Marketing Essentials

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Marketing Essentials
n Chapter 2 Basic Marketing Concepts
Section 2.2 Market Segmentation
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SECTION 2.2
Market Segmentation
What You'll Learn

• Market segmentation and the four methods commonly
  used to segment a market
• Current demographic, psychographic, and
  geographic trends

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SECTION 2.2
Market Segmentation
Why It's Important
Businesses must know who their customers are to
achieve success. In other words, they must know
their markets. This section will introduce you to
the U.S. marketplace and the different ways
businesses classify and characterize its segments.
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SECTION 2.2
Market Segmentation
Key Terms

• market segmentation
• demographics
• Baby Boom Generation
• Generation X
• Generation Y
• disposable income
• discretionary income
• psychographics
• geographics

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SECTION 2.2
Market Segmentation
Market Segmentation
Dividing the total market into smaller groups of
people who share specific needs and
characteristics is the essence of market
segmentation.
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SECTION 2.2
Market Segmentation
Analyzing Markets
Businesses may segment a market by

• demographics
• psychographics
• geographics
• product benefits

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SECTION 2.2
Market Segmentation
Demographics
Demographics refers to statistics that describe a
population in terms of personal characteristics.
These include

• age
• gender
• income
• ethnic background

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SECTION 2.2
Market Segmentation
Demographics Age
When marketers study age, they classify everyone
according to certain generations, because each
generation tends to have shared experiences and
common bonds. Baby Boom Generation 1946-1964
Generation X 1965-1976
Generation Y 1977-1997
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SECTION 2.2
Market Segmentation
Demographics Gender

• Companies can expand their markets by marketing
  to the other gender, or by marketing their
  products differently to men and women.
• Example Jockey entered the womens market
  with Jockey underwear for women and doubled
  its sales.

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SECTION 2.2
Market Segmentation
Demographics Income
Marketers want to know how much money is
available for spending on different products.
They look at two types of income measurement

• disposable income
• discretionary income

Slide 1 of 2
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SECTION 2.2
Market Segmentation
Demographics Income

• Disposable Income money left over after taxes.
• Important for companies that produce and
  distribute necessities
• Discretionary Income money left after paying
  for food, shelter, and clothing.
• Important for companies that produce and
  distribute luxury items

Slide 2 of 2
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SECTION 2.2
Market Segmentation
Demographics Ethnicity
Marketers often segment the market by ethnicity.
The three largest ethnic groups within the
United States are African-Americans, Hispanics,
and Asian-Americans. These three groups will
account for 33 percent of the U.S. population in
2005.
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SECTION 2.2
Market Segmentation
Census 2000
The United States conducts a census every ten
years to determine the characteristics of the
population. Which ethnic group is declining?
Which ethnic groups are increasing? What effects
will these ethnic changes have on marketing in
the United States?
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SECTION 2.2
Market Segmentation
Psychographics
Psychographics involves studies of consumers
based on social and psychological
characteristics. In addition to segmenting people
by their leisure time interests, marketers
observe trends and changes in households, the
economy, politics, and the workplace.
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SECTION 2.2
Market Segmentation
Geographics
Geographics refers to segmentation of the market
based on where people live. Marketers study
geographics in relation to

• ethnic concentrations
• age
• ethnic background
• income

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SECTION 2.2
Market Segmentation
Product Benefits
Segmenting a market by product benefits involves
studying consumers' needs and wants.

• Example Different shampoos are marketed to
  people with different hair care needs.

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ASSESSMENT
2.2
Reviewing Key Terms and Concepts
1. What do demographics, psychographics,
geographics, and product benefits have in
common? 2. How can a market be segmented using
demographics? 3. What does the study of
psychographics involve?
Slide 1 of 2
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ASSESSMENT
2.2
Reviewing Key Terms and Concepts
4. Provide one example of how a marketer can
segment a market based on product benefits. 5.
Of what significance are the combined
African-American, Hispanic, and Asian-American
populations to marketers?
Slide 2 of 2
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ASSESSMENT
2.2
Thinking Critically
How can Procter and Gamble market household
products to a male market segment? What problems
might PG encounter in that endeavor?
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Marketing Essentials
End of Section 2.2