Market Segmentation is a way of analyzing a market by specific characteristics in order to create a target market

Market Segmentation Once a target market is clearly identified, a business can customize its product offerings and marketing strategies to that specific group of potential customers Businesses can segment a market by: DemographicsPsychographics GeographicsProduct Benefits Sometimes all 4 methods are used

Demographics Refers to the statistics that describe a population in terms of personal characteristics; they include: Age Income Gender Ethnic Background Education Occupation Once marketers know the demographics of a particular market they can categorize and develop their products to appeal to its members

Age When marketers study age, they classify everyone according to certain generations Each generation tends to have common bonds because they have collectively shared experiences This makes it easier to target The last three markets are: Baby Boom(er) Generation Generation X Generation Y

Baby Boomers There are approximately 76 million baby boomers As of 1/1/2006, a boomer will hit the age of 60 every 7 seconds for the next 19 years! The number of Americans over 65 will double by 2030 Because of their large size and since their spending power increases as they get older, marketers spend a lot of attention to this group They control 2.6 trillion and have about 51% of the wealth in the United States They are prime targets for all types of luxury and recreational items They will remain a strong market for all kinds of products geared towards an aging population

Generation X There are around 40 Million in this age group Often products of duel career households or divorced parents Have been bombarded with media from an early age Tend to be savvy and skeptical consumers Better educated than any previous generation More financially cautious and conservative Prime consumers of cosmetics, fashion, movies and electronics Marketers use sharp images, humor and music to reach this group

Generation Y – Millennials Around 77 Million of you! Most are children of Baby Boomers Growing up during a computer revolution, very comfortable using a computer and searching the internet Accustomed to doing more than one thing at a time Strive to be different than their parents Has 130 million in spending power and influences 250 billion in parent purchases; big ticket items like cars and computers Many buy their own shampoo and toiletries Marketers want to build brand loyalty by attracting consumers when their in their teens

Gender Segmenting by gender is also a tactic of marketers Gender-Neutral products may use different advertising media and messages when targeting men and women

Income Marketers want to know how much money is available for spending on different products Two types of money measurement are looked at; disposable and discretionary income Disposable – money left over after taking out taxes (net) Marketers who distribute and produce and distribute products that are necessities are interested in changes in consumer’s disposable income.

Income - continued Discretionary Income – Money left over after paying basic living necessities like food and shelter and clothing Marketers who sell luxury items are interested in changes in consumer discretionary income

Ethnic Background The United States population is becoming more diversified, mainly because of increased immigration The Caucasian population is declining while other ethnic populations are increasing Understanding the culture and religion of your target market is very important……………. Marketers may use ethically targeted magazines or media to reach ethnic markets

Psychographics Involves studies of consumers based on social and psychological characteristics. People’s attitudes, lifestyles, and values are studied by marketers The way people spend their time and money are closely related to attitudes and lifestyles People with similar interests and values are a way marketers gear their products/services towards them; Golf Digest, Photography, Sports Illustrated, Marie Claire, good Houskeeping

Psychographics continued…. Trends Marketers also observe changes in consumers households, the economy, politics and the workplace because these factors also contribute to changes in personal attitudes about health, time, fun, and living in general Health and nutrition are big trends of the 21 st century, as well as exercising and taking care of yourself low-calorie, fat – free, low sodium, are just a few examples of foods you see in grocery stores Fast-food chains also have lower calorie options and kids meals

Trends continued… Workplace Trends – “Business Casual” Casual is the norm for a lot businesses Wrinkle Reducer by Wisk is product geared toward this trend We are encouraged to “take a break”, Mcdonalds, Ben and Jerry’s – indulge yourself, Women are Worth it –Loreal, Dove chocolate etc… Time – has become a commodity to market Recreation and vacations have become the # 1 luxury ofAmericans

Trends continued… Before the recession there was an increase in spending with Entertainment such as concerts, Sports, electronics, theme parks etc… Upscaling is also a trend; name brands and premium products; people define themselves through the products and brands they buy

Geographics Refers to segmentation based on where people live Geographically you can segment locally, regional, national, or global markets Marketers study where people live to better target to them with media and ads Some local businesses cater to their customers Ethnic concentrations are also considered

Product Benefits Segmenting by product benefits involves studying consumers’ needs and wants Companies market product benefits not just the physical characteristics Examples: Soda ~ Diet, Caffeine free Sneakers ~ Bball, Soccer, Football, Runners, aerobic Shampoo ~ Dry, Oily, Straight, curly Toothpaste ~ Cavity protection, Whitening, Sensitive Teeth etc.