2 Market SegmentationDividing the total market into smaller groups of people who share specific needs and characteristicsRemember a “market” is:People who share similar needs and wants and are capable of buying products
3 You DecideExplain which groups of people the following products are most suitable for:Sports & exercise goodsLuxury sports carsAnimated filmsLipstickSports and Exercise goods: Those interested in health and fitness, Those trying to lose weight, Those who have enough discretionary income to afford them (middle and upper income), Those who just had a heart attack or found out their fitness level is making them have health problems. Those who enjoy playing sports, Those that belong to a teamLUXURY SPORTS CARS: Upper middle class with discretionary income that can afford it, trust fund people, Those who need to impress someone,Those with a need for speedANIMATED FILMS: children ages 1 and up, adults who take children to movies or purchase videos for children,LIPSTICK: females, ages 12 and up, all income levels
4 Segment Jeans Market Who buys jeans? Classify people who form this market:By age: kids, teens, adultsBy price: marketers try to reach different income levels (also called socio-economic group)By desired features: tight fit, comfortable fit, newest fashion, unique design, etc.Levi’s makes: relaxed fit, regular fit, 501 original, loose straight, boot cut, low rise straight, and low rise boot cut
5 Ways to Segment Population The four factors that help segment a market and describe a target market are:DemographicsGeographicsPsychographicsBehavioral factors
6 DemographicsDemographics refer to statistics that describe a population in terms of personal characteristics such as:AgeGenderIncomeMarital statusFamily sizeFamily Life cycleEducationOccupationAge - – think of different generations: baby boomer, Gen x, Gen Y, Gen Z (Net gen)Life cycle refers to single, young married, married with children, sole survivor, etc.
7 Analyzing a MarketWhen calculating how much products should cost, marketers look at two types of income measurement:disposable income - Money left after subtracting taxesdiscretionary income - Money left after subtracting costs for basic living necessities.Marketers who sell necessities such as food and clothing are concerned with disposable income, while those who sell luxury products pay attention to discretionary income.
8 GeographicsThe term geographics refers to segmentation of the market based on where people live. To segment a market geographically, you can refer to:Local marketsRegional marketsNational marketsGlobal marketsAlso, consider:Population density (urban, suburban, rural)Climate (tropical, temperate, cold)
9 Psychographics Psychographics involves grouping people with similar: LifestylesAttitudesValuesOpinionsActivitiesInterestsThis may be based on: culture, religion, race, social classRemember the magazine you analyzed – didn’t it advertise to a particular interest group?
10 BehavioralSeparating the market based on product-related behavior involves looking at the:Benefits desired by consumers – (convenience, economy, prestige)Shopping patterns – do they already purchase it? Where would they use it?Usage rate – light medium, heavy; have they ever purchased it?
11 Behavioral ContinuedBy studying consumer behavior, many businesses find that 80 percent of a company’s sales are generated by 20 percent of its customers.This phenomenon is known as the “80/20" rule.
12 Mass Marketing vs Segmentation Mass marketedWhen a product has universal appeal and few features to differentiate them, it is marketed to everyoneExamples: milk, toothpaste, computersMost companies market to a “niche”which means to a particular segment of peopleEven milk uses various models to try to appeal to different groups.
13 Be Prepared to StandStand if you believe you belong to the segment that the following different products are aimed at.iPodsTomsLaptopBowlingCosmopolitan magazineAndroid phoneMountain bikeLocal cinemaSaga is Over 50’s
14 Math PracticeIF 93 percent of the US population of 290,890,777 snacks at least once a day, how large is the market for snack food?270,528,432The 80/20 Rule: Here are sales figures for 10 customers. (1) $75,000, (2) $700,000, (3) $815,000, (4) $70,000, (5) $60,000, (6) $30,000, (7) $25,000, (8) $53,750, (9) $40,000, (10) $25,000Explain the 80/20 rule using the above figuresTotal = 1,893,750so the two customers above #2 and #3 have 80% of the sales but constitute 20% of the customers!Total = 1,893,750 so the two customers above #2 and #3 have 80% of the sales but constitute 20% of the customers!
15 AssignmentWe are going to be using market segmentation to create a person who is representative of a target market.Find handouts:“Target Market person Activity”“Figure 5.2 Useful Segmentation Bases”Divide into teams of 2 – 3Need poster board, Internet (or magazines), markers