Market Planning Market Segmentation

Mass marketing (Review) Appeals to all people Sometimes, this won’t work Discuss

Take a few minutes Make a list of purchases you make and link it to your social identification or personality. Let me explain… List specific brands – I buy Vans shoes rather than I buy shoes.

Market Segmentation A way of analyzing a market by specific characteristics in order to define the target market.

Market segmentation A group of people that demand similar products and/or services A true market segment meets the following criteria: Distinct from other segments (different segments have different needs) Homogeneous within the segment (exhibits common needs) Responds similarly to a market stimulus Can be reached by a market intervention Analysis – are our groups “true market segments?”

Market Segmentation Businesses look for ways to connect with current and potential customers They need to know these people well. Where they live Their income level Age Ethnic background Activities Values Interests

Market segmentation Marketers analyze groups of customers and break them down to smaller, more precise clusters.’ For example: Jeans Who is buying? At what price? What special features do they want?

Types of Segmentation Demographics Geographics Psychographics Behavioral

Demographics Describe a population based in terms of personal characteristics. Demographics include: Age Baby Boomers – Born between 1946-1964 Generation X – early 1960s to the early 1980s Generation Y (Millennials) - early 1980s to the early 2000s Generation Z – (Also known as iGeneration) early years of the 2000s to the present Gender Income (Disposable and Discretionary) Marital Status Ethnic Background Family Size

Income (a demographic) Marketers want to know how much money people have to spend on different products – they look at two types of incomes: Disposable Income: money left after taxes Discretionary Income: money left after paying for basic living necessities (like food, shelter, clothing).

Income continued Marketers who produce and distribute products that are necessities are interested in changes in consumers’ disposable income. Marketers who sell luxury & premium products are interested in changes in consumers’ discretionary income. During tough economic times, people have less discretionary income, so it is hard to market luxury items.

U.S. Trend – The percentage of the Caucasian population is declining, while other ethnic populations increase.

Geographics Segmentation of market based on where people live Location – where people live (northwest United States, Texas) Climate & Weather City size – small city, urban, suburbs, rural Global markets For example: A small restaurant will cater to people who live near by Coca-Cola and Pepsi are marketed internationally

Psychographics Grouping people with similar lifestyles as well as: Attitudes Values Social activities Lifestyle Hobbies Opinions (How a shared group spends their time and money)

Psychographics What kind of extracurricular hobbies/interests are you involved in? Why? Imagine you are in front of the magazine section of a bookstore. What kinds of magazines are available? Music teachers, dancers, and other music lovers would be one category of people who share psychographic characteristics.

Behavioral Segmentation The way customers use a product or act toward a product Looking at the benefits desired by the customer Shopping patterns Usage rates (80/20 rule) Brand loyalty For example: MasterCard research revealed five groups of online customers: Confident core users Cautious shoppers Mainstream users Curious but not convinced And technology skeptics The overriding finding was that enhanced security influenced purchasing decisions.

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.

How do Marketers use this info? Study shopping patterns Most teens spend less than $50 a month on entertainment Teen girls spend 15% more on music than boys Companies classify customers according to percent of sales generated

The 99 Cent Hamburger What image does Wendy’s promote through its 99-cent hamburger campaign? If Wendy’s lowered their prices, they might sell more product but their profit margin would drop. If they raised their prices, they could lose customers to competitors who offer similar products. Have you ever been prompted to buy a product or use a service that was advertised at a reduced price for a limited time?

How to Identify Your Target Market To identify your target market, you first need to answer these questions: What are you selling, and what makes it so unique?  To whom do you want to sell it?  Why should people buy the product or service from you? 

Group assignment Break into table groups Find two examples of how two companies use different products to reach different market segments. For example, an auto company has different car models that appeal to completely different market segments. Identify at least two variables the company used to identify the target market for each product category. Each group should have a total of four ads. Share findings to the class and discuss.