Consumer Behavior, Eighth Edition SCHIFFMAN & KANUK Chapter 3 Market Segmentation

Market Segmentation The process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix.

Three Phases of Marketing Strategy Phase 1: Market Segmentation Phase 2: Target Market and Marketing Mix Selection Phase 3: Product/Brand Positioning

Table 3.1: Sodexho’s Segmentation of College-age Eating Patterns Star Gazers Light, healthy foods Price insensitive Brand conscious Employed full-time over summer Active, out-going Family income > 100,000 Fun Express Variety, taste, and nutrition Price conscious Work part-time over summer Value leisure time Family income $30,000 - 60,000

“Best” Customer Segmentation High Current Share Low High Low HiHighs (stroke) LowHighs (chase) Consumption HiLows (tickle) LoLows (starve)

Segmentation Studies Designed to discover the needs and wants of specific groups of consumers in order to develop specialized products to satisfy specific group needs (e.g., Centrum) Designed to guide the repositioning of a product (e.g., Nintendo) Used to identify the most appropriate media for advertising (e.g., People and Teen People)

Bases for Segmentation Geographic Segmentation Demographic Segmentation Psychological Segmentation Psychographic Segmentation Sociocultural Segmentation Use-Related Segmentation Usage-Situation Segmentation Benefit Segmentation Hybrid Segmentation Approaches

Table 3.2 Market Segmentation SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Geographic Segmentation Region Southwest, Mountain States, Alaska, Hawaii City Size Major metropolitan areas, small cities, towns Density of area Urban, suburban, exurban, rural Climate Temperate, hot, humid, rainy Demographic Segmentation Age Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+ Sex Male, female Marital status Single, married, divorced, living together, widowed Income Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,999, $100,000 and over Education Some high school, high school graduate, some college, college graduate, postgraduate Occupation Professional, blue-collar, white-collar, agricultural, military

Table 3.2, continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Psychological Segmentation Learning-involvement Perception Personality Needs-motivation Shelter, safety, security, affection, sense of self-worth Extroverts, novelty seeker, aggressives, low dogmatics Low-risk, moderate-risk, high-risk Low-involvement, high-involvement Psychographic Subcultures (Race/ethnic) Religion Cultures (Lifestyle) Segmentation Economy-minded, couch potatoes, outdoors enthusiasts, status seekers American, Italian, Chinese, Mexican, French, Pakistani Catholic, Protestant, Jewish, Moslem, other African-American, Caucasian, Asian, Hispanic Family life cycle Social class Lower, middle, upper Bachelors, young married, full nesters, empty nesters Attitudes Positive attitude, negative attitude Sociocultural Segmentation

SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Use-Related Segmentation Brand loyalty Awareness status Usage rate Heavy users, medium users, light users, non users Unaware, aware, interested, enthusiastic None, some, strong Use-Situation Segmentation Location Objective Time Leisure, work, rush, morning, night Personal, gift, snack, fun, achievement Home, work, friend’s home, in-store Person Self, family members, friends, boss, peers Benefit Segmentation Convenience, social acceptance, long lasting, economy, value-for-the-money Geodemographics “Money and Brains,” “Black Enterprise,” “Old Yankee Rows,” “Downtown Dixie-Style” Demographic/ Psychographics Combination of demographic and psychographic profiles of consumer segments profiles SRI VALSTM Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler Hybrid Segmentation

Geographic Segmentation The division of a total potential market into smaller subgroups on the basis of geographic variables (e.g., region, state, or city).

Demographic Segmentation Age Sex Marital Status Income, Education, and Occupation

Age: Segmentation by Age Effects and Cohort Effects Seven Life Development Stages (Table 3.3) Provisional Adulthood Pulling up roots First Adulthood Reaching out, Questions/questions, Mid-life explosion Second Adulthood Settling Down, Mellowing, Retirement

Marital Status Households as a consuming unit Singles Divorced Single parents Dual-income married

Psychological Segmentation Motivations Personality Perceptions Learning Attitudes

AIOs Psychographic (lifestyle) variables that focus on activities, interests, and opinions.

Table 3.6 Excerpts from AIO Inventory Instructions: Please read each statement and place an “x” in the box that best indicates how strongly you “agree” or “disagree” with the statement. I feel that my life is moving faster and faster, sometimes just too fast. If I could consider the “pluses” and “minuses,” technology has been good for me. I find that I have to pull myself away from e-mail. Given my lifestyle, I have more of a shortage of time than money. I like the benefits of the Internet, but I often don’t have the time to take advantage of them. Agree Completely Disagree Completely [1] [2] [3] [4] [5] [6] [7] [1] [2] [3] [4] [5] [6] [7] [1] [2] [3] [4] [5] [6] [7] [1] [2] [3] [4] [5] [6] [7] [1] [2] [3] [4] [5] [6] [7]

Table 3.7 A Hypothetical Psychographic Profile of the Techno-Road-Warrior Sends and/or receives 15 or more e-mail messages a week Regularly visits Web sites to gather information and/or to comparison shop Often buys personal items via 800 numbers and/or over the Internet May trade stocks and/or make travel reservations over the Internet Earns $100,000 or more a year

Figure 3.1 Centrum Targets Lifestyle

Sociocultural Segmentation Family Life Cycle Social Class Culture, Subculture, and Cross-Culture

Family Life Cycle Phases a family goes through in their formation, growth, and final dissolution Bachelorhood Honeymooners Parenthood Post-parenthood Dissolution Explicit basis: marital status, family status Implicit basis: age, income, employment

Use-Related Segmentation Rate of Usage Heavy vs. Light Awareness Status Aware vs. Unaware Brand Loyalty Brand Loyal vs. Brand Switchers

Figure 3.2 Campbell’s Seeks to Create Awareness and Interest

Usage-Situation Segmentation Segmenting on the basis of special occasions or situations Example Statements: Whenever our daughter, Jamie, gets a raise, we always take her out to dinner. When I’m away on business, I try to stay at a suites hotel. I always buy my wife flowers on Valentine’s Day.

Figure 3.3 Ad Designed to Spell Out Rewards of Consumer Loyalty

Figure 3.4 Occasion- Specific Ad

Benefit Segmentation Segmenting on the basis of the most important and meaningful benefit Prudential - financial security Iomega - data protection Wheaties - good health Eclipse - fresh breath

Figure 3.5 Ad Offering Combined Benefits

Hybrid Segmentation Approaches Psychographic-Demographic Profiles Geodemographic Segmentation SRI Consulting’s Values and Lifestyle System (VALSTM)

Table 3.8 Demographic-Psychographic Profile of Newsweek % Index Total adult readers 19,593,000 Men Professionals/ Managers Age 35-49 Household income >$100,000 Married Own laptop PC Spent $3000+ on vacation last year 100.0 100 55.9 117 35.3 174 36.5 114 25.1 172 62.4 109 12.0 150 12.3 164

Table 3.9 Demographic-Psychographic Internet Shopping Styles E-bivalent Newbies Time-Sensitive Materialists Clicks & Mortar Hooked, Online, & Single Hunter-Gatherers Brand Loyalists

Figure 3.6 Targeting An Active Lifestyle

Table 3.10 Sample Claritas Geodemographic Clusters Blue Blood Estates .8% of U.S. households Professional Elite super-rich College graduate 35-44, 45-54, 55-64 Country club members, own mutual phones, play golf Young Influentials 1.1% of U.S. households Professional College graduate Under 24, 25-34 Yuppies, drink imported beer, read fashion magazines

Figure 3.8 VALS High Resources Low Resources STRUGGLERS FULFILLEDS BELIEVERS ACHIEVERS EXPERIENCERS STRIVERS MAKERS Low Resources High Resources Action Oriented Status Oriented Principle Oriented ACTUALIZERS Figure 3.8 VALS

Figure 3.9 VALS 2 Segments and Participation in Selected Sports

Table 3.11 Size of VALS Segment as Percent of U.S. Population VALSTM SEGMENT PERCENT OF POPULATION Actualizer 11.7% Fulfilled 10.5 Believer 17.0 Achiever 14.7 Striver 11.8 Experiencer 12.9 Maker 12.0 Struggler 9.5

Mindbase Segmentation Monitor Mindbase based on Yankelovich’s Monitor Survey of American Values and Attitudes Table 3.12

Table 3.12 Eight Major Mindbase Segments Up and Comers Young Materialists Stressed by Life New Traditionalists Family Limited Detached Introverts Renaissance Elders Retired from Life

Criteria For Effective Targeting of Market Segments Identification Sufficiency Stability Accessibility