Customer Segmentation Techniques Flashcards
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Read the first 7 Customer Segmentation Techniques flashcards as text
Which of the following is an example of a fencing mechanism used to enforce price segmentation?
Answer: Requiring proof of student status to access a discounted price
Fences are conditions customers must meet to access a lower price tier, such as proving student status, which prevents higher-willingness-to-pay customers from self-selecting into the discount.
A software company charges small businesses $50/month and enterprises $500/month for the same core product. This pricing strategy relies on which segmentation principle?
Answer: Third-degree price discrimination
Third-degree price discrimination involves charging different prices to identifiable customer groups (e.g., SMB vs. enterprise) based on their different price elasticities.
What does the concept of 'segment attractiveness' primarily evaluate when prioritizing which customer segments to target?
Answer: Size, growth rate, profitability, and competitive intensity
Segment attractiveness is a multi-factor assessment including size, growth potential, profitability, competitive intensity, and alignment with the company's capabilities.
In value-based segmentation, which customer group should typically receive the highest price?
Answer: The segment that derives the greatest economic value from the product
Value-based pricing targets each segment at a price aligned with the economic value it receives; the segment extracting the most value can justifiably be charged the most.
A company segments its market by ZIP code to offer different pricing in regions with higher average incomes. What type of segmentation is this?
Answer: Geodemographic segmentation
Geodemographic segmentation combines geographic location with demographic factors (like income) to identify segments with distinct purchasing power and willingness to pay.
Which metric is most useful for assessing the long-term profitability potential of a customer segment?
Answer: Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) captures the total net profit a company expects from a segment over the entire relationship, making it the best indicator of long-term profitability.
When a hotel charges leisure travelers less than business travelers for the same room, which fence is most commonly used to separate the segments?
Answer: Saturday-night stay requirement
A Saturday-night stay requirement is a classic fence that separates price-sensitive leisure travelers (who can stay weekends) from business travelers (who typically cannot).