1. Chapter 3 Marketing Segmentation

2. ©2000 Prentice Hall What is Marketing Segmentation? Who uses market segmentation? How does market segmentation operate?

3. ©2000 Prentice Hall 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.

4. ©2000 Prentice Hall Mass Marketing Offering the same product and marketing mix to all consumers.

5. ©2000 Prentice Hall Positioning Establishing a specific image for a brand in relation to competing brands.

6. ©2000 Prentice Hall Who Uses Market Segmentation? Marketers of consumer goods Retailers Hotels Industrial Manufacturers

7. ©2000 Prentice Hall Repositioning Changing the way a product is perceived by consumers in relation to other brands or product uses.

8. ©2000 Prentice Hall Bases for Segmentation Geographic Segmentation Demographic Segmentation Psychological Segmentation Psychographic Segmentation Sociocultural Segmentation Use-Related Segmentation Usage-Situation Segmentation Benefit Segmentation Hybrid Segmentation Approaches

9. ©2000 Prentice Hall Table 3.1 Market Segmentation Categories and Selected Variables SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Geographic Segmentation Climate Density of area City Size RegionSouthwest, Mountain States, Alaska, Hawaii Major metropolitan areas, small cities, towns Urban, suburban, exurban, rural Temperate, hot, humid, rainy Demographic Segmentation Income Marital status Sex AgeUnder 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+ Male, female Single, married, divorced, living together, widowed Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,000, $100,000 and over Occupation EducationSome high school, high school graduate, some college, college graduate, postgraduate Professional, blue-collar, white-collar, agricultural, military

10. ©2000 Prentice Hall Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Psychological Segmentation Learning-involvement Perception Personality Needs-motivationShelter, 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) SegmentationEconomy-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 classLower, middle, upper Bachelors, young married, full nesters, empty nesters AttitudesPositive attitude, negative attitude Sociocultural Segmentation

11. ©2000 Prentice Hall Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Use-Related Segmentation Brand loyalty Awareness status Usage rateHeavy users, medium users, light users, non users Unaware, aware interested, enthusiastic None, some, strong Use-Situation Segmentation Location Objective TimeLeisure, work, rush, morning, night Personal, gift, snack, fun, achievement Home, work, friend’s home, in-store PersonSelf, family members, friends, boss, peer Benefit SegmentationConvenience, social acceptance, long lasting, economy,value-for-the-money

12. ©2000 Prentice Hall Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Geodemographics“Money and Brains,” “Black Enterprise,” “Old Yankee Rows,” “Downtown Dixie-Style” Demographic/psychographicCombination of demographic and psychographic profiles of consumer segments profiles SRI VALS TM Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler Hybrid Segmentation VALS TM is an example of a demographic/psychographic profile. PRIZM is an example of a geodemographic profile.

13. ©2000 Prentice Hall Geographic Segmentation The division of a total potential market into smaller subgroups on the basis on geographic variables (e.g., region, state, or city).

14. ©2000 Prentice Hall Micro- marketing Highly regionalized marketing strategies that use advertising and promotional campaigns specifically geared to local market needs and conditions.

15. ©2000 Prentice Hall Demographic Segmentation Age Sex Marital Status Income, Education, and Occupation

16. ©2000 Prentice Hall Age Age effects –occurrences due to chronological age Cohort effects –occurrences due to growing up during a specific time period

17. ©2000 Prentice Hall Sex Traditional roles of men and women in purchases Changing sex roles –Dual-income households Working women less accessible through traditional media

18. ©2000 Prentice Hall Marital Status Households as a consuming unit –Singles –divorced –single parents –dual-income married

19. ©2000 Prentice Hall Income, Education, and Occupation Income often combined with other variables for segmentation The three variables tend to be correlated

20. ©2000 Prentice Hall Psychological Segmentation Motivations Personality Perceptions Learning Attitudes

21. ©2000 Prentice Hall AIOs Psychographic variables that focus on activities, interests, and opinions. Also referred to as Lifestyle.

22. ©2000 Prentice Hall Table 3.2 A Portion of an AIO Inventory Used to Identify Techno-Road-Warriors 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. I am generally open to considering new practices and new technology. [1][2][3][4][5][6][7] Agree Completely Disagree Completely

23. ©2000 Prentice Hall Table 3.3 A Hypothetical Psychographic Profile of the Techno-Road-Warrior Goes on the Internet 6-plus times a week 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 Belongs to several rewards programs (for example, frequent flyer programs, hotel programs, rent-a-car programs)

24. ©2000 Prentice Hall Sociocultural Segmentation Family Life Cycle Social Class Culture, Subculture, and Cross-Culture

25. ©2000 Prentice Hall Family Life Cycle Phases a family goes through in their formation, growth, and final dissolution –Bachelorhood –Honeymooners –Parenthood –Post-parenthood –Dissolution

26. ©2000 Prentice Hall Culture, Subculture, an Cross-Culture Segmenting on the basis of cultural heritage –assumes members of the same culture share the same values, beliefs, and customs Subcultures are united by certain experiences, values, or beliefs. –e.g., Hispanic subculture, African American subculture, etc.

27. ©2000 Prentice Hall Use-Related Segmentation Rate of Usage –Heavy vs. Light Awareness Status –Aware vs. Unaware Brand Loyalty –Brand Loyal vs. Brand Switchers

28. ©2000 Prentice Hall Usage-Situation Segmentation Segmenting on the basis of special occasions or situations

29. ©2000 Prentice Hall Benefit Segmentation Segmenting on the basis of the most important benefit sought by consumers when purchasing the product or service –Toothpaste can be bought for Good Taste (e.g., Colgate) Fresh Breath (e.g, Close Up) White Teeth (e.g, Rembrandt) Cavity Protection (e.g., Crest)

30. ©2000 Prentice Hall Hybrid Segmentation Approaches Psychographic-Demographic Profiles Geodemographic Segmentation SRI Consulting’s Values and Lifestyle System (VALS TM )

31. ©2000 Prentice Hall Table 3.4 Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber DEMOGRAPHICSPercent SEX (BASE 990) Men86 Women13 PSYCHOGRAPHICSPercent USE A COMPUTER100 At home96 At work89 On vacation/traveling46 AGE Under 25 5 25 - 3418 35 - 4429 45 - 5431 55 - 6412 65 or older 5 Mean age44.1 SELECTED USE OF COMPUTER Word Processing96 Connect to Internet86 E-mail84 For work80 Accounting/record keeping75 Reference68 Recreation/games66

32. ©2000 Prentice Hall Table 3.4 continued DEMOGRAPHICSPercent PSYCHOGRAPHICSPercent EDUCATION Some college or less27 Graduate college27 Education beyond college graduate46 EMPLOYMENT STATUS Employed by someone else68 Self-employed21 Other11 PORTABLE DEVICES USES WHEN TRAVELING ON BUSINESS Laptop/notebook computer57 Cellular phone47 Beeper or pager30 Personal Digital Assistant/ electronic organizer14

33. ©2000 Prentice Hall Table 3.4 continued DEMOGRAPHICSPercent PSYCHOGRAPHICSPercent OCCUPATION/BUSINESS DEPT. Computer related- professional22 Senior or corporate management16 Engineering-related professional13 Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales26 Others23 TRAVEL FOR BUSINESS/PLEASURE Business Travel 5 or more days per month31 5 or more nights away from home per month17 Pleasure/Vacation Travel 15 or more days per year37 Mean number of days per year15.5 MEMBER OF FREQUENT FLYER PROGRAMS90

34. ©2000 Prentice Hall Table 3.4 continued DEMOGRAPHICSPercentPSYCHOGRAPHICSPercent INCOME Under $30,0007 $30,000 - $49,99915 $50,000 - $74,99924 $75,000 - $99,99919 $100,000 or more24 Mean income$87,700 PRIMARY RESIDENCE Own74 Rent18 Other3 No answer5 FINANCIAL SERVICES Currently own Mutual funds48 Stocks44 Bonds24 Life insurance/annuities44 Currently use Brokerage services36 On-line investment services16 Retirement/financial planning41

35. ©2000 Prentice Hall Table 3.4 continued RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTSPercent Research before choose brand of new product to buy41 Other people ask my opinion about which computer products to buy41 Usually buy products based on quality, not price26 Prefer products that are latest in new technology26 Among group I am one of first to try new product19 Walking/running/jogging63 Exercise/fitness/weight training44 Bicycling7 Swimming37 Golf27 Fishing23 Boating/sailing19 Skiing19 Tennis14 SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEARPercent

36. ©2000 Prentice Hall Table 3.4 continued Listen to music77 Reading61 Going to movies60 Surfing the Internet50 Games-videos on computer48 Gardening32 Going to the theater32 Cooking30 Photography30 Collecting stamps/coins11 Sewing needlecraft6 HOBBIES/OTHER ACTIVITIES PARTICIPATED INPercent Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

37. ©2000 Prentice Hall Table 3.5 Sample Geodemographic Clusters BLUE BLOOD ESTATES 0.8% of United States households Predominant employment: Professional Elite super-rich families Key education level: College grads Adult age range: 35-44, 45-54, 55-64 Characteristics: America’s wealthiest suburbs are populated by established executives, professional, and heirs to “old money.” These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines. BLUE BLOOD ESTATES 0.8% of United States households Predominant employment: Professional Elite super-rich families Key education level: College grads Adult age range: 35-44, 45-54, 55-64 Characteristics: America’s wealthiest suburbs are populated by established executives, professional, and heirs to “old money.” These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines.

38. ©2000 Prentice Hall Table 3.5 continued MID-CITY MIX 1.3% of United States households Predominant employment: Service, white-collar African American Singles and families Key educational level: High school, some college Adult age range: 35-54 Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines. MID-CITY MIX 1.3% of United States households Predominant employment: Service, white-collar African American Singles and families Key educational level: High school, some college Adult age range: 35-54 Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines.

39. ©2000 Prentice Hall Table 3.5 continued GRAY COLLARS 2.1% of United States households Adult age range: 55-64, 65+ Median household income: $31,400 Aging couples in inner suburbs Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial “Rust Belt,” Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950’s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines. GRAY COLLARS 2.1% of United States households Adult age range: 55-64, 65+ Median household income: $31,400 Aging couples in inner suburbs Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial “Rust Belt,” Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950’s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines.

40. ©2000 Prentice Hall Table 3.5 continued YOUNG INFLUENTIALS 1.1% of United States households Predominant employment: Professional, white-collar Upwardly mobile singles and couples Key education level: College grads Adult age range: 24, 25-34 Characteristics: This cluster is dubbed the “Young Urban Professional.” Before getting married they were the educated, high-tech, metropolitan sophisticates, the “swingers” and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines. YOUNG INFLUENTIALS 1.1% of United States households Predominant employment: Professional, white-collar Upwardly mobile singles and couples Key education level: College grads Adult age range: 24, 25-34 Characteristics: This cluster is dubbed the “Young Urban Professional.” Before getting married they were the educated, high-tech, metropolitan sophisticates, the “swingers” and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines.

41. ©2000 Prentice Hall Table 3.5 continued SHOTGUNS AND PICKUPS 1.6% of United States households Predominant employment: Blue-collar, farm Rural blue-collar workers and families Key education level: High school grade school Adult age range: 35-44, 45-54 Characteristics: The least affluent of the “Country Families” clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the “Country Families” group in blue-collar jobs; the majority are married with school- age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines. SHOTGUNS AND PICKUPS 1.6% of United States households Predominant employment: Blue-collar, farm Rural blue-collar workers and families Key education level: High school grade school Adult age range: 35-44, 45-54 Characteristics: The least affluent of the “Country Families” clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the “Country Families” group in blue-collar jobs; the majority are married with school- age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines. Source: Courtesy of Claritas Inc. (PRIZM and 62 Cluster nicknames are registered trademarks of Claritas Inc.). Reprinted by permission.

42. ©2000 Prentice Hall Figure 3-10: SRI Consulting’s Values and Lifestyle System (VALS TM ) ACTUALIZERS STRUGGLERS FULFILLEDS BELIEVERS ACHIEVERS EXPERIENCERS STRIVERSMAKERS Low Resources High Resources Action OrientedStatus Oriented Principle Oriented

43. ©2000 Prentice Hall Figure 3.11 VALS TM 2 Segments and Participation in Selected Sports

44. ©2000 Prentice Hall Table 3.6 The Size of Each VALS TM Segment as Percent of the United States Population VALS TM SEGMENT PERCENT OF POPULATION Actualizer 10.5 11.7% Struggler Maker Experiencer Striver Achiever Believer Fulfilled 9.5 12.0 12.9 11.8 14.7 17.0

45. ©2000 Prentice Hall Criteria For Effective Targeting of Market Segments Identification Sufficiency Stability Accessibility

46. ©2000 Prentice Hall Implementing Segmentation Strategies Concentrated Versus Differentiated Marketing Countersegmentation

47. ©2000 Prentice Hall Counterseg- mentation Strategy A strategy in which a company combines two or more segments into a single segment to be targeted with an individually tailored product or promotion campaign.