Marketing Chapter 8 Homework a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs

Instructor Manual

Lamb/Hair/McDaniel, MKTG 13E, 9780357127810; Chapter 8: Segmenting and Targeting

Markets

Table of Contents

Purpose and Perspective of the Chapter …………………………………………………………………………. 2

Cengage Supplements …………………………………………………………………………………………………… 2

Learning Outcomes ……………………………………………………………………………………………………….. 2

Complete List of Chapter Activities and Assessments ……………………………………………………… 3

Key Terms ……………………………………………………………………………………………………………………… 5

What’s New in This Chapter ……………………………………………………………………………………………. 6

Chapter Outline …………………………………………………………………………………………………………….. 6

Discussion Questions …………………………………………………………………………………………………… 16

Additional Activities and Assignments …………………………………………………………………………… 17

Additional Resources ……………………………………………………………………………………………………. 27

External Videos or Playlist ……………………………………………………………………………………………………….. 27

Appendix …………………………………………………………………………………………………………………….. 28

Generic Rubrics ……………………………………………………………………………………………………………………… 28

Standard Writing Rubric …………………………..……………………………………………………………………………… 28

Standard Discussion Rubric ……………………………………………………………………………………………………… 29

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website, in whole or in part.

Purpose and Perspective of the Chapter

The purpose of this chapter is to learn the characteristics of markets, which are individuals

or organizations that make purchases, and market segments, which are groups with similar

product needs. Market segmentation enables marketers to tailor marketing mixes to meet

the needs of particular population segments and depends on four basic criteria: (1) a

Cengage Supplements

The following product-level supplements provide additional information that may help you

in preparing your course. They are available in the Instructor Resource Center.

• Transition Guide (provides information about what’s new from edition to edition)

• Educator’s Guide (describes assets in the platform with a detailed breakdown of

Learning Outcomes

The following learning outcomes are addressed in this chapter:

8-1 Describe the characteristics of markets and market segments

8-2 Explain the importance of market segmentation

8-3 Discuss the criteria for successful market segmentation

8-4 Describe the bases commonly used to segment consumer markets

Complete List of Chapter Activities and Assessments

For additional guidance refer to the Teaching Online Guide.

Chapter

Learning

Objective

PPT slide

Activity/Assessment

Duration

Certification

Standard

N/A

MindTap: Why Does

Market Segmentation

Matter to Me?

5 minutes

BUSPROG:

Reflective

Thinking

DISC: Customer

Segments and The

Importance of Market

Segmentation

DISC: Customer

8-3

MindTap: Learn It 8-3:

Criteria for Successful

Segmentation

5 minutes

BUSPROG:

Analytic

DISC: Strategy

8-4

MindTap: Learn It 8-4:

Bases for Segmenting

Consumer Markets

5 minutes

BUSPROG:

Analytic

DISC: Customer

8-5

MindTap: Learn It 8-5:

Bases for Segmenting

Business Markets

5 minutes

BUSPROG:

Analytic

DISC: Customer

8-6

MindTap: Learn It 8-6:

Steps in Segmenting a

Market

5 minutes

BUSPROG:

Analytic

DISC: Customer

8-7 – 8-8

MindTap: Learn It 8-7 and

8-8: Strategies for

10 minutes

BUSPROG:

Analytic

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website, in whole or in part.

Selecting Target Markets

and CRM as a Targeting

Tool

DISC: Strategy

8-9

MindTap: Learn It 8-9:

Positioning

5 minutes

BUSPROG:

Analytic

DISC: Strategy

MindTap: Assignment

25 minutes

BUSPROG:

Analytic

DISC: Marketing

Plan

MindTap: Case Activity

15 minutes

BUSPROG:

Analytic

Diversity

International

Perspective

8-3

13

Knowledge Check 1 in

PPT

5 minutes

BUSPROG:

Reflective

Thinking

DISC: Strategy

8-4

29

Group Activity 1 in PPT

25-30 minutes

BUSPROG:

Reflective

Thinking

DISC: Customer

8-6

37

Group Activity 2 in PPT

25-30 minutes

BUSPROG:

Reflective

Thinking

8-8

51

Group Activity 3 in PPT

25-30 minutes

BUSPROG:

Communication

Plan

DISC: Product

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Key Terms

80/20 principle: a principle holding that 20 percent of all customers generate 80 percent of

the demand.

benefit segmentation: the process of grouping customers into market segments

according to the benefits they seek from the product.

cannibalization: a situation that occurs when sales of a new product cut into sales of a

firm’s existing products.

concentrated targeting strategy: a strategy used to select one segment of a market for

targeting marketing efforts.

market segment: a subgroup of people or organizations sharing one or more

characteristics that cause them to have similar product needs.

market segmentation: the process of dividing a market into meaningful, relatively similar,

and identifiable segments or groups.

market: people or organizations with needs or wants and the ability and willingness to

buy.

repositioning: changing consumers’ perceptions of a brand in relation to competing

brands.

satisficers: business customers who place an order with the first familiar supplier to satisfy

product and delivery requirements.

segmentation bases (variables): characteristics of individuals, groups, or organizations.

target market: a group of people or organizations for which an organization designs,

implements, and maintains a marketing mix intended to meet the needs of that group,

resulting in mutually satisfying exchanges.

What’s New in This Chapter

The following elements are improvements in this chapter from the previous edition:

• New discussion of importance of market segmentation with examples

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Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. “LO

CH–##” refers to the chapter learning outcome; “PPT Slide #” refers to the slide number in the

PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource

Center); and, as applicable for each discipline, accreditation or certification standards (“DISC”).

Introduce Chapter 8 and review the learning outcomes. (PPT Slide 2).

1. Markets and Market Segments (LO 8-1, PPT Slide 3, DISC: Customer)

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website, in whole or in part.

a. A market is (1) people or organizations with (2) needs or wants and (3) the ability

and (4) the willingness to buy. It’s important to note that a group of people or an

organization that lacks any one of these characteristics is not a market.

2. The Importance of Market Segmentation (LO 8-2, PPT Slide 8, DISC: Customer)

a. Market segmentation has become a powerful marketing tool for success only since

the 1960s. Because it provides marketers with a deeper understanding of customer

lifestyles, values, jobs to be done, need states, and buying occasions, marketers can

b. The analysis of big data has provided new ways of reaching a deeper understanding

of consumers and their behavior.

Example: Swedish furniture company Ikea uses big data to determine how to adjust

3. Criteria for Successful Segmentation (LO 8-3, PPT Slide 10, DISC: Strategy)

a. The three most valuable outcomes of market segmentation include the following:

• It allows marketers to identify groups of customers with similar needs, and then

b. A useful segmentation scheme should also meet four basic criteria:

• Substantiality: A segment must be large enough to make commercial sense. A

housing development, for example, does not need an extensive pool of potential

customers to still make commercial sense due to the high price of each home.

• Identifiability and measurability: Marketers must be able to identify and

measure the size of a segment based on data such as population, number of

4. Bases for Segmenting Consumer Markets (LO 8-4, PPT Slide 14, DISC: Customer)

a. Marketers use segmentation bases, or variables, which are characteristics of

individuals, groups, or organizations, to divide a total market into segments.

Markets can be segmented using a single variable, such as age group, or several

variables, such as age group, gender, and education. Single-variable segmentation is

simpler and easier to use than multiple-variable segmentation. However, as the

• Age Segmentation: Common age groups include newborns, infants, young

children, tweens, Millennials, Generation X, Baby Boomers, and seniors.

Although there are obviously many differences, the people within each of these

categories often share some common traits, habits, and needs.

Examples: Generation Z born between 1995 and 2015 want to work for their

• Gender Segmentation: In the U.S., women buy 70% to 80% of the consumer goods

sold each year, although a recent marketing trend is to market traditionally

“female–oriented” products toward men and vice versa.

• Income Segmentation: Income is an obvious choice for segmenting markets

because income level influences consumers’ wants and, more important, their

ability to buy.

• Ethnic Segmentation: Historically, marketers in the United States functioned as if

all Americans conformed to a homogenized, Anglo-centric ideal. Today, they are

d. Family life-cycle (FLC) segmentation: In many cases, purchasing decisions are

determined by a combination of age, marital status, and the presence or absence of

children. The most common categories are explained in Exhibit 8.1.

Instructor Manual: Lamb/Hair/McDaniel, MKTG 13E, 9780357127810; Chapter 8: Segmenting and Targeting Markets

PRESENTATION VISUAL: Exhibit 8.1 Family Life Cycle

e. Psychographic Segmentation: As helpful as age, gender, income, ethnicity, FLC

stage, and other demographic variables are, sometimes more information is needed

to develop meaningful segmentation strategies. Psychographic segmentation

expands upon these basics with variables like:

• Personality: A person’s traits, attitudes, and habits

• Motives: The emotions that can influence purchasing decisions

f. Psychographic variables can be used individually or combined with other variables

to provide more detailed descriptions of market segments.  

Example: After analyzing data from more than 14,000 people in 22 countries, DuPont

Nutrition & Health identified six core consumer segments in the health and wellness

g. Usage-Rate Segmentation: Usage-rate segmentation divides a market by the

amount of product bought or consumed.

h. Categories vary with the product, but they are likely to include some combination of

5. Bases for Segmenting Business Markets (LO 8-5, PPT Slide 31, DISC: Customer)

a. The business market’s four broad segments—producers, resellers, government, and

institutions—need to be further segmented to be truly useful to business

marketers. (Refer to Chapter 7 for more details on business markets, if needed.)

Two possibilities are:

b. Company Characteristics: Geographic location, type of company, company size,

and product use can be important segmentation variables. Segmenting by customer

c. Buying Processes: The purchasing strategies of the buyers may also provide useful

segments. Two types of buyers have been identified:

6. Steps in Segmenting a Market (LO 8-6, PPT Slide 34, DISC: Strategy)

The six-step process for segmenting a market is as follows:

a. Select a market or product category for study. Whether it’s a market in which the

firm already competes, a new but related market or product category, or a totally

new market, the overall market or product category should be clearly defined.  

b. Choose a basis or bases for segmenting the market: There are no foolproof

procedures for selecting segmentation variables, but the segmentation scheme

must produce segments that meet the four basic criteria discussed earlier in this

chapter (substantiality, identifiability and measurability, accessibility, and

responsiveness).  

It is important to monitor segmentation strategies over time. Markets are dynamic, so

approaches must adapt to the changes that occur in customers’ lives.

7. Strategies for Selecting Target Markets (LO 8-7, PPT Slide 39, DISC: Strategy)

a. A target market is a group of people or organizations for which an organization

designs, implements, and maintains a marketing mix intended to meet the needs of

that group, resulting in mutually satisfying exchanges. There are three general

c. This strategy is often used by first movers in a market. With no competition, the firm

may find it unnecessary to tailor marketing mixes to the preferences of market

segments at first. However, this makes the company more susceptible to

competition.

d. Concentrated Targeting: When using a concentrated targeting strategy, a firm

selects a market niche—meaning one segment of a market—for targeting its

marketing efforts. The firm’s marketers can concentrate on understanding the

needs, motives, and satisfaction of that segment’s members and on developing and

maintaining a highly specialized marketing mix. If the right segment has been

e. Multisegment Targeting: With a multisegment targeting strategy, a firm

chooses to serve two or more well-defined market segments and develops a distinct

marketing mix for each one. Some of the benefits of this strategy include greater

sales volume, higher profits, larger market share, and economies of scale in

manufacturing and marketing. Some of the downsides of the multisegment

targeting strategy include higher costs for product design, production, promotion,

inventory, marketing research, and management. It can also result in

cannibalization, which occurs when sales of a new product cut into sales of a firm’s

existing products.

Example: P&G practices a multisegment targeting strategy with 18 different laundry

8. CRM as a Targeting Tool (LO 8-8, PPT Slide 48, DISC: Marketing Plan)

a. Companies successfully using CRM typically customize their goods and services

based on data generated through interactions between carefully defined groups of

customers and the company. (Refer to Chapter 1 for more details on CRM, if

needed.)

Example: Etsy, an online marketplace where entrepreneurs can sell products they

curate or craft by hand, provides a good example of the application of CRM. Based

b. Four trends that are expected to lead to an even greater use of CRM are:

• Personalization: CRM helps companies fulfill consumers’ desire to be treated as

individuals with their own unique sets of needs and wants.

• Time savings: With the direct and personalized marketing efforts generated by

CRM, consumers can spend less time making purchase decisions and more time

doing the things that are important to them.

9. Positioning (LO 8-9, PPT Slide 53, DISC: Promotion

a. Once marketers have chosen which segment or segments to target with their

marketing mix, they can develop the product’s positioning. In general, position

refers to potential customers’ overall perception of a brand, product line, or

organization relative to competing offerings. Effective positioning requires

d. The alternate strategy is to highlight the product’s similarities to competing products

or brands.

e. Perceptual Mapping: Perceptual mapping is a means of displaying or graphing, in

two or more dimensions, the location—or position—of products, brands, or groups

of products in customers’ minds as compared to competing products or brands. The

dimensions used can include such positioning bases as price, use, or user. Exhibit

8.3 provides an example.

PRESENTATION VISUAL: Exhibit 8.3 Perceptual Map and Positioning Strategy for Saks

Department Stores

f. Positioning Bases: Firms use a variety of bases for positioning: