+ Market Segmentation Analyzing Markets

+ What is Market Segmentation? (Hint: When you “segment” an orange, what do you do to it?) Answer: You break it into smaller “pieces”

+ Definition of “Market Segmentation” Market Segmentation means breaking the market into smaller groups with common characteristics

+ Segment a market for targeting Once the market is divided into smaller groups, then you “target”that particular group (or groups) for marketing.

+ Why segment/target? Business can better match customers’ needs / wants Can increase profits – sell more products; do not waste advertising $$ -- use more wisely Increase opportunities for growth – sell more products! Retain customers

+ How many ways can you divide up the market?

+ Marketers may segment: By geography By personal characteristics (age, ethnic background, marital status) By price / income level (socio- economic status) By desired features/ usage (trucks v. mini-vans; comfort v. style) By psychographics (lifestyle)

+ 4 Ways to Segment the Market Geographic “customers living within 60 miles of downtown Detroit” Location Region Demographic Age Gender Occupation Socio- economic group Usage / Behavior Rate of Usage Benefits sought Loyalty status Readiness to purchase Psychographic Personalities Lifestyle Attitude Class

+ Geography Geographic region – country, state, city Location Size / population density (rural v. urban v. suburban) Climate / weather

+ Name 3 products that would be: 1. Marketed to the states in the mid-west, but not the south 2. Marketed to people in China, but not to people in the U.S. 3. Marketed to people who live in rural areas, but not urban or suburban 4. Marketed to people in Michigan, but not to people in Kansas 5. Marketed to people who live in suburban areas, but not urban 6. Marketed to people who live in Seattle, but not Arizona 7. Marketed to people who live in the U.S., but not to people who live in Guatemala

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+ What is the census? A count of every resident of the U.S. Required by the U.S. Constitution Taken every 10 years 2010 was the last census. Census gathers demographic information about U.S. residents

+ Demographics Personal characteristics that describe a population (a group of people) Includes: 1. Age 2. Gender 3. Income / socio-economic status 4. Marital Status 5. Ethnic Background 6. Occupation

+ Segmenting by Age Different Age groups have different needs and wants. Name something that your parents/adults at home want / need that you don’t. Name something that you want/ need that your parents/ adults at home don’t

+ Is the U.S. population growing older or younger, on average? Older!

+ Age (continued) Since 2000, the U.S. population has continued to grow older. In many states, the median age is 40 or more. Marketers need to plan for an older population.

+ What is the median age in the U.S.? 37.6 in in prod/2002pubs/censr- 4.pdf (see p. 55) prod/2002pubs/censr- 4.pdf

+ Average ages in various states (estimated for 2014) Washington, D.C. – 35.8 Texas Maine – 40.7 Michigan – 36.6 (38.9 in 2010)

+ What per cent of the population is Under 18? 18 – 44? 45 – 64? Over 65?

+ 25% of the U.S. pop. is under 18 10% of the U.S. pop. is % of the U.S. pop. is % of the U.S. pop. is % is over 65 Based on 2010 census.

+ References: All population figures are taken from the U.S. Census, 2010 unless otherwise noted. (census.gov)

+ Segmentation by Age Common labels used to refer to different age groups: 1. “Greatest Generation” - refers to people who were born in the 1920’s, lived through the Great Depression, and fought in / survived WWII.

+ “Baby Boomers” 2. Baby Boom Generation – People born between 1946 and 1964 are called “Baby Boomers.” There were 76 million babies born during this time. They have tremendous spending power and are frequently targeted by marketers.

+ Generation X 3. Generation X, or the Baby Bust Generation – people born from the early 1960’s to The “M-TV” generation. Many had parents who both had careers, or were divorced. Cynical, savvy consumers.

+ Generation Y or Millenials 4. The children of the Baby Boomers are called “Generation Y” or the “Millennial Generation.” Millennials were born between 1980 and More racially and ethnically diverse, tech-savvy.

+ Generation Z 1995 to mid-2000’s “i-generation” Very diverse Poor communication skills Impatient; want instant results Self-centered/ “special snowflakes”

+ Which group are you a member of? Generation Z

+ Name a Product: That you would market to Baby Boomers but not Millenials. That you would market to Generation Z but not to Generation X.

+ Marketing to Children Some countries (UK, Greece, Denmark) regulate and restrict marketing to children. Some countries (Norway, Sweden) prohibit marketing to children under 12.

+ Marketing to Children (continued) EU proposed regulations prohibit product placement in children’s shows, and prohibits appealing to children to “pester” their parents (or other adults) to buy the advertised products.

+ Marketing to Children (continued) In the U.S., marketing to children is minimally regulated (e.g., COPPA.) (Children’s Online Privacy Protection Act limits the personal information that can be collected online from children under 13.

+ Marketing to Children (continued) Marketing to Children –

+ Segmentation by Gender Marketing to Men v. Women Teens – girls spend 15% more than boys What are some examples of gender marketing?

+ Marital Status What percent of total U.S. households consist of a married couple (married to each other)? 50.7% (51% of U.S. population over age 18 is married. In 2012, 20% of the adult population had never been married.)

+ Marital Status (continued) What percent of U.S. households consisted of married couples in the 1950s? 80% (In 1970, 72% of adults over age 18 were married. In 1960, only 9% of the adult population had never been married.)

+ Marital Status (continued) People are older when they get married now, compared to the 1950s. Divorce is more common, and people are living longer after divorced. Fewer people are getting married. What percentage of the U.S. population consists of married couples with kids? 25%

+ Average age at first marriage In 1960, the median age at first marriage was 23 for men and 20 for women. By 2012, it was 27 for women and 29 for men. 25% of never married adults ages are living with a romantic partner.

+ Household size In Michigan, the average household size is 2.49 people 72.1% own their homes in Michigan, 27.9 rent

+ Census Information USA Today

+ Income / Socio-Economic Status Marketers want to know how much money you can spend on their products. They look at two types of income:

+ Income (continued) Disposable income – the money left over after taxes. Discretionary income – the money left over after paying for all basic necessities (e.g., food, shelter, clothing). Makers of luxury products are particularly interested in discretionary income

+ Ethnic Background The U.S. population is growing more ethnically diverse, mainly as a result of increased immigration. Wise marketers will plan accordingly

+ Psychographics Psychographics means grouping people with similar lifestyles, who share attitudes, values, personality traits, and opinions. How do people want to spend their time / $$?

+ Psychographics Examples of Marketing based on Psychographics? People who are interested in a healthy lifestyle People who play video games People who support a particular team People who graduated from a particular university

+ Marketing based on Usage Examples: Luxury items v. utilitarian Fashion v. comfort “early adopters” v. “laggards”

+ Mass Marketing The opposite of Market Segmentation is Mass Marketing Products with “universal appeal” (i.e., they appeal to everyone) and few features that distinguish them from the competition are mass marketed. Mass Marketing uses one single marketing strategy to reach all consumers. Exs.: Coke, Got Milk?

+ How to pick a target market 1. What problem do you solve? 2. Paint a picture of your consumer – Who has the problem? Geographic location? Age group? Income level? 3. Who will gain value from the product? Who has the most to lose if it is not solved? 4. Think about your market – do you want to work /not work with any particular group? Geographically? Particular fields? 5. Do you have an area of expertise? 6.What else is available? Why are you unique?

+ How popular a particular brand or category is What proportion of the target market, bought the product Increasing Market Penetration

+ Sell existing products to new markets – may be existing or new geographic market Increase promotion Lower price New use Ex. - McDonalds opens restaurants in other countries – new markets Ex. – Intuniv – new use Market Development

+ Selling new products to current customers OR sell more to existing customers *80% of sales = 20% of customers New Promotional campaign Ex. - McDonald’s develops a new burger Low calorie option, vegan option Product Development

+ The Key to Marketing: Know your customer / audience