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Chapter 8—Segmenting and Targeting Markets TRUE/FALSE 1. Fisher-Price developed a line of toys for infants in China. Babies make up the market for these products. Answer: False Rationale: Infants do not have an ability to buy and, therefore, cannot be called a market. Their parents would constitute a market. 2. Fisher-Price is identifying Asian markets that are interested in their line of talking toys. Fisher-Price is engaged in the process of market segmentation. Answer: True Rationale: Market segmentation involves identifying and targeting specific groups of consumers or markets with distinct characteristics and preferences, allowing Fisher-Price to tailor its marketing strategies and products to meet the needs and interests of Asian consumers interested in talking toys. 3. Until the 1990s, few firms practiced market segmentation. Answer: False Rationale: Until the 1960s, few firms practiced market segmentation. 4. A market segment is deemed to have substantiality if it contains a large number of potential customers. Answer: False Rationale: Substantiality of a segment refers to a segment being large enough to warrant developing and maintaining a special marketing mix. This does not necessarily require large numbers of potential customers. 5. A segmentation plan must produce segments that are accessible—that is, the firm must be able to reach members of targeted segments with customized marketing mixes. Answer: True Rationale: Accessibility in segmentation ensures that the firm can effectively reach and engage members of targeted segments through appropriate channels and marketing approaches, maximizing the effectiveness of tailored marketing strategies and initiatives. 6. Markets are always segmented by at least two variables. Answer: False Rationale: Although it is less precise, single-variable segmentation is possible; it has the advantage of being simpler and easier to use than multiple-variable segmentation. 7. U.S. paint manufacturers traditionally use different formulas for developing paint to be used in the humid Southeast, the frigid Midwest, and the hot and dry Southwest. This is an example of how demographic segmentation is used. Answer: False Rationale: Regional marketing is an example of using geographic segmentation variables. 8. A market segmentation study done by the University of Thessaly in Greece classified recreational skiers in terms of their gender, age, and income levels. The study used psychographic segmentation variables. Answer: False Rationale: These are examples of demographic segmentation variables. 9. Abbeville Press published a book by Armin Brott and Jennifer Ash entitled The Expectant Father: Facts, Tips, and Advice for Dads-to-Be. It is an advice book for men whose partners are expecting a baby. The market for this book is based on demographics. Answer: True Rationale: The market for "The Expectant Father" book by Abbeville Press is segmented based on demographics related to men whose partners are expecting a baby, focusing on specific life stage and gender demographics. 10. In the United States, women tend to be the key household decision-makers for many products, such as home furnishing purchases, vacations, and autos. Answer: True Rationale: Women in the United States often play a significant role as key decision-makers in household purchases, influencing decisions related to home furnishings, vacations, and automotive purchases based on their preferences and needs. 11. In market segmentation, individual psychographic variables can be combined with other variables to provide more detailed descriptions of market segments. Answer: True Rationale: Psychographic variables such as lifestyle, attitudes, and values can be integrated with demographic and other segmentation variables to create more comprehensive and nuanced descriptions of market segments, enhancing the effectiveness of targeted marketing strategies. 12. Geodemographic segmentation combines geographic, demographic, and lifestyle segmentations. Answer: True Rationale: Geodemographic segmentation combines geographic, demographic, and lifestyle factors to categorize consumers into segments based on where they live, who they are demographically, and how they live their lives, providing a multidimensional view for marketers to target specific audiences effectively. 13. Clorox describes individuals who buy lots of cleaning products as heavy users. This is an example of how companies use benefit segmentation. Answer: False Rationale: Usage-rate segmentation usually describes product usage with categories like heavy and light. 14. The 80/20 principle implies that the majority of all demand is due to a minority of the customers. Answer: True Rationale: The 80/20 principle, also known as the Pareto Principle, suggests that roughly 80% of effects come from 20% of causes. In marketing, this means that a significant portion of a company's revenue often comes from a relatively small percentage of its customers, highlighting the importance of focusing efforts on high-value customers for maximum impact. 15. The business market consists of four broad segments: producers, resellers, government, and regions. Answer: False Rationale: The four segments are producers, resellers, government, and institutions. 16. Company characteristics, such as geographic location, type of company, company size, and product use, can be important segmentation variables. Answer: True Rationale: Company characteristics are valuable segmentation variables in B2B marketing, helping businesses tailor their marketing strategies based on factors such as geographic location, type of industry, company size, and specific product applications, ensuring relevance and effectiveness in targeting business customers. 17. While it is important to understand potential business customers’ buying processes, this is not a helpful segmentation basis. Answer: False Rationale: Many business marketers find it helpful to segment customers and prospective customers on the basis of how they buy. 18. The first step in segmenting a market is to choose a basis or bases for segmenting the markets. Answer: False Rationale: The first step is to select a market or product category for study. 19. One reason marketers use market segmentation as a tool is that once completed, the process need not be repeated. Answer: False Rationale: Markets are dynamic, so it is important that companies proactively monitor their segmentation strategies over time. 20. Dakin Farms in Vermont uses mass marketing. Marketers would call the strategy an undifferentiated targeting strategy. Answer: True Rationale: Mass marketing or undifferentiated targeting strategy involves reaching out to the entire market with a single product or marketing message, which Dakin Farms in Vermont appears to use. 21. Small firms often adopt a concentrated marketing strategy to compete effectively with larger firms. Answer: True Rationale: Small firms frequently employ concentrated marketing strategies, focusing their efforts and resources on specific market segments or niches where they can compete more effectively against larger competitors, leveraging their unique strengths and capabilities. 22. Procter & Gamble markets six different brands of laundry detergent, such as Tide, Era, Gain, and Dreft, each targeting a different market segment. This is an example of concentrated targeting. Answer: False Rationale: This illustrates a multi-segment targeting strategy. 23. The growth of mass marketing is an indication of the importance of implementing CRM. Answer: False Rationale: There are four trends that suggest CRM will continue growing: personalization, time savings and technology. 24. Marketers are rediscovering that the “one-size-fits-all” approach to marketing is still relevant. Answer: False Rationale: The one-size-fits-all marketing is no longer relevant. Consumers want to be treated as the individuals they are, with their own unique sets of needs and wants. 25. A product’s position refers to where it is located on store shelves. Answer: False Rationale: Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. 26. Product differentiation is a positioning strategy. Answer: True Rationale: Product differentiation involves distinguishing a product from its competitors through unique features, benefits, or qualities, which is a key aspect of positioning strategy to attract target customers. 27. A product’s positioning could be based on product users. Answer: True Rationale: Product positioning can be based on the characteristics, behaviors, or preferences of the product's users, aligning the product's image and messaging with the specific needs and desires of the target market to differentiate it effectively in the marketplace. 28. Consumers’ perceptions regarding a product’s position cannot be changed. Answer: False Rationale: Repositioning is changing consumers’ perceptions of a brand in relation to competing brands. MULTIPLE CHOICE 1. A _____ is a group of people or organizations that has wants and needs that can be satisfied by particular product categories, has the ability to purchase these products, and is willing to exchange resources for the products. A. firm B. buyer C. market D. consumer E. target Answer: C Rationale: This is the definition of a market. 2. The Belly Cast kit by Proud Body helps an expectant mom to make a cast of her pregnant body, decorate it, and keep it for a lifetime. The primary market segment for the Belly Cast kit is: A. all parents B. expectant moms C. recently married couples D. parents of toddlers E. collectors of unusual art Answer: B Rationale: A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs, which in this case would be expectant moms. 3. A market is people or organizations that have: A. the ability, willingness, and power to buy. B. a medium of exchange and products they desire. C. needs and wants and an ability and willingness to buy. D. unmet needs or wants and products or services that satisfy those unmet needs or wants. E. communication, financial, and capital resources. Answer: C Rationale: A market is defined as having four imperative characteristics: people or organizations, needs and wants, ability to buy, and willingness to buy. 4. A(n) _____ is a subgroup of individuals or organizations sharing one or more characteristics that cause them to have similar product needs. A. market universe B. market segment C. aggregated market D. segmentation base E. population sample Answer: B Rationale: This is the definition of a market segment. 5. A group of middle school students stop by a bicycle store. The store has just received a new shipment of high-end racing bicycles. The bicycles range in price from $1,200 to $3,000. All of the students want one of these new bikes, but none has the means to buy one. Is this group of consumers a potential market for the expensive bikes? A. Yes, they are a potential market since they are all about the same age. B. No, they do not have the ability to purchase at this time. C. No, to qualify as a market, they must need the product. D. Yes, they are a market because this product could satisfy their consumer wants and desires. E. Yes, they are a market because this group shares relatively similar product needs and purchasing characteristics. Answer: B Rationale: A market is a group of people or organizations that has wants and needs that can be satisfied by particular product categories, has the ability to purchase these products, and is willing to exchange resources for the products. There is no suggestion of ability to purchase in this case. 6. Ford Motor Company produces passenger cars, commercial trucks and specialty vehicles, performance vehicles, and race cars. Ford uses a procedure called _____ to divide its large market. A. micromarketing B. positioning C. market segmentation D. cannibalization E. perceptual mapping Answer: C Rationale: Dividing one large market into divisions based on a variable such as product usage is called market segmentation. 7. _____ is the process of dividing a market into meaningful groups that are relatively similar and identifiable. A. Perceptual mapping B. Positioning C. Micromarketing D. Market sampling E. Market segmentation Answer: E Rationale: This is the definition of market segmentation. 8. The purpose of market segmentation is to: A. reduce the market down to a size the firm can handle B. divide the market into equal size and profit regions for sales territories C. group a large number of markets together, enabling a company to serve them simultaneously D. develop a generalized definition of the market as a whole E. enable the marketer to tailor marketing mixes to meet the needs of one or more specific groups Answer: E Rationale: The purpose of segmentation is to group similar consumers and to serve their needs with a specialized marketing mix. 9. Home Cookin’ Catering would like to improve customer satisfaction and increase repeat business. When you ask the owners to describe a typical customer, they say it is impossible and explain that with corporate functions, family affairs, and fund-raisers, they do not have a typical customer. You suggest it is time for market segmentation because: A. it will enable them to build an accurate description of customer needs by group and to design a marketing mix to fit each segment B. the company needs to reduce the size of the market it serves C. the company needs to learn how to group these markets together into one market to serve all of them adequately D. it will help develop a generalized definition of the market as a whole and reveal the optimal marketing mix for this market E. this will position the company in the minds of its consumers as compared to its competitors Answer: A Rationale: The purpose of segmentation is to group similar consumers and to serve their needs with a specialized marketing mix. 10. Market segmentation can assist marketers to do all of the following EXCEPT: A. develop more precise definitions of customer needs and wants B. identify which variable base should be used for segmenting C. more accurately define marketing objectives D. improve resource allocation E. evaluate performance Answer: B Rationale: Market segmentation itself does not signal which base should be used, but it will define needs and wants, as well as help marketers define marketing objectives, improve resource allocation, and evaluate performance. 11. All of the following are criteria for successful market segmentation EXCEPT: A. substantiality B. identifiability and measurability C. accountability D. accessibility E. responsiveness Answer: C Rationale: The four criteria are substantiality, identifiability and measurability, accessibility, and responsiveness. 12. To be useful, a segmentation scheme must produce segments that meet four basic criteria. The criteria are: A. segmentability, targetability, reliability and validity, and homogeneity B. tangibility, inseparability, non-perishability, and uniqueness C. substantiality, identifiability and measurability, accessibility, and responsiveness D. reliability, flexibility, tangibility, and unbiased E. complexity, compatability, relative advantage, trialability, and observability Answer: C Rationale: Useful segments should be substantial, identifiable and measurable, accessible, and responsive to different marketing mixes. 13. A manufacturer of lenses used in microscopes, binoculars, and telescopes has segmented its market into scientific equipment manufacturers, sporting equipment manufacturers, and retailers who sell replacement lenses. In order for this segmentation scheme to be successful, all of the following criteria must be met EXCEPT: A. substantiality B. accessibility C. identifiability and measurability D. complexity E. responsiveness Answer: D Rationale: Complexity is not a criterion. 14. According to the criterion of _____, a selected segment must be large enough to warrant developing and maintaining a special marketing mix. Serving the specific needs of this segment must be commercially viable, even if the number of potential customers is small. A. causality B. accountability C. responsiveness D. accessibility E. substantiality Answer: E Rationale: Substantiality means segments must be large enough to warrant a separate marketing mix. 15. The marketing researcher for Bubastis Cat Treats has noticed a growing number of cat owners purchasing organic treats for their pets. The researcher thinks there is a market for organic cat treats, but she’s not sure if the segment is substantial. In this case, substantiality means the segment: A. has enough special stores, magazines, and other outlets that it will be possible to direct advertisements at this group B. is large enough to permit a profitable market effort toward its members C. exhibits a response rate to marketing variables different from the rates of other segments D. is too large and needs to be reduced to a more easily identifiable and measurable size E. will be difficult to develop a product to match this group of buyers Answer: B Rationale: Substantiality means the selected segment will be large enough to warrant developing and maintaining a special marketing mix. Serving the specific needs of this segment must be commercially viable, even if the number of potential customers is small. 16. The marketing manager of Gevalia gourmet coffees wants to target the gay male consumer because he thinks this segment of consumers appreciates and consumes gourmet coffee. Even though gay lifestyles are becoming more accepted socially, the manager is finding it difficult to determine the market potential for this segment because many gay consumers are not willing to admit their lifestyle publicly. Which criterion of a useful segment does this illustrate? A. Substantiality B. Identifiability and measurability C. Complexity D. Responsiveness E. Validity Answer: B Rationale: Segments must be identifiable and their size measurable, which might be difficult due to many gay consumers not admitting their lifestyle. 17. Which criterion of useable market segments means the firm must be able to reach members of targeted segments with customized marketing mixes? A. Substantiality B. Identifiability and measurability C. Accessibility D. Responsiveness E. Reliability Answer: C Rationale: This describes accessibility. 18. Many children on the autism spectrum like to chew on clothing, paper, or anything that they can find. Kid Companions manufactures nontoxic, plastic chewable jewelry for kids to wear. The product is a great way to keep kids from chewing on their clothes, while letting them work through their chewing tendencies. However, the company is unsure how to reach parents and therapists with information about their product. This illustrates a segmentation problem with: A. substantiality. B. identifiability and measurability. C. responsiveness. D. accessibility. E. accountability. Answer: D Rationale: Segments must be accessible, which may be difficult to achieve with the homeless population. 19. The requirement for a market segment to be responsive means: A. over half of the consumers in the identified segment will be actively interested in the product B. all the segments identified by a marketer should respond to the marketing mix C. all the segments identified by a marketer should not respond to the marketing mix D. the segments identified by a marketer should not differ in the level of their responsiveness to the marketing mix E. the segment identified by a marketer should differ in how it responds to the marketing mix when compared to another segment confronted with the same mix Answer: E Rationale: The target segment should respond differently to the marketing mix compared to other segments. 20. Altria Group, Inc.’s Phillip Morris failed at an attempt to target Americans looking for a potentially safer cigarette. This market exhibits a lack of: A. substantiality. B. identifiability and measurability. C. responsiveness. D. reliability. E. accessibility. Answer: C Rationale: Responsiveness means that the segment responds to a marketing mix differently than other segments, which does not appear to be the case. 21. A research firm has conducted marketing research on the market for metal roofing for homes. The research firm has determined there are thousands of homeowners who want the durability provided by metal roofs. These homeowners are generally married and between 25 and 54 years of age. They tend to live in suburban neighborhoods, and most subscribe to lifestyle magazines. If you were interpreting these results, you might suggest that the research firm: A. conduct additional research because it has no idea about the measurability of its segments. B. examine the research report again to see if it can determine segment accessibility. C. conduct a follow-up analysis to determine if the segments it might choose would respond differently than other segments to its marketing strategy. D. not segment the concrete siding market because the only market for siding is contractors who build the homes. E. segment the concrete siding market based on the information provided and concentrate its efforts on suburban homeowners between ages 25 and 54 years who read lifestyle magazines. Answer: C Rationale: The only criterion the research firm has not determined is market responsiveness. 22. If a market segment is especially motivated by coupons in newspapers, which segmentation success criterion is most influential in the success of this program? A. Responsiveness B. Identifiability and measurability C. Substantiality D. Accessibility E. Functionality Answer: A Rationale: Responsiveness is in force when a target segment responds differently (hopefully more positively) to the marketing mix than other segments. 23. A health club has a new fitness program for expectant mothers. After flyers were placed at the offices of area obstetricians, classes filled up within two days. Which segmentation success criterion was most influential in the success of this promotion? A. Substantiality B. Identifiability C. Measurability D. Causality E. Responsiveness Answer: E Rationale: Responsiveness is in force when a target segment responds differently (hopefully more positively) to the marketing mix than other segments. 24. _____ are characteristics of individuals, groups, or organizations that marketers use to divide a total market into segments. A. Differentiation guides B. Segmentation bases C. Perceptual maps D. Responsiveness quotients E. Accessibility quotients Answer: B Rationale: This is the definition of segmentation bases. 25. Military Spouses is the only publication in the world that targets readers who are “married to the military.” Its content reflects the unique set of challenges, hardships, and rewards to those whose spouses are in the military. The marital status that has been used to distinguish the market for this magazine is an example of a(n): A. market base. B. selector base. C. identifier. D. segmentation base. E. discriminator base. Answer: D Rationale: A segmentation base is the characteristic used to segment the market. 26. Scott owns Buffalo Mountain Coffee in Deer Park, Ohio.. He understands the need to segment his market, and available marketing research indicates there is much demand in the community for unique coffee drinks. However, he has few resources and cannot engage in intensive consumer research to precisely identify a segment. Which of the following strategies would you suggest he employ? A. Develop an undifferentiated strategy, because it is not a large community and he could create a single marketing mix that would serve the entire community B. Employ a macro segmentation strategy, because the data needed for such a strategy are both easy to get and fit his needs exactly C. Use a single-variable strategy, because it offers an inexpensive alternative that would not require much experience to employ D. Use a multiple-variable segmentation strategy, because it is easier to use than single-variable segmentation E. Conduct a VALS investigation of his buying market Answer: C Rationale: Less precise, single-variable segmentation has the advantage of being simpler and easier to use than multiple-variable segmentation. 27. _____ is the segmenting of markets based on the region of the country or the world, market size, market density (number of people within a certain unit of land), or climate. A. Community segmentation B. Geographic segmentation C. Geodemographic segmentation D. PRIZM segmentation E. Demonstrated regionalization Answer: B Rationale: This is the definition of geographic segmentation. 28. Consumers in Louisiana love hot sauce, and Tabasco and Crystal brands are particularly popular there. Consumers in Michigan do not like hot food, so they purchase very little hot sauce. A national chain of grocery stores would likely use _____ segmentation when stocking condiment merchandise. A. geographic B. economic C. demographic D. benefit E. geodemographic Answer: A Rationale: Geographic segmentation is the most logical base for segmentation of a product that is used more in one area than another. 29. A manufacturer of blankets knows heavy 100 percent wool blankets sell better in the New England area where the winters are harsh and that lighter-weight blankets sell better in the Southeast market where mild winters require fewer and lighter covers for the bed. Segmenting the market according to climate is an example of _____ segmentation. A. psychographic B. lifestyle C. perceptual D. demographic E. geographic Answer: E Rationale: Geographic segmentation includes segmenting markets by climate. 30. The Coca-Cola Company has over 450 brands in over 195 countries. According to their Web site, their products range from Samurai, an energy drink available in Asia to Vita, an African juice drink. It uses _____ segmentation in this marketing strategy. A. geographic B. economic C. demographic D. usage-rate E. multi-positioning Answer: A Rationale: Geographic segmentation segments markets by region of the country or world. 31. Almost all cell phones sold in the United States are black or gray. Almost all cell phones sold in Europe are colorful, and very few black phones are sold. A cell phone manufacturer knowing this information could use _____ segmentation when selling its phones internationally. A. geographic B. economic C. demographic D. benefit E. multi-positioning Answer: A Rationale: Geographic segmentation includes segmenting markets by region of the country or world. 32. All of the following statements are reasons why consumer goods companies take a regional approach to marketing rather than a national approach EXCEPT: A. Many firms need to find new ways to generate sales because of sluggish and intensely competitive markets. B. A regional approach gives marketing managers control over the competitive environment. C. Computerized checkout stations with scanners enable retailers to assess accurately which brands sell the best in each region. D. Many packaged-goods manufacturers are introducing new regional brands intended to appeal to local preferences. E. A more regional approach allows consumer goods companies to react more quickly to competition. Answer: B Rationale: The competitive environment is one of the noncontrollable factors in a company’s environment. 33. Marketers use _____ to segment markets because this information is widely available, and factors such as age or gender are often related to consumer purchasing and consumption behavior. A. benefits B. psychographics C. demographics D. usage rates E. sociocultural attributes Answer: C Rationale: Common bases of demographic segmentation are age, gender, income, ethnic background, and family life cycle. 34. Income, ethnic background, gender, and age are all examples of _____ segmentation bases. A. geodemographic B. organizational C. demographic D. socioeconomic E. psychographic Answer: C Rationale: These are demographic characteristics of consumers. 35. Colgate manufactures a fruit-flavored SpongeBob Square pants toothpaste for kids. The age-based variable that distinguishes the market for this product is an example of _____ segmentation. A. geographic B. demographic C. psychographic D. benefits E. usage rate Answer: B Rationale: A demographic base segments the market. SpongeBob Square pants toothpaste is produced for young children and sold to their parents. 36. Modern Maturity magazine is targeted toward adults aged 50 years and older. It has articles on health and fitness as well as the arts and finance. What segmenting base is Modern Maturity using? A. Demographic B. Geographic C. Nomological D. Economic E. Generational Answer: A Rationale: This magazine is using age as a segmentation base, which is characteristic of demographic segmentation. 37. Fisher-Price developed a rugged, waterproof camera for children. This product uses _____ segmentation. A. ethnicity B. income C. age D. gender E. occupation Answer: C Rationale: Attracting children is a popular strategy for companies that hope to instill early brand loyalty. 38. While most marketing to Generation Y tries so hard to be hip that it borders on parody, Vans has kept the decades-old brand real and vital for Gen Yers. Marketing programs the footwear manufacturer uses to reach Gen Yers include the Vans Skate Parks, which operate in malls around the country; the wildly successful Vans Warped Tour for alternative music; and the Vans Triple Crown, the brand’s answer to the X Games. The segmentation plan used by Vans relies heavily on _____ segmentation. A. ethnicity B. income C. age D. gender E. occupation Answer: C Rationale: Vans is segmenting by age––in this case, Generation Y, which consists of people born between 1979 and 1994. 39. Redbook magazine targets what it calls “Redbook jugglers,” defined as 25- to 44-year-old women who must juggle family, husband, and job. According to a Redbook ad, “She’s the product of the ‘me generation,’ the thirty-something woman who balances home, family, and career—more than any generation before her, she refuses to put her pleasures aside. She’s old enough to know what she wants, and young enough to get it.” This is an example of _____ segmentation. A. demographic and psychographic B. benefit desired and usage rate C. geodemographic and benefit desired D. demographic and usage rate E. benefit desired and demographic Answer: A Rationale: Thirty-something women indicate demographic segmentation. The juggling act describes her lifestyle, which would represent psychographic segmentation. 40. Which of the following statements about the teen market is TRUE? A. Teens represent half of all spending in the United States. B. Teens are technologically savvy and are very social consumers. C. Teens typically have very little influence over major family purchase decisions. D. Teens spend a considerable amount of money on health-related purchases. E. All of the above are true. Answer: B Rationale: Teens have a lot of tech savvy and are social consumers. 41. Deal$ stores sell a wide variety of low-priced merchandise: party supplies, cleaning products, toys, food, housewares, and health and beauty products for both men and women. Many items in the store are priced no higher than one dollar. Which type of demographic segmentation is Deal$ using? A. Ethnic B. Usage rate C. Income D. Gender E. Age Answer: C Rationale: The store sells low-priced products to appeal to low-income customers. 42. H&M plans to open a new store in Saudi Arabia. It will be staffed completely by women. Saudi Arabia has strict laws about women interacting with men other than their husbands, so only women will be permitted to shop there. Which type of demographic segmentation is H&M using? A. Lifestyle B. Usage rate C. Benefit D. Age E. Gender Answer: E Rationale: Gender is a demographic variable, but benefit and lifestyle are not. 43. Abbeville Press published a book by Armin Brott and Jennifer Ash entitled The Expectant Father: Facts, Tips, and Advice for Dads-to-Be. It is an advice book for men whose partners are expecting a baby. What demographic variables have been used to define the market for this book? A. Benefit desired and lifestyle B. Gender and family life cycle stage C. Age, gender, and personality D. Benefit desired and gender E. Usage-rate and lifestyle Answer: B Rationale: Benefit desired, personality, and lifestyle are not demographic variables. 44. Coca-Cola launched a new Black History television commercial on BET to coincide with the Martin Luther King Jr. holiday. The ad is just one element of a strategy for connecting with African American consumers. Coca-Cola’s segmentation plan for this promotional campaign is based on _____ segmentation. A. demographic B. sociocultural attributes C. psychographic D. usage rate E. geodemographic Answer: A Rationale: Ethnicity is a demographic variable for segmentation. 45. Johnson Publishing Company, the world’s largest African American-owned publishing company and home of Ebony magazine, has forged an alliance with Dan River, Inc. to create luxury bed and bath products for the newly developed Ebony Home brand. This brand will use the strong relationship the publisher has with the African American market to sell the brand. What form of demographic segmentation will be used to market the Ebony Home brand? A. Geographic B. Income C. Ethnic D. Benefit E. Lifestyle Answer: C Rationale: In this case, ethnicity would be the demographic variable. 46. In Miami, several radio stations broadcast in Spanish and play Latin music for the Hispanic people living in South Florida. The radio stations are using _____ segmentation. A. usage rate B. ethnic C. socioeconomic D. geographic E. gender Answer: B Rationale: In this case, ethnicity would be the demographic variable. 47. Modern Bride is a publication that contains articles and lots of ads for the bride-to-be. Many young women consult this magazine as they plan their special day. The segmentation base used to define the publication’s target market is based on _____ variables. A. geodemographic B. geographic C. family life cycle D. lifestyle E. psychographic Answer: C Rationale: The publication targets a market segment of consumers in a particular family life cycle stage. 48. A series of stages determined by a combination of age, marital status, and the presence or absence of children is known as the: A. generation gap. B. family life cycle. C. maturation process. D. segmentation cycle. E. psychographic process. Answer: B Rationale: This describes the family life cycle. 49. Jane graduated from high school in 1978, is married, and has two teenage children. Most of Jane’s friends from high school have children who have already graduated from college and gotten married, and some have grandchildren. Jane and her former classmates are at different stages of the: A. internalization phase. B. segmentation process. C. family life cycle. D. psychographic cycle. E. maturation process. Answer: C Rationale: The family life cycle is a series of stages determined by a combination of age, marital status, and the presence or absence of children. 50. Evenflo makes baby gates to keep toddlers away from stairs. What demographic segmentation variable will Evenflo use to identify its target market? A. Gender B. Benefit C. Usage rate D. Family life cycle E. Ethnic Answer: D Rationale: The segment is families with young children. 51. Which of the following businesses would be most likely to use family life cycle segmentation? A. Those that produce and market computer software and hardware B. The snack industry C. Fast-food restaurants D. Business-to-business marketers E. Wedding planners, couples-only resorts, and day care centers Answer: E Rationale: People in different stages of the family life cycle would be most likely getting married, going on a couples-only trip, or needing the services of a day care center. 52. _____ segmentation is based on personality, motives, and lifestyles. A. Psychographic B. Demographic C. Benefit D. Family life cycle E. Character Answer: A Rationale: Personality, motives, and lifestyles are bases of psychographic segmentation. 53. All of the following are bases for psychographic segmentation EXCEPT: A. benefits B. personality C. motives D. lifestyles E. geodemographics Answer: A Rationale: Benefit segmentation is a different segmentation strategy that groups customers on the basis of their needs and wants. 54. A Small World is a nonprofit retail store that sells gift items made by artisans from over 30 different countries. This store provides employment to craftspeople in developing nations and markets their handiwork at a fair price. The store defines its market segment as people who believe in helping others and who feel good about helping others whenever possible. The store uses _____ segmentation. A. demographic B. psychographic C. geodemographic D. ethnic E. geographic Answer: B Rationale: Psychographic segmentation is based on motives, personality, and lifestyles. 55. NASCAR racing fans are some of the most diverse and loyal fans in the world. They will stand in the pouring rain, the freezing cold, or the blistering heat for hours to shake the hand and get the autograph of a NASCAR driver. These fans are not concentrated in any one area but are dispersed throughout the United States. A Web site designed to market NASCAR memorabilia would be most likely to be successful if it used _____ segmentation to determine its target market. A. demographic B. psychographic C. geodemographic D. usage rate E. family life cycle Answer: B Rationale: Since the audience is diverse, demographic segmentation would not be nearly as useful as psychographic segmentation that emphasized the fans’ lifestyles. 56. Wine Spectator is a magazine that targets people who appreciate good wine and food. However, the discriminating reader of this magazine is also interested in travel and health, so the magazine features travel and health-related stories. This publication relies on _____ variables to identify its target market. A. psychographic B. demographic C. usage rate D. geodemographic E. family life cycle Answer: A Rationale: Such magazines are aimed at helping people achieve a certain lifestyle. 57. Magazines like Martha Stewart Living, Better Homes & Gardens, and other magazines targeted to people who are interested in improving their personal spaces rely on _____ segmentation. A. psychographic B. demographic C. usage rate D. geodemographic E. family life cycle Answer: A Rationale: These magazines are aimed at helping people achieve a certain lifestyle. They emphasize the motive variable. 58. The James Hardie Siding Company sells concrete siding. It was having little luck targeting contractors because concrete siding is difficult to install and shows every flaw if a house is incorrectly framed. So Hardie decided to target homeowners who wanted the security of knowing their siding was guaranteed not to rot or crack for 50 years. In terms of psychographic segmentation, the siding company used the _____ variable. A. lifestyles B. motives C. benefits D. demographic E. personality Answer: B Rationale: Using appeals to economy, reliability, and dependability targets customers with rational motives. Benefits is not a psychographic segmentation variable. 59. _____ divides individuals into groups according to the way they spend their time, the importance of items in their surroundings, their beliefs, and socioeconomic characteristics. A. Life cycle segmentation B. Temporal segmentation C. Lifestyle segmentation D. Micro-segmentation E. Macro-segmentation Answer: C Rationale: This describes the essence of lifestyle segmentation. 60. _____ is a method that clusters potential customers into neighborhood lifestyle categories and is a combination of geographic, demographic, and lifestyle segmentations. A. Geodemographic segmentation B. Micro-segmentation C. Sociocultural clustering D. Acculturation E. Lifestyle segmentation Answer: A Rationale: This is the definition of geodemographic segmentation. 61. In Baton Rouge, Louisiana, everyone who is anybody in society can’t wait to get a copy of 225 magazine. The magazine is targeted to the upper middle and upper classes in Baton Rouge and features articles on how they work and play. The editor of 225 magazine is relying on _____ segmentation. A. geodemographic B. graphic C. benefit D. socioeconomic E. income Answer: A Rationale: Geodemographic segmentation combines geographic, demographic, and lifestyle segmentations. 62. Which of the following statements best describes the reason marketers find geodemographic segmentation so effective? A. “A bird in the hand is worth two in the bush.” B. “Every action has an opposite and equal reaction.” C. “A rifle is more exact than a shotgun.” D. “Don’t put all of your eggs in one basket.” E. “Birds of a feather flock together.” Answer: E Rationale: Geodemographic segmentation is a method that clusters potential customers into neighborhood lifestyle categories and is a combination of geographic, demographic, and lifestyle segmentations. 63. Kraft Foods plans to tailor different ads for different neighborhoods in the same region. For example, viewers watching a cable show in a Hispanic neighborhood in Chicago would see different ads during the same commercial breaks as non-Hispanics living in a different neighborhood. Kraft’s strategy best exemplifies _____ segmentation. A. sociocultural B. lifestyle C. cluster benefit D. geodemographic E. systematic geographic Answer: D Rationale: Geodemographic segmentation clusters potential customers into neighborhood lifestyle categories. It combines geographic, demographic, and lifestyle segmentations. 64. _____ is the process of grouping customers into market segments according to the benefits sought from the product. A. Benefit segmentation B. Value-added segmentation C. Lifestyle segmentation D. Macro-segmentation E. Psychographic segmentation Answer: A Rationale: This is the definition of benefit segmentation. 65. Miller Lite’s long-running “Great Taste...Less Filling!” advertising campaign was ranked by Advertising Age magazine as the 8th-best advertising campaign in history. Miller Lite was using _____ segmentation in this ad campaign. A. geographic B. demographics C. psychographics D. benefit E. usage rate Answer: D Rationale: Benefit segmentation groups customers into market segments according to the benefits they seek from the product. 66. ThermaCare air-activated heat wraps are meant to be wrapped around sore muscles and joints. The product is advertised as a powerful pain reliever and a source of deep muscle relaxation. Its soothing warmth can work at night while you sleep to restore your body. The manufacturer of ThermaCare heat wraps is using _____ segmentation. A. geodemographic B. functional C. benefit D. socioeconomic E. feature-based Answer: C Rationale: The benefit sought is freedom from pain. 67. Karry-Lite, the manufacturer of light-weight suitcases with wheels, uses as its slogan, “Takes the ‘lug’ out of luggage.” This slogan illustrates the use of _____ segmentation. A. geodemographic B. benefit C. functional D. usage-rate E. feature-based Answer: B Rationale: The benefit sought is easy-to-carry luggage. 68. There are many furniture manufacturers. Tall Paul’s is the only one that makes furniture to meet the needs of people who are over 6’6” tall. These people find furniture designed for average-sized people to be cramped and uncomfortable. Tall Paul’s uses _____ segmentation. A. geodemographic B. usage-rate C. demographic D. psychographic E. benefit Answer: E Rationale: The consumers are described by the type of benefit they seek. 69. When asked to name a brand of sports drink, most people will answer Gatorade, and some will respond with POWERade. But people with diabetes who still need to replenish electrolytes lost during activity or illness cannot drink these sports drinks because they are high in sugar and thus cannot be consumed by diabetics. As a result, a manufacturer has developed Champion Lyte, which contains no sugar. The manufacturer of Champion Lyte has used _____ segmentation to identify its market. A. geodemographic B. usage-rate C. demographic D. psychographic E. benefit Answer: E Rationale: The consumers can be described by the type of benefit they seek. 70. Many people find it difficult to peel hard-boiled eggs. Eggies is a kitchen gadget designed to help make cooking hard boiled eggs quicker and easier. The product allows customers to hard-boil eggs without the shell. Consumers simply crack an egg, pour it into the plastic “Eggie,” boil, then twist to enjoy hard-boiled eggs without the messy peeling of the eggshell after they're done. Eggies is using _____ segmentation. A. usage-rate B. demographic C. geodemographic D. competitive E. benefit Answer: E Rationale: Eggies is selling the benefit of not having to peel your hard-boiled eggs. 71. Which type of segmentation divides a market by the amount of product bought or consumed? A. Benefit segmentation B. Characteristic segmentation C. Usage-rate segmentation D. Demographic segmentation E. Psychographic segmentation Answer: C Rationale: This is the definition of usage-rate segmentation. 72. Most airline frequent flyer programs reward the most frequent flyers with business class upgrades and flight lounge privileges. Airlines are using these rewards as a means of implementing _____ segmentation. A. lifestyle B. motive C. usage-rate D. demographic E. personality Answer: C Rationale: Usage-rate segmentation divides a market by consumption so that firms can target their heavy users. 73. The public transportation system in the San Francisco area conducted a survey that revealed respondents could be assigned to one of four categories: (1) people who never utilized mass transit, (2) people who utilized mass transit in the past but not now, (3) people who utilized mass transit occasionally, and (4) people who utilized mass transit regularly. These groups have significantly different perceptions about transportation alternatives. This is an example of _____ segmentation. A. demographic B. benefit C. aggregate D. economic E. usage-rate Answer: E Rationale: Segmenting users by amount purchased or consumed is usage-rate segmentation. 74. ThinkGeek is an online retailer that caters to computer enthusiasts and other “geeky” social groups. Their merchandise includes clothing, electronic and scientific gadgets, unusual computer peripherals, office toys, pet toys, child toys, and caffeinated drinks and candy. ThinkGeek runs a points-for-reward system called Geek Points, under which customers can earn rewards for buying more products. This is an example of segmentation by: A. demographic. B. benefit. C. aggregate. D. economics. E. usage rate. Answer: E Rationale: Segmenting users by amount purchased or consumed is usage-rate segmentation. 75. General Mills offers a deal where its cereal users can collect box tops and submit them to General Mills to earn money for their children’s schools. This program, called the Box Tops for Education Program, is a means of changing light users into heavier users. In other words, it is a form of _____ segmentation. A. lifestyle B. motive C. usage-rate D. demographic E. personality Answer: C Rationale: Usage-rate segmentation divides a market by the amount of product bought or consumed. 76. What does the 80/20 principle propose? A. Roughly 80 percent of the profit comes from 20 percent of the sales. B. Roughly 80 percent of a firm’s customers are repeat business. C. Roughly 50 percent of a firm’s customers purchase 80 percent of the sales volume of the product. D. Roughly 20 percent of a firm’s customers purchase 80 percent of the sales volume of the product. E. Sales are equally divided among heavy, medium, and light users, but they all need slightly different products. Answer: D Rationale: The 80/20 principle proposes that a minority of a firm’s customers purchase a majority of the volume of the product. 77. The _____ proposes that a minority of a firm’s customers purchase a majority of the volume of the product. A. majority fallacy B. equity fallacy C. 80/20 principle D. cannibalization rule E. optimizer principle Answer: C Rationale: This is the definition of the 80/20 principle. 78. Pocket-knife collector Sam Penley decided to open The Knife Depot, a store that sells pocket knives and related paraphernalia. After 18 months in business, Sam has noticed that most of his sales are to the same small group of customers (about 40 people) even though he has records to show there are over 200 active pocket-knife collectors within a 50-mile radius of his store. Sam’s retailing experience is supportive of the: A. optimizer principle B. min-max rule C. majority fallacy D. rule of demand E. 80/20 principle Answer: E Rationale: The 80/20 principle proposes that a minority of a firm’s customers purchase a majority of the volume of the product. 79. H&R Block launched a $100 million marketing campaign to parlay the company’s intimate knowledge of 20 million customers’ finances into other services like mortgages and investment advice. Block has great brand recognition, but consumers only care about it four months out of the year. H&R Block is attempting to _____ itself to make people think of it as a company offering services year-round. A. reposition B. reengineer C. demarket D. un-differentiate E. niche Answer: A Rationale: Repositioning means changing the customers’ perceptions of a brand in relation to competing brands. 80. Business marketers focus on all of the following market segments EXCEPT: A. institutions. B. producers. C. households. D. resellers. E. government. Answer: C Rationale: The business market consists of four broad segments: producers, resellers, government, and institutions. Households are part of the consumer market. 81. Zatarains offers packaged spice mixes for jambalaya, gumbo, and red beans and rice. Consumers can buy the product in the store, so Zatarains sells individual household-size packages to resellers. It also sells institutional-size packages to military bases, schools, restaurants, and other large organizations. The marketers of Zatarains would most likely segment the business market according to: A. company characteristics. B. the buying process. C. financial terms. D. customer relationship objectives. E. length of distribution channel. Answer: A Rationale: Each of the buyers of Zatarains’ products has distinct characteristics to be met, such as type of company, company size, and product use. 82. Tower Fasteners developed a commanding position in the fastener industry by having in stock over 150,000 different types of fasteners. Tower’s primary market is defined as companies with a need for specialized fasteners. All of the following are characteristics of the buying organization that Tower can use for segmentation EXCEPT: A. psychographic variables. B. the method the company uses to make purchases. C. geographic location. D. personal characteristics of buyers themselves. E. company size. Answer: A Rationale: Psychographic variables are used in the consumer market. 83. Firms can be categorized by the type of purchasing strategy they use. _____ usually contact familiar suppliers and place an order with the first that can meet product and delivery requirements. A. Strugglers B. Actualizers C. Optimizers D. Satisficers E. Experiencers Answer: D Rationale: This is the definition of satisficers. 84. Hank operates a plumbing and electrical supply store. He has categorized its business customers by their purchasing strategy. Hank has found it much easier to serve and satisfy the _____, who usually recontact familiar suppliers and place an order immediately if product and delivery requirements are acceptable. A. adopters B. adapters C. optimizers D. innovators E. satisficers Answer: E Rationale: Satisficers use a simple, quick purchasing strategy of looking for the first available adequate supplier. 85. Firms can be categorized by the type of purchasing strategy used. _____ consider numerous, even unfamiliar, suppliers and solicit and analyze options. A. Satisficers B. Strivers C. Optimizers D. Actualizers E. Innovators Answer: C Rationale: This is the definition of optimizers. 86. The Green Earth, a landscaping company, finds that the most difficult firms to get business from are the _____, because this group considers numerous and even unfamiliar suppliers, solicits bids, and carefully analyzes options; therefore, it requires a higher levels of customer service. A. actualizers B. strivers C. satisficers D. optimizers E. early adopters Answer: D Rationale: Firms that use an optimizer purchasing strategy consider many suppliers and analyze their options carefully. 87. What is the first step in segmenting a market? A. Set the segmentation goals B. Choose a basis or bases for segmenting the market C. Select a market or product category for study D. Profile and analyze segments E. Select target markets Answer: C Rationale: The steps in segmenting a market are (1) select a market or product category for study; (2) choose a basis or bases for segmenting the market; (3) select segmentation descriptors; (4) profile and analyze segments; (5) select target markets; and (6) design, implement, and maintain appropriate marketing mixes. 88. All of the following are steps in the market segmenting process EXCEPT: A. determining the objectives of the segmentation strategy B. profiling and analyzing segments C. designing, implementing, and maintaining appropriate marketing mixes D. selecting a market or product category for study E. choosing a basis or bases for segmenting the market Answer: A Rationale: The steps in segmenting a market are (1) select a market or product category for study; (2) choose a basis or bases for segmenting the market; (3) select segmentation descriptors; (4) profile and analyze segments; (5) select target markets; and (6) design, implement, and maintain appropriate marketing mixes. 89. June LaVista owns a health and fitness gym. After dividing her customers into four segments based on income range, age, level of fitness, and other selected segmentation descriptors, she wrote out a description of each segment’s size, expected growth, frequency of exercise, and overall profit potential. Which step in segmenting a market is LaVista engaged in? A. Profiling and analyzing her market segments B. Positioning her products to her market segments C. Targeting promotions to her market segments D. Differentiating her market segments E. Concentrating her marketing mix on the most profitable marketing segments Answer: A Rationale: The profiling and analysis of the segments step in segmenting a market involves analyzing the segments’ size, expected growth, purchase frequency, and so on. 90. After selecting a market for study and choosing bases for segmenting that market, the marketer must select the segmentation _____, which identify the specific segmentation variables to use A. descriptors B. matrices C. narratives D. variations E. networks Answer: A Rationale: Descriptors identify the specific segmentation variables to use. 91. Thompson Pools installs and maintains swimming pools. They group their customers according to their needs: new installs, regular maintenance, and frequent product consumers. When do they need a new segmentation analysis? A. Once every 20 years B. They should do them regularly because of the rapidly changing nature of most markets. C. They don’t need any because consumer markets don’t rapidly change and develop like business goods markets. D. Every year, using new bases for variety E. Only when the market changes Answer: B Rationale: Markets are dynamic, so it is important that companies proactively monitor their segmentation over time. 92. Market segmentation: A. is a scientific technique for selecting ways to attract specific population samples B. is rarely done by consumer products companies C. only needs to be done once for each product D. should be redone periodically E. should be done every time a product enters a new stage of its life cycle Answer: D Rationale: Markets are dynamic, so it is important that companies proactively monitor their segmentation over time. 93. A(n) _____ is a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchanges. A. heterogeneous segment B. target market C. responsive segment D. aggregated market E. undifferentiated target Answer: B Rationale: This is the definition of a target market. 94. The debate over gay marriages is causing a great deal of furor, but it has done little to deplete the importance of the affluent gay market to businesses. Georgia Pacific and Mitchell Gold, a furniture manufacturer, are two companies that have implemented and maintained marketing mixes designed to meet the needs of lesbians and gays. To these companies and others, lesbians and gays are a desirable: A. market sample. B. target market. C. perceived market. D. functional market. E. market base. Answer: B Rationale: A target market is a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group. 95. Sure Fit, Inc. has begun a rebranding strategy to let customers know it no longer only produces slipcovers but now also carries a line of rugs, window treatments, and bedding. Its _____ is described as women with average annual household income of $60,000 or more. A. market audience B. market differentiation C. perceived market D. target market E. aggregated market Answer: D Rationale: A target market is a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group. 96. Which of the following is NOT an advantage of an undifferentiated marketing strategy? A. effectively protects firm from competition B. very cost effective C. low complexity D. reaches anyone E. All of the above are advantages. Answer: A Rationale: One major problem associated with undifferentiated marketing is that it makes the company more susceptible to competitive inroads. 97. Which of the following is a potential disadvantage associated with an undifferentiated strategy? A. Large competitors may more effectively market to niche segment B. Unimaginative product offerings C. Segments too small D. High costs E. Loss of synergy Answer: B Rationale: Too often, an undifferentiated strategy emerges by default rather than design. The result is often sterile, unimaginative product offerings that have little appeal to anyone. See Exhibit 8.2. 98. One segment of a market is called a: A. slice B. wedge C. pocket D. slot E. niche Answer: E Rationale: A concentrated targeting strategy focuses on one segment of a market. 99. Which target marketing strategy views the market as one big market with no individual segments and thus uses a single marketing mix? A. Undifferentiated B. Concentrated C. Niche D. Uniform E. Multi-segmented Answer: A Rationale: A firm using an undifferentiated targeting strategy essentially adopts a mass-market philosophy, viewing the market as one big market with no individual segments. 100. Candace Popwell makes and markets Festive Holiday Truffles candy. The confectionary company owner views the world as one big market with no individual segments and tries to reach it with only one marketing mix. Her essentially mass-market philosophy indicates she probably uses a(n) _____ strategy. A. multi-segment targeting B. universal product C. concentrated targeting D. undifferentiated targeting E. product differentiation Answer: D Rationale: With an undifferentiated targeting strategy, the market is viewed as one big market with no individual segments and uses a single marketing mix. 101. When Henry Ford made the Model T, he said that consumers “can have their car in any color they want, as long as it’s black.” This was a case of: A. Repositioning. B. Reengineering. C. one-to-one marketing. D. undifferentiated targeting. E. niche marketing. Answer: D Rationale: An undifferentiated targeting strategy views the market as a whole without individual segments and uses a single marketing mix. 102. All of the following are advantages of using a concentrated targeting strategy EXCEPT: A. concentration of resources B. can better meet the needs of a narrowly defined segment C. allows some small firms to better compete with larger firms D. strong positioning E. cannibalization Answer: E Rationale: Cannibalization is a disadvantage of multi-segment targeting. See Exhibit 8.2. 103. A(n) _____ strategy entails selecting one segment of a market to target and focuses on understanding the needs, motives, and satisfactions of the members of that segment, as well as on developing a highly specialized marketing mix. A. universal product B. undifferentiated targeting C. concentrated targeting D. market development E. product development Answer: C Rationale: Concentrated targeting strategy selects one segment of a market for targeting marketing efforts. 104. Tall Paul’s designs and sells household furniture and furnishings to people who are over 6’6” tall––a rather small target market. Tall Paul’s uses a(n) _____ targeting strategy. A. benefit B. undifferentiated C. multi-segment marketing D. universal product code E. concentrated Answer: E Rationale: Concentrated targeting strategy selects one segment of a market for targeting marketing efforts. 105. When a firm uses a concentrated targeting strategy, it can: A. view the total market as receptive to its product. B. offer a highly specialized marketing mix. C. reach customers in two or more segments that might otherwise be missed. D. avoid the danger of putting all resources in one micro-market. E. concentrate on one generalized product to fit the mass market, maximizing sales volume. Answer: B Rationale: Concentrated targeting focuses on one target market and develops a highly specialized mix. 106. E&V Bridal Studios, a wedding consulting business, only works with Eastern Asian customers who want to use their cultural heritage in their wedding ceremonies. What type of segmentation strategy does the wedding consultant use? A. Market aggregation B. Undifferentiated targeting C. Multi-segment marketing D. Concentrated targeting E. Limited demand Answer: D Rationale: E&V Bridal Studios concentrates on one segment of the market––Eastern Asians who want a traditional wedding. 107. Companies that adopt a concentrated marketing strategy violate which of the following old sayings? A. “You can’t bake a pie without breaking some eggs.” B. “Don’t count your chickens before they hatch.” C. “Don’t put all your eggs in one basket.” D. “The grass is always greener on the other side of the fence.” E. “A rolling stone gathers no moss.” Answer: C Rationale: A concentrated targeting strategy focuses on one segment of a market. 108. When a firm serves two or more well-defined market segments with a distinct marketing mix for each, it is using a(n) _____ targeting strategy. A. undifferentiated B. concentrated C. niche D. multi-segment E. pluralistic Answer: D Rationale: A firm that chooses to serve two or more well-defined market segments and develops a distinct marketing mix for each has a multi-segment targeting strategy. 109. Piper Corporation makes aircrafts. It produces several different planes for three categories of customer: Professional, Personal, and Trainer. What type of targeting strategy is Piper using? A. Demand positioning B. Concentrated C. Undifferentiated D. Multi-segment E. Market differentiation Answer: D Rationale: Piper has chosen three specific markets to target, which is characteristic of a multi-segment targeting strategy. 110. Stouffer’s offers gourmet entrees for one segment of the frozen dinner market and Lean Cuisine for another segment that wants both good taste and low calories. When Stouffer’s chose to serve two well-defined market segments and develop distinct marketing mixes for each, it was implementing a(n) _____ strategy. A. market integration B. concentrated targeting C. undifferentiated targeting D. multi-segment targeting E. heterogeneous positioning Answer: D Rationale: A firm that chooses to serve two or more well-defined market segments and develops a distinct marketing mix for each has a multi segment targeting strategy. 111. With multi-segment targeting, a company could benefit from all of the following EXCEPT: A. greater sales volume B. greater product design and management cost C. higher profits D. larger market share E. economies of scale in manufacturing Answer: B Rationale: Having greater product design and management costs would not be a benefit of using multi-segment targeting. 112. A potential disadvantage of multi-segment targeting is _____, which occurs when sales of a new product cut into sales of a firm’s existing products. A. cannibalization B. synergy C. positioning D. demarketing E. inelastic demand Answer: A Rationale: Cannibalization is a situation that occurs when sales of a new product cut into sales of a firm’s existing products. 113. _____ is one of the potential disadvantages associated with a multi-segment strategy. A. Inadequate demand B. Demarketing C. Lower profits D. Cannibalization E. Loss of synergy Answer: D Rationale: Cannibalization is a situation that occurs when sales of a new product cut into sales of a firm’s existing products. 114. Pharmaceutical firms have introduced new over-the-counter antacids that block the production of stomach acids while still marketing traditional antacids. Traditional antacids treat heartburn by neutralizing stomach acid. If sales of the new acid blockers reduce sales of the traditional antacids, then _____ has occurred. A. demarketing B. cannibalization C. undifferentiation D. repositioning E. perceptual confusion Answer: B Rationale: Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. 115. When Procter & Gamble (P&G) introduced Liquid Tide to a new segment, consumers in the traditional powdered detergent segment switched to the liquid product. Rather than real sales growth, P&G simply experienced the shifting of existing customers to a new product. This exemplifies a drawback of multi-segment targeting strategy called: A. demarketing B. selective perception C. undifferentiation D. cannibalization E. market repositioning Answer: D Rationale: Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. 116. Clorox saw sales of its bleach products suffer when it introduced laundry detergents with bleach as an added ingredient. This is an example of: A. demarketing B. cannibalization C. undifferentiation D. repositioning E. perceptual confusion Answer: B Rationale: Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. 117. A marketing method that tracks interaction with customers to optimize customer satisfaction and long-term company profits is referred to as: A. 80/20 marketing B. interpersonal marketing C. zoned marketing D. customer relationship management E. individual marketing Answer: D Rationale: This is the goal of customer relationship management. 118. Mirage Resorts in Las Vegas has a system that allows hotel clerks instantaneous access to a client’s gambling history to determine what sort of room or complimentary services will provide the guests with the highest level of service. This is an example of which trend contributing to CRM? A. Time Savings B. Personalization C. Loyalty marketing D. Technology E. All of these Answer: B Rationale: Mirage uses personalization to meet the unique needs and wants of its customers. 119. Lands’ End offers customers the option using special software to accurately gauge what size customers are in Lands’ End clothes using a web cam image, and the ability to store size preferences. This is an example of which trend contributing to CRM? A. Time Savings an application of the 80/20 rule B. Personalization firewall marketing C. Loyalty marketing one-to-one marketing D. Technology transformational marketing E. All of these data mining Answer: D Rationale: This type of technology offers customers personalized profiles through advanced technology that collects the information they volunteer. 120. All of the following are true about CRM except: A. Customers resent how companies use their information B. CRM is a huge commitment C. Marketers often have to completely rethink how they target customers. D. Loyalty programs use CRM to thank customers for their business and reinforce the decision to shop at that store. E. CRM makes purchase decisions more routine for regular customers, which offers time savings. Answer: A Rationale: Companies use CRM to make customer experience more pleasant, faster, and more personalized. As long as the information is not abused, customers generally appreciate the attention that CRM allows companies to give them. 121. All of the following have been identified as trends that will lead to the continuing growth of CRM EXCEPT: A. Time Savings B. Personalization C. Loyalty marketing D. Technology E. Product differentiation Answer: E Rationale: All of these are trends impacting the growth of one-to-one marketing except product differentiation, which is a positioning strategy. 122. The Ritz-Carlton hotel chain is renowned for its service and individual treatment of its customers. All service staff and employees have note pads and are taught to record every little piece of information they learn about a customer. If a business traveler ordered soft pillows, only wanted martinis in his mini bar, and needed access to a fax machine, he would find all of these amenities in his room when he arrived. The Ritz-Carlton is basing its CRM on which of the following trends? A. Time Savings B. Personalization C. Loyalty marketing D. Technology E. All of these Answer: B Rationale: Consumers are more and more likely to equate good service with personalized service. 123. Product positioning is the process of: A. finding the correct location for retail outlets to sell a product category. B. finding the right channel of distribution for a product. C. creating the desired image of the firm’s product. D. competing with competitors’ products in the retailers’ stores for the best position on the shelf. E. pricing the product to be at a competitive level with other brands on the market. Answer: C Rationale: Positioning is developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. 124. _____ is the development of a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general and is related to the place a product occupies in consumers’ minds relative to competing offerings. A. Market differentiation B. Diversification C. Combination marketing D. Positioning E. Market aggregation Answer: D Rationale: This is the definition of positioning. 125. Chandler Kumar owns two antique stores. One is in an upscale neighborhood, and its merchandise is artfully arranged and priced to indicate product rarity. The other is in a run-down strip mall and contains some of the same type of merchandise, but the items are left in open boxes and placed haphazardly on shelves. Customers of either store have entirely different perceptions of the stores and would be surprised to know Kumar operates each of them because he uses such differing _____ strategies. A. market integration B. segmentation C. targeting D. positioning E. market combination Answer: D Rationale: Positioning is developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. 126. The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings is referred to as a product’s: A. status B. equity C. frame D. role E. position Answer: E Rationale: This is the definition of a product’s position. 127. Elaine perceives Cadillac automobiles to be for older men, not for young professional women such as herself. Elaine’s perception represents Cadillac’s _____ in her mind. A. status B. frame C. position D. role E. equity Answer: C Rationale: Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. 128. There are a number of devices that parents can buy to prevent their children from hearing objectionable language while they watch television. ProtecTV is the only product of its kind that has an expandable dictionary. Parents can add words and phrases they find offensive, and the additional words will be deleted from soundtracks and captioning. ProtecTV uses a(n) _____ strategy. A. repositioning B. demarketing C. market integration D. undifferentiated targeting E. product differentiation Answer: E Rationale: Product differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors. 129. Products such as bleaches, aspirin, unleaded regular gasoline, and some soaps are distinguished by differences such as brand names, packaging, color, smell, or “secret” additives. With these products, marketers attempt to convince customers that their product is significantly different from the others and should therefore be demanded over competing brands. These marketers are using: A. cannibalization B. perceptual mapping C. psychographic targeting D. integrated marketing E. product differentiation Answer: E Rationale: Product differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors. 130. For years, fryer chickens sold in grocery stores were perceived to be a rather generic product––one brand of chicken was much like another. Then Frank Perdue began an advertising campaign to tell consumers that his brand of chicken was more tender, therefore a better choice. Perdue brought _____ to the marketing of fryer chickens. A. perceptual mapping B. product differentiation C. psychographic targeting D. market innovation E. cannibalization Answer: B Rationale: Product differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors. 131. When the Sara Lee Bakery Group introduced Iron Kids Crustless bread (to save mothers the time and effort of slicing the crusts off sandwiches), it was using: A. PRIZM segmentation B. geodemographic segmentation C. niche marketing strategy execution D. product differentiation E. a target market chart Answer: D Rationale: The purpose of product differentiation is to distinguish one firm’s products from those of another. 132. Which of the following is a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds? A. Perceptual mapping B. Product positioning C. Market segmentation D. Product tracing E. Laddering Answer: A Rationale: This is the definition of perceptual mapping. 133. A(n) _____ could help determine whether or not snacking consumers consider Kashi Tasty Little Crackers healthy and tasty in comparison to other brands. A. predictive model B. perceptual map C. product position D. trend analysis E. internal marketing audit Answer: B Rationale: A perceptual map displays, in two or more dimensions (like healthy and tasty), the location of products in the customers’ minds. 134. All of the following are typical bases for positioning EXCEPT: A. attribute B. price and quality C. distribution D. emotion E. product user Answer: C Rationale: Typical bases for positioning include attribute, price and quality, use or application, product user, product class, competitor, and emotion. 135. In 2008, Apple, Inc. introduced Mobile Me, which keeps everything on a consumer’s Mac, PC, iPod, or iPhone on an online server Apple calls the “Cloud” so that it can be accessed at any time. Apple is catering to on-the-go consumers who use multiple platforms. This positioning strategy is based on the: A. product class B. price and quality C. use or application D. product user E. competitor Answer: D Rationale: This positioning strategy focuses on a personality or type of user. 136. Ad campaigns for Aleve pain reliever emphasize the fact that to get the same relief offered by one Aleve, you would need to take six aspirin or Tylenol and four Advil. These promotions are using the positioning base of: A. product class B. competitor C. product user D. product merits E. price and quality Answer: B Rationale: Positioning against competitors is a positioning strategy. 137. The advertisements for Kay Jewelers usually show a man presenting a woman with a ring or necklace and receiving a kiss in return. The ad then shows the slogan “Every Kiss Begins with Kay.” This is an example of _____ positioning. A. product class B. price and quality C. use or application D. attribute E. emotion Answer: E Rationale: Positioning uses emotion to show how the product makes customers feel. 138. Changing consumers’ perceptions of a brand in relation to competing brands is known as: A. positioning B. repositioning C. reintermediation D. demarketing E. reengineering Answer: B Rationale: This is the definition of repositioning. 139. The Southern Company is the largest provider of utilities in the southeastern United States. It has also been accused of being the biggest source of industrial air pollution in the area. Southern is trying to change consumers’ perceptions of the company by sponsoring a series of television programs on how to preserve our environment. The Southern Company is hoping the programming will lead to: A. repositioning B. reengineering C. demarketing D. undifferentiated targeting E. one-to-one marketing Answer: A Rationale: Repositioning means changing the customers’ perception of a brand in relation to competing brands. 140. To be successful, most businesses focus on customer service. However, the cable industry has a history of poor customer service. Cable companies are facing competition for television customers who once had no choice but cable if they wanted to see more than local programs. In the face of this competition from direct broadcast satellites, cable companies are trying to use a _____ strategy to show that they have become customer oriented. A. segmentation B. product differentiation C. targeting D. repositioning E. demarketing Answer: D Rationale: Repositioning is changing consumers’ perception of a brand in relation to its competitors. Turkey Hunting Equipment Around the beginning of fall each year, about 2.7 million turkey hunters all over the United States start looking at catalogs for the perfect item to guarantee that this year they will kill a wild turkey, the most elusive game bird in North America. The devoted turkey stalker can stock up on everything from camouflaged turkey hunting socks, turkey license plate holders, vests with huge pockets for toting dead birds, and hunting videos to turkey decoys, turkey earrings, and turkey callers. Neil Cost is considered the best manufacturer of turkey callers in the world. It is his only product, and each is highly prized by turkey hunters. It is not unusual for a turkey hunter to pay $5,000 for one of Cost’s callers. 141. Refer to Turkey Hunting Equipment. Wild turkey hunters would be defined as a: A. market segment B. market position C. segmentation base D. retail position E. consumer position Answer: A Rationale: A market segment is a subgroup of individuals sharing one or more characteristics (in this case love of wild turkey hunting) that cause them to have similar product needs. 142. Refer to Turkey Hunting Equipment. Given that the wild turkey hunters number approximately 2.7 million, it meets the segmentation criterion of: A. substantiality B. accessibility C. reliability D. responsiveness E. functionality Answer: A Rationale: The segment is large enough to warrant developing and maintaining it as a special marketing mix. 143. Refer to Turkey Hunting Equipment. Segmenting a market based on the fact that people who enjoy hunting typically exhibit a particular lifestyle is an example of _____ segmentation. A. benefit B. psychographic C. geographic D. geodemographic E. demographic Answer: B Rationale: Psychographic segmentation is based on lifestyle as well as personality and motive. 144. Refer to Turkey Hunting Equipment. What kind of strategy does Cost use to select his target market? A. Concentrated targeting B. Multi-segment C. Mass marketing D. Undifferentiated E. Repositioned Answer: A Rationale: Neil Cost uses concentrated targeting, which focuses on one segment of the market. 145. Refer to Turkey Hunting Equipment. Primos Hunting Calls is another company that manufactures wild turkey callers. It claims each of its callers is able to cluck, shriek, and kee-kee (three sounds that have been known to attract the wild turkey). If you buy one of Cost’s callers, you are limited to one sound. In this way, Primos has implemented a(n) _____ strategy. A. multi-segment B. product differentiation C. undifferentiated marketing D. target market E. repositioning Answer: B Rationale: Product differentiation is used to distinguish one company’s products from those of another. Wrestling Merchandise Market research has shown that 6- to 17-year-old males, 18- to 24-year-old females, and 18- to 44-year-old males are most likely to watch a televised professional wrestling event or attend a live match. Wrestling events are regularly broadcast in 120 different countries. Merchandise licensed by World Wrestling Entertainment (formerly known as the World Wrestling Federation) can be purchased at JCPenney and Walmart. Clothes for adults are used to reach markets that may not buy action figures, video games, and novelty candy, but who are still proud to sport World Wrestling Entertainment (WWE) trademarks. 146. Refer to Wrestling Merchandise. The group identified as strong wrestling fans can be described as a(n): A. market position B. market segment C. positioning D. organizational buyer E. microsegment Answer: B Rationale: A market segment is a subgroup of individuals sharing one or more characteristics that cause them to have relatively similar product needs. 147. Refer to Wrestling Merchandise. Most wrestling fans live in the southern United States. Based on this information, what segmentation base would be appropriate? A. Geographic B. Demographic C. Psychographic D. Product use E. Benefit sought Answer: A Rationale: Geographic segmentation segments markets by region of a country or the world, market size, market density, or climate. 148. Refer to Wrestling Merchandise. The marketing research revealed that _____ segmentation can be used to identify the biggest fans of professional wrestling. A. benefit B. psychographic C. demographic D. geographic E. geodemographic Answer: C Rationale: Age is a demographic variable for segmentation. 149. Refer to Wrestling Merchandise. Since the WWE must use different methods to reach its three largest target markets, it must use: A. undifferentiated targeting B. concentrated or niche targeting C. multi-segment targeting D. demarketing E. repositioning Answer: C Rationale: A firm that chooses to serve two or more well-defined market segments and develops distinct marketing mixes for each is practicing multi-segment targeting. 150. Refer to Wrestling Merchandise. Prior to the 1990s, professional wrestling tried to compete as a legitimate sport just like football and baseball. Now it uses the term sports entertainment when talking about what it is marketing to its fans. This is an example of the implementation of a(n) _____ strategy. A. multi-segment B. product differentiation C. undifferentiated marketing D. target market E. repositioning Answer: E Rationale: Repositioning is changing consumers’ perceptions of a brand in relation to the competing brands. Mercedes-Benz Daimler AG, the maker of Mercedes-Benz automobiles, is planning to launch a new line of downsized luxury vehicles in the United States by 2012. Daimler has experienced a recent drop in global sales attributed to its product mix that focuses on larger luxury automobiles. With increasing fuel prices and stricter U.S. fuel-economy standards coming down the pipeline, Daimler doesn’t want to be left behind. Daimler is behind its competition, though. Its German rivals, Audi and BMW, have been relatively successful in the United States. BMW’s Mini Cooper, demanding as much as $34,000, has already driven away with some of Daimler’s potential sales. While Daimler already offers the Smart car in the United States, the new offerings will not be going after the same consumers. 151. Refer to Mercedes-Benz. Baby boomers have money to burn and will be the primary target for the downsized luxury vehicles offered by Mercedes. Many of them will want this type of car to feel young again. This group is considered a(n): A. consumer advocacy group B. income-ready group C. market D. population E. market maven Answer: C Rationale: A market is people (baby boomers) with needs (feeling young) and the ability and willingness to buy (money to burn). 152. Refer to Mercedes-Benz. Mercedes-Benz’s baby boomers are a useful segment because they meet certain criteria. Which of the following do the baby boomers meet? A. Substantiality B. Identifiability and measurability C. Accessibility D. Responsiveness E. All of these Answer: E Rationale: The successful criteria for market segmentation include substantiality, identifiability and measurability, accessibility, and responsiveness. 153. Refer to Mercedes-Benz. Daimler plans to introduce the downsized luxury vehicles in major U.S. cities, such as Los Angeles, New York, Miami, Atlanta, Dallas, and Chicago because market research has shown that these metropolitan areas have the greatest potential with respect to the consumers able to purchase a $30,000+ smaller luxury vehicle. Which type of psychographic segmentation does this represent? A. Geodemographic B. Personality C. Benefit D. Usage rate E. Demographic Answer: A Rationale: Psychographic segmentation include variables such as personality, motives, lifestyles, and geodemographics. This is an example of geodemographics, which is segmenting potential customers into neighborhood lifestyle categories. 154. Refer to Mercedes-Benz. One potential problem is that some of the purchasers of Daimler’s downsized luxury vehicles could be consumers who would have purchased a larger, higher-priced Mercedes-Benz. This situation is called: A. subjugation B. cannibalization C. sabotage D. benefit transference E. marginal sales Answer: B Rationale: Cannibalization is a situation that occurs when sales of a new product cut into sales of a firm’s existing products. 155. Refer to Mercedes-Benz. Which positioning base will Daimler be using if the company emphasizes the type of people who buy Mercedes-Benz automobiles in its promotional efforts? A. Product user B. Emotion C. Price and quality D. Attribute E. Use or application Answer: A Rationale: Product-user positioning focuses on a personality or type of user. ESSAY 1. What are the four criteria that are necessary to define a market? Answer: A market has the following characteristics: • composed of people or organizations • the people or organizations have needs and wants that can be satisfied by particular product categories • the people or organizations have the ability to purchase the sought products • the people or organizations are willing to exchange resources for desired products 2. You are given the following limited information about a market consisting of ten people. Describe all the possible ways to segment this market. Answer: There are five possible ways to segment this market: • one homogeneous market consisting of ten people (one segment) • a market consisting of ten individual segments • a market composed of two segments based on gender (five males and five females) • a market composed of three segments based on income (four low, two medium, four high) • a market composed of five segments based on gender and income level (one Male/Low, two Male/Medium, two Male/High, three Female/Low, two Female/High) 3. What is a market segment? Define market segmentation and discuss why market segmentation is important to the well-being of most companies. Answer: A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have relatively similar product needs. All people and all organizations within a given segment have some similar characteristics and needs. The process of dividing a market into meaningful segments or groups that are relatively similar and identifiable is called market segmentation. The purpose of segmentation is to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments. Market segmentation is important to the well-being of most companies because it helps decision makers more accurately define marketing objectives and allocate resources. As well, it helps marketers define customer needs and wants more precisely. 4. To be useful, a segmentation scheme must produce segments that meet four basic criteria. Name and briefly describe each of these four criteria. Answer: SUBSTANTIALITY. A selected segment must be large enough to warrant developing and maintaining a special marketing mix (commercially viable). IDENTIFIABILITY AND MEASURABILITY. The segments must be identifiable and their size measurable. Descriptive data regarding demographic, geographic, and/or other relevant characteristics of segment members must be available. ACCESSIBILITY. The firm must be able to reach members of targeted segments with customized marketing mixes. RESPONSIVENESS. The market segment must respond differently than other segments to marketing mixes; otherwise, there is no need to treat that segment separately. 5. Discuss the advantages and disadvantages of single-variable segmentation and multiple-variable segmentation. Answer: Markets can be segmented using a single variable, such as age group, or several variables, such as age group, gender, and education. Although it is less precise, single-variable segmentation has the advantage of being simpler and easier to use than multiple-variable segmentation. Disadvantages of multiple-variable segmentation include: • It is often more difficult to employ than single-variable segmentation. • Usable secondary data are less likely to be available. • As the number of segmentation bases increases, the size of individual segments decreases. 6. What is geographic segmentation? Name four reasons why a company would use a regional marketing approach. Then give a specific example of a company marketing its product(s) regionally. Answer: Geographic segmentation refers to segmenting markets based on region of the country or the world, market size, market density, or climate. Marketers might adopt a regional approach for the following reasons: • Firms need to find new ways to generate sales volume because of sluggish and intensely competitive markets. • Computerized checkout stations with scanners enable retailers to accurately assess which brands are selling well in their region. • Packaged-goods manufacturers are introducing new regional brands intended to appeal to local preferences. • Consumer goods companies use a regional approach because it allows them to react more quickly to competition. Examples of companies using a regional approach include: • The “My Macy’s” program at Macy’s department stores, which tailors each store’s merchandise mix to reflect local tastes. • any company selling climate-dependent products such as snow blowers, water and snow skis, and air-conditioning and heating systems 7. Marketers use a variety of terms to refer to different age groups. Name several examples and describe some characteristics of each. Answer: Common terms used to refer to different age groups include: • newborns • infants • young children • tweens • teens and young adults (Generation Y) • adults (Generation X) • baby boomers • seniors In the U.S., tweens (roughly age 8-12) spend billions of their own dollars each year on purchase for themselves. They also have considerable influence over major family purchase decisions. They are tech-savy and very social consumers. Generation Y (or Millennials) were born between 1982 and 2003 and make up about one-third of the U.S. population. They have considerable purchasing power and tend to be more civic-minded than baby boomers. They respond to companies that show deep commitment to causes. They also embrace personalization and self-expression. Generation Xers were born after the baby boomers. They tend to be disloyal to brands and skeptical of big business. Many make purchasing decisions with input from their families. Xers desire an experience, not just a product. Baby boomers account for half of all spending in the U.S. They were born between 1946 and 1964. They expect attention and service when they shop. They are not especially brand loyal, but they are very diverse. Today’s boomers refuse to believe they are aging, so marketers need to appeal to their interests, lifestyles, and values—anything but age. Seniors include consumers in their early 60s (the War Generation), those in their late 60s to mid 70s (the Depression Generation), and those age 77 and up (the G.I. Generation). Many in this group strive to remain active and use their retirement time to explore new knowledge, travel, volunteer, and spend time with family and friends. However, health concerns are a major issue with this market. 8. What is a segmentation base (or segmentation variable)? Name the common segmentation bases used by marketers to segment consumer markets. Answer: A segmentation base (or variable) is a characteristic of individuals, groups, or organizations that marketers use to divide a total market into segments. Consumer goods marketers commonly use one or more of the following characteristics to segment markets: • geography––by region, market size, market density, or climate • demographics––such as age, gender, ethnic background, income, or family life cycle stage • psychographics––such as motives, lifestyles, or personality • benefits sought––such as less filling or great taste • usage rate––heavy, medium, or light 9. Marketers use demographic information to segment markets because it is widely available and often related to consumers’ purchasing and consumption behavior. List five common bases used by marketers for demographic segmentation. For each base listed, give an example of a product specifically targeted to the needs and wants of the segment identified within the base. Answer: Common bases used in demographic segmentation include: • age • gender • income • ethnic background • family life cycle Some examples: AGE. Cell phones, magazines, and clothing marketed to teens, beer, wine, and spirits marketed to people 20 to 40 years of age, and retirement properties, health and wellness products, and Vespa scooters marketed to baby boomers are examples of products/services targeted at specific age groups. GENDER. Marketers of clothing, cosmetics, personal-care items, magazines, jewelry, and gifts commonly use gender as a segmentation variable. INCOME. The housing, clothing, automobile, and food markets are often segmented by income. Sam’s Club is aimed at lower-income consumers, while Costco attracts more upscale consumers. ETHNIC BACKGROUND. Many products are targeted specifically to various ethnic groups, especially African Americans, Hispanics, and Asian Americans. FAMILY LIFE CYCLE. Marketers target people in different stages of the family life cycle by noting spending needs. Young singles and marrieds buy more cars, furniture, appliances, and vacations. Marrieds with children buy more toys and baby products. Those middle-aged buy more luxury items and home improvements. The elderly focus spending on medical care. 10. What is the family life cycle (FLC)? Briefly describe the lifestyle and purchasing needs of consumers in the following FLC stages: (1) young single, (2) young married without children, (3) young married with children, (4) middle-aged married without children, and (5) older unmarried. Answer: The family life cycle (FLC) is a series of stages determined by a combination of age, marital status, and the presence or absence of children. The FLC is a valuable basis for segmenting markets, because families’ needs, income, resources, and expenditures are different in each life cycle stage. YOUNG SINGLE. Members of this group have few financial burdens, are fashion opinion leaders, and are recreation oriented. They buy basic kitchen equipment, basic furniture, cars, vacations, and items necessary for the “dating game.” YOUNG MARRIED WITHOUT CHILDREN. This group is financially better off than they will be in the near future, so members purchase at a high rate. Many durables are bought, such as cars, home appliances, and furniture. Additionally, vacations are still bought. YOUNG MARRIED WITH CHILDREN. This group concentrates on home ownership and raising children, so liquid assets are low. They like new and advertised products. They tend to buy appliances, baby items, televisions, and some medical products. MIDDLE-AGED MARRIED WITHOUT CHILDREN. Members of this group enjoy a better financial position and are interested in travel, recreation, and self-education. They tend to buy home improvements, vacations, and luxuries. OLDER UNMARRIED. Cuts in income curtail spending of this group. Purchases are more focused on medical care and medical products. 11. What is psychographic segmentation? Discuss why marketers use the basis for segmenting markets. Answer: Psychographic segmentation is market segmentation on the basis of personality, motives, lifestyles, and geodemographics. While age, gender, income, ethnicity, family life cycle stage, and other demographic variables are usually helpful in developing segmentation strategies, often they do not paint the entire picture. Psychographics provide more detailed descriptions of market segments. Psychographic variables alone can be used to segment markets, or they can be combined with other segmentation variables. 12. What is geodemographic segmentation? What is the result of geodemographic segmentation? Give one specific example that illustrates this type of segmentation. Answer: Geodemographic segmentation clusters potential customers into neighborhood lifestyle categories. It is a combination of geographic, demographic, and lifestyle segmentation. The result of geodemographic segmentation is micromarketing, which is the targeting of small geographic regions with specially designed marketing programs. The text example is H-E-B Grocery Company tailoring merchandise in each store to patron preferences. 13. What is benefit segmentation? For toothpaste, list six benefits that might be sought by consumers. For each benefit, give an existing brand name that best exemplifies segmentation according to that benefit. Answer: Benefit segmentation is the process of grouping customers into market segments according to different benefits sought from the product. Student answers are likely to vary greatly. Possible benefits for toothpaste could include: Cavity/Decay Prevention: Crest White/Bright Teeth: Ultra Brite, Gleem, MacLeans, Plus White, Rembrandt Fresh Breath: Close-up, Pepsodent Tartar Control: Tartar Control Crest, Tartar Control Colgate Plaque Reduction: Dental Care, Viadent, Dentagard, Peak, Mentadent Stain Remover: Pearl Drops, Topol, Caffree, Zact, Clinomyn, Rembrandt Gingivitis/Gum Disease Prevention: Crest, Colgate, Mentadent Flavor/Great Taste: Aim, Colgate, StripeFun for Kids: Crest Sparkle, Oral-B Sesame Street, Colgate Jr. No Mess: Pump, neat-squeeze, and specially capped toothpastes Sensitive Teeth: Sensodyne, Denquel, PromiseAll-in-One: Aquafresh Denture Cleaning: Dentu-Creme, Dentu-Gel, Complete Baking Soda: Arm & Hammer, Mentadent Low Price: Arm & Hammer, store brands, brands on sale 14. What is usage-rate segmentation? What is the 80/20 principle, and how does it apply to usage-rate segmentation? Answer: Usage-rate segmentation divides a market based on the amount of product customers purchase or consume. The 80/20 principle states that 80 percent of the demand for a product is generated by 20 percent of all customers. While the percentages are not always exact for all product categories, the principle highlights the disproportionate share of the total consumption of many products and focuses marketers on heavy users. 15. The purchasing strategies of business buyers may provide useful segments. Two purchasing profiles for business buyers have been identified. Name and describe them. Answer: The two purchasing profiles for business buyers are satisficers and optimizers. Satisficers are business customers who place an order with the first familiar supplier to satisfy product and delivery requirements. Optimizers consider numerous suppliers (both familiar and unfamiliar), solicit bids, and study all proposals carefully before selecting one. 16. List, in correct order, the steps in segmenting a market. Answer: The four segmentation steps are to: 1. select a market or product category for study 2. choose a basis or bases for segmenting the market 3. select segmentation descriptors 4. profile and analyze segments 5. select target markets 6. design, implement, and maintain appropriate marketing mixes 17. Name and describe the three targeting strategies. For each strategy, name one advantage and one disadvantage of using the strategy. Answer: UNDIFFERENTIATED TARGETING STRATEGY. This strategy adopts a mass-market philosophy, viewing the market as one big market with no individual segments. Advantages include potential savings on production and lower marketing costs. Disadvantages include susceptibility to competitive inroads and a higher likelihood of unimaginative product offerings with little appeal. CONCENTRATED (OR NICHE) TARGETING STRATEGY. This strategy entails the selection of one segment of a market for targeting. Advantages include concentrated efforts on a highly specialized marketing mix that meets target needs, concentration of resources, the ability to compete against larger firms, and the ability to establish a strong position in a desirable market segment. Disadvantages include segments that are too small, changing segments, and threat of competitive advances. MULTI-SEGMENT TARGETING STRATEGY. When a firm chooses to serve two or more well-defined market segments and develops distinct marketing mixes for each segment, it is practicing multi-segment targeting. Advantages potentially include greater sales volume, higher profits, larger market share, and economies of scale in manufacturing and marketing. Disadvantages include high costs and cannibalization. See Exhibit 8-2. 18. Define cannibalization. Is it always bad? Explain. Answer: Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. Cannibalization would be preferred over losing sales to a competitor. Cannibalization can also help to build new business. 19. Explain what is meant by positioning. Describe the bases marketers use to position products and services. Answer: Positioning is a process that influences potential customers’ overall perception of a brand, product line, or organization in general. Firms use a variety of bases for positioning: ATTRIBUTE. Products may be associated with an attribute, feature, or particular customer benefit. PRICE AND QUALITY. Firms may stress high price as a signal of quality or low price as a signal of value. USE OR APPLICATION. Stressing use situations or special applications effectively positions the product with buyers. PRODUCT USER. This position base associates the product with a personality or type of user. PRODUCT CLASS. The product is associated with a particular category of products. COMPETITOR. Positioning against a competitor would be demonstrated by Avis Rent A Car positioning itself as number two compared to Hertz. EMOTION. Focuses on how the product makes customers feel. 20. What is product differentiation, and how can it be achieved? Answer: Product differentiation distinguishes one firm’s products from those of competitors. Differences can be either real or perceived. Products can be differentiated by brand names, packaging, color, smell, or other means. Test Bank for MKTG Charles W. Lamb, Jr. Hair, Joseph F., Carl McDaniel 9781285091860

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