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Chapter 06 - Targeting Attractive Market Segments

Chapter 06Targeting Attractive Market Segments Multiple Choice Questions 1. _____ is the process by which a market is divided into distinct subsets of customers with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and marketing program. A. Market capitalizationB. Market segmentationC. Brand positioningD. Marketing mixAnswer: bLevel of Difficulty: EasyPage: 141

2. _____ entails designing product offerings and marketing programs that can establish an enduring competitive advantage in the target market by creating a unique brand image, or position, in the customer’s mind.A. Brand positioningB. Market segmentationC. Brand preferenceD. Brand dilutionAnswer: aLevel of Difficulty: EasyPage: 141 3. Identify the scenario emphasizing the impact of income on consumer markets that are segmented demographically. A. MobServ, a mobile service provider, focusing attention on the 65-plus segments to improve market penetrationB. CarsForWomen Inc. launching an online information service aimed at women to directly influence eight out of ten vehicle purchasesC. Cyan Mobiles launching a subsidiary to create an ultra-exclusive mobile telephone targeting customers who buy luxurious productsD. GloGarments creating needs for specialized goods and services due to increase in the number of men opting for neon clothingAnswer: cLevel of Difficulty: HardPage: 145

4. Carol’s Trio, an upscale retail chain, stocks and sells only Spanish, German, and French products. Trio is an example of segmenting a market by _____.A. ageB. ethnic originC. education

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D. income Answer: bLevel of Difficulty: EasyPage: 145

5. _____ divides the market according to the characteristics of the buying organization using attributes such as age of firm, firm size, and industry affiliation. A. MicrosegmentationB. Geographic segmentationC. Behavioral segmentationD. MacrosegmentationAnswer: dLevel of Difficulty: EasyPage: 146

6. In _____, customers are grouped by the characteristics of the individuals who influence the purchasing decision.A. microsegmentationB. geographic segmentationC. demographic segmentationD. macrosegmentationAnswer: aLevel of Difficulty: EasyPage: 146 7. AdventureBikes targets wilderness enthusiasts and introduced special robust bikes for them. PowerDrink’s target market comprises tennis players who need to replenish water and salts lost through perspiration. These are examples of _____ segmentation that is based on target consumers’ activities. A. demographicB. geographicalC. geodemographicD. behavioralAnswer: dLevel of Difficulty: MediumPage: 147

8. When consumers evaluate product alternatives on the basis of desired characteristics and how valuable each characteristic is to them, it is referred to as _____.A. benchmarkingB. productivity paradoxC. choice criteriaD. paradox of thriftAnswer: c




Level of Difficulty: Easy




Page: 147

9. Which of the following statements is true of behavioral segmentation?A. It is useful in assessing the size and market potential of a market segment defined by a particular trade area. B. It identifies a common purchasing structure across all organizational markets.C. It is based on who the target customers are and where they live.D. It identifies new markets even among homogeneous demographic groups when segmented by lifestyle.Answer: dLevel of Difficulty: MediumPage: 148

10. Which of the following is true of principle-oriented consumers?A. They are motivated by abstract and idealized criteria.B. They shop for products that demonstrate the consumer's success.C. They are guided by the need for social or physical activity and variety.D. They are motivated by risk-taking.Answer: aLevel of Difficulty: MediumPage: 149

11. A(n) _____ consumer shops for products that demonstrate the consumer’s success.A. principle-orientedB. action-orientedC. resource-orientedD. status-orientedAnswer: dLevel of Difficulty: EasyPage: 149 12. _____ is the degree to which buying activity is centralized and influences a buyer to consider all transactions with a given supplier on a global basis, to emphasize cost savings, and to minimize risk. A. Brand parityB. Purchasing structureC. Choice criteriaD. Purchasing influenceAnswer: bLevel of Difficulty: EasyPage: 149

13. A(n) _____ refers to a recurring buying situation handled on a routine basis.A. straight rebuyB. old rebuy




C. modified rebuyD. new buyAnswer: aLevel of Difficulty: EasyPage: 150

14. Which of the following buying situations occurs when some element, such as price or delivery schedules, has changed in a client–supplier relationship? A. A straight rebuyB. An old rebuyC. A modified rebuyD. A new buying situationAnswer: cLevel of Difficulty: EasyPage: 150

15. What is the first step in constructing a market attractiveness/competitive position matrix for evaluating potential target markets?A. Selecting market attractiveness and competitive position factorsB. Choosing segments to target and allocate resourcesC. Rating segments on each factor and plotting results on matricesD. Projecting future position for each segmentAnswer: aLevel of Difficulty: EasyPage: 152 16. In which of the following steps of evaluating potential target markets is the market-attractiveness/competitive-position matrix plotted?A. Choosing segments to target and allocating resourcesB. Projecting future position for each segmentC. Rating segments on each factor D. Assigning numerical weights to the factorsAnswer: cLevel of Difficulty: MediumPage: 154-155

17. Based on the market attractiveness/competitive position matrix, which of the following strategies should a firm consider when the market attractiveness is moderate and the competitive position is weak? A. It should expand without high risk or minimize investment and focus on operations.B. It should withdraw if indications of sustainable growth are lacking.C. It should emphasize profitability by increasing productivity.D. It should seek ways to increase current earnings without speeding market's decline.Answer: aLevel of Difficulty: Hard




Page: 157

18. Based on the market attractiveness/competitive position matrix, which of the following strategies should a firm consider when the market attractiveness is low and the competitive position is strong?A. It should build selectively on strengths and invest to improve position only in areas where risk is low.B. It should emphasize profitability by increasing productivity and build up ability to counter competition.C. It should protect current strengths of the firm and seek ways to increase current earnings without speeding market’s decline.D. It should invest more to grow at a maximum rate and concentrate on maintaining strength.Answer: cLevel of Difficulty: EasyPage: 157

19. Based on the market attractiveness/competitive position matrix, which of the following strategies should a firm consider when the market attractiveness is high and the competitive position is strong?A. It should protect existing strengths and invest to improve position only in areas where risk is low.B. It should defend its current position and stop all further investments.C. It should sell when possible to maximize cash value and cut fixed costs in the meantime.D. It should invest more to grow at a maximum rate and concentrate on maintaining strengths.Answer: dLevel of Difficulty: EasyPage: 157

20. Which of the following is true of a mass-market strategy?A. It involves serving one or more segments with customers seeking somewhat-specialized benefits from a product. B. It works on the principle that an undifferentiated marketing strategy generates more sales than a differentiated strategy. C. It involved using a differentiated marketing strategy to decrease manufacturing and promotion costs. D. It involves designing a single product-and-marketing program that will appeal to the largest number of consumers. Answer: dLevel of Difficulty: MediumPage: 157

21. Which of the following market strategies is often favored by smaller companies to avoid direct confrontations with larger firms while building volume and share?A. A niche-market strategyB. A growth-market strategy




C. A resource-market strategyD. A mass-market strategyAnswer: bLevel of Difficulty: MediumPage: 158

Essay Questions 22. What are the steps in a market segmentation process?Answer: There are three important steps in the market segmentation process: 1) Identify a homogeneous segment that differs from other segments: The process should identify one or more relatively homogeneous groups of prospective buyers with regard to their wants and needs and/or their likely responses to differences in the elements of the marketing mix.2) Specify criteria that define the segment: The segmentation criteria should measure or describe the segments clearly enough so that members can be readily identified and accessed, in order for the marketer to know whether a given prospective customer is or is not in the target market and in order to reach the prospective customer with advertising or other marketing communication messages. 3) Determine segment size and potential: Finally, the segmentation process should determine the size and market potential of each segment for use in prioritizing which segments to pursue. Level of Difficulty: MediumPage: 143–144

23. Briefly discuss the market attractiveness and competitive position factors.Answer: Market Attractiveness Factors: Assessing the attractiveness of markets or market segments involves determining the market’s size and growth rate and assessing various trends— demographic, sociocultural, economic, political/ legal, technological, and natural—that influence demand in that market. An even more critical factor in determining whether to enter a new market or market segment, however, is the degree to which unmet customer needs, or needs that are currently not being well served, can be identified. In the absence of unmet or underserved needs, it is likely to be difficult to win customer loyalty, regardless of how large the market or how fast it is growing. “Me-too” products often face difficult going in today’s highly competitive markets.Competitive Position Factors: Understanding the attractiveness of the industry in which one competes is also important. Entering a segment in a way that would place the firm in an unattractive industry or increase its exposure therein may not be wise. Of more immediate and salient concern, however, is the degree to which the firm’s proposed product will be sufficiently differentiated from its competitors, given the critical success factors and product life-cycle conditions already prevalent in the category. Similarly, decision makers need to know whether their firm has or will be able to acquire the resources it will take—human, financial, and otherwise—to effectively compete in the new segment. Simply put, most new goods or services need to be either better from a consumer point of view or cheaper than those they hope to replace. Entering a new market or market segment without a source of




sustainable competitive advantage is often a trap.Level of Difficulty: MediumPage: 153

24. Explain niche-market and growth-market strategies with relevant examples. Answer: Niche-market strategy involves serving one or more segments that, while not the largest, consist of a sufficient number of customers seeking somewhat-specialized benefits from a good or service. For example, overall coffee consumption is down in some countries, but the sales of gourmet coffees in coffee bars such as Starbucks or Coffee Republic have boomed in recent years. Businesses pursuing a growth-market strategy often target one or more fast-growth segments, even though these segments may not currently be very large. It is a strategy often favored by smaller companies to avoid direct confrontations with larger firms while building volume and share. Such a strategy usually requires strong R&D and marketing capabilities to identify and develop products appealing to newly emerging user segments, plus the resources to finance rapid growth. The problem, however, is that fast growth, if sustained, attracts large competitors. This happened to Apple when IBM entered the personal computer industry. The goal of the early entrant is to have developed an enduring competitive position via its products, service, distribution, and costs by the time competitors enter.Level of Difficulty: HardPage: 157–159



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