Segmentation Definitions A market segment can be defined as: A customer group within the market that has special characteristics which are significant to marketing strategy Definition of segmentation Segmentation involves subdividing markets, channels or customers into groups with different needs, to deliver tailored propositions which meet these needs as precisely as possible.

Four Key Categories

Geographic Segmentation This could be by country; region; or city. Each market can be treated individually and the needs of each culture can be accounted for. Demographic Segmentation Age & Gender The Miss Selfridge and Topman are examples of gender segments. The holiday market is clearly segmented –Club for the young –Saga specialising in the 50+

Demographic Segmentation Life Cycle Peoples tastes and needs change as they move through their life. Life-cycle stages Bachelor Stage young, single people not living at home Newly Married Couples young, no children Full Nest I youngest child under six Full Nest II youngest child six or over Full Nest III older married couples with dependent children Empty Nest I older married couples, no children living with them Empty Nest II older married couples, retired, no children living at home Solitary Survivor I in labour force Solitary Survivor II retired

Demographic Segmentation The final demographic segment is by the type of housing and neighbourhood they live in. ACORN A. Agricultural areas 3% of UK population B. Modern family housing, higher incomes 18% of UK population C. Older housing of intermediate status 17% of UK population D. Poor quality older terraced housing 4% of UK population E. Better-off council estates 13% of UK population F. Less well-off council estates 9% of UK population G. Poorest council estates 7% of UK population H. Multi-racial areas 4% of UK population I. High status non-family areas 4% of UK population J. Affluent suburban housing 16% of UK population K. Better-off retirement areas 4% of UK population U. Unclassified 1% of UK

Psychographic Segmentation Psychographic segments are based on lifestyle and personality. Consumers with common lifestyles, will buy similar brands. The most common methods is based on social class, which classifies consumers based on their occupation. A Higher managerial, administrative or professional B Intermediate managerial, administrative and professional C1 Supervisory, clerical, junior administrative or professional C2 Skilled manual workers D Semi and unskilled manual workers E State pensioners, widows, lowest grade workers.

Behavioural Segmentation This is segmentation based a consumers behaviour towards products and services. This could be based on:- –Usage rates (how often) –Who you shop with? –Benefits sought –Brand loyalty –Occasions that stimulate buying e.g. holidays

Why Use Segmentation Detail There are several important reasons why businesses should attempt to segment their markets Better matching of customer needs: Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution Enhanced profits for business: Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits Better opportunities for growth: Market segmentation can build sales. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product

Why Use Segmentation Detail Retain more customers: Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life ("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands Target marketing communications: Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost

Why Use Segmentation Detail Gain share of the market segment: Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.

Why use segmentation? Better matching of customer needs Improved profits for business Better opportunities for growth Retain more customers Target marketing communications Gain share of the market segment

Task 1.2 Market Segmentation –Use as many ways as possible to explain who your target market are –Back your statements with evidence

Help Box To find general information about market segmentation and target customers If you want to find out about the population of Harrogate 13.pdfhttps:// 13.pdf humber/harrogatehttp://localstats.co.uk/census-demographics/england/yorkshire-and-the- humber/harrogate