Market Segmentation Standard 2

Market Segmentation The process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs. Businesses may segment a market by: Demographics Psychographics Geographics Behavioral

Demographics Demographics refers to statistics that describe a population in terms of personal characteristics. These include age, gender, income, ethnic background, education, and occupation.

Demographics - AGE Marketers classify everyone according to certain generations. Generations tend to have common bonds. Baby Boom Generation Generation X Generation Y The New Generation – No Name Yet… Generation Z Generation 2000s

Baby Boomers Born between 1946-1964 76 Million Americans Control 2.6 trillion and 51% of the wealth of this country Prime targets for luxuries and recreational items The oldest turns 65 in 2011 Americans over 65 will double by 2030 Products related to an aging population

Generation X Born between 1965-1976 40 Million Americans Dual-career households or divorced parents Bombarded with media from an early age Savvy and skeptical consumers Better educated than previous generations More financially cautious and conservative Prime consumers of cosmetics, fashionable clothing, movies, and electronic items Marketers must use sharp images, music, a sense of humor, and a little irreverence

Generation Y Born between 1977-1997 77 million Americans Growing up during a computer revolution Interactivity and doing more than one thing at a time Different from their parents Comfortable with computers and surfing the net $130 million in spending power Influences $250 billion in purchases

Generation Y - continued Build brand loyalty by attracting consumers while they are teens Teens buy many of their own personal care items 60% of 12-17-year-olds have their own music players Teens do the family shopping Teens influence big-ticket family purchases: cars, computers, trips Teens are the target

Demographics - GENDER Companies can expand their markets by marketing to the other gender, or by marketing their products differently to men and women Example: Jockey, Gillette

Demographics - INCOME Disposable Income is the money left after taking out taxes. Important for companies that produce and distribute necessities. Discretionary Income is the money left after paying for basic living necessities such as food, shelter, and clothing. Important for companies that produce and distribute luxury items.

Demographics – ETHNIC BACKGROUNDS More diverse due to increased immigration Caucasian population declining

African - American Spend $400 billion annually Ethnic magazines and television targeted Promotional activities with community support

Hispanics Hispanics will surpass African-Americans as largest ethnic group Hispanics culture and diversity comprises 21 nationalities Approximately 70% of Hispanics are Roman Catholic Centers around family – larger families (3.4 vs. 2.6 people) – Live with families Food Marketing Spanish-language TV – 4 hours on weekdays mostly on Spanish programming

Asian-Americans Fastest Growing Most Affluent 16 different nationalities More college graduates than other ethnic groups Professional Jobs Financial services, computers, telecommunications, and new vehicles marketed Prefer to communicate in native langauges

Psychographics Psychographics involves grouping people with similar attitudes, interests, and opinions, as well as lifestyles and shared values.

Psychographics Health Eating Properly Exercising Vacations Trend Setting Issues: Health Eating Properly Exercising Vacations Entertainment (concerts, museums, theater, theme parks, sports, toys, and electronics) Upscaling (Better life)

Geographics Geographics refers to segmentation of the market based on where people live. Segmented by: Local Regional National Global Market

Geographics Marketers must study where people live to decide which media to use and where to market their products. Marketers study Geographics in relation to: Ethnic Concentrations Age Income Ethnic Background

BEHAVIORAL Involves analyzing your customers with regard to sales generated, shopping patterns, and purchase decision-making processes.

Behavioral segmentation Many businesses find that the 80/20 rule applies. 80% of a company’s sales are generated by 20% of its loyal customers. 80/20