Market Segmentation Market Segmentation The process of dividing

Market Segmentation

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.

Three Phases of Marketing Strategy • Phase 1: Market Segmentation • Phase 2: Target Market and Marketing Mix Selection • Phase 3: Product/Brand Positioning

Table 3. 1: Sodexho’s Segmentation of College-age Eating Patterns Star Gazers • Light, healthy foods • Price insensitive • Brand conscious • Employed full-time over summer • Active, out-going • Family income > 100, 000 Fun Express • Variety, taste, and nutrition • Price conscious • Work part-time over summer • Value leisure time • Family income $30, 000 - 60, 000

“Best” Customer Segmentation High Current Share Low Hi-Highs (stroke) Low-Highs (chase) Hi-Lows (tickle) Lo-Lows (starve) Consumption Low

Segmentation Studies • Designed to discover the needs and wants of specific groups of consumers in order to develop specialized products to satisfy specific group needs (e. g. , Centrum) • Designed to guide the repositioning of a product (e. g. , Nintendo) • Used to identify the most appropriate media for advertising (e. g. , People and Teen People)

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

Table 3. 2 Market Segmentation 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, 999, $100, 000 and over Education Some high school, high school graduate, some college, college graduate, postgraduate Occupation Professional, blue-collar, white-collar, agricultural, military

Table 3. 2, 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

SEGMENTATION BASE Use-Related Segmentation Usage rate Awareness status Brand loyalty Use-Situation Segmentation Time Objective Location Person Benefit Segmentation Hybrid Segmentation Demographic/ Psychographics Geodemographics SRI VALSTM SELECTED SEGMENTATION VARIABLES Heavy users, medium users, light users, non users Unaware, interested, enthusiastic None, some, strong Leisure, work, rush, morning, night Personal, gift, snack, fun, achievement Home, work, friend’s home, in-store Self, family members, friends, boss, peers Convenience, social acceptance, long lasting, economy, value-for-the-money Combination of demographic and psychographic profiles of consumer segments profiles “Money and Brains, ” “Black Enterprise, ” “Old Yankee Rows, ” “Downtown Dixie-Style” Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler

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

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

Age: Segmentation by Age Effects and Cohort Effects • Seven Life Development Stages (Table 3. 3) – Provisional Adulthood • Pulling up roots – First Adulthood • Reaching out, Questions/questions, Mid-life explosion – Second Adulthood • Settling Down, Mellowing, Retirement

Marital Status • Households as a consuming unit – Singles – Divorced – Single parents – Dual-income married

Psychological Segmentation • • • Motivations Personality Perceptions Learning Attitudes

AIOs Psychographic (lifestyle) variables that focus on activities, interests, and opinions.

Table 3. 6 Excerpts from AIO Inventory 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. Agree Completely 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. Disagree Completely [1] [2] [3] [4] [5] [6] [7] I like the benefits of the Internet, but I often don’t [1] [2] [3] [4] [5] [6] [7] have the time to take advantage of them.

Table 3. 7 A Hypothetical Psychographic Profile of the Techno-Road-Warrior • 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

Figure 3. 1 Centrum Targets Lifestyle

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

Family Life Cycle • Phases a family goes through in their formation, growth, and final dissolution – Bachelorhood – Honeymooners – Parenthood – Post-parenthood – Dissolution • Explicit basis: marital status, family status • Implicit basis: age, income, employment

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

Figure 3. 2 Campbell’s Seeks to Create Awareness and Interest

Usage-Situation Segmentation • Segmenting on the basis of special occasions or situations • Example Statements: – Whenever our daughter, Jamie, gets a raise, we always take her out to dinner. – When I’m away on business, I try to stay at a suites hotel. – I always buy my wife flowers on Valentine’s Day.

Figure 3. 3 Ad Designed to Spell Out Rewards of Consumer Loyalty

Figure 3. 4 Occasion. Specific Ad

Benefit Segmentation • Segmenting on the basis of the most important and meaningful benefit – Prudential - financial security – Iomega - data protection – Wheaties - good health – Eclipse - fresh breath

Figure 3. 5 Ad Offering Combined Benefits

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

Table 3. 8 Demographic-Psychographic Profile of Newsweek • • Total adult readers 19, 593, 000 Men Professionals/ Managers Age 35 -49 Household income >$100, 000 Married Own laptop PC Spent $3000+ on vacation last year % Index 100. 0 55. 9 35. 3 36. 5 25. 1 62. 4 12. 0 12. 3 100 117 174 114 172 109 150 164

Table 3. 9 Demographic-Psychographic Internet Shopping Styles • • • E-bivalent Newbies Time-Sensitive Materialists Clicks & Mortar Hooked, Online, & Single Hunter-Gatherers Brand Loyalists

Figure 3. 6 Targeting An Active Lifestyle

Table 3. 10 Sample Claritas Geodemographic Clusters Blue Blood Estates • . 8% of U. S. households • Professional • Elite super-rich • College graduate • 35 -44, 45 -54, 55 -64 • Country club members, own mutual phones, play golf Young Influentials • 1. 1% of U. S. households • Professional • College graduate • Under 24, 25 -34 • Yuppies, drink imported beer, read fashion magazines

Figure 3. 8 VALS ACTUALIZERS High Resources Principle Oriented Status Oriented Action Oriented FULFILLEDS BELIEVERS ACHIEVERS EXPERIENCERS STRIVERS STRUGGLERS MAKERS Low Resources

Figure 3. 9 VALS 2 Segments and Participation in Selected Sports

Table 3. 11 Size of VALS Segment as Percent of U. S. Population VALSTM Actualizer Fulfilled Believer Achiever Striver Experiencer Maker Struggler SEGMENT PERCENT OF POPULATION 11. 7% 10. 5 17. 0 14. 7 11. 8 12. 9 12. 0 9. 5

Mindbase Segmentation • Monitor Mindbased on Yankelovich’s Monitor Survey of American Values and Attitudes • Table 3. 12

Table 3. 12 Eight Major Mindbase Segments • • Up and Comers Young Materialists Stressed by Life New Traditionalists • • Family Limited Detached Introverts Renaissance Elders Retired from Life

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