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Chapter 3

Chapter 3 . Marketing Segmentation. What is Marketing Segmentation?. Who uses market segmentation? How does market segmentation operate?. Market Segmentation.

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Chapter 3

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  1. Chapter 3 Marketing Segmentation

  2. What is Marketing Segmentation? • Who uses market segmentation? • How does market segmentation operate?

  3. Market Segmentation The 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.

  4. Mass Marketing Offering the same product and marketing mix to all consumers.

  5. Positioning Establishing a specific image for a brand in relation to competing brands.

  6. Who Uses Market Segmentation? • Marketers of consumer goods • Retailers • Hotels • Industrial Manufacturers

  7. Repositioning Changing the way a product is perceived by consumers in relation to other brands or product uses.

  8. Bases for Segmentation • Geographic Segmentation • Demographic Segmentation • Psychological Segmentation • Psychographic Segmentation • Sociocultural Segmentation • Use-Related Segmentation • Usage-Situation Segmentation • Benefit Segmentation • Hybrid Segmentation Approaches

  9. Table 3.1 Market Segmentation Categories and Selected Variables SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Geographic Segmentation Region Southwest, Mountain States, Alaska, Hawaii City Size Major metropolitan areas, small cities, towns Density of area Urban, suburban, exurban, rural Climate Temperate, hot, humid, rainy Demographic Segmentation Age Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+ Sex Male, female Marital status Single, married, divorced, living together, widowed Income Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,000, $100,000 and over Education Some high school, high school graduate, some college, college graduate, postgraduate Occupation Professional, blue-collar, white-collar, agricultural, military

  10. Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Psychological Segmentation Needs-motivation Shelter, safety, security, affection, sense of self-worth Personality Extroverts, novelty seeker, aggressives, low dogmatics Perception Low-risk, moderate-risk, high-risk Learning-involvement Low-involvement, high-involvement Attitudes Positive attitude, negative attitude Psychographic (Lifestyle) Segmentation Economy-minded, couch potatoes outdoors enthusiasts status seekers Sociocultural Segmentation Cultures American, Italian, Chinese, Mexican, French, Pakistani Religion Catholic, Protestant, Jewish, Moslem, other Subcultures (Race/ethnic) African-American, Caucasian, Asian, Hispanic Social class Lower, middle, upper Family life cycle Bachelors, young married, full nesters, empty nesters

  11. Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Use-Related Segmentation Usage rate Heavy users, medium users, light users, non users Awareness status Unaware, aware interested, enthusiastic Brand loyalty None, some, strong Use-Situation Segmentation Time Leisure, work, rush, morning, night Objective Personal, gift, snack, fun, achievement Location Home, work, friend’s home, in-store Person Self, family members, friends, boss, peer Benefit Segmentation Convenience, social acceptance, long lasting, economy,value-for-the-money

  12. Table 3.1 continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Hybrid Segmentation Demographic/psychographic Combination of demographic and psychographic profiles of consumer segments profiles Geodemographics “Money and Brains,” “Black Enterprise,” “Old Yankee Rows,” “Downtown Dixie-Style” SRI VALSTM Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler VALSTM is an example of a demographic/psychographic profile. PRIZM is an example of a geodemographic profile.

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

  14. Micro-marketing Highly regionalized marketing strategies that use advertising and promotional campaigns specifically geared to local market needs and conditions.

  15. Demographic Segmentation • Age • Sex • Marital Status • Income, Education, and Occupation

  16. Age • Age effects • occurrences due to chronological age • Cohort effects • occurrences due to growing up during a specific time period

  17. Sex • Traditional roles of men and women in purchases • Changing sex roles • Dual-income households • Working women less accessible through traditional media

  18. Marital Status • Households as a consuming unit • Singles • divorced • single parents • dual-income married

  19. Income, Education, and Occupation • Income often combined with other variables for segmentation • The three variables tend to be correlated

  20. Psychological Segmentation • Motivations • Personality • Perceptions • Learning • Attitudes

  21. AIOs Psychographic variables that focus on activities, interests, and opinions. Also referred to as Lifestyle.

  22. Table 3.2 A Portion of an AIO Inventory Used to Identify Techno-Road-Warriors Instructions: 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 don’t have the time to take advantage of them. I am generally open to considering new practices and new technology. Agree Completely Disagree Completely [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] [1] [2] [3] [4] [5] [6] [7]

  23. Table 3.3 A Hypothetical Psychographic Profile of the Techno-Road-Warrior • Goes on the Internet 6-plus times a week • Sends and/or receives 15 or more e-mail messages a week • Regularly visits Web sites to gather information and/or to comparison shop • Often buys personal items via 800 numbers and/or over the Internet • May trade stocks and/or make travel reservations over the Internet • Earns $100,000 or more a year • Belongs to several rewards programs (for example, frequent flyer programs, hotel programs, rent-a-car programs)

  24. Sociocultural Segmentation • Family Life Cycle • Social Class • Culture, Subculture, and Cross-Culture

  25. Family Life Cycle • Phases a family goes through in their formation, growth, and final dissolution • Bachelorhood • Honeymooners • Parenthood • Post-parenthood • Dissolution

  26. Culture, Subculture, an Cross-Culture • Segmenting on the basis of cultural heritage • assumes members of the same culture share the same values, beliefs, and customs • Subcultures are united by certain experiences, values, or beliefs. • e.g., Hispanic subculture, African American subculture, etc.

  27. Use-Related Segmentation • Rate of Usage • Heavy vs. Light • Awareness Status • Aware vs. Unaware • Brand Loyalty • Brand Loyal vs. Brand Switchers

  28. Usage-Situation Segmentation • Segmenting on the basis of special occasions or situations

  29. Benefit Segmentation • Segmenting on the basis of the most important benefit sought by consumers when purchasing the product or service • Toothpaste can be bought for • Good Taste (e.g., Colgate) • Fresh Breath (e.g, Close Up) • White Teeth (e.g, Rembrandt) • Cavity Protection (e.g., Crest)

  30. Hybrid Segmentation Approaches • Psychographic-Demographic Profiles • Geodemographic Segmentation • SRI Consulting’s Values and Lifestyle System (VALSTM)

  31. Table 3.4 Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent SEX (BASE 990) Men 86 Women 13 USE A COMPUTER 100 At home 96 At work 89 On vacation/traveling 46 AGE Under 25 5 25 - 34 18 35 - 44 29 45 - 54 31 55 - 64 12 65 or older 5 Mean age 44.1 SELECTED USE OF COMPUTER Word Processing 96 Connect to Internet 86 E-mail 84 For work 80 Accounting/record keeping 75 Reference 68 Recreation/games 66

  32. Table 3.4 continued DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent EDUCATION Some college or less 27 Graduate college 27 Education beyond college graduate 46 PORTABLE DEVICES USES WHEN TRAVELING ON BUSINESS Laptop/notebook computer 57 Cellular phone 47 Beeper or pager 30 Personal Digital Assistant/ electronic organizer 14 EMPLOYMENT STATUS Employed by someone else 68 Self-employed 21 Other 11

  33. Table 3.4 continued DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent OCCUPATION/BUSINESS DEPT. Computer related- professional 22 Senior or corporate management 16 Engineering-related professional 13 Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales 26 Others 23 TRAVEL FOR BUSINESS/PLEASURE Business Travel 5 or more days per month 31 5 or more nights away from home per month 17 Pleasure/Vacation Travel 15 or more days per year 37 Mean number of days per year 15.5 MEMBER OF FREQUENT FLYER PROGRAMS 90

  34. Table 3.4 continued DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent INCOME Under $30,000 7 $30,000 - $49,999 15 $50,000 - $74,999 24 $75,000 - $99,999 19 $100,000 or more 24 Mean income $87,700 FINANCIAL SERVICES Currently own Mutual funds 48 Stocks 44 Bonds 24 Life insurance/annuities 44 Currently use Brokerage services 36 On-line investment services 16 Retirement/financial planning 41 PRIMARY RESIDENCE Own 74 Rent 18 Other 3 No answer 5

  35. Table 3.4 continued RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTS Percent SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEAR Percent Research before choose brand of new product to buy 41 Other people ask my opinion about which computer products to buy 41 Usually buy products based on quality, not price 26 Prefer products that are latest in new technology 26 Among group I am one of first to try new product 19 Walking/running/jogging 63 Exercise/fitness/weight training 44 Bicycling 7 Swimming 37 Golf 27 Fishing 23 Boating/sailing 19 Skiing 19 Tennis 14

  36. Table 3.4 continued HOBBIES/OTHER ACTIVITIES PARTICIPATED IN Percent Listen to music 77 Reading 61 Going to movies 60 Surfing the Internet 50 Games-videos on computer 48 Gardening 32 Going to the theater 32 Cooking 30 Photography 30 Collecting stamps/coins 11 Sewing needlecraft 6 Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

  37. Table 3.5 Sample Geodemographic Clusters • BLUE BLOOD ESTATES • 0.8% of United States households • Predominant employment: Professional • Elite super-rich families • Key education level: College grads • Adult age range: 35-44, 45-54, 55-64 • Characteristics: America’s wealthiest suburbs are populated by established executives, professional, and heirs to “old money.” These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines.

  38. Table 3.5 continued • MID-CITY MIX • 1.3% of United States households • Predominant employment: Service, white-collar • African American Singles and families • Key educational level: High school, some college • Adult age range: 35-54 • Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines.

  39. Table 3.5 continued • GRAY COLLARS • 2.1% of United States households • Adult age range: 55-64, 65+ • Median household income: $31,400 • Aging couples in inner suburbs • Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial “Rust Belt,” Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950’s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines.

  40. Table 3.5 continued • YOUNG INFLUENTIALS • 1.1% of United States households • Predominant employment: Professional, white-collar • Upwardly mobile singles and couples • Key education level: College grads • Adult age range: 24, 25-34 • Characteristics: This cluster is dubbed the “Young Urban Professional.” Before getting married they were the educated, high-tech, metropolitan sophisticates, the “swingers” and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines.

  41. Table 3.5 continued • SHOTGUNS AND PICKUPS • 1.6% of United States households • Predominant employment: Blue-collar, farm • Rural blue-collar workers and families • Key education level: High school grade school • Adult age range: 35-44, 45-54 • Characteristics: The least affluent of the “Country Families” clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the “Country Families” group in blue-collar jobs; the majority are married with school-age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines. Source: Courtesy of Claritas Inc. (PRIZM and 62 Cluster nicknames are registered trademarks of Claritas Inc.). Reprinted by permission.

  42. ACTUALIZERS Figure 3-10:SRI Consulting’s Values and Lifestyle System (VALSTM) High Resources Principle Oriented Status Oriented Action Oriented FULFILLEDS ACHIEVERS EXPERIENCERS BELIEVERS STRIVERS MAKERS STRUGGLERS Low Resources

  43. Figure 3.11 VALSTM 2 Segments and Participation in Selected Sports

  44. Table 3.6 The Size of Each VALSTM Segment as Percent of the United States Population VALSTM SEGMENT PERCENT OF POPULATION Actualizer 11.7% Fulfilled 10.5 Believer 17.0 Achiever 14.7 Striver 11.8 Experiencer 12.9 Maker 12.0 Struggler 9.5

  45. Criteria For Effective Targeting of Market Segments • Identification • Sufficiency • Stability • Accessibility

  46. Implementing Segmentation Strategies • Concentrated Versus Differentiated Marketing • Countersegmentation

  47. Counterseg-mentation Strategy A strategy in which a company combines two or more segments into a single segment to be targeted with an individually tailored product or promotion campaign.

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