Market Segmentation

Professor Richardson

SEGMENTATION

slide

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

SEGMENTATION

slide

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

SEGMENTATION

slide

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

Professor Richardson

SEGMENTATION

slide

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

SEGMENTATION

slide

What is a Market?

PEOPLE

Professor Richardson

SEGMENTATION

slide

What is a Market?

PEOPLE
BUT - not just ANY people, they have to have Willingness to buy Purchasing power (money) Authority to buy
Professor Richardson SEGMENTATION slide 7

Types of Markets
Consumer Goods and Services Industrial Goods and Services

Professor Richardson

SEGMENTATION

slide

Classes of Consumer Products

14-1 Convenience Shopping Specialty

Services $

PO P
ATM

Goods

Professor Richardson

SEGMENTATION

slide

Various Classes of Consumer and Industrial Goods and Services

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

Professor Richardson

SEGMENTATION

slide

10

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

Professor Richardson SEGMENTATION slide 11

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

Professor Richardson

SEGMENTATION

slide

12

Market Segmentation Defn

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

Professor Richardson

SEGMENTATION

slide

13

Market Segmentation
Characteristics
age gender geographic location income spending patterns cultural background demographics marital status education language mobility
Professor Richardson SEGMENTATION slide 14

4 commonly used bases for Segmentation

Descriptive

Market Segmentation

geographic location demographic

Behavioural

psychographic benefits
Professor Richardson SEGMENTATION slide 15

Slide 3-7

Figure 3.1 Bases for Market Segmentation

Professor Richardson

SEGMENTATION

slide

16

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)

Professor Richardson

SEGMENTATION

slide

17

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

Professor Richardson

SEGMENTATION

slide

18

Geographic location of Canadians

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

Professor Richardson

SEGMENTATION

slide

19

Slide 3-8

Percentage Distribution of the Population of Canada by Province Geographic Segmentation

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

Professor Richardson

SEGMENTATION

slide

20

 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
Professor Richardson SEGMENTATION slide 21

Impact of Immigration

Slide 3-9

Figure 3.4 UrbanRural Population Distribution, 18711991

Geographic Segmentation

Professor Richardson

SEGMENTATION

slide

22

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.

Professor Richardson

SEGMENTATION

slide

23

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

Professor Richardson

SEGMENTATION

slide

24

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

Professor Richardson

SEGMENTATION

slide

25

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

Examples ??
Professor Richardson SEGMENTATION slide 26

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

Examples ??
Professor Richardson SEGMENTATION slide 27

Demographic Segmentation
age

also, people have different consumption patterns at different ages children and teens drink a lot of milk adults dont older adults need calcium, but dont drink milk (they take pills)

eg. Milk products

Examples ??
Professor Richardson SEGMENTATION slide 28

Slide 3-10

Figure 3.5 Population Projections by Age Group

Demographic Segmentation

Professor Richardson

SEGMENTATION

slide

29

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

Professor Richardson

SEGMENTATION

slide

30

Demographic Segmentation

household (family - style) size 0-5 6-19 young children school children

BUYING PATTERNS

20-34 young adults 35-49 younger middle-aged 50-64 older middle-aged 65+ 80+ seniors SUPER seniors

Professor Richardson

SEGMENTATION

slide

31

Demographic Segmentation

household (family - style) size 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

THE CHANGING HOUSEHOLD

Professor Richardson

SEGMENTATION

slide

32

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

Professor Richardson

SEGMENTATION

slide

33

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

Professor Richardson

SEGMENTATION

slide

34

Demographic Segmentation

household (family - style) size

FAMILY LIFE CYCLE STAGES 5. Older a. older married b. older unmarried (divorced, widowed) 6. other

Professor Richardson

SEGMENTATION

slide

35

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.

Professor Richardson

SEGMENTATION

slide

36

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

Professor Richardson

SEGMENTATION

slide

37

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)

Professor Richardson

SEGMENTATION

slide

38

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

Professor Richardson

SEGMENTATION

slide

39

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
Professor Richardson SEGMENTATION slide 40

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

Professor Richardson

SEGMENTATION

slide

41

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

Professor Richardson

SEGMENTATION

slide

42

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.html

Professor Richardson

SEGMENTATION

slide

43

Psychographic Segmentation LIFESTYLE PROFILES Table 3.8 - HOW DO YOU FIT?

Professor Richardson

SEGMENTATION

slide

44

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

Professor Richardson

SEGMENTATION

slide

45

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 plan- modern example would be price of PCs for home use - biggest use is entertainment NOT schoolwork or home based businesses

Professor Richardson

SEGMENTATION

slide

46

Benefit Segmentation of the Toothpaste Market Benefit Segmentation

Segment Name The Sensory Segment Principal benefit sought Demographic strengths Special behavioural characteristics Flavour, product appearance Children Users of spearmintflavoured toothpaste Colgate, Stripe High selfinvolvement Hedonistic The Sociables Brightness of teeth Teens, young people Smokers The Independent Segment Price Men Heavy users

The Workers Decay prevention Large families Heavy users

Brands disproportionately flavoured Personality characteristics Lifestyle characteristics

MacLeans, Plus White, Ultra Brite High sociability Active

Crest

Brands on sale High autonomy Valueoriented

High hypochondriasis Conservative

Professor Richardson

SEGMENTATION

slide

47

Slide 3-12

Segmentation for Industrial Markets

Figure 3.9 Segmentation Bases for Industrial Markets

Professor Richardson

SEGMENTATION

slide

48

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

Professor Richardson

SEGMENTATION

slide

49