978-0077861049 Chapter 4 Solution Manual Part 1

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Chapter–by–chapter aids: Chapter 4

Instructor’s Manual to Accompany Essentials of Marketing IV-4-1

CHAPTER 4: FOCUSING MARKETING STRATEGY WITH

SEGMENTATION AND POSITIONING

CHAPTER 4 – COMMENTS ON QUESTIONS AND PROBLEMS

4- 1. A generic market is a market with broadly similar needs and sellers offering diverse ways of

satisfying those needs, while a product–market is a market with narrowly similar needs and

sellers offering close–substitute ways of satisfying those needs. The generic market for

market of paper plates for U.S. family picnics and informal gatherings, on the other hand, there

are many competitors offering different styles, sizes, colors, and so on of paper plates, but they

4- 2. Market segmentation is a two–step process of (1) naming broad product–markets and (2)

segmenting these broad product–markets in order to select target markets and develop suitable

marketing mixes. Naming a broad product–market involves “breaking apart” – disaggregating –

all possible needs into some generic markets and broad product–markets in which the firm may

relatively homogeneous group of customers who will respond to a marketing mix in a similar

way. See section “Market Segmentation Defines Possible Target Markets.”

and a great deal of intuition and judgment is required to find the “right” dimensions. The

question is intended to force a review of the types of dimensions listed in the text. The students

probably will want to use geographic dimensions first, and this would be reasonable for a

present or proposed products. But in situations where competitive products are “me–too”

products, the differentiating characteristics may be minor and the determining dimensions may

be minor also. The students should not be led into thinking of these minor differences as

Customers regularly buy some kinds of products – e.g., specific foods and household supplies

– and large sales volumes can be won with “almost” “me–too” products.

whole “mass market” and try to find one or two demographic characteristics that will explain

the behavior of submarkets. Basically, they stop at the stage of disaggregating markets.

Research shows that this approach has at least two major shortcomings. It often leads to trying

the manager first narrows down to the relevant product market – and then aggregates

customers with similar needs into segments. See section “Market Segmentation Defines

Possible Target Markets” for more discussion on the importance of thinking of segmenting as

respect to scores on entrance exams or grade point averages achieved elsewhere. Some do

Part IV

IV-4-2 Perreault, Cannon, & McCarthy

attempt to recruit students from various ethnic groups and regions to provide better “balance”

among their students, and others do appear to be aiming at the “mass market.” Admissions

officers and counselors attempt to select “good” students for their particular “marketing mix.”

Among other things, the students’ own preferences and previous records are relevant for

sure, the students may facilitate the aggregating process by not applying at obviously

unsuitable places, but it is still the responsibility of the admissions officers to select those

whom they feel will be the best match with the academic unit’s offering.

and generally are able to do a reasonably good job of describing their own market. Many are

reasonably satisfied with the present offerings, while some real “watch buffs” have such

4- 7. Useful class discussion can center on how each student is slightly different with respect to

determining dimensions. This can be summarized neatly on the chalkboard by drawing several

markets and submarkets within the same generic market area, and then applying nicknames to

account in strategy planning. Typically, however, the students come from a sufficiently

homogeneous background that several markets are usually adequate for describing their part

4- 8. This question may involve some “field research” – which the students enjoy. Some are so

involved with their own interests, however, that they have difficulty seeing how and why others

choose to live where (and how) they do. Further, the fact that each student may, at different

times, be in different submarkets seems to elude them. Nevertheless, this can be a very useful

of view. Ultimately, a consensus usually develops that there are several submarkets such as

the following: “socializers,” “young couples,” “serious students,” “budget–oriented,” etc. Then it

will be useful to identify which local apartments are catering to each of the markets –

always interesting to see how successful some new enterprises can be in college towns, and

how many more or less direct copies can be absorbed once someone shows that there is a

market for a particular kind of place. College students do have money to spend, and there are

4- 9. Positioning approaches show where proposed and/or present brands are located in a market –

as seen by customers. This information can help marketing managers in a number of ways.

First, it can help a marketing manager to decide whether he wants to leave his product where it

is – or try to make changes (for example, in the product or in customer perceptions by changes

in promotion). It can show what brands are viewed as most similar to the firm‘s offering – and

thus it can help to identify which brand is competing most directly with which other brands. It

can also point to market segments whose needs are not being met by current offerings.

Sometimes it can also help in making decisions about whether or not to try to combine several

segments into a single target market. For additional detail, see Exhibit 4-11 and section

“Differentiation and Positioning Take the Customer Point of View.”

Chapter–by–chapter aids: Chapter 4

Instructor’s Manual to Accompany Essentials of Marketing IV-4-3

DISCUSSION OF COMPUTER-AIDED PROBLEM 4: SEGMENTING CUSTOMERS

The questions for this problem are intended to deepen students’ understanding of ideas related to

segmenting, clustering, and related concepts. The spreadsheet for this problem is different from the ones

for most of the other problems because it is not oriented toward costs, revenue, and profits. Rather, for

this problem the spreadsheet values are the “inputs” and “results” for a (simplified) cluster analysis

technique. Because the “style” of this spreadsheet is different from some of the other spreadsheets, some

instructors may wish to wait and use it later in the course – after students have had more experience with

the more “typical” problems. This problem, could, for example, be used with the marketing research

chapter.

The approach followed in the problem is like the approach that many firms follow in using cluster analysis

techniques to aid in segmenting decisions – and to develop more information about segments. The

problem presents data about the “benefits” that a (small) sample of customers seek from a product—

voice–recognition software. Students enter the data for each customer and based on the clustering results

classify the customers into one of several segments described in the problem. Each customer is classified

into the segment with the most similar “ideal” benefits scores. Then, the students draw on the results of

their analysis to get an idea of the cluster size, characteristics (computer used) of each segment, and

other related information. A small number of customers are analyzed. The point here is for the student to

see how the ideas apply – not to try to develop a “representative” set of results. After doing this exercise,

students will have a better idea of how marketing research can be used to help with segmenting

decisions.

The technical idea underlying this exercise is similar to the notion of “positioning” segments based on

their “ideal” product features, and then seeing which are close and which are not. This point is not

developed in the student materials. But, instructors who emphasize positioning approaches in class might

want to develop this logic in discussing the exercise. The questions also show what can happen when a

company tries to develop an “average” product using the shotgun approach to satisfying everyone –

rather than an approach that targets homogeneous segments.

It will not be obvious to students how the values (the similarity scores) are computed in this spreadsheet.

The approach used in computing the similarity scores is a simplification of a “distance measure” approach

actually used in some popular cluster analysis programs. Even so, the calculations involved are not very

complicated. The overall similarity score for each customer is computed as the sum of a set of 3 similarity

scores – one for each feature. How “close” a customer is to a segment‘s typical (average) preference for

a feature is determined by subtracting that customer’s rating from the average rating for a segment, and

then squaring the resulting difference. By squaring the numbers, minus signs disappear – and bigger

differences (from a segment average) are counted more heavily. Once a similarity score is computed for

each feature, they are summed across features. Then, the same sequence is followed for the next

segment.

The key point to emphasize – perhaps before students start this exercise – is the notion of a distance

measure. The lower the computed score, the more like (closer) the potential customer is to the segment

“ideal.”

The value of this exercise will be enhanced with some in–class discussion. The key points to bring out in

the discussion are covered below. Because the “answers” for the different questions are developed from

across several different spreadsheets, summary tables (like those in the exercise) will be used here –

rather than repeating all the individual spreadsheets. The initial spreadsheet for this problem is presented

Part IV

IV-4-4 Perreault, Cannon, & McCarthy

P L U S – Spreadsheet

Segmenting

Data

CUSTOMER’S RATING OF NEEDS:

Importance of Special Features

8.0

Importance of Ease of Use

4.0

Importance of Ease of Learning

7.0

Overall SIMILARITY SCORES:

Similarity to FEARFUL TYPIST Segment

45.00

Similarity to POWER USERS Segment

30.00

Similarity to SPECIALISTS Segment

3.00

Answers to Computer–Aided Problem 4:

a. The customer (represented on the initial spreadsheet) would be aggregated (clustered) into the

Specialists segment. From the initial spreadsheet (above), you can see that the similarity score for

this segment is very small compared to the similarity score for the other two segments. One effective

approach here for in–class discussion is to put the “average” scores for the three segments on the

board – along with the scores for this specific customer (i.e., the scores would be 8, 4, and 7). Then,

ask the students what segment they think is most like the customer. They will see that the computer

program is simply doing what – in this case – they could have done “visually” by studying the

segments and the needs of this particular customer. This provides an opportunity to make the point

that clustering approaches attempt to speed up the judgment process by making some of the

decisions “quantitative” In nature. If the instructor desires, the way in which the calculations are done

(described above) can be explained at this point. Putting a table, like the one below, on the board will

help to make everything clear.

Features

Easy to use

Easy to Learn

Fearful Typist

Power Users

Professional Specialist

Customer

Score

Fearful Typist

(3–8)2 + (8–4)2 + (9–7)2

Power Users

(9–8)2 + (2–4)2 + (2–7)2

Professional Specialist

(7–8)2 + (5–4)2 + (6–7)2

Students will see that the arithmetic involved in not very complicated – but rather that it would be

tedious to do by hand – especially if a large sample were involved.

b. The similarity scores for the different customers with each of the different segments are as follows:

Chapter–by–chapter aids: Chapter 4

Importance of need:

Similarity Scores

Segment

Cust–

Omer

Com–

puter

Feature

Easy to

Use

Easy to

Learn

Fearful

Power

Specialist

Dell

123

Power

Specialist

Apple

110

Fearful

Apple

Fearful

Specialist

Dell

114

Power

Apple

Fearful

Note that each customer is “aggregated” into the segment for which that customer has the lowest

similarity score – i.e., the segment to which that customer is most similar. From the above, it can be

seen that there are 2 customers in the Power User Segment, 2 in the Professional Specialist

segment, and 3 in the Fearful Typist segment.

c. A glance at the table above suggests that the Fearful Typists prefer Apple computers. More

generally, the instructor can make the point that this is the type of analysis that is often used to

identify segmenting dimensions. For example, if other information were available for each customer

(demographics like age, sex, income, etc.), we could also develop profiles of what each segment was

like on other dimensions – not just what computer the customer uses.

d. Based on the analysis (see the table for Question b), it appears that customer D is least like any of

the segments. The lowest similarity score for customer D is 9.00. All of the other customers have at

least one similarity score lower than that. You can use this example to point out – reiterating the point

made in the text – that some customers may really be different – and not fit “neatly” into a typical

segment.

CHAPTER 4 – COMMENTS ON USE OF SUGGESTED CASES WITH THIS

CHAPTER

Case 3: NOCO United Soccer Academy

This case can be used here to demonstrate making target market decisions. The four options presented

in the NOCO United case focus on distinct target markets. The best practice approach to market

segmentation might be used to guide discussion:

1. Name the broad target market. The product–market definition should include product type,

customer needs, customer types, and geographic area. It’s important to strike a balance between

being too broad and too narrow. One might say that NOCO United’s product-market is soccer

2. List potential customer needs. This is a brainstorming step. Students might suggest factors like:

shooting skills, dribbling skills (or more broadly technical soccer skills at a very basic or very

Part IV

advanced level), staying in shape, or getting a scholarship. Other factors might include the desire

of parents to have a place for their kids to go after school, or for fun or social opportunities – a

different needs. For example, the needs of kids age 6–9 would differ from older kids – and those

playing for traveling, competitive teams might differ from those of recreational players. A matrix

5. Name (nickname) the possible product–markets. These might include names similar to: “future

soccer superstars,” “already superstars,” “good athletes,” “social soccer players,” “just wanna

have fun,” “just learning the game,” etc.

6. Evaluate why product–markets behave as they do. Choose a couple of the segments from Step 5

and think more deeply about their specific needs.

more data. But an instructor could simply have students make educated guesses (which may be

pretty accurate given these students were recently members of the broader market). One might

also estimate the relative sizes – “Which product–market is largest?”

See case discussion in Part V.

Case 7: Omarama Mountain Lodge

This case can be used to illustrate a marketing mix that is focused on a very small, but potentially

attractive, target market segment. Omarama Mountain Lodge targets an elite group of people who have

Case 10: Cooper’s Ice Center

Cooper’s Ice Center is an ice–skating rink that is faced with the challenge of trying to appeal to different

target market groups. It deals with this challenge by offering different programs to different market

segments at different times and days of the week. See case discussion in Part V.

Bass Pro Shops is the nation’s leading retailer of outdoor gear. It also is regarded as a master marketer

for a unique shopping experience that blends goods and services with theater and entertainment—a trend

in retailing called “destination development.” Destination retailers don’t just sell a product; they create an

unforgettable experience for their customers. The case allows for a discussion of segmentation and

positioning as Bass clearly differentiates its offering from other retailers. For more details, see the Video

Instructor’s Manual on the Instructor’s Resource CD or the Instructor Side of the Online Learning Center