Segmenting a Market

Segmenting the Market

Suppose this class represents a larger market. How would you segment the class into smaller market segments?

With your group, decide on one characteristic that can be used to segment the class into smaller markets.

Market Segmentation

The process of dividing a large market into smaller parts is called market segmentation.

Each smaller part is called a market segment.

Each market segment is made of customers with similar wants and needs for a specific product.

Market Segmentation

In the consumer market, marketers use characteristics of customers to segment the market. (Ex. age, gender, etc.)

A customer characteristic that is used to segment a market is called a segmentation variable.

Market Segmentation

Imagine that $100 is available to spend. How might the following spend the money?: A teenaged male A teenaged female A 30-year-old parent with two children A wealthy 40-year-old A retired person on a very small fixed

income

Market Segmentation

There are over 25 different variables that marketers use to segment the consumer market.

Marketers have organized these variables into four categories: Geographic Demographic Psychographic Behavioral

Geographic Variables

Segmenting a market based on where customers live is called geographic segmentation.

Geographic Variables

Location Country vs. city US vs. Europe

Climate Clothes Toys

City Size

Geographic Variables

With your partner:Choose a geographic variable.Think of a product that can be

segmented based on that variable.Name the product and the

geographic variable.Then describe the market segment.

Demographic Variables

A census is a count of the people in a country made by the government on a regular basis. (U.S. – 10 yrs.)

A census collects demographic information, which consists of statistics of a population of people.

Demographic Variables

The categories that this information is divided into are called demographic variables.

Segmenting a market based on demographic variables is called demographic segmentation.

Demographic variables commonly used by marketers include age, gender, ethnicity, income, and family size.

Demographic Variables:Age

Age is a commonly used segmentation variable because people at different ages have different needs and wants.

How does age affect a person’s needs and wants for clothing?

Demographic Variables:Age

A generation is a group of people born during a particular period of history.

The period that group of people grew up in has a major affect on their attitudes, wants, and needs. Ex. – Baby Boomers (1946-1964)

Demographic Variables:Age

Demographic Variables:Gender

Men and women differ in their wants and needs for many products. (Shocking, I know…)

Marketers use these differences to develop products that meet the specific needs of men or women.

Demographic Variables:Ethnicity

Many marketers have found success by segmenting the market based on ethnicity.

They develop products to meet the needs of a specific ethnic group and the wants of people interested in that ethnic group.

Demographic Variables:Income

Income level has a major influence on what people buy.

People with similar income levels buy similar types of products.

Lower income – necessities Higher income – recreation, education, luxury

Vs.

Demographic Variables:Income

There are two categories of income that marketers are interested in:Disposable income – income a person

has available to spend (dispose of) after taxes have been taken out.

Usually spent on necessitiesDiscretionary income – left after taxes

and necessities have been paid for.Spent however you want

Demographic Variables:Income

With your partner, name the types of businesses that would be interested in the amount of disposable income customers have.

Then, name the types of businesses that would be interested in the amount of discretionary income customer have.

Demographic Variables:Income

Think about it:

Teenagers as a group do not havehigh incomes. Yet, they seem tohave a great deal of discretionaryincome. Why?

Demographic Variables:Family Size

Marketers have discovered that households consisting of one person have quite different needs and wants from ones with parents and children.

Psychographic Variables

Customers have psychological and emotional characteristics that affect their needs and wants for products.

Segmenting a market based on psychological characteristics of customers is called psychographic segmentation.

Psychographic Variables: Hobbies and Activities

People who participate in the same activities or have the same hobbies tend to have similar buying patterns.Hobbies: photography,

quilting, collecting, etc.Activities: sports,

sightseeing, etc.

Psychographic Variables: Lifestyle

Lifestyle and values are often difficult to measure and define.

Surveys are given that ask participants to agree or disagree with AIO statements (activities, interests, opinions).

SRI Consulting Business is well known for its psychographic research.

Their survey is called the VALS Survey.

Psychographic Variables: Lifestyle

Psychographic Variables: Lifestyle

Take the VALS Survey!

http://www.sricbi.com/VALS/presurvey.shtml

Behavioral Variables

Segmenting a market based on the way customers use a product or behave toward a product is called behavioral segmentation.

Behavioral Variables:Features Desired

Customers vary in the features they want in a product.Ex. Computers, cars, etc.

Behavioral Variables:Usage Rate

Research shows that for many businesses, 80 percent of the sales come from 20 percent of the customers – 80/20 rule

Marketers often segment the market based on how often the customer uses or buys the product (usage rate).

Categories include heavy, moderate, light, and nonuser.

Behavioral Variables:Brand Loyalty

The value of brand loyalty is related to the 80/20 rule.

Loyal customers often are the source of most of a company’s sales, so marketers often segment based on degree of loyalty.

Combining Variables

Market Segment Profile

Once marketers have divided a market into segments, they must choose the segment or segments to target.

A market segment profile is a detailed description of the typical consumer in a market segment. Includes geographic location,

demographics, psychographics, and behavior.