Beckman PowerPoint Presentation

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Market Segmentation
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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

• Two Step Process
• 1. Naming broad product-markets
• 2. Segmenting these to select target markets

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Clustering

• Marketing-Oriented managers know that segmenting
  involves clustering people with similar needs
  into a market

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Market Segmentation

• Four Criteria for determining if the segment you
  have is useful
• 1. Homogenous
• 2. Heterogenous
• 3. Substantial
• 4. Operational

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Market Segmentation

• Four Criteria
• 1. Homogenous- the people within the segment are
  all similar
• 2. Heterogenous- the people between segments
  should be very different
• 3. Substantial- the segment should have enough
  people to make to worthwhile
• 4. Operational- the dimensions should be useful

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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
Slide 3-7
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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 peoples
  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

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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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Percentage Distribution of the Population of
Canada by Province
Slide 3-8
Geographic Segmentation
, Ontario contains 52 of foreign born people in
Canada
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Impact of Immigration

• Ontario contains 51.8 of Canadas living
  foreign-born people
• Most of these people live in Toronto
• Canadas 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

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Slide 3-9
Figure 3.4 UrbanRural Population Distribution,
18711991
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
Climatewinter 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 smallclothing 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

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

Examples ??
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Demographic Segmentation

• age
• also, people have different consumption patterns
  at different ages
• eg. Milk products
• children and teens drink a lot of milk
• adults dont
• older adults need calcium, but dont drink milk
  (they take pills)

Examples ??
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Slide 3-10
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 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

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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 divorcedin 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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Engels 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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Engels 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 peoples
  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 peoples 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 The use of
detailed information to understand differences in
what people buyWTGR
psychological
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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//ou
rworld.compuserve.com/homepages/finkleman/psychogr
.htm
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Psychographic Segmentation

Goldfarb Segments 1. Day2day watchers 2. Old
fashioned Puritans 3. Responsible survivors 4.
Joiner-Activists 5. Aggressive Achievers 6.
Disinterested Self-Indulgents http//www.goldfarbc
onsultants.com/who.html
More traditional
Less traditional
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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.goldfa
rbconsultants.com/who.html
Page 5152
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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 customersexample,
people buy something because it causes a
benefitie. Diet coke - less sugar, lose
weightie. 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
marketsie. 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

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Benefit Segmentation of the Toothpaste Market
Benefit Segmentation
Segment Name The The
Sensory The Independent Segment Sociables The
Workers Segment Principal benefit
sought Flavour, product Brightness Decay Price ap
pearance of teeth prevention Demographic
strengths Children Teens, young Large
families Men people Special behavioural Users
of Smokers Heavy users Heavy users characteristics
spearmint- flavoured toothpaste Brands
disproportionately Colgate, MacLeans, Crest Brand
s flavoured Stripe Plus White, on sale Ultra
Brite Personality characteristics High
self- High High High involvement sociability hypo
chondriasis autonomy Lifestyle characteristics Hed
onistic Active Conservative Value- oriented
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Slide 3-12
Figure 3.9 Segmentation Bases for Industrial
Markets
Segmentation 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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Criteria for Segmenting

• Single Target Market approach
• Multiple Target Market approach
• Combined Target Market approach

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Criteria for Segmenting

• Combined Target Market approach
• Eg. A company that makes garlic flavoured cream
  cheese
• competition is companies that use single market
  approach and makeroasted garlic and garlic and
  herb cream cheese

too much combining is risky
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Segmenting

• ...Should you Segment, or Combine
• the text says it is better to segment
• - also, depends on which gives you the best
  profit
• TR - it also depends on what competition does !

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Profit is the Balancing Point

• In trying to determine whether you should divide
  the market up into many segments, and sell
  variations of the product to different segments,
  or sell the same product to everybody, the
  deciding factor is based on which option will
  give you the most profit

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Market Segmentation
AGGREGATING

• cost considerations encourage more aggregating
  to obtain economies of scale
• demand considerations suggest less aggregating
  to satisfy needs more exactly
• what does this mean ?

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Market Segmentation
AGGREGATING

• Segmenting is an aggregating process
• what does this mean ?

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Market Segmentation
AGGREGATING

• Aggregate - 1. collected collective, total 2.
  Sum total 3. Unite
• - Oxford Pocket Dictionary
• TR. - all the stuff together
• Aggregating
• - putting things together which are similar

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Market Segmentation
AGGREGATING

• Aggregating
• how far should the aggregating go ?
• - sometimes not everybody will fit, you can leave
  them out, or just call it other
• these people are simply too few may have to
  be ignored unless they are willing to pay a high
  price for special treatment