Part 3 Marketplace Dynamics Chapter 16 Segmenting a Market

Chapter Objectives Explain how segmentation helps a marketer determine a market to target. List the four categories of segmentation variables for the consumer market. Explain each segmentation category and give one example. Describe how marketers use more than one segmentation variable.

Market Segmentation Segmentation variable customer characteristic used to segment a market Age Income

Market Segmentation Segmentation variables are organized into four categories geographic demographic psychographic behavioral What customer characteristics come to mind when you consider these categories?

Geographic Variables Geographic segmentation dividing a market based on where customers live

Location Location Example: car manufacturer not climate geography of place customs of place Example: car manufacturer For the United Kingdom market, steering wheel on the right For the United States market, steering wheel on the left

Climate Climate different climates require different types of products, such as clothing automobile tires housing heating and air conditioning

City Size Market size often varies with city size Ch. 16, Segmenting a Market City Size Market size often varies with city size for some products, a small city might not have a large enough market to generate enough profit Small Medium Large

City Size Example: some restaurant chains will open only in cities of 200,000 or more people Conversely, some products are very successful in small markets

Demographic Variables Census count of the people in a country made by the government on a regular basis the U.S. government takes a census every ten years Demographic information statistics (numbers) that describe the characteristics of a population collected in a census

Demographic Variables Demographic variables are used to segment large markets into smaller markets that might be good target markets Demographic segmentation the process of segmenting a market based on demographic variables Choose a demographic variable. How would you use it to segment a market?

Age Generation group of people who were born or grew up during a particular period of history People in the same generation generally have similar attitudes, wants, and needs The U.S. consumer market is often segmented by generations

In which generation do you belong? your parents? Age In which generation do you belong? your parents?

Gender Markets are often segmented into products for men or women ©2007 JupiterImages Corporation Name some products that were developed to meet the specific needs of men or women.

Ethnicity Needs for many products vary with ethnic or cultural heritage examples ingredients for making ethnic foods items for religious practices

Income Marketers are interested in two categories of income disposable income money left after taxes are taken out discretionary income money left after taxes are taken out and after necessities are paid for A market is often segmented based on income levels

Family Size Families of different sizes have different needs Describe the differences in purchases between a single person and a large family.

Psychographic Variables Psychographic segmentation based on psychological characteristics of customers

Hobbies and Activities People who participate in the same hobbies and activities often buy similar things examples of hobbies and activities photography quilting stamp collecting sports cultural events

Behavioral Variables Behavioral segmentation dividing a market based on the way customers use a product Behavioral variables include features desired usage rate brand loyalty

Features Desired Customers vary in the features they want some just want the basics others want advanced or extra features ©2007 JupiterImages Corporation

How could you use the difference in usage rate to segment a market? 80/20 rule most of the profits (80%) come from a few customers (20%) who show the greatest brand loyalty Marketers often segment the market based on customer usage rates heavy, moderate, light, nonuse How could you use the difference in usage rate to segment a market?

Market Segment Profile a detailed description of the typical customer in a market segment Includes information on geographic variables demographics psychographics behavior relevant to the product