Professor Richardson S E G M E N T A T I O N slide 1

Professor Richardson S E G M E N T A T I O N slide 2

Purpose of this section

1. Introduce the Concept of the MARKETING PLAN

2. To Define Market Segmentation

3. Present 4 types of market segmentation

4. Aspects of the Canadian market

5. Main types of segmentation in industrial markets

Professor Richardson S E G M E N T A T I O N slide 3

Baby Boomers & Chicken• Purpose of this discussion is to explain the

advantages of carefully watching how a market segment acts as it becomes older

• You have to watch consumption trends and match this - (eg. This is the wrong time to open a steak house)

• “ Companies must plan constantly and the plan must be based on an understanding of market trends and marketing segments”

Professor Richardson S E G M E N T A T I O N slide 4

Marketing Plan - many factors involved

• Consumer Analysis

• Environmental Analysis

1. Target Market - you have to decide on which segment

2. Look at competitors, what are they doing

3. Market research required

4. Develop a unique marketing plan

Professor Richardson S E G M E N T A T I O N slide 5

Fundamental Tasks in Developing a Marketing Plan

1. Target Market **

2. Implement a Marketing Program

** this recognizes that you are “consumer oriented (to be able to do this, you have to recognize the difference among people and understand there are different segments)

Professor Richardson S E G M E N T A T I O N slide 6

What is a Market?

PEOPLE

Professor Richardson S E G M E N T A T I O N slide 7

What is a Market?

PEOPLEBUT - not just ANYANY people, they have to have

• Willingness to buy

• Purchasing power (money)

• Authority to buy

Professor Richardson S E G M E N T A T I O N slide 8

Types of Markets

• Consumer Goods and Services

• Industrial Goods and Services

Professor Richardson S E G M E N T A T I O N slide 9

Classes of Consumer ProductsClasses of Consumer Products

ConvenienceConvenience ShoppingShopping SpecialtySpecialty

GoodsGoods

ServicesServices

PO

P

14-1

$$

ATM

Professor Richardson S E G M E N T A T I O N slide 10

Various Classes of Consumer and Industrial Goods and Services

eg . n ewsp ap er

eg . Mac's Milk

Con ven ien ce G ood s

eg . g roceries

eg . cloth in g

Sh op p in g G ood s

Consum er G oods

eg . travel

eg . b an kin g

Sp ecialty Services

eg . fast food s

Con ven ien ce Services

Consum er Services

raw m ate ria lg ra in , s tee l

eg . w irin gh arn ess

eg . c ircu it b oard

com p on en tp arts

m aterialsn u ts, b olts

P rod u c tion G ood s

Industria l G oods

accessory eq u ip m en ttools, com p u ters

eg . b u ild in g s

in stallation s

S u p p ort S ervices

Industria l Services

Good s an d S ervic es

Def’n - industrial goods industrial goods are products used in the production of other products

Professor Richardson S E G M E N T A T I O N slide 11

Industrial GoodsIndustrial GoodsIndustrial goods are things used in the Industrial goods are things used in the

production of other productsproduction of other products

Some products are both industrial and consumer Some products are both industrial and consumer goods - eg. electricity, water, desktop PCsgoods - eg. electricity, water, desktop PCs

2 categories of industrial goods2 categories of industrial goods

• Production GoodsProduction Goods

• Support GoodsSupport Goods

Professor Richardson S E G M E N T A T I O N slide 12

Market Segmentation

• With a large country

• Many different types of people

- it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market

Professor Richardson S E G M E N T A T I O N slide 13

Market Segmentation Defn

• “Grouping people according to their similarity related to a particular product category”

Professor Richardson S E G M E N T A T I O N slide 14

Market SegmentationCharacteristics• age

• gender

• geographic location

• income

• spending patterns

• cultural background

• demographics

• marital status

• education

• language

• mobility

Professor Richardson S E G M E N T A T I O N slide 15

Market Segmentation4 commonly used bases for Segmentation

Descriptive

geographic location

demographic

Behavioural

psychographic

benefits

Professor Richardson S E G M E N T A T I O N slide 16

Figure 3.1 Bases for Market SegmentationSlide 3-7

Professor Richardson S E G M E N T A T I O N slide 17

Market Segmentation

geographic location - based upon where people live (historically a popular way of dividing markets)

demographic - based upon age, gender and income level (very often used)

Professor Richardson S E G M E N T A T I O N slide 18

Market Segmentation

Psychographic / lifestyles - based on people’s opinions, interests, lifestyleseg, people who like hard rock music probably prefer beer to wine

benefits - based on the different expectation that customers have about what a product/service can do for themeg. People who want to but “lite” food cause ti will help them lose weight

Professor Richardson S E G M E N T A T I O N slide 19

Geographic location of Canadians

• most live in Toronto - Montreal axis

• + Vancouver

• most live along east-west line close to the American border

Professor Richardson S E G M E N T A T I O N slide 20

Percentage Distribution of the Population of Canada by Province

Slide 3-8

+, Ontario contains

52% of foreign born people in Canada

Geographic Segmentation

Professor Richardson S E G M E N T A T I O N slide 21

Impact of Immigration• Ontario contains 51.8% of Canada’s

living foreign-born people

• Most of these people live in Toronto

• Canada’s urban population is growing for 2 reasons1. Immigrants come to Canada and make their homes in the cities2. Canadians are moving out of the rural areas and in to the cities

Professor Richardson S E G M E N T A T I O N slide 22

Figure 3.4 Urban–Rural Population Distribution, 1871–1991

Slide 3-9

Geographic Segmentation

Professor Richardson S E G M E N T A T I O N slide 23

Geographic Segmentation

The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns.

Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address.

This helps people plan store locations and the location of other services.

Professor Richardson S E G M E N T A T I O N slide 24

Geographic Segmentation

Climate:

winter equipment and recreation are effected by geographic location

you will sell more snow shovels in Northern Ontario than southern Ontario , BUT, population in Northern Ontario is very small

clothing purchases are also effected by climate/geography

Professor Richardson S E G M E N T A T I O N slide 25

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

• age

• gender (male/female)

• income

• occupation

• education

• household (family - style) size

Professor Richardson S E G M E N T A T I O N slide 26

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

• gender (male/female)gender (male/female)

•gender is an obvious way to divide the market into segments since so many products are gender-specific

• clothing

• medical products

• sports products/services

• entertainment Examples ??

Professor Richardson S E G M E N T A T I O N slide 27

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

age

• age is another obvious way to divide the market into segments since so many products are based upon “time of life”

• diapers for babies

• toys for children

• entertainment for “over 19” Examples ??

Professor Richardson S E G M E N T A T I O N slide 28

Demographic Segmentation

age

• also, people have different consumption patterns at different ages

•eg. Milk products

• children and teens drink a lot of milk

• adults don’t

• older adults need calcium, but don’t drink milk (they take pills)

Examples ??

Professor Richardson S E G M E N T A T I O N slide 29

Figure 3.5 Population Projections by Age GroupSlide 3-10

Demographic Segmentation

Professor Richardson S E G M E N T A T I O N slide 30

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

•household (family - style) size

• Segmenting by the “stages in the family life cycle”

(page 45)

• There are different buying characteristics of people in each stage of the family

Professor Richardson S E G M E N T A T I O N slide 31

Demographic Segmentation

•household (family - style) size

BUYING PATTERNS

• 0-5 young children

• 6-19 school children

• 20-34 young adults

• 35-49 younger middle-aged

• 50-64 older middle-aged

• 65+ seniors

• 80+ SUPER seniors

Professor Richardson S E G M E N T A T I O N slide 32

Demographic Segmentation

•household (family - style) size

THE CHANGING HOUSEHOLD

• half of the households in Canada are only one, or two people

• number of married couples forming a household is decreasing

• many unmarried people, and old widowed people, live by themselves

Professor Richardson S E G M E N T A T I O N slide 33

Demographic Segmentation

•household (family - style) size

FAMILY LIFE CYCLE STAGES

1. Young Single

2. Young Married with no Children (DINKS)

3. Young - married with children

- divorced without children- divorced with children

Professor Richardson S E G M E N T A T I O N slide 34

Demographic Segmentation

•household (family - style) size

FAMILY LIFE CYCLE STAGES

4. Middle Aged

a. married without children

b. divorced without children

c. married with children

d. divorced with children

e. married without dependent children

f. divorced without dependent children

Professor Richardson S E G M E N T A T I O N slide 35

Demographic Segmentation

•household (family - style) size

FAMILY LIFE CYCLE STAGES

5. Older

a. older married

b. older unmarried (divorced, widowed)

6. other

Professor Richardson S E G M E N T A T I O N slide 36

Demographic Segmentation

•household (family - style) size

SSWDs

single separated widowed divorced

in Canada, 1.6 million people live alone- they buy different sizes of products eg. Single serving soup, etc.

Professor Richardson S E G M E N T A T I O N slide 37

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

• age

• gender (male/female)

• income• occupation

• education

• household (family - style) size

Professor Richardson S E G M E N T A T I O N slide 38

Demographic Segmentation

income

Segmenting markets on the basis of income and expenditure patterns

- The number of single mom families has increased by 12.8% between 1985 and 1994

- Male single parent families have more income, on average, than Female single parent families(chart 3.6)

Professor Richardson S E G M E N T A T I O N slide 39

Engel’s Laws

As family income increases ……• a smaller % goes for food - TRUE• the % spent on housing and household

operations and clothing will remain constant (that is grow as total income grows) - FALSE in reality this amount declines

• the % spent on recreation, education will increase - TRUE, but there are exceptions

Professor Richardson S E G M E N T A T I O N slide 40

Engel’s Laws

Why is this important……• because marketing managers can use this

law to figure out what will happen (ie. What kinds of spending patterns will develop) if people’s incomes increase

• also, if you are planning on going into a new market, where people have more money - this “law” helps you to plan how people’s spending patterns will be different

Professor Richardson S E G M E N T A T I O N slide 41

Psychographic Segmentation

“The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers” TEXT

The use of detailed information to understand differences in what people buyWTGR

psychological

Professor Richardson S E G M E N T A T I O N slide 42

Psychographic Segmentation

Psychographic profiles on a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions

AIO - activities, interests, and opinions

http://ourworld.compuserve.com/homepages/finkleman/psychogr.htm

Professor Richardson S E G M E N T A T I O N slide 43

Psychographic Segmentation

Thompson Lightstone Segments

1. Passive/Uncertain

2. Mature

3. Home Economists

4. Active/Convenience

5. Modern Shoppers

6. Traditional Home/Family Oriented

http://www.goldfarbconsultants.com/who.html

Professor Richardson S E G M E N T A T I O N slide 44

Psychographic Segmentation

LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?

Professor Richardson S E G M E N T A T I O N slide 45

Benefit Segmentation

“It is based on the Attributes (characteristics) of products, as seen by the customers”

example, people buy something because it causes a benefitie. Diet coke - less sugar, lose weightie. Extra white toothpaste, whiter teeth, better smile

Professor Richardson S E G M E N T A T I O N slide 46

Benefit Segmentation

“Many marketers now consider benefit segmentation one of the most useful methods of classifying markets”ie. Watches

- the benefits customers looked for where durability and product quality- older research was based on dividing the watch market according to a different segment - once they used the new segment, they changed the marketing plan- modern example would be price of PCs for home use - biggest use is entertainment NOT schoolwork or home based businesses

Professor Richardson S E G M E N T A T I O N slide 47

Benefit Segmentation of the Toothpaste Market

Segment Name

TheThe Sensory The IndependentSegment Sociables The Workers Segment

Principal benefit sought Flavour, product Brightness Decay Priceappearance of teeth prevention

Demographic strengths Children Teens, young Large families Menpeople

Special behavioural Users of Smokers Heavy users Heavy userscharacteristics spearmint-

flavouredtoothpaste

Brands disproportionately Colgate, MacLean’s, Crest Brandsflavoured Stripe Plus White, on sale

Ultra Brite

Personality characteristics High self- High High Highinvolvement sociability hypochondriasis autonomy

Lifestyle characteristics Hedonistic Active Conservative Value-oriented

Benefit Segmentation

Professor Richardson S E G M E N T A T I O N slide 48

Figure 3.9 Segmentation Bases for Industrial MarketsSlide 3-12

Segmentation for Industrial Markets

Professor Richardson S E G M E N T A T I O N slide 49

• Geographic Segmentationuseful for the automotive industry

• Product Segmentationie. Special parts and components

• Segmentation by End-Use Applicationie. Paint mfg. Paint for waterproof applications,

paint for rust prevention, paint which sticks to glass

Segmentation for Industrial Markets