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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
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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.”
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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
next:
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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
3
8
9
Power Users
9
2
2
Professional Specialist
7
5
6
Customer
8
4
7
Score
Fearful Typist
(3-8)2 + (8-4)2 + (9-7)2
=
45
Power Users
(9-8)2 + (2-4)2 + (2-7)2
=
30
Professional Specialist
(7-8)2 + (5-4)2 + (6-7)2
=
3
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:
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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
A
Dell
8
1
2
123
2
33
Power
B
HP
6
6
5
29
34
3
Specialist
C
Apple
4
9
8
3
110
29
Fearful
D
Apple
2
6
7
9
90
27
Fearful
E
HP
5
6
5
24
41
6
Specialist
F
Dell
8
3
1
114
3
30
Power
G
Apple
4
6
8
6
77
14
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
