MARKET

2
SEGMENTATION
AND THE
MARKETING
ENVIRONMENT
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPTs t/a Consumer Behaviour by Karen Webb
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Market segmentation and the marketing
environment
At the end of this session, you should understand:
• What is meant by the marketing environment and its
relationship to consumer behaviour
• The trends in consumption behaviour and the marketing
environment in the ‘noughties’
• The underlying principles of consumer behaviour and how
to explain the concept of segmentation
• The broad approaches to segmentation in consumer and
business markets
• The conditions for effective segmentation and the
advantages and limitations of segmenting markets
• The ways that various target marketing strategies are used to
satisfy customer needs

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-2
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 The marketing environment in the
‘noughties’
• The marketing environment
includes all factors
that influence the operation
of a business and its
effectiveness in the
marketplace

See EXHIBIT 2.1 Peppercorn Food Company

addresses the trend towards healthier eating,
page 35.
PowerPoint slides supplied on the Instructor
Resource CD to accompany Consumer
Behaviour include advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-3
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Technology boom

• Technology - affordable, accessible and user

friendly
– Changing the way consumers, live, buy and consume,
i.e. SMS competition promotions, searching for products
and buying them online (globally), match to lifestyle

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-4
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Social/cultural factors
• Focus on healthier lifestyles
– nutritional issues, natural medicine, healthy fast food, psychology,
relaxation therapies
• Multicultural
– wide variety of foods, activities and product/service
experiences from all over the world
• Time poor consumers
– work to leisure time ratio, fast paced lifestyle
• Changing gender roles
– role changes in family units, single families
• Household consumption
– media consumption becoming fragmented, Internet buying
• Environmental issues

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-5
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Changing gender roles

See EXHIBIT 2.10 Marketers of skin care products are

now successfully targeting men, page 40.

PowerPoint slides supplied on the Instructor Resource

CD to accompany Consumer Behaviour include
advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-6
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Segmentation
• The process of dividing the market into different groups
• Allows the marketer to better respond to the needs of the
consumer through different marketing mixes
• Five steps
1. Research needs or buying motivations i.e. for toilet paper -
price conscious, softest and best quality, or environmentally friendly
2. Consider how the needs relate to the segmentation bases

Geographic

Demographic

Psychographic

Product-related benefit segmentation
3. Describe segments as distinct groups i.e. ‘budget conscious’
4. Determine which segment will be targeted and the positioning
approach
5. Develop an appropriate marketing mix

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-7
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Geographic
• Grouping people according to their geographic
location

• International country or region, state, regional area

within a state, city/town, suburb, rural, urban

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-8
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Demographic
• Age
• Gender
• Family life cycle
• Occupation
• Education
• Ethnic background

EXHIBIT 2.11 Using demographic criteria to

segment the market, page 43

PowerPoint slides supplied on the Instructor

Resource CD to accompany Consumer
Behaviour include advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-9
Slides prepared by Sarah Fletcher and Morena Dobrowolski
Geodemographic

• Combining geographic and demographic

information

• Based on the assumption that people living in

similar areas have similar needs, wants and
purchasing behaviour

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-10
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Psychographic
• Profiles developed by
considering attitudes,
interests and opinions
• Grouping consumers
according to similar lifestyle
traits, i.e health conscious,
environmentally aware,
adventure seekers

See EXHIBIT 2.12 American Express appeals to

lifestyle segments, page 43

PowerPoint slides supplied on the Instructor

Resource CD to accompany Consumer Behaviour
include advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-11
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Product-related benefit segmentation
• Based on the benefits
desired from the product
category

• These can vary with usage

situation

See EXHIBIT 2.13 An example of product-

related segmentation, page 44.

PowerPoint slides supplied on the Instructor

Resource CD to accompany Consumer
Behaviour include advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-12
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Describe segments - activity

• List the needs and motives for:

‘budget conscious’ or ‘home beautifuls’

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-13
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Determine which segments to target and
the positioning approach
• All segments? One segment? A couple of
segments? What should an organisation do when
customers can be clearly segmented?

• Considering ‘home beautifuls’ or ‘budget conscious’

renovation segments, how could an organisation
serve both with its approach to meeting their
needs?

• Would this be different if they chose to only serve

one of these segments? How?

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-14
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Determine the appropriate marketing
mix
• The target market is that group of customers
chosen as the focus of the organisation’s
marketing effort

• A clear or distinct identity must be achieved,

showing clear benefits to the target market –
this is the positioning strategy

• The marketing mix is used to:

– Communicate and deliver this strategy
– Differentiate the organisation’s offering from competitors’
– Maximise satisfaction with the offering

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-15
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Market aggregation
• Market aggregation:
– Treating the total market as one unit
– Useful when customers have similar perceptions
about the offering
– Profitable if economies of scale can be achieved

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-16
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Broad approaches to segmentation

• What business is the company really in?

• What is the psychological basis of the wants and

needs of the customers?

• What is happening in the market? Is the structure

changing?

• Will technology, new products, or competitor

threats change the market?
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPTs t/a Consumer Behaviour by Karen Webb 2-17
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Changes in the market and impact for
marketers

See EXHIBIT 2.15 Yates provides water-saving

solutions, page 48.

PowerPoint slides supplied on the Instructor Resource

CD to accompany Consumer Behaviour include
advertisement images.

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-18
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Conditions for effective segmentation

• Measurable

• Accessible

• Large enough to be profitable

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-19
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Advantages and limitations of segmenting
markets
• Benefits
– Allows better satisfaction of customers
– More efficient use of marketing resources

• Limitations
– Expensive to produce small quantities for limited
market size
– Difficult to know where to identify a segment
– Smaller business may have difficulty segmenting

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-20
Slides prepared by Sarah Fletcher and Morena Dobrowolski
 Business market segmentation
• Geographic segmentation
– Regional variables

Customer concentration

Regional industrial growth

International macroeconomic factors
– Useful if customers have similar needs
– Not effective where customers’ needs not considered
• Customer type and size
– Size of organisation
– Industry of customer
– The offering of the customer (what they make or sell)

Copyright  2005 McGraw-Hill Australia Pty Ltd

PPTs t/a Consumer Behaviour by Karen Webb 2-21
Slides prepared by Sarah Fletcher and Morena Dobrowolski