Structure Of Consumer Markets

A MarketA group of people who need and want a particular product, and have the buying

power, willingness, and authority to purchase the product.

What’s a Market?

Need Ability Willingness Authority

Two Basic Types of Markets

HOMOGENOUS

consumers have similar

product needs

“Mass Market Approach”

Two Basic Types of Markets

• HETEROGENEOUS

consumers have

dissimilar product needs

“Target Market Approach”

A fairly homogenous (similar) group of consumers to whom a company wishes to appeal

What is a Target Market?

A Target Marketing Approach:

implies that a firm’s marketing mix (product, place, price, promotion)

is focused on a single market segment

Market SegmentA group of individuals that share one or more characteristic in common that cause them to have relatively similar

product needs.

Target Market Selection Process

2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use

1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy

3. Develop Market Segment Profiles3. Develop Market Segment Profiles

4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments

5. Select Specific Target Markets5. Select Specific Target Markets

Undifferentiated Strategy

Single Single Marketing Marketing

MixMix

Target MarketTarget MarketOrganizationOrganization

Concentrated Strategy

Single Single Marketing Marketing

MixMix

Target MarketTarget MarketOrganizationOrganization

Differentiated Strategy

OrganizationOrganization

Marketing Mix 1Marketing Mix 1

Target MarketTarget Market

Marketing Mix 2Marketing Mix 2

Target Marketers have Specific Aims

In a product-market area

A segmenter A combiner

The Strategy

Strategyone

strategyStrategy

three

Strategytwo

The

Using single targetmarket approach can aim at one sub-market with one marketing mix

Using multiple targetmarket approach canaim at two or more sub-markets with differentmarketing mixes.

Using combined targetmarket approach can aim at two or more submarkets with the same marketing mixes.

What is the conceptual philosophy underlying target marketing?

P

Q0

D

P

Q0

P

Q0

0

0

0 0

0 0

0 0

A. Mass marketer sees one demand curve for its target market

B. Combiner sees one demand curve for its combined target market

C. Segmenter sees one demand curve for each submarket

That there are different demand curves in different market segments

Detailed View of Demographic Variables

Age Gender Race Ethnicity Income Education

Occupation Family Size Family Life Cycle Religion Social Class

Detailed View of Geographic Variables

Region Urban, Sub-

urban, Rural City Size County Size

State Size Market Density Climate Terrain

Detailed View of Psychographic Variables

Personality Attributes Motives Lifestyles

Detailed View of Behavioristic Variables

Volume Usage End Use Benefit Expectations Brand Loyalty Price Sensitivity

Target Market Selection Process

2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use

1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy

3. Develop Market Segment Profiles3. Develop Market Segment Profiles

5. Select Specific Target Markets5. Select Specific Target Markets

4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments

How to Evaluate Market Segments

Market Potential (growth in overall market)

Company Sales Potential (market share)

Competitive Assessment (nature of competition)

Cost Estimates (competitive advantage)

How is target marketing accomplished?

Narrowing Down to Target MarketsAll needs in the world

Some generic needs

Some “broad” product-markets

One “broad” product-market

Homogeneous “narrow” product markets

Singletargetmarket

approach

Multipletargetmarket

approach

Combinedtargetmarket

approach

Disaggregatingi.e.,NAMINGbroad product-markets

Aggregatingi.e.,SEGMENTINGinto possible target markets

Selecting targetmarketing approach

Every individual has his or her own unique position in a market - those with similar positions can be

aggregated into potential target markets

C

A B

A. Product-market showing three segments B. Product-market showing six segments

AB

C

D

E

F

Dependability dimension

Stat

us d

imen

sion

Dependability dimension

Stat

us d

imen

sion

Requirements for Effective Market Segmentation

• Is the market heterogeneous?

• Is the segment identifiable and divisible?

• Can you compare and estimate the sales potential, costs,

and profits from the segments?

• Do one or more of the segments offer enough profit?

• Is it possible to reach the segment?

Segmentation Base

A characteristic of individuals or groups that is related to product use

and that can be used to divide the total market into segments.

Finding the Relevant Segmenting Dimensions

Determining dimensions(product type)

Determining dimensions(brand specific)

All potential dimensions

Qualifying dimensions

Generally relevant topurchasing behavior

Relevant to including a customer type in the product-market

Affect the customer’spurchase of a specifictype of product

Affect the customer’schoice of a specificbrand

Two approaches to choosing a segmentation base

Single-variable Segmentation

Less than$10,000

$10,000-$19,999

$20,000-$40,000

More than$40,000

e.g., Annual household income

Multivariable Variable Segmentation

Light UserModerate User

Heavy User

Urban

Suburban

Rural

Less than$10,000

$10,000-$19,999

$20,000-$40,000

More than$40,000

Annual Income

Popu

latio

n D

ensi

tyVo

lume U

sage

Demographic Trends

U.S. Age Distribution and Projections

13.0

22.7

16.3

13.6

5.7

12.8

12.0

18.7

13.4

17.5

12.0

6.2

12.4

7.7

9.2

6.6

0.0 5.0 10.0 15.0 20.0 25.0

65 and older

45 to 64

35 to 44

25 to 34

18 to 24

14 to 17

5 to 13

Younger than 5

Age

gro

ups

Percent of Population

19852000

Birth Rates (1976 and 2000)3,665

2,797

69.7%

67.2%

33%

19%

54%

34%

TOTAL BIRTHS (IN THOUSANDS)

OVERALL FERTILITY RATE (PER 1,000 WOMEN)

PERCENTAGE OF BIRTHS TO WOMEN IN THEIR 30s

CHILDLESS WIVES, 30-40 PLANNING TO HAVE CHILDREN

2000 1976

Boom and Bust

• 1945 - 1965 Baby “boom”

• 1965 - 1976 Baby “bust”

• 1976 - 1996 “Eco” Boom

• 2008 - another boom????

Impact of slowing birth rates

• Markets affected?

• Is it the same across all population

groups?

• When will it recover?

Me, Myself, and I

• 29 million Americans live alone

• 25% of Americans who love alone are divorced

• 60% of Americans who live alone are over 50

• 80% of women who live alone are over 65

• Boomer women will begin to turn 65 in 2011

Cohort Analysis

The Kids Market (4 - 10 years)

“Children are the brightest stars in the consumer constellation”

The Kids Market (4 - 10 years)

Why are they so important?

• They have their own buying power

• They influence family sending

• They are the future consumer markets

“Cradle-to-Grave” Marketing

Eco Boomers (11 - 23), a.k.a. Generation Y

The “About to be……..” generation

To Be About to Be• Inside the head of a 21 year old:

– Sophisticated– Challenge authority– Close to parents physically and emotionally– Skeptical consumers– Hardened to advertising– Less brand loyal– Attached to technology

• Automobiles: “home Sweet Car”– View driving as a social activity– And as a means of escape– And a home on wheels

• Technology: “Going Mobile”– Integrated in the very fabric of their lives– Full spectrum users

To Be About to Be

• Fashion: “More than midriffs”– Both males and females are into shopping– Lifestyle clothing

• Media and advertising: “Lifestyle interruptions”– Heavy media users– Lifestyle interruptions– Immune to ads – prefer entertainment

To Be About to Be

• Ethnic influences:– Multicultural roots– Ethnic influences on popular culture

• Customization: “Having it their way”– Customized products to suits own tastes and whims– Having it now

To Be About to Be

College Crowd+ (20-24)

a.k.a. Generation Xers

“Marketers realize that, when it comes to buying, college students lose their virginity over and over again!”

Generation Xers• more than half have cars• two-thirds have credit cards• two-thirds have telephone calling cards• half own a computer• three-quarters have cable TV premium

channels

• not prone to extravagance-dislike hype• savvy--no nonsense• demanding--cynical• visually driven• performance based consumers• bound to home• high racial/ethnic awareness

GenXers-Psychographics

The Face of the New Homemaker

The Face of the New Homemaker

• more educated

• more savvy

• more hectic lifestyles

• more hold jobs

• more are male

• want to shed the “home maker”image

The Mature Market

The Mature Market

Perhaps no other consumer market justifies segmentation

more than the mature market..the older they get the more dissimilar they become

• Healthy Indulgers (18% of 55+ group)

• Healthy Hermits (36% of 55+ group)

• Ailing Outgoers (29% of 55+ group)

• Frail Recluses (17% of 55+ group)

The Mature Market

Courtesy: American Demographics

Demographic Trends

Products Using Age Segmentation

Ownership of Cats and Dogs by Age

42

67

42

22.4

53.5

29.7

55.9

32.6 35.930.5 29

17.3

0

10

20

30

40

50

60

70

18-24 25-34 35-44 45-54 55-64 65+

Dogs Cats

Products Using Race Segmentation

Category 1990 2001 1990 2001

Total Minority

$439.9 $860.6 10.6% 12.2%

Black 307.8 572.1 7.4 8.1

Hispanic 207.5 452.4 5.0 6.4

Asian 112.9 253.8 5.0 6.4

Native American

19.2 34.8 0.5 0.5

Buying Power in $bills % Market shareMinority Buying Power

personal care (women)

personal care (men & women)

personal care (men)

apparel for kids under 2

hosiery

women’s accessories

$312 $532 41.4%

$349 $530 34.2%

$160 $212 24.3%

$379 $456 17.0%

$94 $108 12.6%

$139 $157 11.4%

All

hhlds

Black

hhlds

Percent

diff

2000 SpendingRace

Average Annual Spending(index of 100 = all US hhs)

Non-Hispanic hhs(index =$35,525)

Hispanic hhs(Index $29,333)

Food at home 99 117Cereal & baked goods 100 103Beef 96 146Pork 96 143Poultry 97 130Fish and seafood 94 162Eggs 91 176Fresh milk & cream 98 132Fruits and vegetables 97 128Sugars/sweets 101 90Fats and oils 99 114Non-alcoholic beverages. 99 107Food away from home 102 78

Sub-cultural Differences in Movie Going Behavior

All Non-Hispanic

white

Black Hispanic

Frequent attendees (2X/months+) 15% 13% 13% 36%

Low spenders $1-9/person 30% 35% 19% 16%

Medium spenders $10-11/person 30% 30% 28% 31%

High spenders $12-30/person 36% 31% 52% 49%

Regularly buy refreshments 42% 40% 40% 54%

Would stop buying refreshments if they were more expensive

74% 75% 77% 63%

Shopping Preferences

01020304050607080

discountdepartmnet

store

drugstore regulardepartment

store

specialitystore

whites blacks

Income

48

47

41

40

37

36

28

24

0 10 20 30 40 50

Buy fewer booksCut back on cell and home phone useGo to fewer concertsCut back on clothing purchasesCut back on electronics purchaseGo to fewer theaters and rent moviesForgo vacationsEat out less often

Ranking Products Consumers Would Cut Back on if Spending Decreased

Detailed View of Geographic Variables

Region Urban, Sub-

urban, Rural City Size County Size

State Size Market Density Climate Terrain

Population by State (all figures in thousands)

4,978

2,869

30,953

1,014

1,2511,773

3,995

17,338

1,589

3,362

445

784 634

710

2,519

3,102

1,580

5561,251

4,978

2,424

5,259

2,733

4,451 4,9029,336

11,628 5,630

10,91412,001

17,941

1,767

3,718

5,094

2,659 4,186 6,964

13,925

3,658

6,970

6,530

1,268

1,209(NH) 6,026(MA) 1,104(RI) 3,327(CT) 7,952(NJ) 5,020(MD) 710(DE) 598(DC)

0-1,000

1,001-2,000

2,001-4,000

4,001-5,000

5,001-8,000

8,001-17,000

over 17,000

Note: The height of the block in each state shows its relative population level

1993 Population:

Percent Change in Population by State, 1990-2000

19.2

7.2

4.0

15.0

21.1

23.1 20.5

14.1 .1

3.0

-1.4

12.1

-2.6

-4.7

.8

17.9

-2.0

1.5

2.8 4.2

3.7

-7.6

3.8-.5

-.5

-.3 -.9

-.3

-1.5-7.3

5.9

6.6 5.5 19.4

20.3

10.1

11.011.8

11.7

-2.7

1.2

4.95.116.7

3.5

4.65.18.211.510.23.2

Decreasing 0.1-3.9% 4.0-9.9% 10.0-15.9% 16-29.9%

Percent Change in population:

Detailed View of Psychographic Variables

Personality Attributes Motives Lifestyles

Brain Reserve

10 MAJOR CULTURAL TRENDS AFFECTING U.S.

CONSUMERS

10 MAJOR CULTURAL TRENDS

1. Cashing out

2. Cocooning

3. Down-aging

4. Egonomics

5. Fantasy/adventure

6. 99 lives

7. S. O. S

8. Small indulgencies

9. Staying alive

10. Vigilante consumer

10 MAJOR CULTURAL TRENDS

Lifestyle

ConsumerConsumerMarket Market

SegmentationSegmentationVariablesVariables

DemographicDemographic GeographicGeographic

PsychographicPsychographic BehavioristicBehavioristic

Detailed View of Behavioristic Variables

Volume Usage End Use Benefit Expectations Brand Loyalty Price Sensitivity

Volume Usage

End Usage

Benefits Expectation

Benefit Expectations

1Dial

Lifebuoy6

Lava

3Lux

5

4 Dove

Tone7

2

8 Coast

Zest

Lever 2000

Safeguard

Deoderant

High Moisturizing

Low Moisturizing

Nondeoderant

Brand Loyalty

Minority Consumers: Brand Loyalty

0

10

20

30

40

50

60

70

Statement A Statement B Statement C

16 to 2425 to 3435 to 4950 +

Statement A: spend more to get the bestStatement B: buy brand to feel I’ve made itStatement C: buy brands to let others know I’ve made it

Price Sensitivity

The Market Segmentation Process

Target Market Selection Process

2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use

1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy

3. Develop Market Segment Profiles3. Develop Market Segment Profiles

4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments

5. Select Specific Target Markets5. Select Specific Target Markets

Toothpaste Market Segment Description

The sensorysegment

The sociablessegment

The worrierssegment

The independentsegment

Principal benefitsought

Flavor, productappearance

Brightness of teeth

Decayprevention Price

Demographicstrengths Children Teens, young

people Large families Men

Special behavioral

characteristics

Users of spearmintflavored

toothpaste

Smokers Heavy users Heavy users

Brandsdisproportionately

flavored

Colgatestrip

Macleans PlusWhite Ultra

BriteCrest Brands on sale

Personalitycharacteristics

High self-involvement

Highsociability

High hypochon-driasis High autonomy

Life-stylecharacteristics Hedonistic Active Conservative Value-oriented

Segment Name

Target Market Selection Process

2. Determine Which Segmentation Variables to Use2. Determine Which Segmentation Variables to Use

1. Identify the Appropriate Targeting Strategy1. Identify the Appropriate Targeting Strategy

3. Develop Market Segment Profiles3. Develop Market Segment Profiles

5. Select Specific Target Markets5. Select Specific Target Markets

4. Evaluate Relevant Market Segments4. Evaluate Relevant Market Segments

How to Evaluate Market Segments

• Market Potential

• Company Sales Potential

• Competitive Assessment

• Cost Estimates

One-on-One Marketing