MARKETING PRINCIPLES UNIT

Market Segmentation

What is Market Segmentation?

Identifying a target market by dividing the market into segments according to customer needs and characteristics.

Market segmentation helps marketers sell more efficiently. HOW?

Market Segmentation

The aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. 

Used to identify different market segments: Homogeneity (common needs within segment) Distinction (unique from other groups) Reaction (similar response to market)

Market Segmentation in Detail

Consumer Market Segmentation Demographics Geographics Psychographics Behavioral

Business Market Segmentation Geographics Customer Type Buyer Behavior

Consumer Market Segmentation

Allows an organization to construct market segments for evaluation to help select appropriate target markets.

Consumer Market

Segmentation

Demographics

Geographics

Psychographics Behavioral

Demographic Variables

Characteristics about the consumer: Age:

76 million “Baby Boomers” 1946- 1964 51% of wealth 40 million “Generation X” 1965- 1976 Conservative $ 77 million “Generation Y” 1977- 1997 Computerized

Gender: Male vs. Female Income:

Disposable income: Money after taxes Discretionary income: Money after paying all living costs

Ethnicity: US Population is changing: California 1st state in which

Caucasians are the minority.

Geographic Variables

Statistics about where people live. People who live in the same area usually have similar needs.

Businesses look at four (4) states for Hispanic markets: NY, TX, CA, and FL.

It is said that one-half of the American population will be living in CA, TX, and FL in the near future. Why do you think this would be true or false?

Psychographic Variables

Personalities and LifestylesUsed when segmentation by age and gender

is not sufficient. Involves family criteria. Focuses on attitudes and values.

Behavioral Variables

Breaks down the areas of consumer usage rates and purchasing patterns, price sensitivity, brand loyalty, and benefits sought.

The Circle of Life Marketing

Think about Market Segmentation in this manner:

Can you say Hakuna Matata for Market Segmentation?

Business Market Segmentation

Smaller number of potential customers than Consumer Markets.

More likely to be price driven rather than brand driven. Demand in business markets tends to be more volatile than

consumer markets. Examples: Banks, Airlines, Commercial Foods

Business Market Segmentation

Geographics

Customer Type

Buyer Behavior

Geographic Segmentation

Based on regional variables: Customer Concentration Regional Industrial Growth Rate International Macroeconomic Factors

Customer Type

Depends upon the size of the organization/business, the industry, and position in the value chain. Can an organization provide enough products to reach

low, mid-range, and high-value customers? Does the industry cater to various types of customers? Is there value to the customer for this

product/service?

Buyer Behavior

Customers are affected by the following: Loyalty to suppliers Usage patterns Order size

Questions to Ask

How have values in terms of marketing have changed over the past 10 years?

How has this influenced marketers?

What are some of the changes experienced towards values?

Disadvantages of Market Segmentation

Costs more to differentiate packaging, promotion, etc. to more than one market.

Research and identification is costly.Production costs increase when the product is

changed to meet the needs of more than one market.

Only used when the potential sales will exceed sales from marketing to one larger group.

Risk is involved with smaller, diversified markets.

Market Identification

The process of a marketer in identifying the most profitable areas to offer a new product or service.

Uses market segmentation strategies. Consumer Market Segmentation Business Market Segmentation

Presentation Resource

www.quickmba.com/marketing/market-segmentation/