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  1. 1. Market Segmentation
  2. 2. Purpose of this section 1. Introduce the Concept of the MARKETING PLAN 2. To Define Market Segmentation 3. Present 4 types of market segmentation 4. Aspects of the Canadian market 5. Main types of segmentation in industrial markets
  3. 3. Baby Boomers & Chicken <ul><li>Purpose of this discussion is to explain the advantages of carefully watching how a market segment acts as it becomes older </li></ul><ul><li>You have to watch consumption trends and match this - (eg. This is the wrong time to open a steak house) </li></ul><ul><li>“ Companies must plan constantly and the plan must be based on an understanding of market trends and marketing segments” </li></ul>
  4. 4. Marketing Plan - many factors involved <ul><li>Consumer Analysis </li></ul><ul><li>Environmental Analysis </li></ul><ul><li>1. Target Market - you have to decide on which segment </li></ul><ul><li>2. Look at competitors, what are they doing </li></ul><ul><li>3. Market research required </li></ul><ul><li>4. Develop a unique marketing plan </li></ul>
  5. 5. Fundamental Tasks in Developing a Marketing Plan 1. Target Market ** 2. Implement a Marketing Program ** this recognizes that you are “consumer oriented (to be able to do this, you have to recognize the difference among people and understand there are different segments)
  6. 6. What is a Market? <ul><li>PEOPLE </li></ul>
  7. 7. What is a Market? <ul><li>PEOPLE </li></ul><ul><li>BUT - not just ANY people, they have to have </li></ul><ul><li>Willingness to buy </li></ul><ul><li>Purchasing power (money) </li></ul><ul><li>Authority to buy </li></ul>
  8. 8. Types of Markets <ul><li>Consumer Goods and Services </li></ul><ul><li>Industrial Goods and Services </li></ul>
  9. 9. Classes of Consumer Products Convenience Shopping Specialty Goods Services 14-1 POP $ $ ATM
  10. 10. Various Classes of Consumer and Industrial Goods and Services Def’n - industrial goods are products used in the production of other products
  11. 11. Industrial Goods <ul><li>Industrial goods are things used in the production of other products </li></ul><ul><li>Some products are both industrial and consumer goods - eg. electricity, water, desktop PCs 2 categories of industrial goods </li></ul><ul><li>Production Goods </li></ul><ul><li>Support Goods </li></ul>
  12. 12. Market Segmentation <ul><li>With a large country </li></ul><ul><li>Many different types of people </li></ul><ul><li>- it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market </li></ul>
  13. 13. Market Segmentation Defn <ul><li>“ Grouping people according to their similarity related to a particular product category” </li></ul>
  14. 14. Market Segmentation <ul><li>Characteristics </li></ul><ul><li>age </li></ul><ul><li>gender </li></ul><ul><li>geographic location </li></ul><ul><li>income </li></ul><ul><li>spending patterns </li></ul><ul><li>cultural background </li></ul><ul><li>demographics </li></ul><ul><li>marital status </li></ul><ul><li>education </li></ul><ul><li>language </li></ul><ul><li>mobility </li></ul>
  15. 15. Market Segmentation <ul><li>4 commonly used bases for Segmentation </li></ul><ul><li>Descriptive </li></ul><ul><li>geographic location </li></ul><ul><li>demographic </li></ul><ul><li>Behavioural </li></ul><ul><li>psychographic </li></ul><ul><li>benefits </li></ul>
  16. 16. Figure 3.1 Bases for Market Segmentation Slide 3-7
  17. 17. Market Segmentation <ul><li>geographic location - based upon where people live (historically a popular way of dividing markets) </li></ul><ul><li>demographic - based upon age, gender and income level (very often used) </li></ul>
  18. 18. Market Segmentation <ul><li>Psychographic / lifestyles - based on people’s opinions, interests, lifestyles eg, people who like hard rock music probably prefer beer to wine </li></ul><ul><li>benefits - based on the different expectation that customers have about what a product/service can do for them eg. People who want to but “lite” food cause ti will help them lose weight </li></ul>
  19. 19. Geographic location of Canadians <ul><li>most live in Toronto - Montreal axis </li></ul><ul><li>+ Vancouver </li></ul><ul><li>most live along east-west line close to the American border </li></ul>
  20. 20. Percentage Distribution of the Population of Canada by Province Slide 3-8 +, Ontario contains 52% of foreign born people in Canada Geographic Segmentation
  21. 21. Impact of Immigration <ul><li>Ontario contains 51.8% of Canada’s living foreign-born people </li></ul><ul><li>Most of these people live in Toronto </li></ul><ul><li>Canada’s urban population is growing for 2 reasons 1. Immigrants come to Canada and make their homes in the cities 2. Canadians are moving out of the rural areas and in to the cities </li></ul>
  22. 22. Figure 3.4 Urban–Rural Population Distribution, 1871–1991 Slide 3-9 Geographic Segmentation
  23. 23. Geographic Segmentation The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns. Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address. This helps people plan store locations and the location of other services.
  24. 24. Geographic Segmentation Climate: winter equipment and recreation are effected by geographic location you will sell more snow shovels in Northern Ontario than southern Ontario , BUT, population in Northern Ontario is very small clothing purchases are also effected by climate/geography
  25. 25. Demographic Segmentation <ul><li>Demographic Segmentation is the most common approach to Market Segmentation </li></ul><ul><li>Variables are: </li></ul><ul><li>age </li></ul><ul><li>gender (male/female) </li></ul><ul><li>income </li></ul><ul><li>occupation </li></ul><ul><li>education </li></ul><ul><li>household (family - style) size </li></ul>
  26. 26. Demographic Segmentation <ul><li>Demographic Segmentation is the most common approach to Market Segmentation </li></ul><ul><li>Variables are: </li></ul><ul><li>gender (male/female) </li></ul><ul><li>gender is an obvious way to divide the market into segments since so many products are gender-specific </li></ul><ul><li>clothing </li></ul><ul><li>medical products </li></ul><ul><li>sports products/services </li></ul><ul><li>entertainment </li></ul>Examples ??
  27. 27. Demographic Segmentation <ul><li>Demographic Segmentation is the most common approach to Market Segmentation </li></ul><ul><li>Variables are: </li></ul><ul><li>age </li></ul><ul><li>age is another obvious way to divide the market into segments since so many products are based upon “time of life” </li></ul><ul><li>diapers for babies </li></ul><ul><li>toys for children </li></ul><ul><li>entertainment for “over 19” </li></ul>Examples ??
  28. 28. Demographic Segmentation <ul><li>age </li></ul><ul><li>also, people have different consumption patterns at different ages </li></ul><ul><li>eg. Milk products </li></ul><ul><li>children and teens drink a lot of milk </li></ul><ul><li>adults don’t </li></ul><ul><li>older adults need calcium, but don’t drink milk (they take pills) </li></ul>Examples ??
  29. 29. Figure 3.5 Population Projections by Age Group Slide 3-10 Demographic Segmentation
  30. 30. Demographic Segmentation <ul><li>Demographic Segmentation is the most common approach to Market Segmentation </li></ul><ul><li>Variables are: </li></ul><ul><li>household (family - style) size </li></ul><ul><li>Segmenting by the “stages in the family life cycle” </li></ul><ul><li>(page 45) </li></ul><ul><li>There are different buying characteristics of people in each stage of the family </li></ul>
  31. 31. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>BUYING PATTERNS </li></ul><ul><li>0-5 young children </li></ul><ul><li>6-19 school children </li></ul><ul><li>20-34 young adults </li></ul><ul><li>35-49 younger middle-aged </li></ul><ul><li>50-64 older middle-aged </li></ul><ul><li>65+ seniors </li></ul><ul><li>80+ SUPER seniors </li></ul>
  32. 32. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>THE CHANGING HOUSEHOLD </li></ul><ul><li>half of the households in Canada are only one, or two people </li></ul><ul><li>number of married couples forming a household is decreasing </li></ul><ul><li>many unmarried people, and old widowed people, live by themselves </li></ul>
  33. 33. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>FAMILY LIFE CYCLE STAGES </li></ul><ul><li>1. Young Single </li></ul><ul><li>2. Young Married with no Children (DINKS) </li></ul><ul><li>3. Young - married with children </li></ul><ul><li>- divorced without children - divorced with children </li></ul>
  34. 34. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>FAMILY LIFE CYCLE STAGES </li></ul><ul><li>4. Middle Aged </li></ul><ul><li>a. married without children </li></ul><ul><li>b. divorced without children </li></ul><ul><li>c. married with children </li></ul><ul><li>d. divorced with children </li></ul><ul><li>e. married without dependent children </li></ul><ul><li>f. divorced without dependent children </li></ul>
  35. 35. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>FAMILY LIFE CYCLE STAGES </li></ul><ul><li>5. Older </li></ul><ul><li>a. older married </li></ul><ul><li>b. older unmarried (divorced, widowed) </li></ul><ul><li>6. other </li></ul>
  36. 36. Demographic Segmentation <ul><li>household (family - style) size </li></ul><ul><li>SSWD s </li></ul><ul><li>single separated widowed divorced in Canada, 1.6 million people live alone - they buy different sizes of products eg. Single serving soup, etc. </li></ul>
  37. 37. Demographic Segmentation <ul><li>Demographic Segmentation is the most common approach to Market Segmentation </li></ul><ul><li>Variables are: </li></ul><ul><li>age </li></ul><ul><li>gender (male/female) </li></ul><ul><li>income </li></ul><ul><li>occupation </li></ul><ul><li>education </li></ul><ul><li>household (family - style) size </li></ul>
  38. 38. Demographic Segmentation income Segmenting markets on the basis of income and expenditure patterns - The number of single mom families has increased by 12.8% between 1985 and 1994 - Male single parent families have more income, on average, than Female single parent families (chart 3.6)
  39. 39. Engel’s Laws <ul><li>As family income increases …… </li></ul><ul><li>a smaller % goes for food - TRUE </li></ul><ul><li>the % spent on housing and household operations and clothing will remain constant (that is grow as total income grows) - FALSE in reality this amount declines </li></ul><ul><li>the % spent on recreation, education will increase - TRUE , but there are exceptions </li></ul>
  40. 40. Engel’s Laws <ul><li>Why is this important…… </li></ul><ul><li>because marketing managers can use this law to figure out what will happen (ie. What kinds of spending patterns will develop) if people’s incomes increase </li></ul><ul><li>also, if you are planning on going into a new market, where people have more money - this “law” helps you to plan how people’s spending patterns will be different </li></ul>
  41. 41. Psychographic Segmentation “ The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers” TEXT The use of detailed information to understand differences in what people buy WTGR psychological
  42. 42. Psychographic Segmentation Psychographic profiles on a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions AIO - activities, interests, and opinions
  43. 43. Psychographic Segmentation Thompson Lightstone Segments 1. Passive/Uncertain 2. Mature 3. Home Economists 4. Active/Convenience 5. Modern Shoppers 6. Traditional Home/Family Oriented
  44. 44. Psychographic Segmentation LIFESTYLE PROFILES Table 3.8 - HOW DO YOU FIT?
  45. 45. Benefit Segmentation “ It is based on the Attributes (characteristics) of products, as seen by the customers” example, people buy something because it causes a benefit ie. Diet coke - less sugar, lose weight ie. Extra white toothpaste, whiter teeth, better smile
  46. 46. Benefit Segmentation “ Many marketers now consider benefit segmentation one of the most useful methods of classifying markets” ie. Watches - the benefits customers looked for where durability and product quality- older research was based on dividing the watch market according to a different segment - once they used the new segment, they changed the marketing plan- modern example would be price of PCs for home use - biggest use is entertainment NOT schoolwork or home based businesses
  47. 47. Benefit Segmentation of the Toothpaste Market Segment Name The The Sensory The Independent Segment Sociables The Workers Segment Principal benefit sought Flavour, product Brightness Decay Price appearance of teeth prevention Demographic strengths Children Teens, young Large families Men people Special behavioural Users of Smokers Heavy users Heavy users characteristics spearmint- flavoured toothpaste Brands disproportionately Colgate, MacLean’s, Crest Brands flavoured Stripe Plus White, on sale Ultra Brite Personality characteristics High self- High High High involvement sociability hypochondriasis autonomy Lifestyle characteristics Hedonistic Active Conservative Value- oriented Benefit Segmentation
  48. 48. Figure 3.9 Segmentation Bases for Industrial Markets Slide 3-12 Segmentation for Industrial Markets
  49. 49. <ul><li>Geographic Segmentation </li></ul><ul><li>useful for the automotive industry </li></ul><ul><li>Product Segmentation </li></ul><ul><li>ie. Special parts and components </li></ul><ul><li>Segmentation by End-Use Application </li></ul><ul><li>ie. Paint mfg. Paint for waterproof applications, paint for rust prevention, paint which sticks to glass </li></ul>Segmentation for Industrial Markets