Agenda

1. Housekeeping: readings, team name & e-e-mail, etc.

2. News1. Surveillance data mining2. Shopping basket analysis

3. Segmentation marketing1. Basics of segmentation2. Geographics 3. Demographics4. Lifecycle5. Cohorts6. Psychographics & behavior

4. Team discussion questions1. Profile yourself as consumer2. Profile your customers: How does this enable you to

respond to their needs better5. Next week: consumer behavior– why we buy what we buy

Use the various consumer profiling methods to:

1. Profile yourself as a consumer (use VALS-2, Prism, and other demographic, psychographic, and lifestyle descriptors).

2. What are the implications for marketers (e.g., how is this reflected in how they do/can market to you more effectively)?

3. Profile the customers in your business (or department).

4. How does this information about your customers enable you to provide better products/services to them?

5. What more do you need to know? How could you find out?

Group discussion questions for tonight

You might understand the parts, but might miss the whole chicken

What is?

Demographic/Geographic refers to age, sex, income, education, race, martial status, size of household, geographic location, size of city, and profession.

Life stage refers to chronological benchmarking of people's lives at different ages (e.g., pre-teens, teenagers, empty-nesters, etc.).

Lifestyle refers to the collective choice of hobbies, recreational pursuits, entertainment, vacations, and other non-work time pursuits

Psychographics refers to personality and emotionally based behavior linked to purchase choices; for example, whether customers are risk-takers or risk-avoiders, impulsive buyers, etc.

Belief and value systems includes religious, political, nationalistic, and cultural beliefs and values.

Behavior analysis includes what behaviors consumers actually engage in (after all is said and done)

Methods of Seg-men-ta-tion

Requirements for segmentation

Question: What are some criteria that could be used to ensure that a segmentation has utility?

Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified.

Relevant/Accessible: the segments must be reachable through communication and distribution channels.

Substantial: the segments should be sufficiently large to justify the resources required to target them.

Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes.

Durable: the segments should be relatively stable to minimize the cost of frequent changes.

Pitfalls of Segmentation

• appeal to segments that are too small

• misread consumer similarities and differences

• become cost inefficient

• spin off too many imitations of their original products or brands

• become short-run rather than long-run oriented

• unable to use certain media (due to small segment size)

• compete in too many markets

• confuse people

• become locked in to a declining market

• too slow to seek innovation possibilities for new products

Claritas (Prizm demographic profile by Zipcode)

SRI VALS Survey (lifestyle profiling)

Sample Segmentation Services & Systems

AGS Demographic Database

         

Family Lifecycle & Retailing

Ricercar geodemographic profiling

Mosaic Segmentation

Yankelovich

Nielson

Demographic Profile

Business segmentation can help companies align their sales territories based on the opportunitieson the ground. The BEFOREmap shows territories determine by geometry—four quadrants dividing the central area—while the AFTERmap shows territories that vary in size based on the number andpotential value of target businesses (the red dots indicating the locations of target businesses). Bymapping its business prospects by size and industry type in Lexington, Kentucky, a company canbetter realign its sales territories based on the concentrations of its high-quality prospects.

• Demographic analysis• Demographic data packs• PRIZM market segments• Prizm ZIP profile

PRIZM– Potential Rating Index for Zip Marketers

• Mosaic segments

A Affluent Suburbia01 Very high-income, families with older children in suburban areas02 Very high-income, large families in suburban areas03 Very high-income, young, suburban families with children04 Empty-nest, high-income, suburban couples05 High-income, families with older children in suburban areas06 Large, high-income families in major market suburbs07 High-income families with children in suburbs08 Suburban, high-income families with older children

In your discussion team:Describe yourself as a target market using the descriptors from the various methods of profiling we have covered.

Given your description, how would a marketer most optimally contact and engage you?

Sample Profile

Cluster analysis

Cluster analysis builds hierarchical trees based on similarity among individuals compared across several dimensions of questions

Cluster Analysis of Recreational Groups

• Types• Applications• VALS-2 survey

9%

11%

16% 13%

13%

12%

12%

13%

Strugglers

Actualizers

Principles Status Action

Fulfilled

Social Technographics Ladder (2008)

Forrester categorizes social computing behaviors into a ladder with six levels of participation; we use the term "Social Technographics" to describe analyzing a population according to its participation in these levels.

http://www.forrester.com/Groundswell/profile_tool.html

http://blogs.forrester.com/groundswell/2007/12/the-social-prof.html

Segmentation of blog users by political party

There is a persistent tendency for Democrats to participate more fully in social technologies. Looking at the index (all adults = 100), you can see that Democrats are at least 10% more likely to do just about anything involving social technologies. The Republicans are the opposite -- they're a lot LESS likely to participate

Segmentation of democratic blog users by who they voted for

One in three Obama voters is a Joiner, which may be helping the my.barackobama.com strategy. Edwards voters (62% Spectators) are the most likely to be consuming social applications; Clinton voters are the least, with only 49% Spectators and 42% Inactives. 34% of Gore voters are Critics -- he ought to connect with them in some sort of community or forum to make them a force for his issues in the general election. Obama, Clinton, and Edwards voters are all rich with Creators (at least 22% of their supporters) -- energize those voters and they'll start getting the Spectators excited.

Segmentation of republican blog users by who they voted for

Note the relatively anemic levels of Creator participation -- no Republican gets above 16%. The Creators are the voters who energize everybody else with their contribution.

Target Market & the 4 Ps

How STP adds value to a firm

Marketing resources are focused to better meet customers needs and deliver more value to them

Customer develop preference for brands that better meet their needs and deliver more value

Customers become brand/supply loyal, repeat purchase, share favorable experiences

Brand supplier loyalty leads to increased market share and creates a barrier to competition

Fewer marketing resources needed over time to maintain share due to brand or supplier loyalty

Profitability (value to the firm) increases

The Intergenerational Cohort Approach

(see Meredith, G. E., Schewe, C. D., & Karlovich, J. (2001) Defining Markets, Defining Moments: America's 7 Generational Cohorts, Their Shared Experiences, and Why Businesses Should Care

Depression Cohort (Born from 1912 – 1921; Came of age during the Great Depression; Aged 79 – 88 in 2000): This group’s coming of age experience consisted of economic strife, elevated unemployment rates and having to take menial jobs to survive. Financial security—what they most lacked when coming of age—rules their thinking.

Marketing Tip: Having lived through the Depression, this cohort prefers to pay more for a smaller serving, rather than throw something away. As a result, single-serving products are now becoming popular. Maxwell House Filter Pack Singles, Pillsbury single-serve cakes, and Orville Redenbacher single-serve microwave popcorn are all examples.

World War II Cohort (Born from 1922-1927; Came of age during World War II; Aged 73-78 in 2000): Sacrifice for the common good was widely accepted among members of this Cohort, as evidenced by women working in factories for the war effort and men going off to fight. Overall, this cohort was focused on defeating a common enemy, and their members are more team-oriented and patriotic than those of other generational cohorts.

Marketing Tip: The1940s were an intensely romantic period. Therefore romance (candlelight dinners, hand-holding, soft music) can provide a wonderful context for advertising messages. In ads for Lazy-Boy recliners, the company uses a scene of a couple sitting on the porch of a Victorian-type home; the man is dressed in clothes of the ‘40s, while the woman, clearly his sweetheart, is looking down demurely as he speaks to her. Older adults immediately relate to the ad, which goes on to emphasize how long the company has been in business—another strong selling feature for this cohort.

Post-War Cohort (Born from 1928-1945; Came of age after WWII; Aged 55-72 in 2000): These individuals experienced a time of remarkable economic growth and social tranquility, a time of family togetherness, the Korean conflict, McCarthyism, school dress codes, and moving to the suburbs. Overall, this cohort participated in the rise of the middle class, sought a sense of security and stability, and expected prosperous times to continue indefinitely.

Marketing Tip: Post-War grandparents are healthy, active, educated and endowed with sizeable nest eggs. Spending by grandparents on their grandchildren is on the rise. Yet, toy stores are so focused on capturing the young parent market that they ignore this fact. A good example of a company taking advantage of this market is Genesis Direct of Secaucus, NJ, which markets a catalog called Gifts For Grandkids. The company provides a quarterly newsletter that offers tips that subtly help grandparents carry out their roles.

Leading-Edge Baby Boomer Cohort (Born from 1946-54; Came of age during the turmoil of the ‘60s; Aged 46-54 in 2000): This group remem- bers the assassinations of John and Robert Kennedy and Martin Luther King, Jr. It was the loss of JFK that largely shaped this cohort’s values. They became adults during the Vietnam War and watched as the first man walked on the moon. Leading-Edge Boomers were dichotomous: they championed causes (Greenpeace, civil rights, women’s rights), yet were simultaneously hedonistic and self-indulgent (pot, “free love, ”sensuality). Marketing Tip: You can reap major rewards by tying your product to health and wellness values. Retailers can joint-venture with hospitals to offer on-site health seminars that have a direct nutritional link to providing health and wellness. Offering tips in newsletters on health and fitness is another way to enhance satisfaction. Financial institutions should consider designing financial instruments (like “Christmas Club”) that promote saving strictly for health, wellness and fitness purposes.

Trailing-Edge Baby Boomer Cohort, or “Generation Jones” (Born from 1955-1965; Came of age during the first sustained economic downturn since the Depression; Aged 35-45 in 2000): This group witnessed the fall of Vietnam, Watergate and Nixon’s resignation. The oil embargo, and the raging inflation rate and the more than 30 percent decline in the S&P Index led these individuals to be less optimistic about their financial future than the Leading-Edge Boomers.

Marketing tip: Technology is making it easier to telecommute, and more and more Trailing-Edge Boomers are finding ways to work from home. Marketers looking to serve this labor force should offer telecommuters ways to get out of the house. Fitness clubs could offer special packages to attract home-based workers, many of whom have the flexibility to work out during the day and make up the time later in the evening. Restaurants could host telecommuter roundtables—monthly or bimonthly luncheons that would give home-based workers the opportunity to meet and network with new people.

Generation X Cohort (Born from 1965-1976; Came of age during a time of instability and uncertainty; Aged 24-34 in 2000): These are the latchkey children of divorce and have received the most negative publicity. This cohort has delayed marriage and children, and they don’t take these commitments lightly. More than other groups, this cohort accepts cultural diversity and puts quality of personal life ahead of work life. They’re “free agents,” not “team players. ”Despite a rocky start into adulthood, this group shows a spirit of entrepreneurship unmatched by any other cohort. Marketing Tip: Because this cohort is very street smart when it comes to advertising, oversold sales pitches full of hype will fall flat. They need to be spoken to in a way that says, “You’re different. We respect that.” Chrysler’s Neon’s “Hi” campaign, which showed the car with the simple message “Hi” written above it, was very effective with Xers mainly because it dropped all pretensions and talked directly to the customer in a non-threatening way.

Generation Y Cohort (Born from 1977-?; Came of age during the “Information Revolution;” Aged 23 and under in 2000): We call the youngest cohort “Generation Y,” or “Y-Gen, ”because the advent of the Internet is a defining event for them, and be- cause they will be the “engine” of growth over the next two decades. While still a work in progress, their core value structure seems to be quite different from that of Gen-X. They are more idealistic and social-cause oriented, without the cynical, “What’s in it for me?” free-agent mindset of many Xers.Marketing Tip: This is the most diverse cohort of all. One third are from a minority group compared to one fourth of the total population. In marketing to this group, reflect greater diversity in your ads. The Gap and Benetton have been particularly effective in mirroring diversity in their advertising. Even Ralph Lauren’s “wasp-ish” lines of clothing have embraced racial and ethnic diversity.

In online communities, who are the influencers?

Social Network Analysis

The Hypernetworked World

Profile of Motor Boat Owner Segmentation

Reds, Blues, and ‘Tweens

1. Who are political independents in Minnesota; How would you characterize them?

2. Given this description, how could each major political party appeal to them for the next election?

If you were going to gather information for segmenting beer drinkers, how would you go about it?

Using one or more of the profiling methods discussed, identify several of your target market segments for a business. Describe one in detail in a paragraph and be prepared to present in class.

Team activity: Segmentation Task

Additional Slides (not used)

Clinic Cynic: Generally distrustful of medical profession with poor adherence to treatment. Suspicious of ads and their promises. Fairly involved in wellness. Responds to issues as they occur

Avoider: Refrains from using healthcare services. Does not participate in competitive sports or good nutrition. Shows the most healthy apathy. Moderately receptive to ads; dominated by males.

Generic: Shops around to save healthcare dollars. Most likely to experiment with alternative healthcare delivery. Active, information seeker, open to advertising. Adherence adversely affected by costs.

Family centered: Puts family health above all other health issues. Enjoys role as family health decision maker. Moderate information seeker but attends to ads.

Traditionalist: Willing to pay more for quality healthcare. Can be very brand-driven. Easiest to satisfy. High rates of chronic disease but underuse of Rx. Low receptivity to ads.

Loyalist: Moderation in all healthcare opinions and behaviors, and average interest in health information, fitness and nutrition. Interested in saving money but will often pay more for care of better quality.

Ready User: Least likely to avoid healthcare services; undeterred by expense. Frequent use of Rx. Good nutrition but rarely does heavy exercise. Attends to ads, although somewhat skeptical.

Independently Healthy: Active in exercise, sports, and good nutrition. Likely to try different providers and healthcare alternatives. Looks for long-term benefits. Fairly involved in seeking healthcare information.

Naturalist: Propensity for nontraditional healthcare. Concerns with nutrition and staying active, but not sports. Skeptical of ads & providers. Contrary opinions, high expectations, hard to satisfy.

Segments for Broadband & Wireless

Positioning strategies can be based on:

Team activity:You as customer– Reflect on CSS graduate students as a market segment. How would you describe yourself as a target group?