencies in cost of labor, materials, supply chain, or other operational elements lead to price leadership. 79. Ads with messages like "Orange juice—It's not just for breakfast anymore!" or "Soup can be a delicious way to start a cold winter's day" are using _______________ segmentation. A. Benefits sought B. Lifestyle C. Psychographic D. Usage-based E. Geographic Answer: D. Usage-based Rationale: Marketers often segment based on whether a consumer is a light, medium, or heavy user of a certain product. Usage-based segmentation attempts to greatly enhance the usage rate for a product, such as orange juice. 80. With reference to the VALS™ framework, the primary motivation for makers is _______________. A. Self-expression B. Achievement C. Ideals D. Money E. Recognition Answer: A. Self-expression Rationale: Makers value practicality and self-sufficiency. The primary motivation for makers is self-expression. 81. Firms use _______________. A. One segmentation technique at a time B. Multiple segmentation techniques simultaneously C. One technique then sequentially another and then yet another D. A maximum of two segmentation techniques simultaneously E. None of the above Answer: B. Multiple segmentation techniques simultaneously Rationale: Firms use multiple segmentation techniques simultaneously. They develop a profile of a segment that might include aspects of any or all of the segmentation approaches (geographic, demographic, psychographic, and behavioral approaches to segmenting). 82. Serenity was born in 1970. Her parents met at the famous Woodstock festival. She is a member of the _______________. A. Baby boomer generation B. GI generation C. Silent generation D. Gen X E. Millennial generation Answer: D. Gen X Rationale: People belonging to Generation X are born between 1965-1977. 83. Generation "X" is often referred to as the _______________. A. Spoiled generation B. Non-consumption generation C. Millennial generation D. Baby bust generation E. None of the above Answer: D. Baby bust generation Rationale: Gen X is often referred to as the "baby bust" because it represents a natural cyclical downturn in birthrate. 84. Primary markets differ from secondary and tertiary markets by _______________. A. The possibility of meeting the ROI target B. The difficulty of attacking the market C. The consumers ability to buy multiple units D. The advertising effort needed for the market E. All of the above Answer: A. The possibility of meeting the ROI target Rationale: Primary markets are expected to be the most profitable. They clearly have the best chance of meeting ROI goals. 85. When a company is confused about market segments, it sometimes picks a one-market strategy. This segmentation approach is called _______________. A. Concentrated target marketing B. Undifferentiated target marketing C. Differentiated target marketing D. Customized target marketing E. One-to-one marketing Answer: B. Undifferentiated target marketing Rationale: The broadest possible approach to target marketing is undifferentiated target marketing —which is essentially a one-market strategy, sometimes referred to as an unsegmented mass market. 86. Differentiated target marketing means _______________. A. Offering different prices to different markets B. Providing the same value offering to every market segment C. Developing different value offerings for different targeted segments D. Using different promotional strategies for different markets E. None of the above Answer: C. Developing different value offerings for different targeted segments Rationale: Differentiated target marketing, often referred to as simply differentiation, means developing different value offerings for different targeted segments. Possible sources of differentiation are many and include innovation/ R&D, product quality, etc. 87. Concentrated target marketing is often used by _______________. A. Large companies to dominate a market B. Start-up firms to enter a market as a focus player C. Multinational companies D. Virtual firms that use internet marketing E. Large companies to enhance the brand image of their products Answer: B. Start-up firms to enter a market as a focus player Rationale: Concentrated target marketing involves targeting a large portion of a small market. Many start-up firms enter a marketplace as a focus player because they are not saddled with keeping up with competitive demands in the broader market. 88. Firms that develop such close relationships with customers that they seem to deliver customized goods and services are engaged in _______________ marketing. A. Concentrated target marketing B. One-to-one marketing C. Differentiated marketing D. Undifferentiated marketing E. Shotgun marketing Answer: B. One-to-one marketing Rationale: With the proliferation of CRM, firms are able to develop more customized approaches to target marketing which is known as one-to-one marketing. 89. A good example of a company using customized (one-to-one) marketing is _______________. A. Southwest Airlines B. Microsoft C. IBM D. Dell E. All of the above Answer: D. Dell Rationale: Dell makes the customer feel like each computer was custom made for each person. 90. Constantly developing the "next new thing" leads to _______________ leadership. A. Convenience B. Image C. Innovative D. Price E. Personnel Answer: C. Innovative Rationale: Constantly developing the "next new thing" leads to innovative leadership. For example, Apple. 91. Positioning strategy is a process that often starts with _______________. A. Focus groups B. Surveys of customers C. Perceptual maps D. Gap analysis E. None of the above Answer: A. Focus groups Rationale: Many positioning studies start with focus groups that allow participants to talk about aspects of their experiences with a product. From the focus groups, a set of attributes is developed for further analysis. 92. A(n) _______________ displays paired attributes in order to compare consumer perceptions of each competitor's delivery against those attributes. A. Virtual map B. Attribute map C. Monolithic map D. Perceptual map E. None of the above Answer: D. Perceptual map Rationale: A perceptual map is a useful visual tool for positioning which displays paired attributes in order to compare consumer perceptions of each competitor's delivery against those attributes. 93. Perceptual map is a visual tool used for _______________. A. Gap analysis B. Positioning C. Concept testing D. Price elasticity testing E. None of the above Answer: B. Positioning Rationale: A perceptual map is a useful visual tool for positioning which displays paired attributes in order to compare consumer perceptions of each competitor's delivery against those attributes. 94. Utilization of symbols, atmosphere, and creative media to create differentiation leads to _______________ leadership. A. Convenience B. Image C. Innovative D. Price E. Personnel Answer: B. Image Rationale: Utilization of symbols, atmosphere, and creative media to create differentiation leads to image leadership. For example, BMW. 95. With reference to the VALS™ framework, _______________ favor stylish products that emulate the purchases of people with greater material wealth. A. Strivers B. Survivors C. Believers D. Achievers E. Thinkers Answer: A. Strivers Rationale: Strivers are trendy and fun loving. They have little discretionary income and tend to have narrow interests. They favor stylish products that emulate the purchases of people with greater material wealth. 96. _______________ occurs when consumers have only a vague idea about the company and its products, and do not perceive any real differentiation. A. Confused positioning B. Over positioning C. Under positioning D. Doubtful positioning E. None of the above Answer: C. Under positioning Rationale: Under positioning occurs when consumers have only a vague idea about the company and its products, and do not perceive any real differentiation. 97. Apple Cora Anderson was born in 2001. She is a member of the _______________ generation. A. Baby boomer B. GI C. Silent D. Gen X E. Millennial Answer: E. Millennial Rationale: The Millennial generation consists of people who are born after 1994. 98. A personnel leadership position implies that the company _______________. A. Has employees who are more talented than the competition B. Spends the least amount of money on employee salaries C. Offers the highest salaries to its employees as per the industry standards D. Hires only those employees who are already trained E. Has systems to monitor employee benefits Answer: A. Has employees who are more talented than the competition Rationale: Hiring employees who are competent, reliable, courteous, credible, responsive, and able to communicate clearly, leads to personnel leadership. Personnel leadership is based on differentiation in terms of quality of employees. 99. When a company tries to make the product or service significantly easier to obtain than the competition, it is employing _______________. A. Service leadership B. Image leadership C. Competitive intelligence D. Perceptual mapping E. Convenience leadership Answer: E. Convenience leadership Rationale: When a company tries to make the product or service significantly easier to obtain than the competition, it is employing convenience leadership. For example, amazon.com 100. When consumers have too narrow an understanding of the company, brand, or product, it is called _______________. A. Underachieving B. Over positioning C. Under positioning D. Perplexing positioning E. Lack of positioning Answer: B. Over positioning Rationale: Over positioning occurs when consumers have too narrow an understanding of the company, product, or brand. 101. When a company has doubtful positioning consumers view the claims made by the company as _______________. A. Being exaggerated B. Lacking efficiency C. Lacking credibility D. Exceeding performance E. Lacking performance Answer: C. Lacking credibility Rationale: When a company has doubtful positioning, the claims made for the product or brand are not regarded as credible by consumers. Short Answer Questions 102. Define market segmentation. Answer: Segmentation is the process by which a company divides a market into meaningful smaller markets or submarkets based on common characteristics. 103. Define target marketing. Which segments should the firm select? Answer: Once a segmentation approach is developed, marketing managers engage in target marketing, which involves evaluating the segments and deciding which shows the most promise for development. In most ways, selecting target markets (also called market targets) is truly an investment decision. That is, a company must decide where to best invest its limited resources in developing markets for future growth. Everything else being equal, it should invest in the target markets that promise the best overall return on that investment over the long run. 104. How does a firm connect its value proposition to the target market? Answer: Finally, the way the firm ultimately connects its value proposition to a target market is through its positioning. Positioning relies on the communication of one or more sources of value to customers in a way that the customer can easily make the connection between his or her needs and wants and what the product has to offer. Positioning strategies are executed through the development of unique combinations of the marketing mix variables, introduced in Chapter 1 as the 4Ps: Product (or more broadly—the offering), price, place (distribution/supply chain), and promotion. 105. What are the four basic principles of segmentation? Answer: • Not all customers are alike. • Subgroups of customers can be identified on some basis of similarity. • The subgroups will be smaller and more homogeneous than the overall market. • Needs and wants of a subgroup are more efficiently and effectively addressed than would be possible within the heterogeneous full market. 106. What is a heterogeneous market? What is a homogeneous market? Give an example of each. Answer: A heterogeneous market is one made of dissimilar customers that may be grouped into smaller homogeneous groups that are similar. An example of a heterogeneous market is the automobile market. It is a broad market with many different customers seeking different features and benefits. Homogeneous groups within the automobile market include light truck owners, heavy truck owners, sports car drivers, luxury SUV drivers, green consumers seeking hybrids, drivers seeking basic transportation in the compact or subcompact markets, etc. 107. Explain the concept of differentiation. Answer: Differentiation means communicating and delivering value in different ways to different customer groups. 108. Jane is evaluating Central America as a possible new market for the OTC (over-the-counter) pharmaceutical line she manages. What are some of the barriers the company may face in reaching segments there? Answer: Barriers to reaching a segment might include language, physical distance, or as in the case of some developing markets, transportation, technology, and infrastructure challenges. Firms have to be able to sustain their management of a target segment over time—if this activity becomes problematic it can be a drain on resources and result in poor ROI. 109. How would you use geographic segmentation in the bathing suit market? Answer: Stores in warm climates would stock bathing suits all year long. Stores in climates with four seasons would stock the suits just prior to warm weather arriving. For example, Texas, North Carolina, and Virginia would stock suits earlier than Maine or Wisconsin. 110. How does age segmentation limit marketers? For example, you are a college student yet undoubtedly you have many friends from high school who did not go to college. How are their lifestyles different from yours? What do they do in their leisure time that is different than what you and your college friends do? What other methods of segmentation other than age would be better to reach them? Answer: Answers will vary but may include friends who are parents, in the military, work at a full time job, etc. Better methods of segmentation may include family and household segmentation, income, education, social class or psychographic. Age segmentation limits marketers by assuming that individuals within the same age group have similar needs and behaviors, overlooking the diversity in lifestyles and interests. For example, college students may focus on academic and social activities, while friends who didn't go to college may prioritize work, family, or vocational training. Their leisure activities might include different hobbies, entertainment preferences, or social gatherings. Better segmentation methods include psychographic segmentation, which considers values, interests, and lifestyles, and behavioral segmentation, which focuses on purchasing habits and product usage. 111. Marcus is a high school teacher who was born in 1980. What generation does he belong to and what are its characteristics? Answer: Generation Y (60 million born 1978-1994) • Pragmatic • Optimistic • Team players • Savvy consumers • Edgy • Focused on urban style • More idealistic than Gen X • Technology comes naturally 112. Karen is a marine biologist who was born in 1970. What generation does she belong to and what are its characteristics? Answer: Generation X (57 million born 1965-1977) • Lack of trust in society • Cynical and media-savvy • Entrepreneurial • Accept diversity • Environmentally conscious • Work to live, not live to work 113. Ron's grandfather was born in 1934. What generation does he belong to and what are its characteristics? Answer: Silent (35 million born 1925-1945) • Strength in human relation skills • Respectful of others' opinions • Trusting conformists • Health, stability, and wisdom • Civic life and extended families 114. Of people born after 1965, which generation or generations do marketers favor and why? Answer: Because Gen X is such a small segment of the consumer market, many marketers have their eye squarely on the Gen Y and Millennial cohorts as the next great consumer frontier. Both of these groups are highly technology-savvy and don't balk at using any and every sort of communication medium to enhance their lives. 115. What is the size of the minority population in the U.S. and which is the largest minority group? Answer: 100.7 million people are in minority groups or about 1/3 of the total population. Hispanics make up the largest group. 116. What is geodemographic segmentation and what are PRIZM clusters? Answer: A hybrid form of segmentation that considers both geographic and demographic factors is called geodemographic segmentation. Typically, marketers turn to firms that specialize in collecting such data on an ongoing basis to purchase data relevant to their geographic area of focus. One source is Nielsen's Claritas, which continually updates a large database called PRIZM-NE that is zip-code driven. PRIZM profiles every zip code in the United States by both demographic and lifestyle (psychographic) variables. Over time, PRIZM has discovered 62 "neighborhood types" into which all zip codes fall. 117. Why is the Benefits Sought method of segmentation a good place to start the segmentation process? Answer: For many marketing managers, segmentation by benefits sought is the best place to start the process of market segmentation. You might begin by identifying groups interested in the specific bundle of benefits afforded by your offering and then move toward utilizing the other segmentation variables to further hone the profile of the core group that is attracted to your product's benefits. 118. In the B2B market, how do you segment by operating variables? Answer: Look at technology, user status, or customer capabilities. 119. Should every company develop and serve a tertiary target market? Answer: No. The tertiary market is one that may be attractive for the future but is not so attractive now. 120. What research technique does a firm in starting to determine its positioning strategy often use? Answer: Focus groups. A firm often uses perceptual mapping to determine its positioning strategy. 121. Define perceptual maps. Answer: The data generated from the above analysis can be used to develop a useful visual tool for positioning called a perceptual map, which displays paired attributes in order to compare consumer perceptions of each competitor's delivery against those attributes. Today this is usually accomplished by computer statistical software applications that plot each competitor's relative positioning on the attributes. Essay Questions 122. When the social networking site Facebook started, its primary members were in the young adult market of 18 to 24 year olds. Now the 35 and over age group has the largest membership. What kind of value does Facebook offer to different segments? Answer: Facebook offers value by linking people through common interests. For the younger segment, the links are based on which University they attend, which town they live in, which high school they went to. It allows them to stay in touch with their "old" friends, while also forming new friends in their new social settings. Additionally, Facebook is customizable, so music, politics, movies, etc. can all link one person to another. To the younger segment, Facebook is an interactive statement of who they are. For the older segment, Facebook not only links based on town, but also on family groups, business groups and other professional groups. In Facebook, you are allowed to create segments to fit your particular means. The older segment tends to gain value from Facebook by using it to keep in touch with family and business associates. Answer should include the concept of the segment is clearly differentiated on one or more important dimensions when communicating the value of the product. Facebook offers social connectivity and networking opportunities to young adults, while providing reconnection and community engagement for the 35 and over age group. 123. Hybrid cars attract different customer segments. Identify two segments and explain what message you would send to each. Answer: The first segment is the green consumer who is most interested in the impact of emissions on the environment. The message should focus on low emissions, impact on the environment, saving the earth. The second segment is concerned with the source and price of fuel. Many people don't like the idea of buying fuel from foreign sources or the fluctuating price of fuel. The message should be focused on ‘Buy American'. Another segment would be the price conscious consumer. Emphasize the cost-saving on fuel over the lifetime of the car. 124. Wal-Mart operates stores, Sam's Clubs, supercenters, and neighborhood markets. How do you think the company views market segmentation? Answer: Wal-Mart views the market in a very sophisticated way. They include in their offerings things for many different groups. Their primary market is the value market. This includes people form all walks of life that are interested in products that are value priced. At the same time, they have opened different kinds of stores like Sam's club, which is oriented toward bulk purchasers. Their neighborhood stores are for people who are more interested in convenience than some other things. Wal-Mart continues to use race in their marketing and focusing on Hispanics and African Americans in particular. Thus, you can see that they use many different segmentation approaches. 125. How can Spuds and Suds, a Dallas, Texas sports bar, determine if there is a market segment of sufficient size to justify its purchase of the National Hockey League Center Ice package? Answer: The bar's business drops off after football season ends with the Super Bowl. The subscription is expensive but the owner will purchase it if he thinks he can draw hockey fans, especially from February to the end of hockey season in June. 126. Audrey is studying generational segmentation. What are the most important things she needs to know about baby boomers? Answer: The generational group that has traditionally been the apple of the marketing manager's eye is the baby boomers. This is because there are so many of them and because they personify conspicuous consumption—acquiring products for the pure enjoyment of the purchase. An interesting aspect of boomers is that the oldest among the group have just entered their early 60s in age, and the majority of them will soon be facing decisions about retirement and beyond. Much of the research on baby boomers indicates that—at least in their minds—they don't age. Recall that a marketer must be cognizant of the difference between chronological age and attitudinal age. It is anticipated that this forever-young generation will enter the segment we would traditionally label as "older consumer" without an old outlook on life and the future. This has profound implications for marketers in that it turns on end the stereotypical approaches to what products are marketed to them and how they are marketed. Many boomers will become more active, spend more money, and want to experience more new things after retirement than they ever did while they were employed—that is, if you can get them to retire. Many smart marketers who happen to be of Generation X or Y would do well to rethink the potential impact of successful strategies aimed at these ageless boomers. 127. Many people of the GI Generation and the Silent Generation now live in or are considering retirement communities, nursing homes or assisted living facilities. What do marketing managers need to understand about these groups? Answer: GI (16 million born 1901-1924) • Financial security and conservative spending shaped by hard times and the economic depression of the 1930s • No such thing as problems—only challenges and opportunities • Civic minded • Duty to family, community, and country • Unified and team oriented Silent (35 million born 1925-1945) • Strength in human relation skills • Respectful of others' opinions • Trusting conformists • Health, stability, and wisdom • Civic life and extended families 128. How does Gillette use gender segmentation? Answer: Gillette learned some years ago that generally, women don't like to use a man's razor, which they had to do for decades because no thought was given to differences in gender usage preference. Research in the 1980s revealed that most women viewed men's razors as too bulky, with too many bells and whistles, and not feminine in color or design. Suddenly, Gillette found an underserved new submarket for segmenting its razor line: The female shaver! The result was a completely new brand and product line called Gillette Venus, whose tagline is "Reveal the Goddess in You." Venus comes in six models: Original Venus; Venus Embrace, which "embraces a whole new level of smoothness"; Venus Breeze, the only razor with built-in shave gel bars; Venus Vibrance, which gently exfoliates to reveal more radiant skin; Venus Divine, which contains "Intensive Moisture Strips" enriched with oils; and Venus Disposable, for the "Goddess on the Go." 129. Rita spent four years at HSN (formerly Home Shopping Network) as a category manager in healthcare products aimed at the B2C market. Target headquarters in Minneapolis recruited her to manage the stationery division. She contracts with suppliers worldwide to supply the chain with notebooks, notepads, art supplies, computer paper, etc. In analyzing the target markets, should Rita use an undifferentiated or differentiated target marketing strategy? Which of Michael Porter's competitive strategies does Target use? Answer: The broadest possible approach is undifferentiated target marketing—which is essentially a one-market strategy, sometimes referred to as an unsegmented mass market. Firms whose market approach is grounded in Porter's competitive strategy of low cost may use a relatively undifferentiated target marketing strategy based primarily on the resulting price advantage. 54 Southwest Airlines and Wal-Mart are two firms that have built their businesses on their inherent internal cost advantages, passing along a price advantage to the mass market. But most firms don't have the kind of cost efficiencies it takes to operate such a target marketing approach and instead have to rely on developing sources of differentiation other than price. 130. Identify and describe the most often used sources of differentiation? Answer: Price leadership: Efficiencies in cost of labor, materials, supply chain, or other operational elements enabling the price leader to charge less. Example: Wal-Mart. Innovative leadership: Constantly developing the "next new thing." Example: Apple. Service leadership: Having an unusual and notable commitment to providing service to customers. Example: Ritz-Carlton, BMW. Product leadership: Performance, features, durability, reliability, style, and so on. Example: BMW. Personnel leadership: Hiring employees who are competent, reliable, courteous, credible, responsive, and able to communicate clearly. Example: Southwest Airlines. Convenience leadership: Making the product or service significantly easier to obtain. Example: Amazon.com. Image leadership: Symbols, atmosphere, and creative media. Example: BMW. It is important to note that firms and brands often rely on multiple sources of differentiation simultaneously. Note above that BMW stakes a claim to differentiation by leadership in product, service, and image—a great position to be in. 131. Identify and describe the four types of positioning errors. Answer: Under positioning: When consumers have only a vague idea about the company and its products, and do not perceive any real differentiation. Until recently, both Audi and Volkswagen suffered from under positioning as many consumers struggled to identify salient points of differentiation between those brands and their competitors. However, both brands have beefed up their marketing communication to better clarify exactly what each stands for in the marketplace. • Over positioning: When consumers have too narrow an understanding of the company, product, or brand. Dell became so entrenched as a brand of PCs that it has been a bit of a struggle to extend the brand into other lucrative product lines. Neither HP nor Apple suffers from over positioning; both have engaged in great positioning strategies over the long run. • Confused positioning: When frequent changes and contradictory messages confuse consumers regarding the positioning of the brand. McDonald's found itself the victim of confused positioning as it moved out of the 1990s. It had tried (and failed) at so many diverse new product launches in the restaurants that many customers lost track of what the core of the brand was. Since then, under new top leadership, McDonald's has embraced its core differentiators of consistency of products and dependability of service, while growing new products at a much more conservative rate. Doubtful positioning: When the claims made for the product or brand are not regarded as credible by consumers. Sadly, firms that engage in unethical business practices often do not realize the magnitude of damage being done to their brand. Also, you will learn in the chapters on products and branding that trial is only the initial goal of marketing communication. After initial trial, firms need to ensure that the offering consistently meets or exceeds customer expectations so that repurchase—and loyalty—will occur, which is a process of customer expectations management. When FedEx promises 8 a.m. next-day delivery, it has to be sure its systems can actually produce such a level of performance all the time. Test Bank for Essentials of Marketing Management Greg W. Marshall, Mark W. Johnston 9780078028786, 9780071082020, 9780077400187
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