MKTG 2030 Chapter Notes - Chapter 9: Ford Model T, Market Segmentation, Mass Customization

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3 Mar 2015
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Market Segmentation, Targeting and Positioning
Zappos = Segments + Service
-Offer a selection of shoes to people who want the convenience of buying online and greater customer
service
-There is free shipping both ways
-They have lines of clothes, accessories, beauty aids and housewares
-All members of the company go through customer loyalty training
Why Segment Markets?
-Ford Model T: focus in economies of scale created by mass production
-GE produced cars of different models and colours to appeal to the preferences of different consumers
-Market segmentation necessity: people are different and have different needs and wants
oHelps marketers respond more effectively to specific needs and wants of groups
Market Segmentation
-Market segments: relatively homogeneous groups of prospective buyers that result from the market
segmentation process; consists of people who are relatively similar to each other in terms of
consumption behaviour
oAggregate people in groups with common needs and responses to a marketing action
-Product differentiation: firm uses different marketing mix activities, features and ads to help
consumers perceive the product as being different from and better than competing products
Linking Needs to Actions
-Marketers need to lead to tangible marketing actions that can increase sales and profitability
-Need to group entities in the market according to the similarity of needs and benefits
oThese needs and benefits must be related to specific marketing actions that the company can
take
Using Market-Product Grids
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-Framework to relate the market segments of potential buyers to products offered/marketing actions by
the firm
-Gives marketers info about relative attractiveness of given segments and an idea about the type of
product that should be produced to cater to those segments
When to Segment Markets
-Do so when you expect that sales, return on investment and profits will increase
-The following are three situations that illustrate effective use of marketing segmentation
One Product and Multiple Market Segments
-When producing only one product and selling it to two or more market segments, a company can avoid
the costs of developing and producing additional versions of the product
-Incremental costs of taking the product into a new segment are those of a separate promotional
campaign
oEx: movies, magazines, books
Multiple Products and Multiple Market Segments
-Ford’s different lines of cars are each targeted at a different type of customer
-Proliferation of different models can reduce quality and raise prices
-Now: Ford produces higher volume of fewer models and higher quality because they have few basic
designs
Segments of One: Mass Customization
-Economies of scale in manufacturing and marketing made mass produced goods so affordable that
most customers were willing to compromise on individual tastes and settle for standardized products
-Today’s internet environment + flexible manufacturing = goods can be tailored to the tastes of
individual customers on high-volume scale
-Ultra customization; allows you to hand pick your entertainment packages, personalize your next
vacation, design your own clothes, design your website and choose exactly the info you want to be
exposed to
Segmentation Trade-Off: Synergies vs. Cannibalization
-Need to find a good balance between satisfying customer’s individual wants and achieving
organizational synergy (increased customer value by performing organizational functions efficiently)
-The company should also get more sales and profits
-Cannibalization: issue new products/new chain and it steals customers and sales away from older and
existing products
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