Market Segmentation and Segmentation Strategies A market segment is a specific group of customers with unique customer needs, purchase

behaviors, and identifying characteristics

6-1

Selecting and Entering Market Segments

Single-segment concentration
M1
P1 P2 P3 P1 P = Product M = Market P2 P3 Product specialization M1 M2 M3

Selective specialization
M1
P1 P2 P3

M2

M3

M2

M3

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Selecting and Entering Market Segments (cont)

Market specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 P = Product M = Market

Full market coverage M1 M2 M3

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Segmentation Strategies
Mass Market Large Segment Adjacent Segment MultiSegment Small Segment Niche Segment Mass Customization

Segment A

Segment A

Segment A

Seg A1 Seg A2 Seg A3

Seg A4
Seg A5 Seg B1 Seg B2 Seg B3 Seg C1 Seg C Seg C2 Seg C2
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Segment B

Seg C

Segment B

Perceptual Map
Light #7 N=30 #6 N=39

Miller . #8 N=15
Hamms . Schlitz
. .

Falstaff . Regular
.

Pabst

Blatz
.

#3 N=52

#2 N=79 Premium Budweiser

Meisterbrau #4 N=43 #1 N=82

#5 N=32
Hearty
6-5

Forces that Shape Consumer Market Needs

Segmentation is the Process of Dividing a Larger Market into Smaller Pieces Based on One or More Characteristics.
1. Demographic Age, gender, family structure, income, social class, race & geography 2. Lifestyle Attitudes, values, activities, interests 3. Usage Quantity, time of use, frequency of use
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1. Demographic (Age, gender, family structure, income, social class, race & geography)

1. Geographic Segmentation
Region Pacific; Mountain; West North Central; East North Central; East South Central; South Atlantic; Middle Atlantic; New England Under 5,000; 5,000-19,999; 20,00049,999; 50,000-99,999; 100,000249,999; 250,000-499,999; etc Urban, suburban, rural

Size of city, country or standard metropolitan statistical area Population density Climate

Warm, cold

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1. Demographic Segmentation
Age Under 6; 6-12; 13-19; 20-29; 30-39; 40-49; 50-59; 60+

Gender
Family size Income

Male; Female
1-2; 3-4; 5+ persons Under $15,000; $15,000-$24,999; $25,000-$34,999; $35,000-$49,999; Over $50,000 Professional; craftspeople, foremen; farmers; retired; students; homemakers; unemployed; etc...

Occupation

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PROPENSITY TO CONSUME PRODUCTS BY AGE CATEGORY

Laxatives 35 45 Car Wax Frozen Metal Polish Diarrhea Remedies 99 116

Male Female 18-24 25-34 107 115 141 118

120 117

94 110

110 119

Pizza

Beer, Ale

Yogurt

50 76

35-49
50-64

103
92

104
84

108
87

125
93

135
85

110
126

74
125

173
95

> 65

67

49

60

62

39

114

271
6-9

65

2. Lifestyles (Attitudes, values, activities, interests)

Interests: Benefit Segmentation of the Toothpaste Market Sensory Independent Segment Sociables Worriers Segment
Principal Flavor, Brightness Benefit Product of teeth Sought appearance Decay prevention Price

Demographic Strengths Brands Favored

Children

Teens, Young people Macleans, Plus White, Ultra Brite

Large families Crest

Men

Colgate, Stripe

Brands on sale

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2. Lifestyles

Psychographic Categories
Interests Family Home Opinions Themselves Social issues Demographics Age Education

Activities Work Hobbies

Social events
Vacation Entertainment

Job
Community Recreation

Politics
Business Economics

Income
Occupation Family size

Club membership Fashion

Community Shopping Sports Food Media Achievements

Education
Products Future Culture

Dwelling
Geography City size Life cycle stage
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VALS2
ACTUALIZERS

High Resources
Principle Oriented

Status Oriented

FULFILLEDS

ACHIEVERS

Action Oriented

EXPERIENCERS

BELIEVERS

STRIVERS

MAKERS

Low Resources
STRUGGLERS
SRI Consultings Values and Lifestyle System (VALSTM)
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VALSTM Segment as Percent of the United States Population

VALSTM SEGMENT Actualizer
Fulfilled
Successful, sophisticated, active, high self-esteem, and abundant resources Mature, satisfied, comfortable people who value order, knowledge and responsibility Conservative, conventional people with concrete beliefs and strong attachments to traditional institutions Successful career and work-oriented who control their lives Seek motivation, self-definition and approval from the world around them Young, vital, enthusiastic, impulsive and rebellious Practical people who have constructive skills and value self-sufficiency Chronically poor, ill-educated, low skilled, without strong social bonds

PERCENT OF POPULATION

11.7% 10.5

Believer
Achiever Striver Experiencer Maker Struggler

17.0
14.7

11.8
12.9 12.0
6 - 13

9.5

3. Usage (Quantity, time of use, frequency of use)

Usage Segmentation
Media usage Specific media usage Payment method Loyalty status Usage rate User status Usage situation Newspaper; magazine; TV; Internet Sports Illustrate; Life; Cosmopolitan Cash; Visa; MasterCard; American Express; check None; some; total Light; medium; heavy Nonuser; ex-user; current user; potential user Work; home; vacation; commuting
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Heavy-Half Segmentation
Percentage of Population Non Light Heavy Users Half Half Cola Bourbon Beer Dog Food RTE Cereal Shampoo 22% 59% 67% 67% 4% 18% 39% 20% 16% 16% 48% 41% 39% 21% 17% 17% 48% 41% Volume Non Light Heavy Users Half Half 0% 0% 0% 0% 0% 0% 10% 11% 12% 13% 13% 19% 90% 89% 88% 87% 87% 81%
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Male Beer Drinkers

I like to play poker I would rather spend a quiet evening at home than go out to a party I smoke too much I would like to be a pro football player I would do better than average in a fist fight I go to church regularly Beer is a real mans drink Playboy is one of my favorite magazines I am a girl watcher Men are smarter than women

Percentage of Agreement Non Light Heavy Users Users Users

18

37

41

67 29 10
17 57 9 11 33 22

53 40 15
26 37 16 21 47 27

44 41 21
32 31 44 28 54 31
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Usage Rates
Product
Catsup

Light Buyers
Unmarried or married over age 50 without children

Heavy Buyers
Under 50, 3 or more children

Consumption Multiple 7.8

Frozen Orange Juice

Candy Bars Beer

Under 35 or over 65, not college grads, 2 or fewer children

Under 35, no children

College grads, between 35 and 65

8.0

35 or over, 3 or more children Between 25 & 50, not college grad, TV more than 3.5 hours

21.9

Under 25 or over 50, college educated, nonprofessional, TV less

40.0

than 2 hours
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Forces that Shape Business Market Needs

Firmographic Forces Number of employees Sales volume Number of locations Years in business Financial situation Business Culture Business sophistication Growth orientation Innovativeness Technology Decision making

Usage Behaviors Application Quantity Time of purchase Frequency of purchase Users

6 - 18

Targeting: Evaluating Market Segments

Similar, but Different? Able to be Measured?

Members are similar, but different from others

Size and purchasing power can be measured.

Segments are large enough to be profitable.

Large Enough?
Reachable? Serve the Needs?

Marketing communications can reach the segment.

Marketer can serve the needs of the segment.

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