Market Segmentation

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Market Segmentation

• March 4, 2009

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What Is Segmentation?

• The act of breaking down a large, diverse
  (heterogeneous) market into manageable, more
  similar (homogeneous) submarkets or segments.
• Segmentation is the process of identifying groups
  of people with certain shared characteristics
  within a broad product market.

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• Segmenting the Consumer Market (Shared
  Characteristics)

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1. Behavioristic

• By Purchase Behavior
• Example Wedding Fairs and wedding attire
  promoted early spring because traditionally,
  weddings take place early to late summer.

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2. Geographic

• By Region
• Example Raid Cockroach Spray is promoted in
  Houston and New York where roaches are a problem.

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3. Demographic

• Characteristics
• i.e., sex, age, ethnicity,
  education, occupation
  and
  income.
• Example Baby care products to adults 25-34
  years of age vs. healthcare insurance to adults
  55 years of age.

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4. Psychographic

• Segmented groups based on their values, attitudes
  and lifestyles.
• Example Targeting a new post-workout health
  drink which adds muscle tone to health conscious
  individuals OR State of the Art Golf Club in
  Golf Digest

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Media Usage Patterns

• Identifies consumer markets based on how they use
  media
• Amount of use
• Type of media
• Vehicles

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Targeting

• After basic segmentation
• analysis is completed, marketer
• chooses a target segment as
• the focal point for the marketing campaign.
• Targeting is the focus of all marketing
  activities toward a previously identified
  profitable segment of a market.

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The Target Marketing Process

• To determine the content, look and feel of
  advertising
• Example Designing an ad campaign for men
  between 25-50 years of age who love working
  with their hands. i.e.
  Sears DYI (Do-it-yourself Market)

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Product Life Cycle

• The products position in the Life Cycle
  influences the target market selected and type of
  advertising used.
• Note Humans pass through stages of change in
  their lives and so do products.

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• Four Major Stages in The Product
  Life Cycle

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1. Introduction Stage

• New product introduced to the marketplace
• Educate consumers
• Build widespread distribution
• Stimulate demand
• Example Diet Coke with Lemon,
  Heavy spending period for
  demand pull (vs. supply push)

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2. Growth Stage

• The period of rapid market expansion and repeat
  purchases.
• Note Competitors jump into the
  market, i.e., Pepsi Lemon/Lime
• Example Cellular phones exploded onto the
  scene, sales quadrupled and competitors jumped
  on the bandwagon.

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3. Maturity Stage

• The marketplace becomes saturated as the number
  of new customers dwindles and sales level off.
• Note At this stage companies increase sales only
  at the expense of stealing market share from
  competitors.

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3. Maturity Stage (cont.)

• Example
• Weak companies fall as price promotion takes
  over. In the early to mid 1990s cell phones
  sold for 1,500 and suddenly they were promoted
  for 100 - 200.
• Look at whats happening to
  Plasma Screen TVs today.

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4. Decline Stage

• Due to obsolescence, new technology or changing
  consumer tastes.
• Example Record turntables and LP Albums vs.
  Cassette Tapes ? CDs ? MP3s

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Product Positioning

• The goal is to own a word which positions the
  product in the consumer mind.
• Levis Jeans
• FedEx Dependability
• Volvo Safety
• Disney Fun
• Wal-Mart Value

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• Three Types of Product
  Differences

Hidden Difference
Induced Difference
Perceptible Difference
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1. Perceptible Difference

• Differences are readily apparent
  i.e., unique taste
• Example Dr. Pepper vs. Coke

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2. Hidden Difference

• Not readily seen and must be assumed to be true
  by the consumer.
• Examples
• Jergens Antibacterial Plus Soap
  cleans and kills the germs on your
  hands.
• Purina Fit Trim Dog Food has 15 fewer calories.

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3. Induced Difference

• Advertising is used to create a difference in the
  consumers mind that is not really there.
• Examples
• Lee Flared Cuff Pants will drive men who arent
  already crazy, crazy.
• Pensacola Florida," The perfect place
  for a perfect vacation.

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Other Terms To Be Familiar With

• Direct Marketing
• Takes the store to the consumer.
• mail order-house which communicates
  directly with the consumer.
• Collateral Materials
• Reinforce the brands positioning
• catalogs, brochures, sales kits,
  annual reports etc.

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Other Terms To Be Familiar With

• Sales Promotion
• Free samples, displays, cents-off coupons.
• Designed for a short period of time to compliment
  a marketing program.