BSAD 112 DEMOGRAPHICS AND SEGMENTATION 1 Demographics Demographic variables Social stratification – in the U.S. – in other cultures Measurement of social class

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 2 Definition Demographics : the description of a population in terms its size, distribution, and structure

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 3 Issues in Demographics Population – size: number of individuals – distribution across a geographic region rural, urban, or suburban – Structure age economic stratification occupational distribution status/social class

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 4 Demographics helps Understand current markets--demand for products explained in terms of personal characteristics Predict future markets

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 5 Population U.S. – growing, fueled by immigration rather than birthrates (implications) – shifting (away from Midwest toward South, Southwest) – highly mobile Germany – declining (large incentives given to have children) – traditionally static (immobile) but more mobile now due to unification of East and West Germany opportunities with EC

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 6 Age “Graying” countries – Germany, Japan, U.S. High birthrate areas – Africa, parts of Asia, Latin America Age group vs. demand for products (refer to section on subculture)

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 7 Other Demographic Variables Occupation Education Income Ethnic group (refer to section on subculture) Religious groups Geographic region

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 8 Social Class In the U.S. – often denied – not clearly defined but – clear differences in individual status income power/privilege In India – traditionally defined by rigid caste (now officially outlawed but still in practice) – movement traditionally not permitted In Britain – class differences not legally spelled out, but accepted by tradition – class “consciousness” – some upward movement possible

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 9 Implications for Marketing Strategy – “At level’’--accurately portray class standing Positioning strategies – Upward Pull (opportunity to enjoy pleasures of higher class) – Appeal to newly wealthy (ability to enjoy better things in life now)

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 10 Measuring Social Status--not an easy task Single item measures – education – occupation/licensure – income Multi-item indices – e.g., U.S. Census: occupation, income, education Other issues--e.g., club memberships, family relationships

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 11 SEGMENTATION Bases for segmentation Determining which segments exist Choosing segments to serve Serving chosen segments – positioning – promotion – product features Segmentation in direct marketing Segmentation exercise

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 12 Requirements for Segment Viability Group identity (similarity within, differences between, segments) Systematic behaviors Marketing mix efficiency potential

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 13 Three “Levels” of Segmentation Personal characteristics – lifestyle – personality Benefits sought – attributes – results Behavior – approach to purchase – variety seeking/loyalty Note: Some of these approaches overlap. It is not essential to be dogmatic in distinguishing.

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 14 Level 1: Personal Characteristics Demographics – age, sex, ethnic group – geographic region – education, occupation, social class Media exposure Lifestyle/Psychographics

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 15 Lifestyles and Psychographics: Examples Activities, Interests, and Opinions (AIO) VALS, VALS2 Residence based (e.g., PRIZM)

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 16 The PRIZM System 60 consumer measures within zip code area 36,000 zip code areas Statistical methods used to find areas containing relatively consumers ---> 60 segments

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 17 Level 2 Benefits Sought Based on – differences in arbitrary tastes (e.g., cola vs. non-cola drink) – ideal point – tradeoffs (e.g., taste vs. calories) – usage situation (e.g., coffee for camping (instant) vs. higher quality for home brewing) A consumer in search of benefits.

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 18 Level 3 Behavior Attitude Extent of usage Shopping approach – price elasticity – deal-proneness – brand loyalty – sources of influence on brand choice: advertising sales person store assortment What do you mean you won’t give me a discount? Then I’ll go to the competitors!

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 19 Means of Segmentation in Direct Marketing Income Past purchases Ethnic surnames Credit history Hobbies/interests (magazine subscription lists)

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 20 Sources of Info for Direct Marketing Segmentation Phone books--often contain both names and addresses; yellow pages State registrations (vehicle, driver’s licenses) Past purchases (from company or outside) Professional and school directories Magazine subscription lists Credit rating bureaus

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 21 Advanced Segmentation Techniques in Direct Marketing “ Merge-Purge” – merge: add lists together; add purchased lists to own customer list – purge: sort of duplicates special software allows for standardization of addresses (“phonetic” matching possible )

BSAD 112 DEMOGRAPHICS AND SEGMENTATION 22 Sources of List Value Recency Frequency of purchase Value of past purchases Geography (zip code as surrogate for lifestyle) Gender identifiability