Marketing Principles CHAPTER 2 SECTION 1

 The best way for a business to connect with customers is to know these people well.  The process of taking people from a given market into smaller groups is called market segmentation.  It is usually too expensive to target all the potential target markets.  Companies need to identify those markets that it has an advantage to enable it to survive against its competition over a long period of time.

 Four ways to segment the market:  Demographics – statistics that describe a population: age, gender, income, marital status, ethnic background, education, and occupation  Marketers can easily use age to segment the market  Baby boomers – born between 1946 – 1964  Generation X – followed the baby boom generation  Generation Y – sons and daughters of the later baby boomers

 Gender helps to create market segments as well.  Income – marketers want to know how much money people have to spend on products  Disposable income – money left after taking out taxes  Discretionary income – money left after paying for needs  During tough economic times people have less discretionary income.  U.S. population is becoming more multicultural and ethnically diverse

 Geographics – segmentation based on where people live  Can also include population density and climate  Small independent businesses segments their market on a local basis  These businesses want customers to become regulars.  Local and state geographics play a significant role in political campaigns.  Food manufacturers and retailers have learned that people in certain geographic areas share similar tastes.

 Psychographics – people with similar attitudes, interests, and opinions as well as lifestyles and shared values  Consumers’ attitudes and options are often created by changing times and personal experiences.  Taking responsibility for one’s health, eating healthier, and becoming physically fit are trend-setting issues for businesses.  People who share common interests and activities often purchase similar products and services.

 Behavioral Characteristics  Consumers classify their customers according to the percentage of sales each group generates.  Some companies use loyalty programs to ensure that their customers keep buying the companies products.  Companies have found that many customers research products on the internet before making a final purchase.

 When products have universal appeal and few features to differentiate them from competitors, mass marketing is used.  Mass Marketing – uses a single marketing strategy to reach all customers  One advantage of target market segmentation is the ability to target a very specific audience.  Niche marketing narrows and defines a market with extreme precision, which increases the chances of a product’s success.