Market Segmentation

Lesson 1.4 Activity 1

Vocabulary Market

Segmentation Demographics Baby Boom

Generation Generation X Generation Y

Geographics Psychographic

s Disposable

Income Discretionary

Income

What is Market Segmentation? Market segmentation is

dividing the total market into smaller groups of people who share specific needs and characteristics.

Why it is Important Businesses must know who their customers are in

order to achieve success. After all, the goal of a business is to make a profit!

This lesson will introduce you to the different ways a business segments their markets.

4 Ways to Segment a Market

1. Demographics

2. Psychographics

3. Geographics

4. Product Benefits

Demographics refers to statistics that describe a population in terms of personal characteristics such as: Age Gender Income Level Ethnic Background

1. Demographics

Demographics: Age Marketers classify people according to the

generation they were born in because each generation shares similar experiences. For example: Baby Boomers: Born 1946-1964 Generation X: Born 1965-1976 Generation Y: Born 1977-1997

Demographics: Gender Companies are always looking for ways to

expand their markets. One common way is to market products differently to men and women. For example: Secret Deodorant is not just for a “woman”

anymore. They have expanded their market to deodorants for men.

Demographics: Income Marketers want to know how much money

consumers have for spending on different products. There are two types of income measurement: Disposable Income – Money left over after

paying taxes Discretionary Income – Money left over after

paying for food, shelter, and clothing

Demographics Ethnicity

The U.S. population is becoming more ethnically diverse with increasing purchasing power.

The three largest ethnic groups in the United States; Hispanics, African-Americans, and Asian-Americans are expected to represent 36 percent of the U.S. Population by 2025.

Marketers need to know how to market product and services to culturally diverse populations.

2. Psychographics Psychographics involves the psychological

and social characteristics of consumers. For instance:

Lifestyle – Are they into sports, cooking, the theater? How do they spend their time and money?

Are they health conscience, what do they do for fun?

What are the current work trends like?

3. Geographics

This segmentation refers to where people live. This could be segmented many ways such as:

Locally, Nationally, or Globally In an Ethnic Neighborhood A Retirement Community

Would the same products that sell well in California, also sell well in Maine?

4. Product Benefits Segmenting a market by the benefits a

product provides. For instance:

The shampoo industry

segments the market by

types of shampoo; dry hair, fine, dandruff, tinted, etc.

The Marketing Concept

Consumers

Marketing Research Marketing Segmentation

Product Price Place Promotion

Putting it all together…