Market Segmentation 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 target market. Segment by demographics Psychographics geographics behavioral factors

Demographics Demographics - Statistics that describe a population in terms of personal characteristics including Age Gender (male/female) Income Ethnic background Education Occupation

Demographics - AGE Classify by generation which have collective shared experiences and common bonds Baby Boomer Generation 1946-1964 Generation X (Baby Bust Generation) 1965-1976 Generation Y (Echo Boomers or Millennium Generation) 1977-1997 See pg 39 for description of groups

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 Disposable income – money left after paying taxes Discretionary income – is the money left after paying for basic living necessities such as food, shelter and clothing. When marketing luxury items, companies must be very aware of changes in discretionary income Income levels help to distinguish between different socioeconomic groups. Affluent – 8 million households, income greater than $100,000 year – HALF of all discretionary spending in the US

Demographics – Marital Status Married couples are 50.7% 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 due to increased immigration

Geographics Geographics is segmentation of the market based on where people live. Local, regional , national or even global markets. Geographics is studied in relation to age, ethnic background and income. Government created Metropolitan Statistical Areas MSA’s – defined geographical areas used for distribution of financial aid. Marketers also use to target consumers. Sales and Marketing Management magazine reports on where people are moving and spending power of MSAs.

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 people spend their time and money People who share similar interests have similar attitudes. Some magazines are targeted this way. Trends include changes in households, the economy, politics and the workplace. These changes contribute to changes in attitudes about health, time, fun and living and general.

Behavioral Segmenting based on product-related behavior involves looking at The benefits desired by the consumers Shopping patterns of the customers Usage rates Examples of desired benefits Sport shoes – jog, walk, tennis aerobics. Shampoo – oily, dry or normal. Soda, diet, caffeine free, etc.

Behavioral Examples: Desire for luxury goods is a growing consumer trend MasterCard research of online consumers and their concern for security: Confident Core Users Cautious Shoppers Mainstream Users Curious but not convinced Technological Skeptics Teenagers spend less than $50 a month on entertainment Teenage girls spend more on music than boys

Consumer Behavior 80/20 Rule 80% of a company’s sales are generated by 20% of its loyal customers

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

Conclusion Definition of Market Segmentation Four Methods to segment a market Differentiate between Mass Marketing and Segmentation