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Chapter 3

BUS 343 - Chapter 3.pdf

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Business Administration
BUS 343
Robert Krider

Created by Mark Liangco Chapter 3 (Week 4) Segmentation 1. Customer Orientation - Communicate, understand and find someone that will engage in exchange with you 2. Customer Heterogeneity - Customers are different from each other on not only simple demographics, but what they value, find interesting, read, believe, enjoy, hate, relate to, identify with…. - Customer heterogeneity provides opportunities for profit? o Because customers different from what they value and you can target a particular segment for maximum profit! o Toshiba printers are segmented to small, medium, large businesses and home users. If your product is completely unique, has no competition and substitution, people need it to survive and demand is without limits, then market segmentation is a waste of time. Competition in the Macro environment 1) Monopoly: - one firm supplies a product, and can control the price - Example: BC Hydro 2) Oligopoly: - few sellers, each with substantial market share - Example: Microsoft, Apple, Gas companies 3) Monopolistic competition: - Many sellers, with some product differentiation and hence some monopoly power and control over price within a particular segment. - Example: Restaurants (what do restaurants differ from one another? LOCATION and how their food is served) 4) Perfect competition: - Many sellers of the same product; have no control over price… - Basic commodities: tissue paper, wheat Segmentation Variables 1) Behavioral - Techniques that divide consumers into segments on the basis of how they act towards feel about oruse a product or service. - Is more useful because you can specifically do something about it. - Types: o Benefit segmentation- Segmentation based on benefits they seek in using products (softness of tissue etc) o Product usage segmentation - Segmentation based on amount of product purchased or how the product is used.  80/20 Rule – A marketing rule of thumb that 20% of purchasers account for 80% of sales.  Long tail – A new approach to segmentation based on the idea that companies can make more money by selling small amounts of items that only a few people want, provided they sell enough different items.  Example: Amazon sells a ton of books! o Usage occasion – Segmentation based on when the product is used. 2) Descriptive / Demographic - Segments based on demographic, age, sex, social class, ethnicity among others. 3) Psychographics 1 Created by Mark Liangco - Groups consumers by these other variables related to an individual psychological and metal state. - Example: VALS framework. The inferior use of segmentation Descriptive segmentation  4Ps A more difficult but more powerful approach Descriptive Segmentation  Behavioral Segmentation  4 Ps You do behavioral segmentation first and analyze using the 4 Ps. Then do descriptive segmentation to see if there is a connection between behavioral and your descriptive segmentation. You don't stop at just one segment. Sometimes, there are a couple of segments that have the same behavioural aspects. Segmentation Criteria 1) Members in segment must have similar needs/wants. 2) Consumers in segment should be sufficiently different from the other segments. 3) Segment must be large enough now and in the future. 4) Segment must represent a measurable market (consumers must have purchasing power/
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