### Potential Exam Questions: Chapter 4.

2 (Market Segmentation & Targeting)

#### **Multiple Choice Questions**

1. What is the primary purpose of market segmentation?

a) To reduce production costs

b) To identify groups of customers with similar needs and wants

c) To eliminate competition

d) To standardize marketing strategies

**Answer: ** b) To identify groups of customers with similar needs and wants

2. Which of the following is **NOT** a common basis for segmenting consumer markets?

a) Geographic

b) Psychographic

c) Political affiliation

d) Behavioral

**Answer:** c) Political affiliation

3. The VALS framework classifies consumers based on:

a) Income and age

b) Primary motivations and resources

c) Geographic location

d) Brand loyalty

**Answer:** b) Primary motivations and resources

4. Which generational cohort is characterized by being "highly socially conscious and
impatient"?

a) Baby Boomers

b) Gen Xers

c) Millennials

d) Traditionalists

**Answer:** c) Millennials

5. What is a key requirement for effective segmentation?

a) Segments must be politically aligned

b) Segments must be measurable and substantial

c) Segments must ignore demographic differences

d) Segments must target non-users exclusively

**Answer:** b) Segments must be measurable and substantial

---

#### **Short Answer Questions**

6. **Explain the difference between *demographic* and *psychographic* segmentation.**

**Answer:**

- *Demographic segmentation* divides markets based on objective characteristics like age,

gender, income, or education.

- *Psychographic segmentation* categorizes consumers by lifestyle, values, or personality

traits (e.g., using the VALS framework).
7. **Describe the "nested approach" to segmenting business markets.**

**Answer: **

The nested approach combines macro (e.g., industry, company size), intermediate (e.g.,
operating variables, purchasing approaches), and micro bases (e.g., buyer-seller relationships,
individual characteristics) to create a detailed segmentation continuum.

8. **What are the five behavioral variables used in segmentation?**

**Answer: **

Occasions, benefits sought, user status, loyalty status, and usage rate.

---

#### **Essay Questions**

9. **Compare *undifferentiated*, *differentiated*, and *concentrated* marketing strategies.

Provide examples.**

**Answer:**

- **Undifferentiated:** One marketing mix for the entire market (e.g., basic utilities like
water).

- **Differentiated:** Customized mixes for multiple segments (e.g., Coca-Cola’s varied product
lines).

- **Concentrated:** Focus on a single segment (e.g., Tesla targeting luxury EV buyers initially).

10. **How can a company use Porter’s Five Forces to evaluate the attractiveness of a market
segment?**

**Answer:**

Analyze:

- **Rivalry** (competition intensity),

 - **Buyer/Supplier Power** (negotiation leverage),

- **Threat of Substitutes/New Entrants** (barriers to entry).

Example: A high-tech segment with strong supplier power and few substitutes may be
attractive if rivalry is low.

---

#### **Application Question**

11. **A company selling fitness wearables wants to segment its market. Outline a segmentation
plan using at least three bases (e.g., demographic, behavioral).**

**Answer:**

- **Demographic:** Target millennials (age 25-40) with disposable income.

- **Behavioral:** Focus on "heavy users" (fitness enthusiasts) and "occasions" (New Year’s
resolutions).

- **Psychographic:** Appeal to "Achievers" (VALS framework) motivated by health and

performance.

---

These questions cover key concepts from the chapter, including segmentation bases,
generational influences, and strategic targeting. They test both theoretical understanding and
practical application.
Below is a list of potential exam questions based on the provided document, "Chapter 4.2
Identifying Market Segments and Targets." The questions are designed to cover key concepts,
definitions, and applications from the document, suitable for a marketing course exam. They are
categorized into different types (e.g., multiple-choice, short-answer, and essay) to provide
variety and assess various levels of understanding.

---

### Multiple-Choice Questions

1. **What is a market segment?**

a) A group of customers with different needs and wants

b) A group of customers who share similar needs and wants

c) A group of competitors in the same industry

d) A group of suppliers for a specific product

**Answer**: b) A group of customers who share similar needs and wants

2. **Which of the following is NOT a segmentation variable for consumer markets?**

a) Geographic

b) Demographic

c) Psychographic

d) Organizational demographics

**Answer**: d) Organizational demographics

3. **Which segmentation approach combines geographic and demographic factors, as proposed

by Nielsen Claritas?**

a) VALS Framework

b) PRIZM (Potential Rating Index by Zip Markets)

 c) Behavioral Segmentation

d) Nested Approach

**Answer**: b) PRIZM (Potential Rating Index by Zip Markets)

4. **Which generational group is described as socially conscious, selective, and concerned

about environmental issues?**

a) Baby Boomers

b) Gen Xers

c) Millennials (Echo Boomers)

d) Silent Generation

**Answer**: c) Millennials (Echo Boomers)

5. **In behavioral segmentation, which role is responsible for making the final purchase
decision?**

a) Initiator

b) Influencer

c) Decider

d) User

**Answer**: c) Decider

6. **Which of the following is a criterion for effective segmentation?**

a) Complex

b) Measurable

c) Temporary

d) Uniform

**Answer**: b) Measurable
7. **Which macro base for segmenting business markets focuses on the size of the buying unit?
**

a) Industry

b) Company size

c) Geographic location

d) Purchasing approaches

**Answer**: b) Company size

8. **According to Porter’s Five Forces Model, which factor determines the long-run
attractiveness of a market segment?**

a) Customer loyalty

b) Threat of new entrants

c) Product pricing

d) Brand awareness

**Answer**: b) Threat of new entrants

---

### Short-Answer Questions

9. **Define a market segment and explain why it is important for effective targeting.**

**Answer**: A market segment is a group of customers who share a similar set of needs and
wants. It is important for effective targeting because it allows companies to identify distinct
buyer groups, select the most attractive segments, and tailor marketing strategies to meet their
specific needs, thereby improving efficiency and effectiveness.

10. **List the four main segmentation variables for consumer markets and provide an example
of each.**
 **Answer**: The four main segmentation variables are:

- Geographic: Segmenting by cities (e.g., targeting urban vs. rural consumers).

- Demographic: Segmenting by age (e.g., marketing toys to children).

- Psychographic: Segmenting by lifestyle (e.g., targeting adventure seekers for travel packages).

- Behavioral: Segmenting by usage rate (e.g., targeting heavy coffee drinkers for premium
coffee brands).

11. **What are the five criteria for effective segmentation?**

**Answer**: The five criteria for effective segmentation are:

- Measurable (size and buying power can be quantified).

- Substantial (large and profitable enough).

- Accessible (can be reached and served).

- Differentiable (segments respond differently to marketing efforts).

- Actionable (programs can be formulated to serve the segment).

12. **Explain the difference between hard-core loyals and switchers in behavioral
segmentation.**

**Answer**: Hard-core loyals are customers who consistently purchase from one brand,
showing strong brand loyalty. Switchers, on the other hand, show no loyalty to any brand and
frequently change their purchases based on factors like price or availability.

13. **What are the three broad bases for segmenting business markets?**

**Answer**: The three broad bases for segmenting business markets are macro (e.g.,
industry, company size, location), intermediate (e.g., operating variables, purchasing
approaches, situational factors), and micro (e.g., motivation, buyer-seller relationships, risk
perception).

14. **Describe the PRIZM approach to geographic segmentation.**

 **Answer**: PRIZM (Potential Rating Index by Zip Markets) is a geo-clustering approach by
Nielsen Claritas that segments markets based on five broad categories: education and affluence,
family life cycle, urbanization, race and ethnicity, and mobility. It assumes inhabitants in a
cluster share similar lifestyles, jobs, and preferences.

15. **What is the purpose of the nested approach in business market segmentation?**

**Answer**: The nested approach incorporates macro, intermediate, and micro bases of
segmentation to balance simplicity and cost (outer nest) with detailed, specific insights (inner
nest), enabling effective segmentation by considering both broad and subjective customer
characteristics.

---

### Essay Questions

16. **Discuss the steps in the market segmentation process and explain how they contribute to
effective marketing strategies.**

**Answer**: The market segmentation process includes seven steps:

1. **Need-based segmentation**: Identify customers with similar needs to form segments.

2. **Segment identification**: Define segments using actionable variables like demographics

or behavior.

3. **Segment attractiveness**: Evaluate segments based on market growth, competitive

intensity, and access.

4. **Segment profitability**: Assess the financial viability of each segment.

5. **Segment positioning**: Create a value proposition tailored to the segment’s needs.

6. **Segment acid test**: Develop a segment storyboard to test the strategy’s clarity and
appeal.

7. **Market mix strategy**: Expand the positioning into the marketing mix (product, price,
place, promotion).
 These steps ensure that companies target the right customers with tailored strategies,
maximizing resource efficiency and customer satisfaction.

17. **Compare and contrast the macro, intermediate, and micro bases for segmenting business
markets. Provide an example for each.**

**Answer**:

- **Macro bases** focus on broad, objective characteristics like industry, company size, and
location (e.g., segmenting computer manufacturers by targeting the healthcare industry). They
are simple but may overlook customer differences.

- **Intermediate bases** include operating variables (e.g., usage rate), purchasing approaches
(e.g., centralized purchasing), and situational factors (e.g., urgency of need). For example,
targeting heavy users of office supplies for bulk discounts. These are more specific but overlap
with macro and micro bases.

- **Micro bases** focus on subjective factors like motivation, buyer-seller relationships, and
risk perception (e.g., targeting purchasing agents who value long-term vendor loyalty). They are
detailed but costly and time-consuming.

Each base provides unique insights, and a balanced approach enhances segmentation
effectiveness.

18. **Explain how demographic segmentation is used in consumer markets and discuss its
advantages and limitations.**

**Answer**: Demographic segmentation divides markets based on variables like age, life cycle
stage, gender, income, generation, social class, and race/culture. For example, a company might
target millennials with tech-savvy products or high-income consumers with luxury goods.
**Advantages** include its association with consumer needs, ease of measurement, and
widespread use in marketing. **Limitations** include its inability to capture nuanced
preferences (e.g., psychographic or behavioral differences) and the fact that income does not
always predict the best customers. Combining demographic segmentation with other variables
enhances its effectiveness.

19. **Analyze the role of behavioral segmentation in consumer markets. How can companies
use loyalty status and buyer readiness to improve their marketing strategies?**
 **Answer**: Behavioral segmentation divides consumers based on their behavior, such as
occasions, benefits sought, loyalty status, buyer readiness, usage rate, and attitude. **Loyalty
status** (e.g., hard-core loyals, split loyals, shifting loyals, switchers) helps companies identify
and retain loyal customers while converting switchers through promotions or improved
offerings. For example, a coffee brand might offer loyalty rewards to hard-core customers.
**Buyer readiness** (e.g., awareness, interest, purchase intention) allows companies to tailor
communications, such as using awareness campaigns for unaware consumers or discounts for
those ready to buy. By leveraging these variables, companies can create targeted strategies that
enhance customer retention and conversion rates.

20. **Evaluate the three marketing strategies (undifferentiated, differentiated, and

concentrated) for targeting market segments. Discuss when each strategy is most
appropriate.**

**Answer**:

- **Undifferentiated marketing** targets the entire market with one marketing mix, suitable
for products with universal appeal (e.g., salt) but risks missing specific segment needs.

- **Differentiated marketing** targets multiple segments with tailored marketing mixes, ideal
for companies with diverse product lines (e.g., a car manufacturer offering sedans and SUVs)
but is resource-intensive.

- **Concentrated marketing** focuses on a single segment, best for niche markets or

companies with limited resources (e.g., a luxury watch brand targeting high-income consumers).

Each strategy depends on the company’s resources, market diversity, and competitive
environment, with concentrated marketing often preferred for specialized offerings and
differentiated for broad market coverage.

---

### Notes for Exam Preparation

- **Focus Areas**: Emphasize understanding segmentation variables, criteria for effective

segmentation, and the differences between consumer and business market segmentation.

- **Application**: Include questions that require students to apply concepts to real-world

examples, such as segmenting a specific market or choosing a targeting strategy.
- **Mix of Question Types**: Use multiple-choice for quick recall, short-answer for concise
explanations, and essay questions for in-depth analysis to assess various learning levels.

These questions should help students engage with the material and prepare effectively for an
exam based on the document. Let me know if you need additional questions, a specific format,
or questions that integrate concepts from both provided documents!