Professor Richardson

SEGMENTATION

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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

SEGMENTATION

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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”

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• Consumer Analysis

Marketing Plan - many factors involved

• 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

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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)

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SEGMENTATION

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What is a Market?

PEOPLE

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What is a Market?

PEOPLE
BUT - not just ANY people, they have to have • Willingness to buy • Purchasing power (money) • Authority to buy
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Types of Markets
• Consumer Goods and Services • Industrial Goods and Services

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SEGMENTATION

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Classes of Consumer Products
Convenience Shopping Specialty

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Goods

Services
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POP
ATM

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Various Classes of Consumer and Industrial Goods and Services
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Def’n - industrial goods are products used in the production of other products Professor Richardson SEGMENTATION slide 10

Industrial Goods
Industrial goods are things used in the production of other products
Some products are both industrial and consumer goods - eg. electricity, water, desktop PCs

2 categories of industrial goods • Production Goods • Support Goods
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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

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

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Market Segmentation
Characteristics
• • • • • • • • • • • age gender geographic location income spending patterns cultural background demographics marital status education language mobility
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Market Segmentation
4 commonly used bases for Segmentation
Descriptive

geographic location demographic
Behavioural

psychographic benefits
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Figure 3.1 Bases for Market Segmentation

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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)

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Market Segmentation
Psychographic / lifestyles - based on people’s
opinions, interests, lifestyles eg, 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 them eg. People who want to but “lite” food cause ti will help them lose weight

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Geographic location of Canadians
• most live in Toronto - Montreal axis • + Vancouver • most live along east-west line close to the American border

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Slide 3-8

Percentage Distribution of the Population of Canada by Province Geographic Segmentation

+, Ontario contains 52% of foreign born people in Canada

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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 reasons 1. Immigrants come to Canada and make their homes in the cities 2. Canadians are moving out of the rural areas and in to the cities
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Figure 3.4 Urban–Rural Population Distribution, 1871–1991

Geographic Segmentation

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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.
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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
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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
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Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation Variables are: • 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
Professor Richardson

Examples ??
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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”
Professor Richardson

Examples ??
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SEGMENTATION

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 ??
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Figure 3.5 Population Projections by Age Group

Demographic Segmentation

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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
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Demographic Segmentation
•household (family - style) size BUYING PATTERNS • 0-5 • 6-19 • 20-34 • 35-49 • 50-64 • 65+ • 80+ young children school children young adults younger middle-aged older middle-aged seniors SUPER seniors
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Professor Richardson

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

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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

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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
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Demographic Segmentation
•household (family - style) size FAMILY LIFE CYCLE STAGES 5. Older a. older married b. older unmarried (divorced, widowed)

6. other

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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.

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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
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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)

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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
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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

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Psychographic Segmentation “The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers” TEXT
psychological The use of detailed information to understand differences in what people buy WTGR
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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

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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 Professor Richardson S E G M E N T A T I O N
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Psychographic Segmentation LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?

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Benefit Segmentation “It is based on the Attributes (characteristics) of products, as seen by the customers” example, people buy something because it causes a benefit
ie. Diet coke - less sugar, lose weight ie. Extra white toothpaste, whiter teeth, better smile

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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 planmodern example would be price of PCs for home use biggest use is entertainment NOT schoolwork or home based businesses

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Benefit Segmentation
The Sensory Segment Principal benefit sought Demographic strengths Special behavioural characteristics

Benefit Segmentation of the Toothpaste Market
Segment Name The Sociables Brightness of teeth Teens, young people Smokers The Independent Segment Price Men Heavy users

The Workers Decay prevention Large families Heavy users

Flavour, product appearance Children Users of spearmintflavoured toothpaste Colgate, Stripe High selfinvolvement Hedonistic

Brands disproportionately flavoured Personality characteristics Lifestyle characteristics

MacLean’s, Plus White, Ultra Brite High sociability Active

Crest

Brands on sale High autonomy Valueoriented

High hypochondriasis Conservative

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Segmentation for Industrial Markets

Figure 3.9 Segmentation Bases for Industrial Markets

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Segmentation for Industrial Markets

• Geographic Segmentation
useful for the automotive industry

• Product Segmentation
ie. Special parts and components

• Segmentation by End-Use Application
ie. Paint mfg. Paint for waterproof applications, paint for rust prevention, paint which sticks to glass

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