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Part 3 Marketplace DynamicsChapter 16

Segmenting a Market

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Chapter Objectives

Explain how segmentation helps a marketer determine a market to target.

List the four categories of segmentation variables for the consumer market.

Explain each segmentation category and give one example.

Describe how marketers use more than one segmentation variable.

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Segmentation variable customer characteristic used to segment

a market

Market Segmentation

Adult

Teen

Child

Baby

Senior

Age Income

Medium

Low

High

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Market Segmentation

Segmentation variables are organized into four categories geographic demographic psychographic behavioral

What customer characteristics come to mind when you consider these categories?

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Geographic Variables

Geographic segmentation dividing a market based on where

customers live

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Location

Location not climate geography of place customs of place

Example: car manufacturer For the United Kingdom market,

steering wheel on the right For the United States market,

steering wheel on the left

U.S.A.

U.K.

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Climate

Climate different climates

require different types of products, such as– clothing– automobile tires– housing– heating and air

conditioning

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City Size

Market size often varies with city size for some products,

a small city might not have a large enough market to generate enough profitLarge

Medium

Small

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City Size

Example: some restaurant chains will open only in cities of 200,000 or more people

Conversely, some products are very successful in small markets

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Demographic Variables

Census count of the people in a country made by

the government on a regular basis– the U.S. government takes a census

every ten years Demographic information

statistics (numbers) that describe the characteristics of a population– collected in a census

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Demographic Variables

Demographic variables are used to segment large markets into smaller markets that might be good target markets

Demographic segmentation the process of segmenting a market

based on demographic variables

Choose a demographic variable. How would you use it to segment a market?

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Age

Generation group of people who were born or grew up

during a particular period of history People in the same generation generally

have similar attitudes, wants, and needs The U.S. consumer market is often

segmented by generations

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In which generation do you belong?your parents?

Age

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Gender

Markets are often segmented into products for men or women

Name some products that were developed to meet the specific needs of men or women.

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Ethnicity

Needs for many products vary with ethnic or cultural heritage examples

– ingredients for making ethnic foods

– items for religious practices

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Income

Marketers are interested in two categories of income disposable income

– money left after taxes are taken out discretionary income

– money left after taxes are taken out and after necessities are paid for

A market is often segmented based on income levels

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Family Size

Families of different sizes have different needs

Describe the differences in purchases between a single person and a large family.

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PsychographicVariables

Psychographic segmentation based on psychological characteristics of

customers

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Hobbies and Activities

People who participate in the same hobbies and activities often buy similar things examples of hobbies and activities

– photography– quilting– stamp collecting– sports– cultural events

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Behavioral Variables

Behavioral segmentation dividing a market based on the way

customers use a product Behavioral variables include

features desired usage rate brand loyalty

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Features Desired

Customers vary in the features they want some just want the

basics others want advanced

or extra features

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Usage Rate

80/20 rule most of the profits (80%) come from a few

customers (20%) who show the greatest brand loyalty

Marketers often segment the market based on customer usage rates heavy, moderate, light, nonuse

How could you use the difference in usage rate to segment a market?

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Market Segment Profile

Market segment profile a detailed description of the typical

customer in a market segment Includes information on

geographic variables demographics psychographics behavior relevant to the product