200086 Lecture Notes - Lecture 26: Psychographic, Direct Marketing

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amberhippopotamus661

27 Apr 2019

School

UWS

Department

University of Western Sydney

Course

200086

Professor

anon

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Document Summary

The segmentation of consumer markets requires the creation of sub-groups from a larger population to more specifically target them. There are virtually dozens of ways that a market might be segmented and the segments chosen will depend on the business and the products or services it offers. Basically, segmentation is all about identifying specific groups of people based on common characteristics. One common way of segmenting a market is through the use of demographics. Demographics are quantitative characteristics of a group of people. These characteristics might include sex, age, income or geography (where they live). Businesses that segment their market based on demographics are attempting to target specific market segments that are more likely to be interested in what they have to offer. The cosmetics industry, for example, primarily targets women. The hunting industry might be more likely to target men. Luxury car makers target their markets based on income.

Related Questions

The practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations is referred to as ________.

Answers:	micromarketing
	segmented marketing
	undifferentiated marketing
	niche marketing
	global marketing

Â· Question 2

Cupcake Gourmet, a high-end bakery in Manhattan, segments its customers according to those who frequent their store regularly, those who visit infrequently, and those who have never visited. This is an example of usage-rate segmentation.

Answers:	True
	False

Â· Question 3

A segment is more attractive if it is easy for new competitors to enter the market.

Answers:	True
	False

Â· Question 4

Demographic factors are the most popular bases for segmenting customer groups.

Answers:	True
	False

Â· Question 5

Argonaut Food Stores, a retail giant, hires better-skilled employees than its competitors by employing strategic recruitment practices. It also conducts highly specialized training programs for its employees. In this case, Argonaut has focused on gaining a strong competitive advantage through ________ differentiation.

Answers:	services
	product
	image
	channel
	people

Â· Question 6

Bass Pro Shops recognizes that outdoors enthusiasts are a diverse group. Likely segments include hunters, campers, and boaters. What is this segmentation method called?

Answers:	user status
	usage rate
	psychographic
	behavioral
	benefit

Â· Question 7

Which of the following is an approach where firms target a whole market based on common consumer needs?

Answers:	micromarketing
	geographic segmentation
	concentrated marketing
	undifferentiated marketing
	demographic segmentation

Â· Question 8

A company or brand image should convey a product's distinctive benefits and position.

Answers:	True
	False

Â· Question 9

Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation.

Answers:	True
	False

Â· Question 10

A brand difference is said to be preemptive if ________.

Answers:	the difference is communicable
	the difference can be introduced profitably
	buyers can afford to pay for the difference
	the difference is beneficial to customers
	competitors cannot easily copy the difference

sangriahedgehog208

Choose the right answer

Question 1

With respect to consumer behavior, one's attitudes, learning, and perceptions would be

		impersonal influences
		interpersonal influences
		personal influences
		insitutional influences

Question 2

In Maslow's hierarchy of needs,

		a physiological need must be met directly before social needs.
		esteem needs are the highest order of needs.
		self-actualization needs are the highest order
		safety needs and esteem are of the same importance.

Question 3

The most likely product to be purchased in an attempt to satisfy self-esteem needs would be

		"super class" tickets for your next air flight.
		a really fast computer.
		a home security system.
		yogurt and health food.

Question 4

Which of the following is not a characteristic that distinguishes organizational markets from consumer markets?

		Organizational markets are more geographically concentrated.
		More people exert influence on the organizational buying decision.
		The organizational market tends to have a greater number of buyers.
		Organizations often engage in multiple sourcing and vendor analysis.

Question 5

Consumers may attempt to reduce postpurchase anxiety in the consumer decision process by

		avoiding favorable information about the selected brand
		seeking reassurance from dissatisfied customers
		seeking information that favors the rejected brands
		ignoring unfavorable reports about the chosen brand

Question 6

The buying center concept explains how groups of people participate informally in business purchase decisions and

		methods to break through group perceptions.
		the role the group members play in buying decisions.
		how family units operate as buying centers.
		the process of performing vendor analysis.

Question 7

In the organizational buying process, a triggering event such as announcement of the availability of a new product whose use could improve the company's market performance is referred to as

		need or opportunity recognition
		identification of suppliers
		information search
		word-of-mouth exploration

Question 8

An undifferentiated marketing strategy

		serves the consumer better because the products offered are designed to meet the needs of a specific group of people
		benefits from the control and efficiency of short production runs
		ignores differences among consumer groups and focuses on the broad market
		is the most common strategy today and is used more now than in the past

Question 9

Goods purchased by the ultimate consumer for personal use are called

		personal products
		purchased products
		consumer products
		commercial products

Question 11

A particular purchasing agent might allow some salespeople to see the engineers responsible for developing product specifications but not allow others the same privilege. In the buying center, this purchasing agent is filling the role of

		a "hard" nose
		a gatekeeper
		an influencer
		a decider

Question 12

"Our prices are the lowest, we guarantee it" is an example of a positioning strategy based on the product's

		competitors
		price
		class
		application

Question 13

Segmenting the market based on exactly how an industrial purchaser will use products is referred to as

		customer-based segmentation
		benefits segmentation
		end-use application segmentation
		geographic segmentation

Question 14

The lumber your carpenter purchases to finish out your basement is classified as

		a home improvement product
		a raw material
		a business product
		a consumer good

Question 15

When consumer demand for personal computers affects computer manufacturers' demand for computer chips, this situation is known as

		volatile demand
		conjoined demand
		derived demand
		joint demand

Question 16

Which of the following is a personal factor in consumer bahavior?

		a cultural influence
		group membership
		friends' opinions
		a person's attitudes

Question 17

Cognitive dissonance would be most likely to occur after the purchase of

		sneakers
		groceries
		an automobile
		cosmetics

Question 18

Which of the following would be most likely to break through a person's perceptual screen?

		a newspaper ad featuring white type on a black background
		a black- and -white classified ad
		reducing the size of the ad
		using fewer colors in the ad

Question 19

The Fortune 500 list of America's largest firms based on sales revenues and number of employees provides a basis for

		market segmentation based upon customer type
		demographic segmentation based upon geographic location
		end-user segmentation of this market
		demographic segmentation based upon customer size

Question 20

Straight rebuy behavior by industrial purchasers will probably continue if the supplier provides

		poor service
		poor quality
		shipping delays
		satisfactory performance

Question 21

A controversial technique of subconscious communication, aimed at circumventing the perceptual screens, is called

		shadowed perception
		leger-de-main
		subliminal perception
		perception incognito

Question 22

Those products that are actually considered when making a consumer purchase decision are

		customer options
		customer selections
		the evoked set
		the product set

Question 23

The component of the business market that consists of individuals and firms that acquire goods and services to be used directly, or indirectly, in producing other goods and services is called:

		wholesaling and retailing
		the commercial market
		government
		an institution

Question 24

The institutional market does not include which of the following?

		hospitals
		museums
		motion pictures theatres
		universities

Question 25

Advertising for smoke alarms, air bags and life insurance typically uses which of Maslow's levels of needs to appeal to consumers?

		self-esteem needs
		safety and security needs
		physiological needs
		protection needs

Question 26

One type of buying center role is that of the

		influencer who supplies information for evaluation.
		authority figure who decides who, what, where, when, and how.
		disseminator who function is to get advertisements to prospects.
		specifier who needs on the specifications of products

Question 27

Manufacturing firms that convert to automated factory systems must purchase equipment that they have never bought before, such as robots and computers. This buying situation is called

		a straight rebuy
		a modified rebuy
		a contract purchase
		new-task buying

Question 29

A commonly used basis for segmenting consumer markets is

		product-related characteristics
		health-related matters
		information-related concepts
		performance-related criteria

1 points

Question 30

The business market is also known as the

		wholesale market
		corporate market
		organizational market
		distribution market

Question 31

Which of the following consumer problem-solving behaviors requires the least effort?

		extended problem solving
		limited problem solving
		impulsive buying
		routine response behavior

Question 32

The relationship between the demand for silk cloth and consumer demand for silk blouses and neckties is known as

		joint demand
		demand volatility
		derived demand
		consumer demand

Question 33

Examples of business market items that would usually be purchased as a straight rebuy are

		high quality raw materials
		heavy-duty machinery
		paper clips and pencils
		high-tech components

Question 34

The person who joins a local bowling league for the social interaction, even if he or she is a novice bowler, is probably trying to satisfy his or her

		esteem needs
		self-actualization needs
		physiological needs
		belongingness/social needs

Question 35

Campbell's "Soup for One" is an example of a product that is targeted to

		large families with high product usage of certain things but different preferences
		dual-income couples with no kids
		well-off older families
		non-traditional households such as nonfamily, single-person or single-parent situations

Question 36

Red Ryder Industries markets rodeo and horse riding supplies specifically to women. This is an example of

		market stratification
		market segmentation
		non-traditional marketing
		multi-gender marketing

Question 37

Purchases made by choosing a preferred brand or one of a limited group of acceptable brands are called

		extended problem solving
		routinized response behavior
		limited problem solving
		selective problem solving

Question 38

The slogan "the graying of America" describes the trend

		toward people retiring later in life
		of the word force to contain a disproportionate number of older Americans
		for gray hair to develop from years of high-stress urban work
		upward in the elderly population as Americans tend to live longer

Question 39

People or institutions must have sufficient purchasing power and the authority and willingness to buy to be considered a

		market
		buyer
		player
		segment

Question 40

Reference group influences would be most likely to be significant in the decision to buy

		a loaf of bread
		a Mercedes Benz
		a clock radio
		cellophane tape

Question 41

Internal search in the consumer decision process may include

		subscribing to consumer magazines to evaluate alternatives
		talking to family members
		reviewing past purchases
		surveying coworkers for buying options

Question 42

The process of dividing the total market into several smaller, homogeneous groups is called

		market penetration
		market segmentation
		market mixing
		market division

Target costing Mercedes-Benz All-Activity Vehicle (AAV)

Introduction

During the recession beginning in the early 1990s, Mercedes-Benz (MB) struggled with product development, cost efficiency, material purchasing, and problems in adapting to changing markets.

In 1993, these problems caused the worst sales slump in decades, and the luxury carmaker lost money for the first time in its history. Since then, MB has streamlined the core business, reduced parts and system complexity, and established simultaneous engineering programs with suppliers.

In their search for additional market share, new segments, and new niches, MB started developing a range of new products. New product introductions included the C-Class in 1993, the E-Class in 1995, the new Sportster SLK in 1996, and the A-Class and M-Class All-Activity Vehicle (AAV) in

1997. Perhaps the largest and most radical of MB's new projects was the AAV. In April 1993, MB announced it would build its first passenger vehicle-manufacturing facility in the United States.

The decision emphasized the company's globalization strategy and desire to move closer to its customers and markets.

Mercedes-Benz United States International used function groups with representatives from every area of the company (marketing, development, engineering, purchasing, production, and controlling) to design the vehicle and production systems. A modular construction process was used to produce the AAV. First-tier suppliers provided systems rather than individual parts or components for the production of approximately 65,000 vehicles annually.

The AAV Project Phases

The AAV moved from concept to production in a relatively short period of time. The first phase, the concept phase, was initiated in 1992. The concept phase resulted in a feasibility study that was approved by the board. Following board approval, the project realization phase began in 1993, with production commencing in 1997. Key elements of the various phases are described next.

Concept Phase, 1992-1993

Team members compared the existing production line with various market segments to discover opportunities for new vehicle introductions. The analysis revealed opportunities in the rapidly expanding sports utility vehicle market that was dominated by Jeep, Ford, and GM. Market research was conducted to estimate potential worldwide sales opportunities for a high-end AAV with the characteristics of a Mercedes-Benz. A rough cost estimate was developed that included materials, labor, overhead, and one-time development and project costs. Projected cash flows were analyzed over a 10-year period using net present value (NPV) analysis to acquire project approval from the board of directors. The sensitivity of the NPV was analyzed by calculating "what-if" scenarios involving risks and opportunities. For example, risk factors included monetary exchange rate fluctuations, different sales levels due to consumer substitution of the AAV for another MB product, and -product and manufacturing costs that differed from projections. Based on the economic feasibility study of the concept phase, the board approved the project and initiated a search for potential manufacturing locations. Sites located in Germany, other European countries, and the United States were evaluated. Consistent with the company's globalization strategy, the decisive factor that brought the plant to the United States was the desire to be close to the major market for sports utility vehicles.

Project Realization Phase, 1993-1996

Regular customer clinics were held to view the prototype and to explain the new vehicle concept. These clinics produced important information about how the proposed vehicle would be received by potential customers and the press. Customers were asked to rank the importance of various characteristics, including safety, comfort, economy, and styling. Engineers organized in function groups designed systems to deliver these essential characteristics. However, MB would not lower its internal standards for components, even if initial customer expectations might be lower than the MB standard. For example, many automotive experts believed that the superior handling of MB products resulted from manufacturing the best automobile chassis in the world. Thus, each class within the MB line met strict standards for handling, even though these standards might exceed customer expectations for some classes. MB did not use target costing to produce the lowest-priced vehicle in an automotive class. The company's strategic objective was to deliver products that were slightly more expensive than competitive models. However, the additional cost would have to translate into greater perceived value on the part of the customer.

Throughout the project realization phase, the vehicle (and vehicle target cost) remained alive because of changing dynamics. For example, the market moved toward the luxury end of the spectrum while the AAV was under development. Besides, crash test results were incorporated into the evolving AAV design. For these reasons, MB found it beneficial to place the design and testing team members in close physical proximity to other functions within the project to promote fast communication and decision making. Sometimes new technical features, such as side airbags, were developed by MB. The decision to include the new feature on all MB lines was made at the corporate

level because experience had shown that customers' reactions to a vehicle class can affect the entire brand.

Production Phase, 1997

The project was monitored by annual updates of the NPV analysis. Also, a three-year plan (including income statements) was prepared annually and reported to the headquarters in Germany.

Monthly departmental meetings were held to discuss actual cost performance compared with standards developed during the cost estimation process. Thus, the accounting system served as a control mechanism to ensure that actual production costs would conform to target (or standard) costs.

Target Costing and the AAV

The process of achieving the target cost for the AAV began with an estimate of the existing cost for each function group. Next, components of each function group were identified with their associated costs. Cost reduction targets were set by comparing the estimated existing cost with the target cost for each function group. These functional groups included the following: doors, sidewall and roof, electrical system, bumpers, power train, seats, heating system, cockpit, and front end. Next, cost reduction targets were established for each component. As part of the competitive benchmark process, MB bought and tore down competitors' vehicles to help understand their costs and manufacturing processes.

The AAV manufacturing process relied on high-value-added systems suppliers. For example, the entire cockpit was purchased as a unit from a systems supplier. Thus, systems suppliers were part of the development process from the beginning of the project. MB expected suppliers to meet established cost targets. To enhance function group effectiveness, suppliers were brought into the discussion at an early stage in the process. Decisions had to be made quickly in the early stages of development. The target costing process was led by cost planners who were engineers, not accountants.

Because the cost planners were engineers with manufacturing and design experience, they could make reasonable estimates of costs that suppliers would incur in providing various systems. Also, MB owned much of the tooling, such as dies to form sheet metal, used by suppliers to produce components. Tooling costs are a substantial part of the one-time costs in the project phase.

Index Development to Support Target Costing Activities

During the concept development phase, MB team members used various indexes to help them determine critical performance, design, and cost relationships for the AAV. To construct the indexes, various forms of information were gathered from customers, suppliers, and their own design team. Although the actual number of categories used by MB was much greater, Table 1 illustrates the calculations used to quantify customer responses to the AAV concept. For example, values shown in the "Importance" column resulted from asking a sample of potential customers whether they consider each category extremely important when considering the purchase of a new MB product. Respondents could respond affirmatively to all categories that applied.

To gain a better understanding of the various sources of costs, function groups were identified together with target cost estimates. (MB also organizes teams called function groups whose role is to develop specifications and cost projections.) As shown in Table 2, the relative target cost percentage of each function group was computed.

Table 3 summarizes how each function group contributes to the consumer requirements identified in Table 1. For example, safety was identified by potential customers as an important characteristic of the AAV; some function groups contributed more to the safety category than others. MB engineers determined that chassis quality was an important element of safety (50% of the total function group contribution).

Table 4 combines the category weighting percentages from Table 1 with the function group contribution from Table 3. The result is an important index that measures the relative importance of each function group across all categories. For example, potential customers weighted the categories of safety, comfort, economy, and styling as 0.41, 0.32, 0.18, and 0.09, respectively. The rows in Table 4 represent the contribution of each function group to the various categories. The importance index for the chassis is calculated by multiplying each row value by its corresponding category value and summing the results: (0.50 X 0.41) + (0.30 X 0.32) + (0.10 >< 0.18) + (0.10 X 0.09) = 0.33.

As shown in Table 5, the target cost index is calculated by dividing the importance index by the target cost percentage by function group. Managers at MB used indexes such as these during the concept design phase to understand the relationship of the importance of a function group to the target cost of a function group. Indexes less than 1 may indicate a cost above the perceived value of the function group. Thus, opportunities for cost reduction consistent with customer demands may be identified and managed during the early stages of product development.

Choices made during the project realization phase were largely irreversible during the production phase because approximately 80% of the production cost of the AAV was for materials and systems provided by external suppliers.

The AAV project used a streamlined management structure to facilitate efficient and rapid development. The streamlined MB organization produced an entirely new vehicle from concept to production in four years. Using the target costing process as a key management element, MB manufactured the first production AAV in 1997.

https://drive.google.com/file/d/0B7DlLcOZwfeKXzdfbVQwMlVteUE/view?usp=sharing link to required tables

Required Explain the process of developing an important index for a function group or component. How can such an index guide managers in making cost reduction decisions? How does MB approach cost reduction to achieve target costs? How do suppliers factor into the target costing process? Why are they so critically important to the success of the MB AAV? What role does the accounting department play in the target costing process?

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200086 Lecture Notes - Lecture 26: Psychographic, Direct Marketing

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