Section 2.2 – Market Segmentation

What You’ll Learn

• What market segmentation is and the four methods used to segment a market

• Analyze a target market

• Differentiate between mass marketing and market segmentation

Identifying and Analyzing Markets

• Businesses look for ways to connect with current and potential customers.

• Marketers must know where their customers live(region), their income level, age, ethnic background, activities, values, and what interests them.

Analyzing Markets

Market segmentation is a way of analyzing a market by specific characteristics in order to create a target market

Analyzing Markets

• Companies study data generated by governments, private research firms, trade associations, and their own research to determine if a given target market is large enough to justify expense.

Types of Segmentation:

• Demographics

• Psychographics

• Geographics

• Behavioral

Demographics – statistics that describe a population in terms of personal characteristics.

• Demographics include– Age– Gender– Income– Marital Status

• Age– Baby Boom Generation

• Born between 1946-1964

• Targets for all types of products, such as technological gadgets, cosmetics and products to enhance lifestyle.

Demographics

• Generation X – Known as the baby bust generation– Most members are children of dual career

households or divorced parents– Savvy purchasers and skeptical consumers.– To reach this group marketers must use

sharp images, music, a sense of humor and meet them on their terms.

Demographics

• Generation Y– Sons and daughters of the later baby

boomers– Known as Echo Boomers or Millennium

Generation– More racially and ethnically diverse with

spending power.– Most members of this generation use email

and surf the Web

Income• Marketers want to know how much

money they have to spend on different products.

Disposable income – money left after taking out taxes

Discretionary income – money left after paying for basic living necessities such as food, shelter, and clothing

Demographics

Demographics

• Gender– Helps create market segments.

• Marital Status – US Census reports 49.7% of total households are married couples.

• Down from 80% in 1950. • Married couples with kids represent 25%

of the population.

Demographics

• Ethnic Background – US is becoming more diverse

U.S. Trend – The percentage of the Caucasian population is declining, while

other ethnic populations increase.

Psychographics

• Involves grouping people with similar lifestyles, as well as shared attitudes, values, and opinions.– Activities: ex. Magazines– Attitudes: Consumers attitudes, such as taking

responsibility for one’s health, eating healthier, and becoming physically fit, are trend setting issues

– Personality & Values

Music teachers, dancers, and other

music lovers would be one category of people who share

psychographic characteristics.

Behavioral Segmentation• Looking at the benefits desired by

consumers, shopping patterns, and usage rate. Market benefits, not just the physical characteristics of a product.

• Many people regardless of status, desire luxury and premium merchandise

Behavioral Segmentation

• Research shows that teenagers spend $50 a month on entertainment. Girls spend $15 more than boys on music.

• Many businesses find that the 80/20 rule applies.

• 80 % of a company’s sales are generated by 20 % of its loyal customers.

Geographics – Segmentation based on where people live-May market locally, regionally, nationally, or globally

Mass Marketing Vs Segmentation

• Mass marketing not as popular as it once was.

• Niche marketing (the current trend) – markets are narrowed down and defined with extreme precision.