2.2 Market SegmentationMARKETINGMR. PAVONE

Identifying and Analyzing Markets

Think of yourself as a consumer. What are your key characteristics?

Identifying and Analyzing Markets Businesses look for ways to connect with current and

potential customers by getting to know them well. Market Segmentation – The process of analyzing and

classifying customers in a given market to create smaller, more precise target markets.

To meet the needs of different market segments, manufacturers use a unique marketing mix, including different products, promotions, stores and price points.

By using a sustainable competitive advantage, marketers identify its specific markets to target.

Companies will study data in order to break down information to demographics, geographics, psychographics, and behavioral factors.

Demographics

Demographics – Statistics that describe a population in terms of personal characteristics such as age, gender, income, marital status, ethnicity, education, and occupation.

Age Marketers easily use age to segment the market by

creating age ranges; some of the common labels used to segment the population by generation are: Baby Boom Generation: 76 million babies born

between 1946 and 1964 with a seeming increase in income and spending power as they get older; prime targets for all types of products.

Generation X (Baby Bust Generation): Generation from 1965 to early 1980s, mostly children of dual-career households or divorced parents, heavily influenced by the media and marketed with music, share images and humor.

Generation Y: Generation from mid 1980s to early 2000s, also known as the Millennium Generation, very ethnically diverse, very heavily influenced by the Internet.

Gender Gender helps to create market segments as well; one

good example being Jockey (one a men’s underwear company) doubling its sales by entering the women’s market with Jockey underwear for women.

Income Marketers want to know how much money people

have to spend on different products and therefore look at two types of income: disposable and discretionary income.

Disposable Income – The money left over after taxes are taken out of a consumer’s income.

Discretionary Income – The money left over from a consumer’s income after paying for basic living necessities such as food, shelter, and clothing.

Marital Status The U.S. Census indicates that married couples have

decreased to 49.7 percent of total households, compared to 80 percent in the 1950s, attributed to reasons such as: People are older when they get married for the first time. Higher divorce rates. People are living longer. People are remarrying less.

Ethnic Background The U.S. population is becoming more multicultural

and ethnically diverse; the Caucasian population is declining, while African American, Hispanic and Asian American populations make up more than 30 percent of the U.S. population.

Geographics Geographics – Segmentation of the market based on

where people live. Geographics segment markets geographically by local,

regional, national, even global markets; some examples: Businesses interested in marketing to Latinos need to know the top

Hispanic markets, such as New York, Miami, etc. 55% of the African-American population lives in the South, but large

populations of African-Americans also reside in New York and Chicago. If interested in marketing to children, it is good to know large

proportions of children to population reside in Utah and Alaska. In 2005, the states with the largest populations of people age 65 and

older could be found in California, Florida, New York and Texas. In 2005, states with a median household income of at least $50,000

were Delaware, Washington, California, Colorado, Virginia, Utah, Massachussetts, Minnesota, Alaska, Connecticut, New Hampshire, Hawaii, Maryland and New Jersey.

Psychographics Psychographics – Studies of consumers based on

social and psychological characteristics. Consumer lifestyles include how people spend their

time and money based on: Activities Attitudes Personality & Values

Activities If you made a list of all of your present activities, you

would realize how many market segments can be identified by psychographics.

Attitudes Consumers’ attitudes, such as taking responsibility for

one’s health, eating healthier, and becoming physically fit, are trend-setting issues for markets in the twenty-first century.

Personality & Values More advanced study of psychographics includes the

study of personality characteristics and values.

Behavioral Segmenting the market based on product related

behavior involves looking at the benefits desired by consumers, shopping pattern and usage rate.

MasterCard research revealed five groups of online consumers: Confident core users Cautious shoppers Mainstream users Curious but not convinced Technology skeptics

How Marketers Use Consumers’ Behavioral Patterns

Marketers study shopping patterns to determine usage rates, for instance, Jupiter Research determined that most teenagers spend about $50 a month on entertainment and teenage girls spend 15 percent more on music than teenage boys.

Companies classify their customers according to the percentage of sales each group generates; many businesses are finding that 80 percent of their sales are generated by 20 percent of their loyal customers (the 80/20 rule).

Mass Marketing Versus Segmentation

Mass Marketing – Use of a single marketing plan to reach all customers.

When products have universal appeal and few features to differentiate them from competitors, mass marketing is used.

A New Marketing Trend Mass marketing is not as popular as it once was; the

current trend is now niche marketing, the narrowing down of markets and defining them with extreme precision.