Market Segmentation

Consider
1. 2.
 

the role of segmentation in marketing strategy types of market segmentation in
consumer markets B2C industrial B2B

3. 4. 5. 6.

criteria & bases for segmenting consumer markets. the segmentation process & basic strategies positioning & repositioning factors behind segmentation strategy choices.

1

Overview

 

discover needs/wants of consumer groups to develop specialised products to satisfy group needs identify the best media for advertising related concepts (STP)
  

Segmentation (subsets with similar needs) Targeting (which segment to aim for) Positioning (the product in the mind of the customer)
2

Target Market Analysis

  

What market segments are we choosing to serve Why? How are these segments evolving? What new segments are emerging?

 

Mass marketing?

econ of scale clear segment a Niche a Locality an Individual
3

Micromarketing
   

Concentrated (niche) & micro-marketing
Niche  commit all marketing resources to serve a single market segment  Attractive to small firms with limited resources and to firms offering highly specialized goods and services Micro-marketing  target potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household  WWW & Internet makes micromarketing more effective
4

Trainers that meet the special needs of women and their feet. 5 .

Market Aggregation The market •No segmentation •heterogenous customers •homogenous product •no differentiation 6 .

.based on customer-based characteristics or product attributes S-1 • Identifiable • Measurable • Accessible. reachable • Substantial enough • Unique enough • Durable/stable S-3 S-2 Good market segmentation  has internally homogenous members and  is externally heterogeneous 7 ..Segments must be Segmentation .

Targeting Focus on segment(s) providing most value Pareto Principle the 20% who provide 80% of sales value Group e. by -age -sex -income -lifestyle Choice criteria? S-1 S-3 S-2 8 .g.

illustrations The 80/20 rule Brand User 20% 20% Loyal Revenue/Profits 80% 20% Semi-Loyal Switchers Competitive Brand User 40% Non User of .Value segmentation – Pareto . Category Source: Garth Hallberg 20% 9 .

design a programme to fit. authority & willingness to buy? What specific consumer segment is most likely to buy the product?  Now target the market.Tasks in Strategic Marketing Plans  Before implementing a marketing mix strategy (7Ps).   Who has the purchasing power. identify. implement it 10 . evaluate & select a target market.

Positioning Low Price premium convenient B Consistent quality C Not accessible A Brand conscious accessible D 11 .

Positioning    shaping the product & developing a marketing programme so that product is perceived to be (and is) different from competitors‟ products. Positioning map: to show differences in consumers‟ perceptions of competing products Reposition: marketing strategy to change a product‟s position in consumers‟ minds relative to positions of rival product 12 .

directly or indirectly. 5 litre tomato sauce containers for food service operators 13  Business goods (B2B)  .B2C and B2B Goods   identify the purchaser + reasons for buying the goods Consumer goods (B2C)  products & services bought by the end consumer for personal use. Products/services bought to be used.g. to produce or supply other goods/services or for resale e.

"birds of a feather flock together"      actual behavior toward product itself.Bases for Market Segmentation Demographic Gender Age Family life cycle Race/Ethnic group Social class Education Income Occupation Family size Religion Home ownership Psychographic Segmentation     Activities Interests Opinions. regular etc. Readiness to buy Occasions: holidays & events that stimulate purchases 14 .. 1st-time. Attitudes & Values (AIO) surveys for measuring lifestyle. A good starting point for segmentation Benefits sought Usage rate Brand loyalty User status: potential. Lifestyles Personality Self-image Potential Markets   Behavioural Geographicn Country Region Urban/Suburban/Rural Population density City size Climate  Geo-Demographic – Ethnic .

Urban Uptown Midtown Mix Urban Cores Elite Suburbs The Affluentials Middleburbs Inner Suburbs 2nd City Society City Centers Micro-City Blues Landed Gentry Country Comfort Middle America Rustic Living  Demographic  Psychographic    Benefit    Product/service design--different models + different features Advertising themes Sales training Special products (sizes and quality) or services Frequent-user promotions Special financial terms Product Usage Rates    15 . income & education groups Product/service positioning Advertising themes Sales training divides U.Decisions Affected by Segmentation Choices Basis Decisions    Geographic sales region Sales force location Retail location Estimate segment size local distribution channels or catering to different age. consumer into 14 groups & 66 segments.S.

• Major brands get 40-80% of sales from core regions • Climate is a segmentation factor e.g. •Northerners eat more soup than Southerners •Southerners use more swimming pool chemicals than Northerners 16 .Canada Main Inhabited Areas in Canada Dividing overall market into homogeneous groups by location • Can identify general patterns but not all consumers in a location will make the same buying decision.Geographic segmentation .

% Distribution of Canadian Population by Province Manitoba 3.1% Newfoundland 1.7% Saskatchewan 3.7% Prince Edward Island 0.1% Nunavut 0.4% Nova Scotia 3.1% Ontario 38.3% Alberta 9.0% 17 .9% British Columbia 13.0% Northwest Territories 0.4% 2001 Quebec 24.0% New Brunswick 2.

2001 POPULATION (THOUSANDS) Region Newfoundland Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Yukon Northwest Territories Nunavut Canada 1981 568 123 847 696 6 438 8 625 1 026 968 2 238 2 744 23 46 n/a 24 343 1991 568 130 900 724 6 896 10 085 1 092 989 2 546 3 282 28 36 21 27 297 2001 513 135 908 729 7 237 11 410 1 120 979 2 975 3 908 29 37 27 30 007 18 Source: Statistics Canada Website http://geodepot.htm.ca/English/Pgdb/People/Population/demo05.Provincial and Territorial Populations. 1981. . 1991.

1871-2001 19 .Urban .Rural Population Distribution.

John’s Chicoutimi-Jonquière Sudbury Sherbrooke Trois-Rivières Saint John Thunder Bay 1996 Population (Thousands) 2001 Population (Thousands) 4445 3359 1891 1031 852 392 698 677 650 416 403 390 347 313 292 281 222 199 178 167 166 150 144 129 131 4881 3512 2079 1107 972 935 693 685 681 426 432 393 359 319 314 305 231 198 176 159 157 155 142 128 125 Source: http:www.statcan.ca/english/Pgdb/People/Population/demo05.Canada's 25 Largest Metropolitan Areas Area Toronto Montreal Vancouver Ottawa-Hull Calgary Edmonton Quebec Winnipeg Hamilton London Kitchener St. Catharines-Niagara Halifax Victoria Windsor Oshawa Saskatoon Regina St.htm 20 .

Population Projections by Age Group Demographic segmentation: dividing consumer groups by e.g. age. education. income. occupation. household size & stage in family life cycle 21 . sex.

single parenthood parenthood (full nest) post-parenthood (empty nest) dissolution (separated. or divorced) retirees with children still at home able elderly 22 . widowed.Family Life Cycle          young singles young married couples who remain childless.

purchases for younger age groups. toys. medicines. used cars Cars. records. cosmetics. furniture.64 65+ Younger middle-aged adults Older middle-aged adults Senior adults Clothing. children’s wear 6 . sports equipment. recreational equipment Recreational items.Buying Patterns for Different Age Groups Age 0-5 Name of Age Group Young children Merchandise bought Baby food.49 50 . school supplies. new furniture. Larger homes.19 20 . purchases for younger age groups 23 . better cars. nursery. presents for young marrieds & infants Medical services. second cars. food.34 School children (including teenagers) Young adults 35 . clothing. houses. travel. recreational equipment. furniture.

g. walking aids  sociologists attribute different consumer needs & wants across age groups to a cohort effect tendency among members of a generation to be influenced & drawn together by significant events occurring in formative years e. fashion garments. age 17-22  24 .  baby food. toothpaste.g.Segmenting by age   many firms identify market segments by age design products to meet specific needs of certain age groups e.

well off. 70-80% of wealth  UK population split 16% 50-64 years old 16% 64 +  Grey    market wealth 20% well off (twice average income) 40% property-rich. income poor 40% poor • 1% in UK (15% in US) on incomes 40% lower than national average income Grey   market lifestyle groups WOOPIES (Well off older persons) married in two person households. 86% Investment income high home & car ownership   OPALS (Old people with affluent lifestyles) JOLLIES . <75yrs.Demographic: The Grey Market  40%   of UK income.Jet-setting oldies with lots of loot 25 .

nearly 50% of US population will belong to nonwhite minority groups  three largest & fastest-growing racial/ethnic groups African Americans. Hispanics.  26 .Ethnic Group Segmentation  USA Census Bureau by 2050. Asian Americans.

% spend on other items (such as recreation & education) increases 27 . a smaller % goes on food 2. the % spend on housing & household operations & clothing stays constant 3.Generalisation … based on studying the impact of household income changes on consumer spending behaviour As family income increases 1.

Percentage Annual Expenditures by Income Groups. 1999 28 .

2% Farm & 4x4 Future families Rising stars MOR Urbans Trendy upstarts Mid-low affluent 6.7% Empty nesters 21.4% High rise hopefuls Hard choices Beer & crisps Hand-to-mouth Families 29.1% Retired seniors 19.7% Most affluent 4.3% Least affluent 7. Interests. job.5% 29 . Opinions Why?    richer descriptions of potential target markets behavioural profiles to target promotions. social & consumer activities Lifestyles  values & demographics AIO surveys: Activities.8% Mid-high affluent 11. price etc detail to match company’s image & offerings with types of consumers likely to buy  develop population psychographic profiles using survey instruments – see VALS “Values and Lifestyles” UK Households 23 million Young NK 29.Lifestyles      decisions about how to live family.Psychographic Segmentation .

8%  Settling . prosperous pensioners (retirement areas) affluent execs .Geo-demographics: Lifestyle and postcodes  Thriving e. better off execs in inner cities comfortable middle-agers in suburbia new home owners older people in less prosperous areas. affluent greys (rural).g. council estates 30  Expanding . 20% of population  wealthy achievers (suburbs).families affluent urbanites.12%    Rising .24%    Aspiring 14%  Striving (struggling?) 23%  .

although significant. does not determine all of our values.sric-bi.com/VALS/ 31 .Lifestyle-VALS  Values and Lifestyles (1978) based on the idea that    social class. there are important value differences within a class • Fulfilled’s. Why are they different? • see http://www. Experiencers all have the same level of resources. Achievers.

com/VALS/presurvey.shtml 32 .VALSTM Network Source: SRI Consulting Business Intelligence http://www.sric-bi.

High-end watches for which life-style segments? 34 .

traditional opinions. competitive. Self-Admirers  High self-image. contented under achievers. Well educated. motivated by success. Chameleons  want to be contemporary to win approval.Other lifestyle descriptors: McCann-Erickson Men        Avant Guardians  concerned with well-being of others rather than possessions. young. Copiers not leaders. pessimistic Token Triers  always willing to improve their luck. Very British and concerned with keeping others on the right path. Sleepwalkers  actively opt out. Self-Exploiters  the “doers” and “self-starters”. Pontificators  strongly held. self-righteous. intolerant of others. pressured. but tend to try and fail. 35 .

moderate-.g. AirMiles.g. ClubCard points 36 . light-user segments   Usage rates for a product e.Behaviour/product-related segmentation    segmentation according to the different benefits that consumers seek from the product focus on „why‟ a customer purchases rather than „what‟ Benefits that we seek when we buy   attributes we seek in a good or service benefits we expect to receive from that good or service heavy-. loyal % of total customers Consumer brand loyalty toward product e.   80/20 principle (“Pareto’s Law”) 80% of a product’s revenues comes from a relative small.

Band-Aid offers “flex” as a benefit to consumers. 37 .

“Linking Attributes. Benefits. 38 . 12(3) pp. and Consumer Values. Chicago. Reprinted with permission by the American Marketing Association. 4-10.Benefit Segmentation Applied to Yogurt Attributes of Yogurt BENEFITS SOUGHT FROM YOGURT Individually packaged Provides choice for family members Convenient to use Tastes good Good quality Healthy Helps digestion Helps diet Spend less money With fruit High. V.” Marketing Research.Mild priced Organic Contains bio-bifidus Low fat Lowpriced X X X X X X X X X X X X X X X X Source: Adapted from Marco Vriens and Ter Hofseted. Fall 2000.

payment methods.Other segmentation categories  Buyer-readiness segmentation:  ignorance. • When I’m away on business. • I always buy my wife flowers on Valentine’s Day. preference and conviction different channels.  Interaction segmentation:   Occasion segmentation:    Internet usage 39 . examples: • Whenever our daughter Jamie gets a raise. marriages. births. deaths etc. awareness. festivals. promotions & communications time of day. I try to stay at a suites hotel. knowledge. we always take her out to dinner.

Market Matching Strategies (1 of 2) PRODUCT OFFERINGS Ford Motor Company Market Segment 1908 Single-Offer Strategy Early 2000s Multi-Offer Strategy Audio/Volkswagen/Porsche 1955 Single-Offer Strategy Early 2000 Multi-Offer Strategy General-Purpose Cars Small Model T Medium Model T Large Sporty Cars Low-Priced Focus Taurus Crown Victoria ZX2 Escort Beetle Polo Golf Passat new Beetle GTI Cabrio Audi TT Boxster Porsche 911 Medium-Priced Cougar Mustang Jaguar XK8 Aston Martin DB7 High-priced 40 .

Market Matching Strategies (2 of 2) Ford Motor Company Market Segment Luxury Cars Medium-priced High-priced Vans Trucks Small Medium Sport Utility Vehicles (SUVs) Audio/Volkswagen/Porsche 1955 Single-Offer Strategy Early 2000s Multi-Offer Strategy Audi A4 Audi A6 Audi A8 EuroVan 1908 Single-Offer Strategy Early 2000s Multi-Offer Strategy Lincoln Continental Lincoln Town Car Jaguar S-Type Windstar Econoline Model T (Truck) Ford Ranger Ford “F” series Explorer Expedition Excursion Lincoln Navigator 41 .

champions 42 . company age Technology.Segmentation for Industrial Markets  Product Segmentation Geographic Segmentation Organizational Demographics  industry size. urgency of order  Operating Variables  Potential Industrial Markets End-Use Application Segmentation Account Size and Potential Segmentation   Purchasing Approach  Situational Variables   Personal Characteristics of Buyers  attitude to risk. routine vs. customized. location. process Organization & DMU structure Order size.

Radio Broadcast segmentation The Total Market for Radio The Market Segment for Radio by Age & Benefit Age Benefit Information Teens Young Adult Middle Adults Senior Entertainment Companionship 43 .

Hypothetical Middle Adult Segment for Radio Middle Adults Early Retiree Information Professional Hourly Employee Business Owner X X X X X X Entertainment Companionship 44 .

Hypothetical Middle Adult Segment for Information Radio Middle Adults Early Retiree Breaking news Political commentary Financial market commentary Professional X Hourly Employee Business Owner X X X X X X X X X X X X Advice Weather Call-in Gossip 45 .

Hypothetical Positioning Map: CBC versus Commercial Radio Entertaining Commercial Talk Radio *As it Happens CBC local* Commercial Talk Radio *This Morning After Hours* Informational *CBC News *Ideas Disc Drive* Music Take 5* Challenging 46 .

Positioning of Soap • Tone High moisturizing 7 • Zest • Lever 2000 2 • Safeguard 4 5 • Dove • Lux Nondeodorant 3 8 Deodorant 1 “Product Space” • Lava Representing Consumers’ Perception for 6 Different Brands of Bar Soap Low moisturizing • Dial • Lifebuoy 47 .

Plot these cars on this Positioning Map Expensive       Inexpensive Conservative Sporty  Honda Accord Jaguar Toyota Yaris VW Golf BMW 300 series Skoda Fabia Porche Place other cars on the map What other criteria would we add to improve the map's usefulness? Expensive Inexpensive   Conservative Sporty 48 .

Construct a Competitive Positioning Map  for the clothing areas of the following retailers         Next Marks and Spencer Primark Miss Selfridge Asda (George) H&M La Senza Coast 49 .

Non-profit market segmentation   Is segmentation for nonprofit marketers of more. or the same importance than for profit-oriented marketers? Examples ? 50 . less.

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