END OF CHAPTER MATERIAL
Discussion Questions
7-1 How would you describe the key differences between differentiation and positioning? Do
businesses use both techniques? (AACSB: Communication)
Answer: Differentiation involves making the product or service noticeably different from the
competition so consumers can recognize its distinctive properties or features more easily. Positioning
7-2 How is demographic segmentation used in consumer markets? Provide an example where marketers
have used demographic segmentation. (AACSB: Communication; Reflective Thinking)
Answer:
Demographic segmentation divides the market into segments based on variables such as age,
life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.
Demographic factors are the most popular bases for segmenting customer groups. One reason is that
consumer needs, wants, and usage rates often vary closely with demographic variables. Another is
Students’ examples will vary. Examples may include Dove developing a line for men. Dove’s
MenCare brand provides a full line of body washes, body bars, antiperspirants, face care, and hair
7-3 What is the value of intermarket segmentation for global businesses? (AACSB: Communication)
Answer:
Intermarket segmentation allows a business to create and identify target market segments of
consumers that share similarities even though the members of those target markets live in different
7-4 There are many ways to segment a market, but not all segmentations are effective. Explain the five
requirements for effective market segmentation. (AACSB: Communication)
Answer: Student answers will vary based on their personal response. Refer to the MyLab for an
7-5 Explain the differences between differentiated and undifferentiated marketing. Can a business
effectively use both strategies? (AACSB: Communication; Reflective Thinking)
Answer:
Differentiated marketing is often used when a business aims to create variants of products or services
that individually aim to cater for specific markets. In essence, the whole (or most) of the market is
catered for, but each distinctive target market has a variant designed to appeal to them in a specific
7-6 How can a company gain competitive advantage through differentiation? Describe an example of a
company that illustrates each type of differentiation discussed in the chapter. (AACSB:
Communication)
Answer: Student answers will vary based on their personal response. Refer to the MyLab for an
Critical Thinking Exercises
7-7 Identify a product or service that you are familiar with but consider a niche product. You have been
asked to come up with a strategy that aims to transform the product from niche to a more
mass-market position. (AACSB: Communication; Reflective Thinking)
Answer:
Market niches are often developed by start-ups. They are turned into mass-market products or
services by merchandisers or much larger established businesses. They have the scale, distribution,
and sales to commercialize the product that the start-ups do not. However, sometimes the transition
Students are likely to approach this in different ways. Strategies that may work include seeking
investment and expertise to assist in the transformation, partnering with a bigger business with
7-8 Manfluencers is a terms that describes a new marketing trend. To what does this term refer? Describe
two examples of how marketers have responded to the manfluencers trend. (AACSB:
Communication; Reflective Thinking)
Answer:
Students’ examples will vary. The term refers to males who shop and prepare meals at least half of the
time. (Source:
https://www.consumeraffairs.com/news/marketing-to-men-by-appealing-to-manfluencers-102513.htm
l; http://midanmarketing.com/beta/wp-content/uploads/2014/12/Manfluence-infographic-081413.pdf;
http://midanmarketing.com/consumers-case/man-fluence/)
Manfluencers is a term that describes the almost 50 percent of men who now do most of the grocery
www.usatoday.com/story/news/nation/2013/10/27/newser-marketing-men/3280773/. Another article
describes several examples – see Anne Marie Chaker, “Groceries Become a Guy Thing,” Wall Street
Journal, (October 17, 2013), p. D1. Food giants Kraft and General Mills are going after
manfluencers. Some changes are merely cosmetic, such as larger portions and darker color schemes
on packages. Powerful Yogurt focuses on protein content, and frozen yogurt, Pro Yo, is geared
For more examples see Sarah Halzack, “Major Food Brands Go After a Once-Ignored Customer:
7-9 In a small group, create an idea for a new business. Using the steps described in the chapter, develop a
customer value–driven marketing strategy. Describe your strategy and conclude with a positioning
statement for this business. (AACSB: Communication; Reflective Thinking)
Answer:
The four major steps in designing a customer value-driven marketing strategy are market
segmentation, market targeting (or targeting), differentiation, and positioning. Students should
identify the target market for their business and identify the competitive advantage. That is, what does
APPLICATIONS AND CASES
Online, Mobile, and Social Media Marketing: Get Your Groupon
Local marketing is an effective tool used by marketers to reach intended market segments. Groupon has
capitalized on this concept by tailoring brands and marketing to the needs and wants of local customer
segments—cities, neighborhoods, and even specific stores. According to its website, Groupon “offers a
vast mobile and online marketplace where people discover and save on amazing things to do, see, eat, and
buy. By enabling real-time commerce across local businesses, travel destinations, consumer products, and
live events, shoppers can find the best a city has to offer. Groupon is redefining how small businesses
attract and retain customers by providing them with customizable and scalable marketing tools and
services to profitably grow their businesses.” This concept lies at the heart of Groupon’s mission: “to
connect local commerce, increasing consumer buying power while driving more business to local
merchants through price and discovery.” To help consumers make those connections, Groupon offers a
mobile app, online marketplace, and social media touchpoints where customers can readily access
information on its daily deals.
7-10 How does Groupon use target marketing? Provide examples. Discuss the ways in which small
businesses can utilize local social media marketing in your community. (AACSB: Communication;
Use of IT; Reflective Thinking)
Answer:
Groupon targets local consumers offering deals and discounts on products, services, and activities by
location. For example, local nail salons offer 25 percent off services, or a local restaurant offers $10
off a $25 purchase. Each location has its own distinct offerings. In addition, Groupon has a set of
products and services offered to a wider market not based on location. For example, a set of spinner
7-11 Do you use Groupon? Is it effective in helping local businesses to meet the challenges of local
marketing? Why or why not? (AACSB: Communication; Reflective Thinking)
Answer:
Students’ answers will vary but many students will be familiar with Groupon. Groupon may or may
not be effective. Local marketing efforts such as Groupon allow businesses to potentially reach new
customers. But are those new customers going to continue to support the business? This is the
Marketing Ethics: Targeting Teens
Beverage Giant Coca-Cola faces several challenges as a result of an increase of consumer health
awareness, the reduction of carbonated drinks in schools in many regions, and newer, healthier drinks.
The brand is having an especially difficult time getting through to teens. To increase sales, Coca-Cola
attempted to make a personal connection with teens through a campaign called “Share a Coke.” The
campaign was first launched in Australia in 2011, then introduced in the United States, and then spread
across 70 countries until 2015.
The soda maker also knows very well that it needs to target teens through social media and mobile
phones. Through the #sharecoke hashtag, Coca-Cola achieved a phenomenal result, with 25 million extra
Facebook followers and an increase of consumption by young consumers by 7 percent in 2015.
However, the campaign was criticized by many; health experts, for instance, expressed their concern that
Coca-Cola uses the Internet and technology to push sugary drinks on teens that might lead to long-term
consequences with regard to their diet and lifestyle.
7-12 Discuss how Coca-Cola expanded its teen customer base again.
Answer:
First, the brand’s marketing value focused on personalization through the use of 600 common names
from around the world, and this allowed teens to show self-expression. Second, Coca-Cola used
7-13 How will Coca-Cola prove that they are catering to teens responsibly?
Answer:
Coca-Cola should improve its brand health score by promoting healthy diets and physical activities.
Peer influence on teens should be taken into account while setting the marketing strategy. The brand
Marketing by the Numbers: USAA
USAA is a financial services company formed in 1922 by 25 Army officers who came together to insure
each other’s automobiles because they were deemed too high-risk to insure. USAA now has almost
25,000 employees and more than 9 million member customers. It consistently ranks in the top 10
automobile insurance companies and offers other types of insurance as well as banking, investment,
retirement, and financial planning services. USAA practices a niche marketing strategy—it targets only
active and former military personnel and their immediate families. Members earn the right to be
customers by serving in the military and can pass that on to their spouses and children. The company was
originally even more restrictive, targeting only military officers. However, in 1996, eligibility was
extended to enlisted personnel and is now extended to anyone who served and was honorably discharged
from the military and his or her immediate family members.
7-14 Discuss the factors used to evaluate the usefulness of the military segment. (AACSB:
Communication; Reflective Thinking)
Answer:
To be useful, market segments must be:
Measurable: The size, purchasing power, and profiles of the segments can be measured.
Accessible: The market segments can be effectively reached and served. There are
several veterans’ organizations toward military personnel and retirees, and USAA can
Substantial: The market segments are large or profitable enough to serve. A segment
Differentiable: The segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs. With their military background and
Actionable: Effective programs can be designed for attracting and serving the segments.
It is possible to design programs specifically for this segment of people in need of
7-15 Using the chain ratio method described in Appendix 2: Marketing by the Numbers, estimate the
market potential in the military (active duty and veterans) market. Be sure to state any assumptions
you make. (AACSB: Communication; Use of IT; Analytical Reasoning)
Answer:
Students’ assumptions and estimates will vary, and instructors can use this exercise as an illustration
that estimating market potential is not an exact science. The aim of this exercise is not to come up
The chain-ratio method described in Appendix 2 for estimating total market demand uses three
variables:
a) number of prospective buyers
b) quantity purchased by an average buyer per year
c) price of an average unit
Market demand can be determined as follows:
Q = n q p
where
Q = total market demand
n = number of buyers in the market
q = quantity purchased by an average buyer per year
p = price of an average unit
For example, the U.S. Census Bureau reports there are 19,300,000 veterans in the United States as of
2014. Additionally, the number of active duty personnel as of May 2016 is 1,330,356
(http://www.governing.com/gov-data/military-civilian-active-duty-employee-workforce-numbers-by-
state.html, accessed October 16, 2016). However, this number must be discounted because some
military personnel and veterans already have life insurance (focusing on that specific service for this
example). One way to discount this number is to multiply it by the percentage of the U.S. population
that does not have life insurance. LIMRA’s 2014 Insurance Barometer Study indicates that 62% of all
people in the United States were covered by some type of life insurance in 2013
(www.iii.org/fact-statistic/life-insurance). The discount factor would be 38% (that is, 1 – 0.62). Thus,
one estimate of the number of potential military clients, active or veterans, is 20,630,356 × 0.38 =
7,839,535 military. Another factor that could discount this number is when the veterans served. For
example, 35% of all veterans served during the Vietnam-era (1964-1975) and are likely already
covered by insurance, so the total number could be discounted by a factor of 0.65 (that is, 1 – 0.35):
7,839,535 × 0.65 = 5,095,698. Depending on assumptions students make, an estimate could be made
as simply as using the number of veterans who served from 1990-present, which is 5.5 million, or the
number of veterans who are younger than 35, which is 1.7 million (see
www.infoplease.com/spot/veteranscensus1.html, accessed October 16, 2016). The number of current
active duty personnel should increase each of these numbers by 1,330,356 military members.
To determine the other elements of the chain ratio method, students will have to state their
assumptions. For example, if using the cost of a policy as the “average price per unit,” then the
“quantity purchased” would be 1 because most veterans and active duty personnel will likely
purchase only one life insurance policy, for example. However, if the “average price per unit” is the
cost for a policy for more than one family member, then the “quantity purchased” will be the number
of policies. To determine costs, students should research the USAA Web site
(https://www.usaa.com/inet/ent_logon/Logon?redirectjsp=true).
Company Case Notes
Virgin America: Flight Service for the Tech Savvy
Synopsis
There are far more failures among airline startups than there are successes. In the past few decades, the
most notable successes have pursued a low-cost/low-fare model (Southwest, Allegiant, Spirit, Frontier,
etc.). This case shows there is room in the market for an airline that doesn’t try to beat the competition by
offering the lowest price, but by offering the best service and the most appealing amenities. Virgin
America is succeeding by doing these things and by targeting the right customer.
Teaching Objectives
The teaching objectives for this case are to:
1. Provide a practical application for possible ways that companies can segment markets.
2. Underscore the difference between segmentation and targeting.
3. Show the importance of establishing a positioning for a brand that is consistent with a targeting
strategy.
4. Illustrate that established brands can reinvent themselves through modifications to a targeting
strategy.
Discussion Questions
7-19 Using the full spectrum of segmentation variables, describe how Virgin America segments and
targets the market for airline services.
While there are numerous segmentation variables that can factor in to Virgin’s strategy, start with the
ones that make the most sense. Then, describe the profile based on others. For example:
Geographic – Silicon Valley. While this is obvious, it doesn’t pan out well, as there is no way that
any airline could succeed by only serving the people from one market. Rather, Virgin started in
Lifestyle – There are numerous lifestyle schemas (VALS, Experian, etc.). Each has a lifestyle type
7-20 Which market targeting strategy is Virgin America following? Justify your answer.
Based on the information in the case, it seems that Virgin America is focused on a single segment,
which qualifies as concentrated strategy. While the airline certainly picks up customers from other
7-21 Write a positioning statement for Virgin America.
Follow the basic template set forth by the textbook: To (target segment and need) our (brand) is
(concept) that (point of difference). Filling in the blanks, this is one alternative: To tech-savvy
7-22 What are the potential issues for Virgin America following the Alaska Airlines acquisition? Will
Virgin America continue to appeal to the same types of customers? Why or why not?
Both airlines have a strong record for customer service. The acquisition also makes sense from the
But clearly, the biggest issue is whether or not Virgin America will continue to maintain its unique
culture and image. Virgin America is truly unique in its positioning and targeting within the airline
In the long-term, if Alaska maintains Virgin as a separate brand, it can continue to court the existing
Virgin base. The fact that Virgin America has recently turned a profit for an entire year is a good
Teaching Suggestions
Ask students to consider their most recent airline experience. Ask them what they loved about it (not just
what the airline did well, but what they loved about it). The list will likely be pretty short. Then, ask
students what aspects of the experience were negative. List both sets of responses on the board. After they
have read the case, make a list of all the amenities on Virgin America that are unique. Finally, ask the
class if they would be willing to pay more for that kind of experience. Finish by asking how much more.
Go to mymktlab.com for the answers to the following Assisted-graded writing questions:
7-23 Describe how marketers segment international markets. What is intermarket segmentation?
7-24 Describe how marketers manage service differentiation, other than through pricing, and describe an
example of a service provider that has successfully differentiated its offering from its competitors.
ADDITIONAL PROJECTS, ASSIGNMENTS, AND EXAMPLES
Projects
1. Go to iTunes (www.apple.com) or Napster (www.napster.com). What unique market segments
appear to be the target of specific genres of music? How did you determine the segments?
(Objective 2)
2. You’ve agreed to help a friend with a home furnishings business segment her market. Suggest a
way to segment the market for her. Select a target market to go after, keeping in mind segment
size and growth, structural attractiveness, and probable company resources. What target
marketing strategy would you use? Explain your answers. (Objective 2)
3. There are many ways to segment a market. Using the four segmentation variables discussed in the
chapter, discuss which variables would be most important for segmenting (a) candidates for
cataract surgery and (b) possible enrollees in a culinary school. Explain your choices. (Objective
2)
4. Collect advertisements that demonstrate the positioning of different watch brands. Sort the
various brands into categories of brands with similar positions. (Objective 4)
Small Group Assignments
1. Form students into groups of three to five. Each group should read Real Marketing 7.1: Mountain
Dew: “Doin’ the Dew” with Brand Superfans. Then have them answer the following questions
and share their answers with the class. (Objective 2 and 4)
a. How would you describe Mountain Dew’s approach to market segmentation?
b. Picture a typical member of “Dew Nation.” How does he/she dress? In what type of
neighborhood does he/she live? What kind of job might he/she have? What kind of vehicle
does he/she drive? What might be his/her attitude toward spending money? Now, do the same
thing for a typical cola drinker. What key differences can you find, and how are they
important to Mountain Dew?
c. How does the Mountain Dew story relate to the segmentation and positioning concepts that
follow in Chapter 7?
2. The Federal Trade Commission (FTC) and citizen action groups have accused tobacco and beer
companies of targeting underage smokers and drinkers. For instance, in recent Super Bowls, Bud
Light and Budweiser ads ranked first through fourth in popularity among viewers under the age
of 17. Also, underage listeners hear more than a third of radio ads for alcoholic beverages.
Considering the foregoing, answer the following questions. (Objective 3)
a. Do you believe the criticism that tobacco and alcohol companies have received is justified?
Why or why not?
b. What do you believe to be the most effective manner to advertise these products without
exposing underage consumers?
Individual Assignments
1. You have been asked by your college/university to help develop a market segmentation strategy
for them. What market segments would you encourage them to pursue and why? (Objective 2)
2. Consider the following comments by a reporter regarding Victoria’s Secret Pink line. “The
message we’re telling our girls is a simple one. You’ll have a great life if people find you sexually
attractive… Do we really need to start worrying about it at 11?” Do you believe this criticism is
justified? Why or why not? (Objective 3)
Think-Pair-Share
Consider the following questions, formulate an answer, pair with the student on your right, share your
thoughts with one another, and respond to questions from the instructor.
1. How would you define market segmentation? (Objective 1)
2. How do geographic segmentation and demographic segmentation differ? (Objective 2)
3. Which one segmentation form do you consider the most valuable? Why? (Objective 2)
4. What is benefit segmentation? Give a good example. (Objective 2)
Outside Examples
1. Review the requirements for effective market segmentation. Now, log on to
Napster (www.napster.com/). How are they attempting to segment their markets? Rate Napster on
each of the five requirements for effective segmentation. Do you believe they are doing a good
job on each? What suggestions for improvement would you recommend? (Objective 2)
Possible Solution:
Napster uses a differentiated marketing strategy. More specifically, they are using demographic,
psychographic, and (to a lesser extent) behavioral-based segmentation variables. The
requirements for effective segmentation and how well Napster is doing in meeting each are:
Measurable—the size, purchasing power, and profiles of the segments can be measured.
Accessible—the market segments can be effectively reached and served. Each of the
Substantial—the market segments are large or profitable enough to serve. Given that the
Differentiable—the segments are conceptually distinguishable and respond differently to
marketing program to reach each segment.
Actionable—effective programs can be designed for attracting and serving the segments.
Napster should concentrate more on designing marketing programs to reach under-served
2. Lifestyle segmentation has many potential advantages. Your text discusses how
lifestyle segmentation has been used by the cruise industry by citing Royal Caribbean and Regent
Seven Seas as examples. Go to the home pages of three additional cruise lines and discuss how
each uses lifestyle segmentation (Objective 2).
Possible Solution:
Students may come up with any number of examples.
Carnival Cruise Line (www.carnival.com/) appeals to the value-oriented consumer as
Norwegian Cruise Line (www.ncl.com/nclweb/home.html) promotes “Freestyle
Holland America Cruise Line (www.hollandamerica.com) appeals to a more refined or
Seabourn Cruises (www.seabourn.com/) refers to their ships as “yachts,” thus giving their