Chapter 11: Unique Marketing Issues (Complete Exam Explanation)
1. Selecting a Market and Establishing a Position
The First Question Every Startup Must Answer
"Who are our customers and how will we attract them?"
A startup cannot sell to everyone.
For example:
• A company making expensive gaming laptops should not target school children.
• A company selling baby products should not target university students.
Therefore, entrepreneurs follow a 3-step process:
Step 1: Market Segmentation
Step 2: Target Market Selection
Step 3: Positioning
2. Market Segmentation
Definition
Market segmentation means dividing a large market into smaller groups of customers who
have similar needs or characteristics.
Think of it like cutting a pizza into slices.
Instead of treating all customers as one group, businesses identify different customer
groups.
Why is Segmentation Important?
Different customers want different things.
Example:
People buying smartphones:
• Some want low price
• Some want good cameras
• Some want gaming performance
• Some want prestige
A company cannot satisfy all groups equally.
Types of Segmentation
A. Geographic Segmentation
Dividing customers based on location.
Examples:
• Country
• City
• Region
Example:
A winter clothing company targets cold regions.
B. Demographic Segmentation
Based on measurable characteristics.
Examples:
• Age
• Gender
• Income
• Family size
Example:
Luxury cars target high-income consumers.
C. Psychographic Segmentation
Based on:
• Lifestyle
• Personality
• Values
Example:
People who care about fitness may buy protein supplements.
D. Behavioral Segmentation
Based on customer behavior.
Examples:
• Brand loyalty
• Purchase frequency
• Benefits sought
Example:
Some people buy toothpaste for whitening.
Others buy it for cavity protection.
E. Product Type Segmentation
Based on different versions of a product.
Example:
Computer industry:
• Tablets
• Laptops
• PCs
• Supercomputers
Conceptual Question
Why do firms segment markets?
Answer:
Because customers have different needs. Segmentation helps firms identify customer
groups and serve them more effectively.
3. Target Market
Definition
A target market is the specific customer group a company chooses to serve.
After segmentation, the company must decide:
"Which group should we focus on?"
Example
Suppose a computer company identifies:
• Students
• Businesses
• Government offices
• Gamers
The company decides to focus only on gamers.
Gamers become the target market.
Characteristics of a Good Target Market
1. Attractive
The market should be profitable.
2. Reachable
The company must be able to reach customers.
3. Capable of Being Served
The company must have the resources to satisfy customers.
Benefits
Specialization
The company becomes an expert.
Better Service
Customers receive more focused solutions.
Competitive Advantage
Competitors serving everyone may not satisfy anyone perfectly.
Conceptual Question
What is a target market?
A target market is the specific segment a company selects to serve because it is attractive
and matches the firm's capabilities.
4. Positioning
Definition
Positioning means creating a unique place in customers' minds.
Why Positioning is Necessary
Imagine three coffee shops.
Coffee Shop A:
Cheap coffee
Coffee Shop B:
Luxury experience
Coffee Shop C:
Fast service
Each occupies a different position.
Customers immediately know what each stands for.
Position
A position is the space a company claims in the customer's mind.
How Companies Position Themselves
By emphasizing specific attributes.
Examples:
• Lowest price
• Highest quality
• Fastest service
• Most innovative
Example
Tesla:
Position = Innovation + Sustainability + Premium Technology
Product Attribute Map
A diagram showing how customers perceive a company compared to competitors.
Example:
Axes might be:
• Price
• Quality
Companies are plotted according to customer perceptions.
Tagline
Definition
A short phrase that reinforces positioning.
Example
Nike
"Just Do It"
Why successful?
Because it appeals to athletes and ordinary people alike.
Conceptual Question
Why is positioning important?
Because it differentiates a company from competitors and helps customers remember
what the company stands for.
5. Branding
One of the most important exam topics.
What is a Brand?
A brand is the collection of feelings, beliefs, and perceptions people associate with a
company.
A brand is NOT just a logo.
Example
When people hear:
Apple
They think:
• Innovation
• Premium quality
• Simplicity
That perception is the brand.
Positive Brand Associations
• Trustworthy
• Reliable
• Innovative
• Friendly
Negative Brand Associations
• Cheap
• Unreliable
• Difficult
Why is Branding Important?
Builds Trust
Customers feel safer buying.
Creates Loyalty
Customers return repeatedly.
Reduces Risk
Customers know what to expect.
Allows Higher Prices
People often pay more for trusted brands.
Different Meanings of a Brand
A brand can be:
Promise
"We will deliver value."
Guarantee
"We will maintain quality."
Reputation
"What people think about us."
Trust Signal
"Customers can rely on us."
How Brands Are Built
Advertising
Repeated exposure.
Public Relations
Positive public image.
Social Media
Customer engagement.
Sponsorships
Association with events.
Good Performance
Consistently satisfying customers.
Strong Brand Benefits
A strong brand:
• Increases sales
• Increases loyalty
• Supports premium pricing
• Raises company value
Conceptual Question
Why is branding important for startups?
Because startups lack reputation. A strong brand builds trust and encourages customers
to try an unfamiliar company.
6. The Four Ps of Marketing
Also called the Marketing Mix.
These are the tools marketers use to satisfy customers.
P1: Product
Definition
The product is the good or service offered to customers.
Core Product
The basic product itself.
Example:
Uber
Core Product = Transportation
Actual Product
Core product plus additional benefits.
Example:
Uber
Actual Product:
• App
• GPS tracking
• Ratings
• Convenience
Product Must Create Value
Customers buy value, not products.
People buy:
• Convenience
• Status
• Comfort
• Solutions
Reference Accounts
A startup's first customers who agree to provide testimonials.
Why important?
Because people trust real customer experiences.
Conceptual Question
Difference between core product and actual product?
Core product = basic item.
Actual product = core product + features + design + packaging + support.
P2: Price
Definition
Money customers pay.
Why Price Matters
Price sends a signal.
High price often suggests:
• Quality
• Prestige
Low price suggests:
• Affordability
Cost-Based Pricing
Formula:
Price = Cost + Markup
Example:
Cost = $50
Markup = $10
Price = $60
Advantages
• Easy
• Ensures profit
Value-Based Pricing
Price depends on customer perception.
Example:
iPhone
Production cost may be lower than selling price because customers perceive high value.
Advantages
• Higher profits
• Reflects customer value
Conceptual Question
Difference between cost-based and value-based pricing?
Cost-based pricing uses production cost.
Value-based pricing uses customer perceived value.
P3: Promotion
Definition
Activities used to communicate product benefits.
Advertising
Paid communication.
Examples:
• TV ads
• YouTube ads
• Billboards
Advantages
Awareness
People learn about products.
Information
Explains benefits.
Lifestyle Association
Creates emotional connections.
Disadvantages
Expensive
Can cost a lot.
Low Credibility
People know companies pay for ads.
Clutter
Too many ads compete for attention.
Google AdWords
Businesses buy keywords.
Example:
Keyword:
"Running Shoes"
When searched, ads appear.
Benefit
Targets interested customers.
Google AdSense
Ads appear on other websites.
Google chooses relevant sites.
Public Relations (PR)
Definition
Activities aimed at maintaining a positive public image.
Difference Between PR and Advertising
Advertising:
Paid directly.
PR:
Usually earned media coverage.
PR Techniques
• Press releases
• News coverage
• Blogs
• Newsletters
• Community service
Social Media
Platforms:
• Facebook
• Instagram
• Twitter/X
• Pinterest
Why Businesses Use Social Media
• Build relationships
• Increase engagement
• Create communities
Blogging
Helps customers:
• Learn about business
• Trust business
• Feel connected
Viral Marketing
Definition:
Marketing that spreads from person to person.
Example:
A funny TikTok product video shared millions of times.
Guerrilla Marketing
Definition:
Low-cost creative marketing.
Uses:
• Surprise
• Creativity
• Public attention
Example:
A company creates a unique street display that goes viral.
Conceptual Question
Difference between Viral Marketing and Guerrilla Marketing
Viral Marketing:
Relies on people sharing content.
Guerrilla Marketing:
Relies on creativity and surprise.
P4: Place (Distribution)
Definition
How products move from producers to customers.
Option 1: Direct Distribution
Company sells directly.
Example:
A startup sells through its website.
Advantages
• More control
• Higher profits
• Direct customer feedback
Option 2: Through Intermediaries
Uses:
• Wholesalers
• Retailers
Example:
Nestlé products sold through supermarkets.
Advantages
• Wider reach
• Faster distribution
Conceptual Question
Difference between direct selling and intermediaries?
Direct:
Company → Customer
Intermediary:
Company → Wholesaler → Retailer → Customer
7. Sales Process
Extremely important.
The sales process provides a systematic method of turning prospects into customers.
Seven-Step Sales Process
Step 1: Prospecting
Finding potential customers.
Example:
Creating a list of interested businesses.
Step 2: Initial Contact
First interaction.
Example:
Email or phone call.
Step 3: Qualifying
Checking whether customer:
• Needs the product
• Can afford it
Step 4: Sales Presentation
Demonstrating value and benefits.
Step 5: Meeting Objections
Handling concerns.
Example:
"It's too expensive."
Salesperson explains value.
Step 6: Closing
Getting customer commitment.
Example:
Signing contract.
Step 7: Follow-Up
Checking customer satisfaction.
Why Follow-Up Matters
• Creates loyalty
• Generates referrals
• Encourages repeat purchases
SUPER IMPORTANT EXAM SUMMARY (MEMORIZE)
STP Model
Segmentation → Target Market → Positioning
4Ps
Product → Price → Promotion → Place
Pricing Methods
Cost-Based Pricing
Value-Based Pricing
Promotion Methods
Advertising
Public Relations
Social Media
Viral Marketing
Guerrilla Marketing
Distribution Methods
Direct Selling
Intermediaries
Sales Process
Prospecting → Contact → Qualify → Present → Objections → Close → Follow-Up
If you can understand and reproduce these explanations and comparisons, you should be
able to answer almost any conceptual question from this chapter.