Chapter 2.2 Market Segmentation & Target Market

¨  What You’ll Learn: ¤ Definition of Market Segmentation ¤ Four methods to segment a market ¤ Differentiate between Mass Marketing and

Segmentation

Analyzing Markets

¨  Market segmentation is a way of analyzing a market by specific characteristics in order to create a defined target market

¨  Segment markets by the following categories: ¤ Demographics ¤ Psychographics ¤ Geographics ¤ Behavioral Factors

Market Segmentation

¨  Take a look at the market for jeans ¨  A marketer may ask… “Who buys jeans? At what

price? What special features do they want?” ¤ Market for jeans could be segmented:

n By age: Kids, teens, adults n By price: Varying income levels n By desired features: Tight fit, newest fashion, comfort

¤ Next question…. “Which of these segments should we target and how?”

Demographics

¨  Demographics: Statistics that describe a population in terms of personal characteristics including:

¤ Age ¤ Gender (male/female) ¤  Income ¤ Ethnic background ¤ Education ¤ Occupation

Demographics - Age

¨  Generations have collective shared experiences and common bonds: ¤ Baby Boomer Generation

n 1946-1964

¤ Generation X (Baby Bust Generation) n 1965-1976

¤ Generation Y (Echo Boomers/Millennium Generation) n  1977-1997

¤ Generation Z (Tech Savvy) à YOU! n 1995-2013

Demographic Segmentation Example:

¨  Target Market = Baby Boomers (50-70 yrs.) Automobiles

n Roomy n Safety Features

¨  PRODUCTS: n Toyota Avalon n Oldsmobile Aurora n Mercury Mystique n Dodge Intrepid n Chrysler Concorde

Demographics - Gender

¨  Target only men or women with specific products ¨  Gender neutral products may use gender specific

promotions to appeal to each gender

Demographics – Income How much $$ do people have to spend?

1.  Disposable income: money left after paying taxes 1.  Important for marketers selling “necessities”

2.  Discretionary income: money left after paying for basic living necessities such as food, shelter and clothing

1.  When marketing luxury items, companies must be aware of changes in discretionary income

Demographics – Marital Status

¨  Married couples are 49.7% of total households in US ¤ Down from 80% in 1950

¨  Reasons for changes: ¤ People are older when they get married for the first

time ¤ People are divorcing more, living longer and

remarrying less ¨  Married couples with kids are 25% of population

Demographics - Ethnic Background

¨  US is multi-cultural and ethnically diverse ¨  We are not only marketing to one culture, or one

ethnicity!!

Geographics

¨  Geographics: Segmentation of the market based on where people live. Local, regional, national or even global markets.

¨  Examples: ¤ If you want to market to people 65 or older, the

largest populations of this group are located in California, Florida, New York, Texas and Pennsylvania.

¤ If you market snow blowers, you would focus on geographic areas with a cold climate.

Psychographics

¨  Psychographics: involves grouping people with similar lifestyles, attitudes, values and opinions

¨  Requires special research to learn about personality

traits and motivation: ¤ Lifestyles are people’s attitudes and values ¤ How do people spend their time and money? ¤ People who share similar interests have similar

attitudes. Some magazines are targeted this way...

Behavioral

¨  Behavioral: Segmenting based on product-related behavior involves looking at: ¤ The benefits desired by the consumers ¤ Shopping patterns of the customers

¨  Examples: ¤ Teenagers spend less than $50 a month on

entertainment ¤ Teenage girls spend 15% more on music than boys ¤ Recall the 80/20 rule (classification of sales)

Mass Marketing vs. Segmentation

¨  Mass marketing is not as popular since most markets can be segmented

¨  Current trend is toward niche marketing: ¤ Markets are narrowed down and defined with extreme

precision ¤ Even products with one slogan will use different models

and themes to reach different segments

Activity

¨  Target Market People ¨  Groups of 4! ¨  Review rubric on katonclasses