The document discusses different methods for segmenting markets, including demographic, psychographic, geographic, and behavioral segmentation. It provides examples of how companies segment based on factors like age, gender, family size, lifestyle, neighborhood, and education. Segmenting allows companies to target specific groups and better meet customer needs versus uniform undifferentiated marketing. The document also discusses the advantages and disadvantages of different segmentation methods.

1. SECTION 2 Market segmentation and its implications for businesses

2. Learning Outcome Individual work Identify six different segmenting methods, give a description of each method Discuss the advantages and disadvantages of each segmenting method Explain the difference between differentiated and undifferentiated marketing Explain what is meant by the term targeting the market

3. Group Work In your groups you are required to divide the class into different groups with similar characteristics. You have 5 mins to complete the task. Countdown Begins ……..

4. MARKET SEGMENTATION Market segmentation involves dividing a market into identifiable sub-markets, each with its own customer characteristics

5. Types of market segmentation The following seven variables are known as demographic factors and form the basis of some major types of market segmentation: Age Sex Family size and lifecycle Psychographic or lifestyle segmentation Social class Neighbourhood classification Education

6. Market segments may be based on differences in: Demographics – age, sex or social class, Psychographics – attitudes and tastes of consumers, Geography – the various regions of the UK

7. AGE Some goods are aimed at young people, some at old – for example, music and fashion tend to be targeted at young consumers. Firms seek to target products at the appropriate groups. High-street banks try to attract students as customers in the hope that these students will stay with them for life and because they expect students to earn relatively high salaries in the future.

8. SOCIAL CLASS In reality, this type embraces social class and income. It is a method of segmentation crudely based on occupation of ‘head of household’. It ignores second or subsequent wage earners. An example is the socio-economic scale (Table 1.1) which is used by the UK market research industry to provide standardised social groupings. Similar classifications, such as the Hall Jones scale, are used elsewhere.

9. Gender Some products are specifically aimed at females, others at males. Businesses do not want to waste money trying to sell products to uninterested groupings. Magazines such as Loaded are promoted to reach young male audiences – during televised football matches, for example.

10. FAMILY SIZE AND LIFE CYCLE Family size is a simple categorisation of number of family members. Family size determines the size of pack purchased and the type of product required.

11. PSYCHOGRAPHIC OR LIFESTYLE SEGMENTATION This seeks to classify people according to their values, opinions, personality characteristics and interests. It concentrates on the person rather than the product, and seeks to discover the unique lifestyles of consumers. Marketeers aim to discover the numbers of people who might fall into each of these lifestyle categories and then adapt products and services to suit the appropriate group. For example, mobile telephone companies switched from selling phones to business people to selling to other groups, such as women travelling alone.

12. NEIGHBOURHOOD CLASSIFICATION. This is a relatively new method of segmentation. ACORN (A Classification Of Residential Neighbourhoods) identifies 38 different types of residential neighbourhood according to demographic, housing and socio-economic characteristics. The classification breaks the whole country down into units of 150 dwellings, with the predominant type being the classification adopted for that unit. Major users of the system include direct mail companies, financial institutions, gas and electricity companies, charities, political parties and credit card companies. ACORN was developed by CACI information services and has been widely used in sitting stores and posters.

13. ACORN Categories 13. Older People, Less Prosperous Areas 14. Council Estate Residents, Better off Homes 15. Council Estate Residents, High Unemployment 16. Council Estate Residents, Greatest Hardships 17. People in Multi-Ethnic, low income ages F Striving 11. New Home Owners, Mature Communities 12. White Collar Workers, Better off Multi-Ethnic Areas E Aspiring 9. Comfortable Middle Agers, Mature Home Owning Areas 10. Skilled Workers, Home Owning Areas D Settling 6. Affluent Urbanities, Town and Grey Areas 7. Prosperous Professionals, Metropolitan Areas 8. Better-off Executives, Inner City Areas C Rising 4. Affluent Executives, Family Areas 5. Well-off Workers, Family Areas B Expanding Wealthy Achievers, Suburban Areas Affluent Greys, Rural Communities Prosperous Pensioners, Retirement Areas A Thriving ACORN Groups ACORN Categories Figure 7.4 ACORN Categories

14. Education This is a less useful factor on which to base segmentation because it is based on the assumption that there is a strong correlation between educational attainment, income levels and expenditure patterns. Firms target luxury products at those they determine to be higher income earners. Newspaper readership is often used as a proxy for education, the assumption being that more highly educated people read the broadsheets

15. Group Activity For each of the following products and services Consider three different ways of segmenting the market  Trainers  Cosmetics  Bicycles  Greeting Cards  Hair cuts