Market segmentation

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Market segmentation

• SOM 660
• Eric N. Berkowitz

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Market Segmentation
definition identification of subgroups in the
population with similar wants and needs. Tailor
the marketing mix (the four Ps) to meet those
subgroups needs.
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You can have any color car you want, as long as
it is black
Henry Ford
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Who Are the Customers?
Demographic Descriptor Variables

• Age
• Family size
• Family life cycle
• Gender
• Income
• Occupation

• Education
• Religion
• Race
• Generation
• Nationality
• Social class

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Who Are the Customers?
Geographic and Psychographic Descriptor Variables

• Region
• City / Metro Size

• Lifestyle
• Personality
• Social Class

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Who Are the Customers?
Behavioral Descriptor Variables

• Occasions--Enterprise
• Benefits
• User status
• Usage rateDuboff article!!heavy half

• Loyalty status
• Buyer readiness stage
• Attitude toward product

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The Law of the Heavy Half Consumer
80/20 rule
a small percentage of consumers tend to account
for a disproportionate share of a products sales
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The Heavy Half Consumer
Colas H 22 H 39 H 39 B 0
B 10 B 90
Beer H 67 H 16 H 17 B 0
B 12 B 88
Canned Hash H 68 H 16 H 16 B
0 B 14 B 86
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Some other heavy half segments
of total
users of total usage Chewing gum
19.7
47.9 Cigarettes 19.5
36.1 Electric
shavers (female) 35.1
82.3 Pretzels
32.2
74.2 Whiskey 12.8
65.5
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Differing Objectives with each segment

• Heavy half
• Middle group
• Non-users

• Maintain
• Increase
• Identify to forget or promote

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Cohort Segmentation/Profiling
A generation is usually defined by years of birth
A cohort is defined by events that occur at
various critical points in the groups lifetime
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Cohort vs. Generation

• A Generation is usually
• Defined by when a group is born
• About 20 - 22 years in duration
• A Cohort is
• Defined by when a group is coming of age
• Can be as long, or as short, as the events that
  define it

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Events Form Values

• The cohort-forming events form similar value
  sets in those who come of age during those events
• The value sets tend to change little during a
  lifetime
• Thus the groups are bound by their similar (and
  unchanging) value sets

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Cohort Definition

• Depression
• World War II
• Post-War
• Boomers I II
• Generation X
• N Gen
• Millenials

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Depression Cohort

• Born between 1912 and 1921 (86 to 95 old)
• Defined by the Great Depression
• financial security rules their thinking
• preserving their homes a central concern

S P 400 declined 69 between 1929and 1932. Not
until 1953 did S P get back to where it had
been in 1929
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Marketing to Depression Cohorts
compulsive savers--60 have outstanding debt
less than 2000 prefer guaranteed investments
(Financial Trust offered federally insured CD
tied to performance of stock market) feel
acute need to leave a legacy to children
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World War II Cohort

• Born 1922 - 1927, came of age 1940 to 1945 (age
  80 to 85 today)--5 of population
• defined by World War II
• defined role in war was for many highest status
  achieved
• common experience was a sense of deferment and
  delayed gratification

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Marketing to World War II Cohorts
less interest in leaving legacy to
children--feel their children are better off
than they were at that age defined role
in war was for many highest status achieved
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Post War Cohort

• Born between 1928 and 1945, came of age 1946 to
  1963
• 22.7 of the present population
• beneficiaries of a long period of economic growth
• tenor of their times conservative, seeking
  comfort and security
• time that promoted conformity

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Leading Edge boomers

• Born between 1946 and 1954
• 17.4 of the population, came of age between
  1963- 1972
• first to experience television as a pervasive
  influence on culture
• came of age in the 60s--Vietnam,
• Kennedy assassination
• heavily values individualism,
• indulgence of self,
• and questioning everything

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Boomers II

• Trailing edge boomers born between 1955 - 1965,
  came of age 1973 to 1983
• external events are stopping Vietnam War,
  Watergate--faith in institutions gone and
  idealistic fervor disappeared
• narcissistic preoccupation with self (Im OK,
  Youre OK)
• oil crisis, S P declined 30 between 1973 and
  1975---debt was way to maintain lifestyle

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Generation X

• Born 1966-1976, came of age 1984-1994, 21.9 of
  the population
• children of divorce, latch key kids--searching
  for anchors
• little hope of lifestyle of parents
• politically conservative

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Communicating across cohortsdifferent strokes
for different folks

• Matures are the analog generationnewspapers
• Boomers value information and detail in an
  organized fashion
• Gen Xers participate in informationthey interact
  with information
• (NIKE, Volkswagon, GOARMY.COM)

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The N - GEN(Network or Internet)

• aged 24-30 today
• Crystallizing Event is the Internet, 9-11
• Archetypical opposite of Gen X recurring
  characteristics similar to Depression/WW II
• Positive, idealistic, hard-working, stressing
  team-play (not free-agency)
• More modest, mannerly, civic-spirited

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The N Gen

• Less likely to gender stereotype
• Less racial stereotype
• Barriers of time and space are differentless
  absolute meaning

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The Millenials

• Born 1983 2002
• Consistently list their parents as their most
  admired choices
• Trust their Grandparents the most followed by
  their parents
• 92 place high value on volunteer work

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Messages for Millenials

• Be Smartyou are special --Baby Gap, Sports
  Illustrated for Kids, Nickelodeon (They have been
  appealed to , catered to)
• Leave no one behind be inclusive
• Connect 24/7 always on, always interdependent
• Achieve nowtutors in preschool, keep climbing
• Serve your community

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Understanding Millenials

• Computers arent technology--never known life
  without computers!
• Internet is better than TV--recent years the
  number of hours spent watching tv has declined
• Reality is no longer real-- digital images
  have/can be altered
• Doing is more important than knowing--half life
  of information is short actions more
  important than accumulation of facts
• Multi-tasking a way of life
• Staying connected a way of life
• Zero tolerance for delays 24x7 variety
  of modes

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PRIZM

• Potential rating index by zip markets

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Multiple factor analysis of every zip code in the
United States
social rank mobility ethnicity family life
cycle housing style 34 factors accounted for
87 of the variation in all U.S. households
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Criteria for Identifying Segments

• Identifiable
• Accessible
• Inclined
• Able
• Profitable
• Desirable
• Available