Segmenting and Targeting Markets

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Segmenting and Targeting Markets
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Market Segmentation
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The Importance of Market Segmentation

• Markets have a variety of product needs and
  preferences
• Marketers can better define customer needs
• Decision makers can define objectives and
  allocate resources more accurately

Competitive Advantage
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No Market Segmentation
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Segmented by Sex
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Segmented by Age
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The Basis of Market Segmentation

• Geographic the study of the market based on
  where customers live
• Region, city, area, county, state, country

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Segmenting Consumer Markets

• Geographic Segmentation Dividing an overall
  market into homogeneous groups on the basis of
  their locations
• Does not ensure that all consumers in a location
  will make the same buying decision.
• Help in identifying some general patterns.

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• Using Geographic Segmentation
• Demand for some goods and services can vary
  according to the geographic region
• Most major brands get 40-80 percent of their
  sales from what are called core regions
• Climate is another important segmentation factor
• Northern consumers, for example, eat more soup
  than Southerners
• Southerners use more chlorine for their swimming
  pools than Northern residents

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Demographic- personal characteristics of a
population

• Age,
• Gender
• Family size
• Marital Status
• Family life cycle
• Household income
• Occupation

• Education
• Religion
• Nationality, social class
• Home Value
• Social Class
• Geographic Region(s)

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Demographics, cont

• Age Cohorts
• Baby Boom generation 1946 - 1964
• Generation X Baby Bust generation
• Generation Y Echo Boomers or Millennium
  Generation
• Ethnic Segmentation ethnic makeup cultural
  tastes
• Socioeconomic social status or economic
  position
• Income, Occupation, Class or social position

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• Demographics, cont
• Marital Status household all those living
  together under one roof
• Family Life Cycle reflects the family
  characteristics, age of parents, age of children,
  whether children are living at home

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Young couple (no children
Young couple with children
Bachelor
Family Life Cycle
Middle aged couple with children
Single again Death or divorce
Middle aged couple with no children
Older couple
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Psychographics

• What makes them tick?
• What's their lifestyle
• Likes
• Dislikes
• Values
• Attitudes

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Psychographic Characteristics
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Psychographics

• Study of consumers based on social and
  psychological characteristics
• Personality, values, opinions, beliefs,
  motivations, attitudes,
• Lifestyle elements including activities and
  interests
• Need for status Role of money (does it buy
  material things, self-esteem, etc?)
• Ethics/"moral compass
• Risk-taker vs. conservative
• Spendthrift vs. hoarder of money

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Psychographics, cont

• Activities
• Different magazines represent market segment

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• Attitudes
• Eating healthy, becoming physically fit
• Personality values
• Personality characteristics values

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Psychographic Profile

• The F3 Gang fuel, food, and fast
• One-stop wonders
• Saving Sams Samanthas
• Earth Worshippers

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Behavioral Analysis

• Segmenting the market based on product-related
  behavior
• What specific benefits are customers seeking?
• What motivates this group to purchase?
• What are the purchasing trends of this group?

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http//www.sric-bi.com/VALS/presurvey.shtml
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Target Market
A group of people or organizations for which an
organization designs, implements, and maintains
a marketing mix intended to meet the needs of
that group, resulting in mutually satisfying
exchanges.
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Undifferentiated Targeting Strategy
Marketing approach that views the market as one
big market with no individual segments and thus
requires a single marketing mix.
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Niche
One segment of a market.
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Behavior/Usage Segmentation

• Markets can be segmented by how often or how
  heavily consumers use a specific product
• 80/20 Principle - 80 of revenue generated by 20
  of customers

Light Users 80
Heavy Users 20
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The 80/20 Principle
A principle holding that 20 percent of all
customers generate 80 percent of the demand.
80/20
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Cannibalization
Situation that occurs when sales of a new product
cut into sales of a firms existing products.
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Toothpaste Segmentation
Benefit Segment Psychographics Favored Brands
Economy(low price) Value oriented Brands on sale
Medicinal(decay prevention) HypochondriacConservative Crest
Cosmetic High sociabilityactive Aqua-FreshUltra Brite
Taste(good tasting) High self-involvement Colgate
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Toothpaste Segmentation
BenefitSegment Demographics Behavior
Economy(low price) Men Heavy users
Medicinal(decay prevention) Large families Heavy users
Cosmetic Teens, young adults Smokers
Taste(good tasting) Children Spearmint lovers