Marketing Segmentation

Unit 1, Chapter 2

Market Segmentation

• Dividing the total market into smaller groups of people who share specific needs and characteristics

• Remember a “market” is:– People who share similar needs and

wants and are capable of buying products

You Decide

Explain which groups of people the following products are most suitable for:•Sports & exercise goods•Luxury sports cars•Animated films•Lipstick

Segment Jeans Market• Who buys jeans?

– Classify people who form this market:– By age: kids, teens, adults– By price: marketers try to reach different

income levels (also called socio-economic group)

– By desired features: tight fit, comfortable fit, newest fashion, unique design, etc.

• Levi’s makes: relaxed fit, regular fit, 501 original, loose straight, boot cut, low rise straight, and low rise boot cut

Ways to Segment Population

• The four factors that help segment a market and describe a target market are:

Demographics

Geographics

Psychographics

Behavioral factors

Demographics

• Demographics refer to statistics that describe a population in terms of personal characteristics such as: Age

Gender

Income

Marital status

Family size

Family Life cycle

Education

Occupation

Analyzing a Market

• When calculating how much products should cost, marketers look at two types of income measurement:

• disposable income - Money left after subtracting taxes

• discretionary income - Money left after subtracting costs for basic living necessities.

• Marketers who sell necessities such as food and clothing are concerned with disposable income, while those who sell luxury products pay attention to discretionary income.

Geographics• The term geographics refers to

segmentation of the market based on where people live. To segment a market geographically, you can refer to: Local markets

Regional markets

National markets

Global markets

• Also, consider: Population density (urban, suburban, rural)

Climate (tropical, temperate, cold)

Psychographics

• Psychographics involves grouping people with similar:LifestylesAttitudesValues OpinionsActivities Interests

• This may be based on: culture, religion, race, social class

Behavioral

• Separating the market based on product-related behavior involves looking at the:Benefits desired by consumers –

(convenience, economy, prestige)

Shopping patterns – do they already purchase it? Where would they use it?

Usage rate – light medium, heavy; have they ever purchased it?

Behavioral Continued

• By studying consumer behavior, many businesses find that 80 percent of a company’s sales are generated by 20 percent of its customers.

• This phenomenon is known as the “80/20" rule.

Mass Marketing vs Segmentation

• Mass marketed – When a product has universal appeal

and few features to differentiate them, it is marketed to everyone

– Examples: milk, toothpaste, computers

• Most companies market to a “niche” – which means to a particular segment of

people

Be Prepared to Stand

Stand if you believe you belong to the segment that the following different products are aimed at.

• iPods• Toms• Laptop• Bowling• Cosmopolitan magazine• Android phone• Mountain bike • Local cinema

Math Practice

• IF 93 percent of the US population of 290,890,777 snacks at least once a day, how large is the market for snack food?– 270,528,432

• The 80/20 Rule: Here are sales figures for 10 customers. (1) $75,000, (2) $700,000, (3) $815,000, (4) $70,000, (5) $60,000, (6) $30,000, (7) $25,000, (8) $53,750, (9) $40,000, (10) $25,000

• Explain the 80/20 rule using the above figures– Total = 1,893,750 – so the two customers above #2 and #3 have 80% of the sales

but constitute 20% of the customers!

Assignment

• We are going to be using market segmentation to create a person who is representative of a target market.

• Find handouts: – “Target Market person Activity”– “Figure 5.2 Useful Segmentation Bases”

• Divide into teams of 2 – 3• Need poster board, Internet (or

magazines), markers