© Professor Tim Richardson matches some of Chpt 3 in Wong, 11 th ed. slide 1 Segmentation.

© Professor Tim Richardson matches some of Chpt 3 in Wong, 11th ed. slide 1

Segmentation


Segmentation

Market Segmentation

• With a large country

• Many different types of people

- it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market


Segmentation

Market Segmentation Defn

• “Grouping people according to their similarity related to a particular product category”


Segmentation

Market Segmentation

Two Step Process

• 1. Naming broad product-markets

• 2. Segmenting these to select target markets


Segmentation

Clustering

• Marketing-Oriented managers know that segmenting involves clustering people with similar needs into a market


Segmentation

Market Segmentation

Four Criteria for determining if the segment you have is useful

1. Homogenous

2. Heterogenous

3. Substantial

4. Operational


Segmentation

Market SegmentationFour Criteria 1. Homogenous

- the people within the segment are all similar

2. Heterogenous- the people between segments should be very different

3. Substantial- the segment should have enough people to make to worthwhile

4. Operational- the dimensions should be useful


Segmentation

Market SegmentationCharacteristics• age

• gender

• geographic location

• income

• spending patterns

• cultural background

• demographics

• marital status

• education

• language

• mobility


Segmentation

Market Segmentation4 commonly used bases for Segmentation

Descriptive

geographic location

demographic

Behavioural

psychographic

benefits


Segmentation Figure 3.1 Bases for Market SegmentationSlide 3-7


Segmentation

Market Segmentation

geographic location - based upon where people live (historically a popular way of dividing markets)

demographic - based upon age, gender and income level (very often used)


Segmentation

Market Segmentation

Psychographic / lifestyles - based on people’s opinions, interests, lifestyleseg, people who like hard rock music probably prefer beer to wine

benefits - based on the different expectation that customers have about what a product/service can do for themeg. People who want to but “lite” food cause ti will help them lose weight


Segmentation

Geographic location of Canadians

• most live in Toronto - Montreal axis

• + Vancouver

• most live along east-west line close to the American border


Segmentation Percentage Distribution of the Population of Canada by Province

Slide 3-8

+, Ontario contains

52% of foreign born people in Canada

Geographic Segmentation


Segmentation

Impact of Immigration• Ontario contains 51.8% of Canada’s

living foreign-born people

• Most of these people live in Toronto

• Canada’s urban population is growing for 2 reasons1. Immigrants come to Canada and make their homes in the cities2. Canadians are moving out of the rural areas and in to the cities


Segmentation

Figure 3.4 Urban–Rural Population Distribution, 1871–1991

Slide 3-9



Segmentation


The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns.

Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address.

This helps people plan store locations and the location of other services.


Segmentation


Climate:

winter equipment and recreation are effected by geographic location

you will sell more snow shovels in Northern Ontario than southern Ontario , BUT, population in Northern Ontario is very small

clothing purchases are also effected by climate/geography


Segmentation

Demographic Segmentation

Demographic Segmentation is the most common approach to Market Segmentation

Variables are:

• age

• gender (male/female)

• income

• occupation

• education

• household (family - style) size


Segmentation



Variables are:

• gender (male/female)gender (male/female)

•gender is an obvious way to divide the market into segments since so many products are gender-specific

• clothing

• medical products

• sports products/services

• entertainment Examples ??


Segmentation



Variables are:

age

• age is another obvious way to divide the market into segments since so many products are based upon “time of life”

• diapers for babies

• toys for children

• entertainment for “over 19” Examples ??


Segmentation


age

• also, people have different consumption patterns at different ages

•eg. Milk products

• children and teens drink a lot of milk

• adults don’t

• older adults need calcium, but don’t drink milk (they take pills)

Examples ??


Segmentation

Figure 3.5 Population Projections by Age GroupSlide 3-10



Segmentation



Variables are:

•household (family - style) size

• Segmenting by the “stages in the family life cycle”

(page 45)

• There are different buying characteristics of people in each stage of the family


Segmentation



BUYING PATTERNS

• 0-5 young children

• 6-19 school children

• 20-34 young adults

• 35-49 younger middle-aged

• 50-64 older middle-aged

• 65+ seniors

• 80+ SUPER seniors


Segmentation



THE CHANGING HOUSEHOLD

• half of the households in Canada are only one, or two people

• number of married couples forming a household is decreasing

• many unmarried people, and old widowed people, live by themselves


Segmentation



FAMILY LIFE CYCLE STAGES

1. Young Single

2. Young Married with no Children (DINKS)

3. Young - married with children

- divorced without children- divorced with children


Segmentation




4. Middle Aged

a. married without children

b. divorced without children

c. married with children

d. divorced with children

e. married without dependent children

f. divorced without dependent children


Segmentation




5. Older

a. older married

b. older unmarried (divorced, widowed)

6. other


Segmentation



SSWDs

single separated widowed divorced

in Canada, 1.6 million people live alone- they buy different sizes of products eg. Single serving soup, etc.


Segmentation



Variables are:

• age

• gender (male/female)

• income• occupation

• education

• household (family - style) size


Segmentation


income

Segmenting markets on the basis of income and expenditure patterns

- The number of single mom families has increased by 12.8% between 1985 and 1994

- Male single parent families have more income, on average, than Female single parent families(chart 3.6)


Segmentation

Engel’s Laws

As family income increases ……• a smaller % goes for food - TRUE• the % spent on housing and household

operations and clothing will remain constant (that is grow as total income grows) - FALSE in reality this amount declines

• the % spent on recreation, education will increase - TRUE, but there are exceptions


Segmentation

Engel’s Laws

Why is this important……• because marketing managers can use this

law to figure out what will happen (ie. What kinds of spending patterns will develop) if people’s incomes increase

• also, if you are planning on going into a new market, where people have more money - this “law” helps you to plan how people’s spending patterns will be different


Segmentation

Psychographic Segmentation

“The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers” TEXT

The use of detailed information to understand differences in what people buyWTGR

psychological


Segmentation


Psychographic profiles on a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions

AIO - activities, interests, and opinions

http://ourworld.compuserve.com/homepages/finkleman/psychogr.htm


Segmentation


Goldfarb Segments

1. Day2day watchers

2. Old fashioned Puritans

3. Responsible survivors

4. Joiner-Activists

5. Aggressive Achievers

6. Disinterested Self-Indulgents

http://www.goldfarbconsultants.com/who.html

More traditional

Less traditional


Segmentation


Page 51~52

Thompson Lightstone Segments

1. Passive/Uncertain

2. Mature

3. Home Economists

4. Active/Convenience

5. Modern Shoppers

6. Traditional Home/Family Oriented

http://www.goldfarbconsultants.com/who.html


Segmentation


LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?


Segmentation

Benefit Segmentation

“It is based on the Attributes (characteristics) of products, as seen by the customers”

example, people buy something because it causes a benefitie. Diet coke - less sugar, lose weightie. Extra white toothpaste, whiter teeth, better smile


Segmentation


“Many marketers now consider benefit segmentation one of the most useful methods of classifying markets”ie. Watches

- the benefits customers looked for where durability and product quality- older research was based on dividing the watch market according to a different segment - once they used the new segment, they changed the marketing plan- modern example would be price of PCs for home use - biggest use is entertainment NOT schoolwork or home based businesses


Segmentation

Benefit Segmentation of the Toothpaste Market

Segment Name

TheThe Sensory The IndependentSegment Sociables The Workers Segment

Principal benefit sought Flavour, product Brightness Decay Priceappearance of teeth prevention

Demographic strengths Children Teens, young Large families Menpeople

Special behavioural Users of Smokers Heavy users Heavy userscharacteristics spearmint-

flavouredtoothpaste

Brands disproportionately Colgate, MacLean’s, Crest Brandsflavoured Stripe Plus White, on sale

Ultra Brite

Personality characteristics High self- High High Highinvolvement sociability hypochondriasis autonomy

Lifestyle characteristics Hedonistic Active Conservative Value-oriented



Segmentation

Figure 3.9 Segmentation Bases for Industrial MarketsSlide 3-12

Segmentation for Industrial Markets


Segmentation

• Geographic Segmentationuseful for the automotive industry

• Product Segmentationie. Special parts and components

• Segmentation by End-Use Applicationie. Paint mfg. Paint for waterproof applications,

paint for rust prevention, paint which sticks to glass

Segmentation for Industrial Markets


Segmentation

Criteria for Segmenting

Single Target Market approach

Multiple Target Market approach

Combined Target Market approach


Segmentation

Criteria for Segmenting

Combined Target Market approach

Eg. A company that makes garlic flavoured cream cheese

competition is companies that use single market approach and makeroasted garlic and garlic and herb cream cheese

“… to

o much combining

is ris

ky …”


Segmentation

Segmenting

“...Should you Segment, or Combine …”

the text says it is better to segment

- also, depends on which gives you the best profit

TR - it also depends on what competition does !


Segmentation

Profit is the Balancing Point

• In trying to determine whether you should divide the market up into many segments, and sell variations of the product to different segments, or sell the same product to everybody, the deciding factor is based on which option will give you the most profit


Segmentation

Market Segmentation

“… cost considerations encourage more aggregating to obtain economies of scale

… demand considerations suggest less aggregating to satisfy needs more exactly…” …”

what does this mean ?


Segmentation

Market Segmentation

“… Segmenting is an aggregating process …”

what does this mean ?


Segmentation

Market Segmentation

Aggregate - 1. collected; collective, total 2. Sum total 3. Unite

- Oxford Pocket Dictionary

TR. - all the stuff together

Aggregating

- putting things together which are similar


Segmentation

Market Segmentation

Aggregating“… how far should the aggregating go …”?

- sometimes not everybody will fit, you can leave them out, or just call it “other”

“… these people are simply too few … may have to be ignored unless they are willing to pay a high price for special treatment…”

© Professor Tim Richardson matches some of Chpt 3 in Wong, 11 th ed. slide 1 Segmentation.

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Transcript of © Professor Tim Richardson matches some of Chpt 3 in Wong, 11 th ed. slide 1 Segmentation.