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Lecture

com 240 Lecture Notes - Market Segmentation, Marketing Mix, Product Differentiation


Department
Commerce
Course Code
com 240
Professor
Charles Scott

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why segment markets?
a. what market segmentation means
market segmentation involves aggregating prospective buyers into groups that (1) have common
needs and (2) will respond similarly to a marketing action.
this results in groups of people, called market segments, which are a relatively homogeneous
collection of prospective buyers.
the existence of different market segments causes firms to use a marketing strategy of product
differentiation: the firm uses different marketing mix activities to help consumers percieve the
product as being different from and better than competing products.
1. segmentation: linking needs to actions
a. the definition of market segmentation stresses two things:
(1) the importance of aggregating or grouping people or organizations in a market
according to the similarity of their needs and the benefits they are looking for in making a
purchase.
(2) the need to relate such needs and benefits to specific tangible marketing actions the firm
can take, such as using one or more of the marketing mix factors.
b. market segmentation is only a means to an end: marketing actions to satisfy customer
needs.
2. using market-product grids
a market-product grid is a framework to relate the market segments of potential buyers to products
offered or potential marketing actions by the firm. thus, the cells in the grid reveal the approximate
size of the market by market segments and product lines.
b. when to segment markets
a business firm will go to the trouble and expense of segmenting its markets when this action will
increase its profit and return on investment. therefore, when its expenses more than offset the
potentially increased revenues from segmentation, it should not attempt to segment its markets. the
specific situations that illustrate this key point are:
one product and multiple market segments when a firm produces only a single product or
service and attempts to sell it to two or more market segments, it avoids the extra cost of
developing and producing additional versions of the product.
when to segment markets
a business firm will go to the trouble and expense of segmenting its markets when this action will
increase its profit and return on investment. therefore, when its expenses more than offset the
potentially increased revenues from segmentation, it should not attempt to segment its markets. the
specific situations that illustrate this key point are:
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