Section 2.2 Market Segmentation

Market Segmentation is a way of analyzing a market by specific characteristics in order to

create a target market

Market SegmentationOnce a target market is clearly identified, a

business can customize its product offerings and marketing strategies to that specific group of potential customers

Businesses can segment a market by:Demographics PsychographicsGeographics Product BenefitsSometimes all 4 methods are used

Demographics Refers to the statistics that describe a population in

terms of personal characteristics; they include:

AgeIncomeGenderEthnic BackgroundEducationOccupation

Once marketers know the demographics of a particular market they can categorize and develop their products to appeal to its members

AgeWhen marketers study age, they classify

everyone according to certain generationsEach generation tends to have common

bonds because they have collectively shared experiences

This makes it easier to targetThe last three markets are:

Baby Boom(er) GenerationGeneration XGeneration Y

Baby Boomers 1946-1964There are approximately 76 million baby boomers

As of 1/1/2006, a boomer will hit the age of 60 every 7 seconds for the next 19 years!

The number of Americans over 65 will double by 2030Because of their large size and since their spending power

increases as they get older, marketers spend a lot of attention to this group

They control 2.6 trillion and have about 51% of the wealth in the United States

They are prime targets for all types of luxury and recreational items

They will remain a strong market for all kinds of products geared towards an aging population

Generation X 1965-1976There are around 40 Million in this age groupOften products of duel career households or

divorced parentsHave been bombarded with media from an early ageTend to be savvy and skeptical consumersBetter educated than any previous generationMore financially cautious and conservativePrime consumers of cosmetics, fashion, movies and

electronicsMarketers use sharp images, humor and music to

reach this group

Generation Y – Millennials 1977- 2000Around 77 Million of you! Most are children of Baby

BoomersGrowing up during a computer revolution, very

comfortable using a computer and searching the internetAccustomed to doing more than one thing at a timeStrive to be different than their parentsHas 130 million in spending power and influences 250

billion in parent purchases; big ticket items like cars and computers

Many buy their own shampoo and toiletriesMarketers want to build brand loyalty by attracting

consumers when their in their teens

GenderSegmenting by gender is also a tactic of

marketersGender-Neutral products may use different

advertising media and messages when targeting men and women

IncomeMarketers want to know how much money is

available for spending on different productsTwo types of money measurement are looked

at; disposable and discretionary income

Disposable – money left over after taking out taxes (net)

Marketers who distribute and produce and distribute products that are necessities are interested in changes in consumer’s disposable income.

Income - continuedDiscretionary Income – Money left over after

paying basic living necessities like food and shelter and clothing

Marketers who sell luxury items are interested in changes in consumer discretionary income

Ethnic BackgroundThe United States population is becoming

more diversified, mainly because of increased immigration

The Caucasian population is declining while other ethnic populations are increasing

Understanding the culture and religion of your target market is very important…………….

Marketers may use ethically targeted magazines or media to reach ethnic markets

PsychographicsInvolves studies of consumers based on social

and psychological characteristics.People’s attitudes, lifestyles, and values are

studied by marketersThe way people spend their time and money

are closely related to attitudes and lifestylesPeople with similar interests and values are a

way marketers gear their products/services towards them; Golf Digest, Photography, Sports Illustrated, Marie Claire, good Houskeeping

Psychographics continued….TrendsMarketers also observe changes in consumers

households, the economy, politics and the workplace because these factors also contribute to changes in personal attitudes about health, time, fun, and living in general

Health and nutrition are big trends of the 21st century, as well as exercising and taking care of yourself

low-calorie, fat – free, low sodium, are just a few examples of foods you see in grocery stores

Fast-food chains also have lower calorie options and kids meals

Trends continued…Workplace Trends – “Business Casual” Casual

is the norm for a lot businessesWrinkle Reducer by Wisk is product geared

toward this trendWe are encouraged to “take a break”,

Mcdonalds, Ben and Jerry’s – indulge yourself, Women are Worth it –Loreal, Dove chocolate etc…

Time – has become a commodity to marketRecreation and vacations have become the # 1

luxury ofAmericans

Trends continued…Before the recession there was an increase in

spending with Entertainment such as concerts, Sports, electronics, theme parks etc…

Upscaling is also a trend; name brands and premium products; people define themselves through the products and brands they buy

GeographicsRefers to segmentation based on where

people liveGeographically you can segment locally,

regional, national, or global marketsMarketers study where people live to better

target to them with media and adsSome local businesses cater to their

customersEthnic concentrations are also considered

Product BenefitsSegmenting by product benefits involves

studying consumers’ needs and wantsCompanies market product benefits not just

the physical characteristicsExamples:

Soda ~ Diet, Caffeine freeSneakers ~ Bball, Soccer, Football, Runners,

aerobicShampoo ~ Dry, Oily, Straight, curlyToothpaste ~ Cavity protection, Whitening,

Sensitive Teeth etc.