4.7: Chapter Glossary and Notes

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Glossary

Trading area elements. Elements of the trading area include: geographic area, the major descriptors of the target market such as demographics, psychographics, and behavioral characteristics, and the industry structure comprising existing competitors (primary and secondary), potential competitors and the market conditions that aid or hinder their entry, product substitutes in general that could hamper sales, and suppliers’ products and services needed for operation.

Market segmentation. The process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers’ (known as segments) based on some type of shared characteristics. Market segmentation assumes that different market ‘segments’ require different marketing programs – that is, different offers, different prices, different promotion, different distribution or some combination of marketing variables.

Shared characteristics. These characteristics comprise common needs, common interests, similar lifestyles, or even similar demographic profiles. The overall aim of segmentation is to identify high yield segments – that is, those segments that are likely to be the most profitable or that have growth potential.

Segmentation strategy factors. These factors include company resources, product variability, the products’ life cycle, market characteristics, and competitive activity.

Total marketplace segment demand. Once you have computed the total foodservice dollars spend in the marketplace, you then quantify the total amount of potential sales ($$$) for foodservice products in your chosen business segment in your trading area. This type of information is typically obtainable from the city Chamber of Commerce, city sales tax records, commercial real estate agencies, and demographic information related to city revenue.

Method of delivery. Concern how customers will receive your products or services and would include dining space, carryout service, delivery service, or Internet activity and so forth.

Major bases used for segmenting a market. In reality, marketers can segment the market using any base or variable as long as it is identifiable, measurable, actionable, and stable. Marketers are looking for a means of achieving internal homogeneity (similarity within the segments), and external heterogeneity (differences between segments).

Demographic segmentation. Segmentation according to demography centers on consumer- demographic variables such as age, income, family size, socio-economic status, etc. Demographic segmentation assumes that consumers with similar demographic profiles will exhibit similar purchasing patterns, motivations, interests and lifestyles and that these characteristics will translate into similar product/brand preferences. In practice, demographic segmentation can potentially employ any variable used by the nation's census collectors.

Geographic segmentation. Physical location or region (country, state, region, city, suburb, postcode).

Geo-demographic segmentation. A combination of geographic & demographic variables such as rural and urban.

Psychographic segmentation. Lifestyle, social or personality characteristics. (Typically includes basic demographic descriptors)

Behavioral segmentation. Purchasing, consumption or usage behavior. (Needs-based, benefit-sought, usage occasion, purchase frequency, customer loyalty, buyer readiness).

Cultural segmentation. A segmentation done according to state, region, suburb and neighborhood. This provides a geographical market view of population proportions and may be of benefit in selecting appropriately located premises, determining territory boundaries and local marketing activities.

Market targeting. The selection of market segments that will become the focus of special attention.

Primary market. The target market selected as the ‘main’ center of marketing activities.

Secondary target market. This is likely to be a segment that is not as large as the primary market, but has growth potential. Alternatively, the secondary target group might consist of a small number of purchasers that account for a relatively high proportion of sales volume perhaps due to purchase value or purchase frequency.

Product demand. The total market demand multiplied by the market share, or the percentage of the market that the operation's product and service mix will capture.

Mass-market Strategy. A mass-marketing strategy requires the operation to develop one product-service mix that is relates to all potential consumers in the target markets. This approach considers the market to be one homogeneous market segment with similar wants and needs by its constituents.

Differentiated Strategy. When a restaurant operation decides to follow a differentiated strategy, it is adopting a strategy that calls for the operation to appeal to more than one market segment with a separate marketing program for each segment. The overall objective of this approach is to increase sales and market share by capturing sales from several smaller market segments. Each of the marketing programs, including the product-service mix, conforms to the specific needs of a market segment.

Concentrated market segmentation strategy. This strategy calls on the operation to develop modifications of one or more product-service mixes marketed to one or relatively few market segments with limited changes in the marketing program.

Notes

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