Market Segmentation

The process of
dividing a potential
market into distinct
subsets of consumers
Market and selecting one or
Segmentation more segments as a
target market to be
reached with a
distinct marketing
mix.
 Three Phases of Marketing
Strategy
• Phase 1: Market Segmentation
• Phase 2: Target Market and Marketing Mix
Selection
• Phase 3: Product/Brand Positioning
Table 3.1: Sodexho’s Segmentation of
College-age Eating Patterns
Star Gazers Fun Express
• Light, healthy foods • Variety, taste, and
• Price insensitive nutrition
• Brand conscious • Price conscious
• Employed full-time • Work part-time over
over summer summer
• Active, out-going • Value leisure time
• Family income >
• Family income
100,000
$30,000 - 60,000
 “Best” Customer Segmentation
High Current Share Low

High Hi-Highs Low-Highs

(stroke) (chase)
Consumption

Hi-Lows Lo-Lows
Low (tickle) (starve)
 Segmentation Studies
• Designed to discover the needs and wants of
specific groups of consumers in order to
develop specialized products to satisfy
specific group needs (e.g., Centrum)
• Designed to guide the repositioning of a
product (e.g., Nintendo)
• Used to identify the most appropriate media
for advertising (e.g., People and Teen People)
 Bases for Segmentation
• Geographic Segmentation
• Demographic Segmentation
• Psychological Segmentation
• Psychographic Segmentation
• Sociocultural Segmentation
• Use-Related Segmentation
• Usage-Situation Segmentation
• Benefit Segmentation
• Hybrid Segmentation Approaches
 Table 3.2 Market Segmentation
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Geographic Segmentation
Region Southwest, Mountain States, Alaska, Hawaii
City Size Major metropolitan areas, small cities, towns
Density of area Urban, suburban, exurban, rural
Climate Temperate, hot, humid, rainy
Demographic Segmentation
Age Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+
Sex Male, female
Marital status Single, married, divorced, living together, widowed
Income Under $25,000, $25,000-$34,999, $35,000-$49,999,
$50,000-$74,999, $75,000-$99,999, $100,000 and over
Education Some high school, high school graduate, some college,
college graduate, postgraduate
Occupation Professional, blue-collar, white-collar, agricultural,
military
 Table 3.2, continued
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Psychological Segmentation
Needs-motivation Shelter, safety, security, affection, sense of self-worth
Personality Extroverts, novelty seeker, aggressives, low dogmatics
Perception Low-risk, moderate-risk, high-risk
Learning-involvement Low-involvement, high-involvement
Attitudes Positive attitude, negative attitude
Psychographic
(Lifestyle) Segmentation Economy-minded, couch potatoes, outdoors enthusiasts,
status seekers
Sociocultural Segmentation
Cultures American, Italian, Chinese, Mexican, French, Pakistani
Religion Catholic, Protestant, Jewish, Moslem, other
Subcultures (Race/ethnic) African-American, Caucasian, Asian, Hispanic
Social class Lower, middle, upper
Family life cycle Bachelors, young married, full nesters, empty nesters
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Use-Related Segmentation
Usage rate Heavy users, medium users, light users, non users
Awareness status Unaware, aware, interested, enthusiastic
Brand loyalty None, some, strong
Use-Situation Segmentation
Time Leisure, work, rush, morning, night
Objective Personal, gift, snack, fun, achievement
Location Home, work, friend’s home, in-store
Person Self, family members, friends, boss, peers
Benefit Segmentation Convenience, social acceptance, long lasting, economy,
value-for-the-money
Hybrid Segmentation
Demographic/ Combination of demographic and psychographic profiles
Psychographics of consumer segments profiles
Geodemographics “Money and Brains,” “Black Enterprise,” “Old Yankee
Rows,” “Downtown Dixie-Style”
SRI VALSTM Actualizer, fulfilled, believer, achiever, striver,
experiencer, maker, struggler
 The division of a total
potential market into
smaller subgroups on
Geographic
the basis of
Segmentation
geographic variables
(e.g., region, state, or
city).
 Demographic Segmentation
• Age
• Sex
• Marital Status
• Income, Education, and Occupation
Age: Segmentation by Age Effects
and Cohort Effects
• Seven Life Development Stages (Table 3.3)
– Provisional Adulthood
• Pulling up roots
– First Adulthood
• Reaching out, Questions/questions, Mid-life
explosion
– Second Adulthood
• Settling Down, Mellowing, Retirement
 Marital Status
• Households as a consuming unit
– Singles
– Divorced
– Single parents
– Dual-income married
Psychological Segmentation
• Motivations
• Personality
• Perceptions
• Learning
• Attitudes
 Psychographic
(lifestyle) variables
AIOs that focus on
activities, interests,
and opinions.
 Table 3.6 Excerpts from AIO Inventory
Instructions: Please read each statement and place an “x” in the box that best
indicates how strongly you “agree” or “disagree” with the statement.
Agree Disagree
Completely Completely
I feel that my life is moving faster and faster,
sometimes just too fast. [1] [2] [3] [4] [5] [6] [7]

If I could consider the “pluses” and “minuses,”

[1] [2] [3] [4] [5] [6] [7]
technology has been good for me.
[1] [2] [3] [4] [5] [6] [7]
I find that I have to pull myself away from e-mail.

Given my lifestyle, I have more of a shortage of [1] [2] [3] [4] [5] [6] [7]
time than money.

I like the benefits of the Internet, but I often don’t [1] [2] [3] [4] [5] [6] [7]
have the time to take advantage of them.
Table 3.7 A Hypothetical Psychographic
Profile of the Techno-Road-Warrior
•Sends and/or receives 15 or more e-mail
messages a week
•Regularly visits Web sites to gather information
and/or to comparison shop
•Often buys personal items via 800 numbers
and/or over the Internet
•May trade stocks and/or make travel reservations
over the Internet
•Earns $100,000 or more a year
Figure 3.1
Centrum
Targets
Lifestyle
 Sociocultural Segmentation
• Family Life Cycle
• Social Class
• Culture, Subculture, and Cross-Culture
 Family Life Cycle
• Phases a family goes through in their
formation, growth, and final dissolution
– Bachelorhood
– Honeymooners
– Parenthood
– Post-parenthood
– Dissolution
• Explicit basis: marital status, family status
• Implicit basis: age, income, employment
 Use-Related Segmentation
• Rate of Usage
– Heavy vs. Light
• Awareness Status
– Aware vs. Unaware
• Brand Loyalty
– Brand Loyal vs. Brand Switchers
 Figure 3.2
Campbell’s
Seeks to
Create
Awareness
and Interest
 Usage-Situation Segmentation
• Segmenting on the basis of special
occasions or situations
• Example Statements:
– Whenever our daughter, Jamie, gets a raise, we
always take her out to dinner.
– When I’m away on business, I try to stay at a
suites hotel.
– I always buy my wife flowers on Valentine’s
Day.
 Figure 3.3
Ad Designed
to Spell Out
Rewards of
Consumer
Loyalty
Figure 3.4
Occasion-
Specific
Ad
 Benefit Segmentation
• Segmenting on the basis of the most
important and meaningful benefit
– Prudential - financial security
– Iomega - data protection
– Wheaties - good health
– Eclipse - fresh breath
 Figure 3.5
Ad Offering
Combined
Benefits
Hybrid Segmentation Approaches

• Psychographic-Demographic Profiles
• Geodemographic Segmentation
• SRI Consulting’s Values and Lifestyle
System (VALSTM)
Table 3.8 Demographic-Psychographic
Profile of Newsweek
• Total adult readers 19,593,000 % Index
• Men 100.0 100
• Professionals/ Managers 55.9 117
• Age 35-49
35.3 174
• Household income >$100,000
36.5 114
•
25.1 172
Married
62.4 109
• Own laptop PC
12.0 150
• Spent $3000+ on vacation last year
12.3 164
Table 3.9 Demographic-Psychographic
Internet Shopping Styles
• E-bivalent Newbies
• Time-Sensitive Materialists
• Clicks & Mortar
• Hooked, Online, & Single
• Hunter-Gatherers
• Brand Loyalists
Figure 3.6
Targeting
An Active
Lifestyle
 Table 3.10 Sample Claritas
Geodemographic Clusters
Blue Blood Estates Young Influentials
• .8% of U.S. households • 1.1% of U.S.
• Professional households
• Elite super-rich • Professional
• College graduate • College graduate
• 35-44, 45-54, 55-64 • Under 24, 25-34
• Country club members, • Yuppies, drink
own mutual phones, imported beer, read
play golf fashion magazines
Figure 3.8 ACTUALIZERS
High Resources

VALS Principle Oriented Status Oriented Action Oriented

FULFILLEDS ACHIEVERS EXPERIENCERS

BELIEVERS STRIVERS MAKERS

Low Resources
STRUGGLERS
 Figure 3.9 VALS 2 Segments and
Participation in Selected Sports
Percent of adults in each VALS 2 type who participated in selected sports in 1995.

Actualizers

Experiencers

Achievers

Makers

Fulfilleds

Strivers

Believers

Strugglers

0 2 4 6 8 10 12 14

Mountain/rock climbing Jet skiing/wave running/water biking Inline skating

Table 3.11 Size of VALS Segment as
Percent of U.S. Population

PERCENT OF
VALS TM
SEGMENT
POPULATION
Actualizer 11.7%
Fulfilled 10.5
Believer 17.0
Achiever 14.7
Striver 11.8
Experiencer 12.9
Maker 12.0
Struggler 9.5
 Mindbase Segmentation

• Monitor Mindbase based on Yankelovich’s

Monitor Survey of American Values and
Attitudes
• Table 3.12
Table 3.12 Eight Major Mindbase
Segments
• Up and Comers • Family Limited
• Young Materialists • Detached Introverts
• Stressed by Life • Renaissance Elders
• New • Retired from Life
Traditionalists
Criteria For Effective Targeting of
Market Segments

• Identification
• Sufficiency
• Stability
• Accessibility