Market Segmentation

Market SegmentationThe 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 StrategyPhase 1: Market SegmentationPhase 2: Target Market and Marketing Mix SelectionPhase 3: Product/Brand Positioning

Table 3.1: Sodexhos Segmentation of College-age Eating PatternsStar GazersLight, healthy foodsPrice insensitiveBrand consciousEmployed full-time over summerActive, out-goingFamily income > 100,000

Fun ExpressVariety, taste, and nutritionPrice consciousWork part-time over summerValue leisure timeFamily income $30,000 - 60,000

Best Customer Segmentation

High

LowConsumption HighCurrent Share LowLo-Lows(starve)Hi-Highs(stroke)Low-Highs(chase)Hi-Lows(tickle)

Segmentation StudiesDesigned 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 SegmentationGeographic SegmentationDemographic SegmentationPsychological SegmentationPsychographic SegmentationSociocultural SegmentationUse-Related SegmentationUsage-Situation SegmentationBenefit SegmentationHybrid Segmentation Approaches

Table 3.2 Market SegmentationOccupationSEGMENTATION BASESELECTED SEGMENTATION VARIABLESGeographic SegmentationClimateDensity of areaCity SizeRegionSouthwest, Mountain States, Alaska, HawaiiMajor metropolitan areas, small cities, townsUrban, suburban, exurban, ruralTemperate, hot, humid, rainyDemographic SegmentationIncomeMarital statusSexAgeUnder 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+Male, femaleSingle, married, divorced, living together, widowedUnder $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,999, $100,000 and overEducationSome high school, high school graduate, some college, college graduate, postgraduateProfessional, blue-collar, white-collar, agricultural, military

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

Demographic SegmentationAgeSexMarital StatusIncome, Education, and Occupation

Age: Segmentation by Age Effects and Cohort EffectsSeven Life Development Stages (Table 3.3)Provisional AdulthoodPulling up rootsFirst AdulthoodReaching out, Questions/questions, Mid-life explosionSecond AdulthoodSettling Down, Mellowing, Retirement

Marital StatusHouseholds as a consuming unitSinglesDivorcedSingle parentsDual-income married

Psychological SegmentationMotivationsPersonalityPerceptionsLearningAttitudes

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

Table 3.6 Excerpts from AIO InventoryInstructions: 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 dont have the time to take advantage of them.[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]Agree CompletelyDisagree Completely

Table 3.7 A Hypothetical Psychographic Profile of the Techno-Road-WarriorSends and/or receives 15 or more e-mail messages a weekRegularly visits Web sites to gather information and/or to comparison shopOften buys personal items via 800 numbers and/or over the InternetMay trade stocks and/or make travel reservations over the InternetEarns $100,000 or more a year

Figure 3.1 Centrum Targets Lifestyle

Sociocultural SegmentationFamily Life CycleSocial ClassCulture, Subculture, and Cross-Culture

Family Life CyclePhases a family goes through in their formation, growth, and final dissolutionBachelorhoodHoneymoonersParenthoodPost-parenthoodDissolutionExplicit basis: marital status, family statusImplicit basis: age, income, employment

Use-Related SegmentationRate of UsageHeavy vs. LightAwareness StatusAware vs. UnawareBrand LoyaltyBrand Loyal vs. Brand Switchers

Figure 3.2CampbellsSeeks to CreateAwareness and Interest

Usage-Situation SegmentationSegmenting on the basis of special occasions or situationsExample Statements:Whenever our daughter, Jamie, gets a raise, we always take her out to dinner.When Im away on business, I try to stay at a suites hotel.I always buy my wife flowers on Valentines Day.

Figure 3.3Ad Designed to Spell OutRewards of Consumer Loyalty

Figure 3.4Occasion-SpecificAd

Benefit SegmentationSegmenting on the basis of the most important and meaningful benefitPrudential - financial securityIomega - data protectionWheaties - good healthEclipse - fresh breath

Figure 3.5Ad OfferingCombined Benefits

Hybrid Segmentation ApproachesPsychographic-Demographic ProfilesGeodemographic SegmentationSRI Consultings Values and Lifestyle System (VALSTM)

Table 3.8 Demographic-Psychographic Profile of NewsweekTotal adult readers 19,593,000MenProfessionals/ ManagersAge 35-49Household income >$100,000MarriedOwn laptop PCSpent $3000+ on vacation last year

% Index100.0 10055.9 11735.3 17436.5 11425.1 17262.4 10912.0 15012.3 164

Table 3.9 Demographic-Psychographic Internet Shopping StylesE-bivalent NewbiesTime-Sensitive MaterialistsClicks & MortarHooked, Online, & SingleHunter-GatherersBrand Loyalists

Figure 3.6TargetingAn ActiveLifestyle

Table 3.10 Sample Claritas Geodemographic ClustersBlue Blood Estates.8% of U.S. householdsProfessionalElite super-richCollege graduate35-44, 45-54, 55-64Country club members, own mutual phones, play golf

Young Influentials1.1% of U.S. householdsProfessionalCollege graduateUnder 24, 25-34Yuppies, drink imported beer, read fashion magazines

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. PopulationVALSTM SEGMENTPERCENT OF POPULATIONActualizer10.511.7%StrugglerMakerExperiencerStriverAchieverBelieverFulfilled9.512.012.911.814.717.0

Mindbase SegmentationMonitor Mindbase based on Yankelovichs Monitor Survey of American Values and Attitudes Table 3.12

Table 3.12 Eight Major Mindbase SegmentsUp and ComersYoung MaterialistsStressed by LifeNew Traditionalists

Family LimitedDetached IntrovertsRenaissance EldersRetired from Life

Criteria For Effective Targeting of Market SegmentsIdentificationSufficiencyStabilityAccessibility