Transcript Market Segmentation

Market Segmentation
Ch 2.2
Section 2.2
Objectives
Explain the concept of market segmentation
Analyze a target market
Differentiate between mass marketing and market
segmentation
Identifying and Analyzing Markets
Companies identify groups of people who have
common interests and traits. This is called market
segmentation.
Businesses use these groups to create market-specific
ads
Market Segmentation
Marketers analyze groups of customers and look to see
if they can break the group down further into smaller
sections
This process of taking a given market and making the
group even smaller is called market segmentation
Market Segmentation
The four factors that help segment a market and describe
a target market are:
Demographics
Geographics
Psychographics
Behavioral factors
Example: Jeans
The jean market:
Segmented by: age (kids, teens, adults)
By Price: different income levels (referred to as socioeconomic)
By desired features: tight, comfortable, unique, newest
design
To meet the needs of these different market segments,
companies make a unique marketing mix for each
segment
Which Segments?
The next question: Which of these segments will we
target?
Must identify markets in which companies have a
sustainable competitive advantage
Advantage that allows you to survive against the
competition over a long period of time
How is this information gathered?
Government census
Private research firms
Trade associations
Make a decision if the market is large enough to target
Additional research will reveal more about the market
segment
Demographics
Statistics that describe a population in terms of
personal characteristics
Age, gender, income, marital status, ethnic
background, education, occupation
Age: target markets by using age ranges
common labels used: Baby boomers, Generation X and
Generation Y or the Echo Generation
Age: Boomers
Baby boomers: 76 million
born between 1946-64
As the boomers get older,
their income and
spending power increase
Prime target for many
products: tech gadgets,
cosmetics, and products
that enhance their lifestyle
Gen X or baby Bust
Followed the boomers
Children of duel-career households or divorced parents
Bombarded with media from early age
Savvy purchasers and skeptical consumers
Reach this market: sharp images, music, a sense of
humor and meet them on their terms
Generation Y
Sons and daughters of later boomers (you)
Known as Echo Boomers or Millennium Generation
More racially and ethnically diverse with spending
power
Fashions and info get passed via the internet
Gender
Gender creates market segments
Jockey exclusively for men: entered the women’s
market doubled its sales
Income
Marketers want to know how much money they have to
spend on different products
They look at two types of income:
Disposable income: Money left over after
taxes/important to companies that produce and sell
necessities
Discretionary income: Money left over after paying for
basic living necessities such as food, shelter, and
clothing/important to companies that sell luxury items
Marital Status
Census says married couples have slipped to 49.7% of
total households compared with 80% in the 50’s
Reasons for change: getting married later, divorcing
more, living longer, and remarrying less
Married couples with kids represent less than 25% of
the population
Ethnic Background
U.S. population is becoming more diverse
Due to increase immigration
Caucasians population is declining
African American, Hispanic, and Asian make up 30%
of the population
By 2025 they will represent 37.2%
Geographics
Segmenting markets based on where people live
Closely related to demographics because of the similarities
among people who live in certain areas
Segmented by:
Local & regional
National & global
Examples:
Small independent restaurant (Cuginos)
Coca-Cola
Meijer
To reach Latinos
Top Hispanic Markets: LA, New York, Miami, Houston
and Chicago
Best places to test new products to reach Latinos
African Americans
55% live in the south
City with the largest populations is New York with 2.3
million
2nd largest: Chicago 1.1 million
Detroit, Philadelphia, Houston, LA, Baltimore, Memphis,
DC, and New Orleans
Key outlets in these cities would be necessary to reach this
market
Children
Highest proportion of their population in the 5-13 year
old age group (15% each) are in Utah and Alaska
14% in Texas, Arizona, California, and Idaho
Older population
65 and older greatest populations are found in
CA (3.8 million)
Florida: (2.9 million)
New York: (2.5 million)
Texas (2.2 million)
Pennsylvania (1.8 million)
Income
States with a median income of at least $50,000
Delaware, Washington, California, Colorado, Virginia,
Utah, Massachusetts, Minnesota, Alaska, Connecticut,
New Hampshire, Hawaii, Maryland, and New Jersey
Target financial, insurance, luxury goods
Psychographics
Grouping people with similar lifestyles, attitudes,
values, and opinions
Activities/Interests: create target markets (magazines
target activity segments)
Attitudes: health conscious, being fit 21st century trend
attitudes
Personality and values: More advanced studies look at
these issues and segment based on them
Behavioral
What are the benefit desired by consumers
Shopping patterns
Usage rate
ex: regardless of income people desire luxury and
premium merchandise/people more and more define
themselves by the products and brands they buy
How marketers use Consumers’
behavioral Patterns
Companies classify their customers according to % of
sales each group generates
Often 80/20 rule applies: 80% of the time sales are
generated by 20% of its loyal customers
Mass Marketing Vs. Segmentation
Mass Marketing is used when a product has universal
appeal and few features that differentiate them from
their competitors
It uses a single marketing strategy to reach all of its
customers
Not very common today
Niche Marketing
Markets are narrowed down and defined with extreme
precision
Even products with one slogan : Got Milk will use
different models or themes to reach market segments