Market Segmentation Slides2

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Market Segmentation Slides2

  1. 1. Segmenting a Market
  2. 2. Segmenting the Market <ul><li>Suppose this class represents a larger market. How would you segment the class into smaller market segments? </li></ul><ul><li>With your group, decide on one characteristic that can be used to segment the class into smaller markets. </li></ul>
  3. 3. Market Segmentation <ul><li>The process of dividing a large market into smaller parts is called market segmentation. </li></ul><ul><li>Each smaller part is called a market segment. </li></ul><ul><li>Each market segment is made of customers with similar wants and needs for a specific product. </li></ul>
  4. 4. Market Segmentation <ul><li>In the consumer market, marketers use characteristics of customers to segment the market. (Ex. age, gender, etc.) </li></ul><ul><li>A customer characteristic that is used to segment a market is called a segmentation variable . </li></ul>
  5. 5. Market Segmentation <ul><li>Imagine that $100 is available to spend. How might the following spend the money?: </li></ul><ul><ul><li>A teenaged male </li></ul></ul><ul><ul><li>A teenaged female </li></ul></ul><ul><ul><li>A 30-year-old parent with two children </li></ul></ul><ul><ul><li>A wealthy 40-year-old </li></ul></ul><ul><ul><li>A retired person on a very small fixed income </li></ul></ul>
  6. 6. Market Segmentation <ul><li>There are over 25 different variables that marketers use to segment the consumer market. </li></ul><ul><li>Marketers have organized these variables into four categories: </li></ul><ul><ul><li>Geographic </li></ul></ul><ul><ul><li>Demographic </li></ul></ul><ul><ul><li>Psychographic </li></ul></ul><ul><ul><li>Behavioral </li></ul></ul>
  7. 7. Geographic Variables <ul><li>Segmenting a market based on where customers live is called geographic segmentation . </li></ul>
  8. 8. Geographic Variables <ul><li>Location </li></ul><ul><ul><li>Country vs. city </li></ul></ul><ul><ul><li>US vs. Europe </li></ul></ul><ul><li>Climate </li></ul><ul><ul><li>Clothes </li></ul></ul><ul><ul><li>Toys </li></ul></ul><ul><li>City Size </li></ul>
  9. 9. Geographic Variables <ul><li>With your partner: </li></ul><ul><ul><li>Choose a geographic variable. </li></ul></ul><ul><ul><li>Think of a product that can be segmented based on that variable. </li></ul></ul><ul><ul><li>Name the product and the geographic variable. </li></ul></ul><ul><ul><li>Then describe the market segment. </li></ul></ul>
  10. 10. Demographic Variables <ul><li>A census is a count of the people in a country made by the government on a regular basis. (U.S. – 10 yrs.) </li></ul><ul><li>A census collects demographic information , which consists of statistics of a population of people. </li></ul>
  11. 11. Demographic Variables <ul><li>The categories that this information is divided into are called demographic variables. </li></ul><ul><li>Segmenting a market based on demographic variables is called demographic segmentation . </li></ul><ul><li>Demographic variables commonly used by marketers include age, gender, ethnicity, income, and family size. </li></ul>
  12. 12. Demographic Variables: Age <ul><li>Age is a commonly used segmentation variable because people at different ages have different needs and wants. </li></ul><ul><li>How does age affect a person’s needs and wants for clothing? </li></ul>
  13. 13. Demographic Variables: Age <ul><li>A generation is a group of people born during a particular period of history. </li></ul><ul><li>The period that group of people grew up in has a major affect on their attitudes, wants, and needs. </li></ul><ul><ul><li>Ex. – Baby Boomers (1946-1964) </li></ul></ul>
  14. 14. Demographic Variables: Age
  15. 15. Demographic Variables: Gender <ul><li>Men and women differ in their wants and needs for many products. </li></ul><ul><li>(Shocking, I know…) </li></ul><ul><li>Marketers use these differences to develop products that meet the specific needs of men or women. </li></ul>
  16. 16. Demographic Variables: Ethnicity <ul><li>Many marketers have found success by segmenting the market based on ethnicity. </li></ul><ul><li>They develop products to meet the needs of a specific ethnic group and the wants of people interested in that ethnic group. </li></ul>
  17. 17. Demographic Variables: Income <ul><li>Income level has a major influence on what people buy. </li></ul><ul><li>People with similar income levels buy similar types of products. </li></ul><ul><li>Lower income – necessities </li></ul><ul><li>Higher income – recreation, education, luxury </li></ul>Vs.
  18. 18. Demographic Variables: Income <ul><li>There are two categories of income that marketers are interested in: </li></ul><ul><ul><li>Disposable income – income a person has available to spend (dispose of) after taxes have been taken out. </li></ul></ul><ul><ul><ul><li>Usually spent on necessities </li></ul></ul></ul><ul><ul><li>Discretionary income – left after taxes and necessities have been paid for. </li></ul></ul><ul><ul><ul><li>Spent however you want </li></ul></ul></ul>
  19. 19. Demographic Variables: Income <ul><li>With your partner, name the types of businesses that would be interested in the amount of disposable income customers have. </li></ul><ul><li>Then, name the types of businesses that would be interested in the amount of discretionary income customer have. </li></ul>
  20. 20. Demographic Variables: Income <ul><li>Think about it: </li></ul><ul><li>Teenagers as a group do not have </li></ul><ul><li>high incomes. Yet, they seem to </li></ul><ul><li>have a great deal of discretionary </li></ul><ul><li>income. Why? </li></ul>
  21. 21. Demographic Variables: Family Size <ul><li>Marketers have discovered that households consisting of one person have quite different needs and wants from ones with parents and children. </li></ul>
  22. 22. Psychographic Variables <ul><li>Customers have psychological and emotional characteristics that affect their needs and wants for products. </li></ul><ul><li>Segmenting a market based on psychological characteristics of customers is called psychographic segmentation . </li></ul>
  23. 23. Psychographic Variables: Hobbies and Activities <ul><li>People who participate in the same activities or have the same hobbies tend to have similar buying patterns. </li></ul><ul><ul><li>Hobbies: photography, quilting, collecting, etc. </li></ul></ul><ul><ul><li>Activities: sports, sightseeing, etc. </li></ul></ul>
  24. 24. Psychographic Variables: Lifestyle <ul><li>Lifestyle and values are often difficult to measure and define. </li></ul><ul><li>Surveys are given that ask participants to agree or disagree with AIO statements (activities, interests, opinions). </li></ul><ul><li>SRI Consulting Business is well known for its psychographic research. </li></ul><ul><li>Their survey is called the VALS Survey . </li></ul>
  25. 25. Psychographic Variables: Lifestyle
  26. 26. Psychographic Variables: Lifestyle <ul><li>Take the VALS Survey! </li></ul><ul><li>http://www.sricbi.com/VALS/presurvey.shtml </li></ul>
  27. 27. Behavioral Variables <ul><li>Segmenting a market based on the way customers use a product or behave toward a product is called behavioral segmentation . </li></ul>
  28. 28. Behavioral Variables: Features Desired <ul><li>Customers vary in the features they want in a product. </li></ul><ul><ul><li>Ex. Computers, cars, etc. </li></ul></ul>
  29. 29. Behavioral Variables: Usage Rate <ul><li>Research shows that for many businesses, 80 percent of the sales come from 20 percent of the customers – 80/20 rule </li></ul><ul><li>Marketers often segment the market based on how often the customer uses or buys the product ( usage rate ). </li></ul><ul><li>Categories include heavy, moderate, light, and nonuser. </li></ul>
  30. 30. Behavioral Variables: Brand Loyalty <ul><li>The value of brand loyalty is related to the 80/20 rule. </li></ul><ul><li>Loyal customers often are the source of most of a company’s sales, so marketers often segment based on degree of loyalty . </li></ul>
  31. 31. Combining Variables
  32. 32. Market Segment Profile <ul><li>Once marketers have divided a market into segments, they must choose the segment or segments to target. </li></ul><ul><li>A market segment profile is a detailed description of the typical consumer in a market segment. </li></ul><ul><ul><li>Includes geographic location, demographics, psychographics, and behavior. </li></ul></ul>

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