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S E G M E N T AT I O N

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Purpose of this section

1. Introduce the Concept of the MARKETING PLAN
2. To Define Market Segmentation
3. Present 4 types of market segmentation
4. Aspects of the Canadian market
5. Main types of segmentation in industrial markets

Professor Richardson

S E G M E N T AT I O N

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Baby Boomers & Chicken

Purpose of this discussion is to explain the
advantages of carefully watching how a
market segment acts as it becomes older
You have to watch consumption trends and
match this - (eg. This is the wrong time to open a
steak house)

Companies must plan constantly and the

plan must be based on an understanding of
market trends and marketing segments

Professor Richardson

S E G M E N T AT I O N

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Marketing Plan - many factors involved

Consumer Analysis
Environmental Analysis
1. Target Market - you have to decide on which segment
2. Look at competitors, what are they doing
3. Market research required
4. Develop a unique marketing plan

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Fundamental Tasks in Developing a Marketing Plan

1. Target Market

**

2. Implement a Marketing Program

** this recognizes that you are consumer oriented

(to be able to do this, you have to recognize the difference among
people and understand there are different segments)

Professor Richardson

S E G M E N T AT I O N

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What is a Market?

PEOPLE

Professor Richardson

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What is a Market?

PEOPLE
BUT - not just ANY people, they have to have
Willingness to buy
Purchasing power (money)
Authority to buy
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Types of Markets
Consumer Goods and Services
Industrial Goods and Services

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Classes of Consumer Products

Goods

Shopping

Specialty

POP

Convenience

ATM

Services
$

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14-1

Various Classes of Consumer and

Industrial Goods and Services
G o o d s a n d S e rv ic e s

C onsum er G oods

C o n s u m e r S e r v ic e s

C o n v e n ie n c e G o o d s

S h o p p in g G o o d s

S p e c ia l t y S e r v ic e s

C o n v e n ie n c e S e r v i c e s

e g . M a c ' s M il k

e g . c l o t h in g

e g . b a n k in g

e g . fa s t fo o d s

eg. new spaper

e g . g r o c e r ie s

e g . tra v e l

r a w m a t e r ia l
g r a in , s te e l

In d u s tr ia l G o o d s

In d u s tr ia l S e r v ic e s

P r o d u c t io n G o o d s

S u p p o r t S e r v ic e s

com ponent
p a rts

m a t e r ia l s
n u ts , b o lts

a c c e s s o r y e q u ip m e n t
to o ls , c o m p u te rs

in s t a l l a t i o n s

e g . b u il d in g s

e g . c ir c u it b o a r d
e g . w ir in g
h a rn e s s

Defn - industrial goods are products used in the production of other

products
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Industrial Goods
Industrial goods are things used in the
production of other products
Some products are both industrial and consumer
goods - eg. electricity, water, desktop PCs

2 categories of industrial goods

Production Goods
Support Goods
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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

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Market Segmentation Defn

Grouping people according to their
similarity related to a particular
product category

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Market Segmentation
Characteristics

age
gender
geographic location
income
spending patterns
cultural background
demographics
marital status
education
language
mobility
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Market Segmentation
4 commonly used bases for Segmentation
Descriptive

geographic location
demographic
Behavioural

psychographic
benefits
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Slide 3-7

Professor Richardson

Figure 3.1 Bases for Market Segmentation

S E G M E N T AT I O N

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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)

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Market Segmentation
Psychographic / lifestyles

- based on peoples

opinions, interests, lifestyles

eg, 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 them
eg. People who want to but lite food cause ti will help
them lose weight

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Geographic location of Canadians

most live in Toronto - Montreal axis
+ Vancouver
most live along east-west line close
to the American border

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Slide 3-8

Percentage Distribution of the

Population of Canada by Province
Geographic Segmentation

+, Ontario
contains
52% of
foreign born
people in
Canada

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Impact of Immigration
Ontario contains 51.8% of Canadas
living foreign-born people
Most of these people live in Toronto
Canadas urban population is growing
for 2 reasons
1. Immigrants come to Canada and
make their homes in the cities
2. Canadians are moving out of the
rural areas and in to the cities
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Slide 3-9

Figure 3.4 UrbanRural Population Distribution, 18711991

Geographic Segmentation

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Geographic 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.
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Geographic 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
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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
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Demographic Segmentation
Demographic Segmentation is the most common
approach to Market Segmentation
Variables are:
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
Professor Richardson

Examples ??
S E G M E N T AT I O N

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Demographic Segmentation
Demographic Segmentation is the most common
approach to Market 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
Professor Richardson

Examples ??

S E G M E N T AT I O N

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Demographic Segmentation
age
also, people have different consumption patterns at
different ages
eg. Milk products
children and teens drink a lot of milk
adults dont
older adults need calcium, but dont drink milk
(they take pills)
Examples ??
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Slide 3-10

Figure 3.5 Population Projections by Age Group

Demographic Segmentation

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Demographic Segmentation
Demographic Segmentation is the most common
approach to Market 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
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Demographic Segmentation
household (family - style) size
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

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Demographic Segmentation
household (family - style) size
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

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Demographic Segmentation
household (family - style) size
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

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Demographic Segmentation
household (family - style) size
FAMILY LIFE CYCLE STAGES
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
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Demographic Segmentation
household (family - style) size
FAMILY LIFE CYCLE STAGES
5. Older
a. older married
b. older unmarried (divorced, widowed)

6. other

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Demographic Segmentation
household (family - style) size

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

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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
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Demographic 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)

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Engels 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
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Engels 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
peoples 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
peoples spending patterns will be different

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Psychographic Segmentation
The use of psychological attributes,
lifestyles and attitudes in determining
the behavioral profiles of different
customers TEXT
psychological
The use of detailed information to understand
differences in what people buy
WTGR
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Psychographic 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

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Psychographic Segmentation
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
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Psychographic Segmentation
LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?

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Benefit Segmentation
It is based on the Attributes (characteristics) of
products, as seen by the customers
example, people buy something because it
causes a benefit
ie. Diet coke - less sugar, lose weight
ie. Extra white toothpaste, whiter teeth, better smile

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Benefit 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 planmodern example would be price of PCs for home use biggest use is entertainment NOT schoolwork or home based
businesses

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Benefit Segmentation of the Toothpaste Market

Benefit Segmentation

Segment Name
The
Independent
Segment

The Sensory
Segment

The
Sociables

The Workers

Principal benefit sought

Flavour, product
appearance

Brightness
of teeth

Decay
prevention

Price

Demographic strengths

Children

Teens, young
people

Large families

Men

Special behavioural
characteristics

Users of
spearmintflavoured
toothpaste

Smokers

Heavy users

Heavy users

Brands disproportionately
flavoured

Colgate,
Stripe

MacLeans,
Plus White,
Ultra Brite

Crest

Brands
on sale

Personality characteristics

High selfinvolvement

High
sociability

High
hypochondriasis

High
autonomy

Lifestyle characteristics

Hedonistic

Active

Conservative

Valueoriented

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Slide 3-12

Figure 3.9 Segmentation Bases for Industrial Markets

Segmentation for Industrial Markets

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Segmentation for Industrial Markets

Geographic Segmentation
useful for the automotive industry

Product Segmentation
ie. Special parts and components

Segmentation by End-Use Application

ie. Paint mfg. Paint for waterproof applications,
paint for rust prevention, paint which sticks to glass

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