Market

Segmentation

Consider
the role of segmentation in marketing strategy
types of market segmentation in

1.
2.

3.
4.
5.
6.

consumer markets B2C

industrial B2B

criteria & bases for segmenting consumer markets.

the segmentation process & basic strategies
positioning & repositioning
factors behind segmentation strategy choices.

Overview

discover needs/wants of consumer groups

to develop specialised products to satisfy
group needs
identify the best media for advertising
related concepts (STP)

Segmentation (subsets with similar needs)

Targeting (which segment to aim for)
Positioning (the product in the mind of the
customer)
3

Target Market Analysis

What market segments are

we choosing to serve
Why?
How are these segments
evolving?
What new segments are
emerging?

Mass marketing?

econ of scale

Micromarketing

clear segment
a Niche
a Locality
an Individual
4

Concentrated (niche) & micro-marketing

Niche
commit all marketing resources to serve a single
market segment
Attractive to small firms with limited resources and
to firms offering highly specialized goods and
services
Micro-marketing
target potential customers at a very basic level,
such as by ZIP code, specific occupation, lifestyle,
or individual household
WWW & Internet makes micromarketing more
effective
5

Trainers that meet the

special needs of
women and their feet.

Market Aggregation
The market

No segmentation
heterogenous
customers
homogenous
product
no differentiation

Segments must be

Segmentation

...based
on customer-based
characteristics or
product attributes

Identifiable
Measurable
Accessible,
reachable

Substantial enough
Unique enough
Durable/stable

S-1

S-3

Good market segmentation

has internally
homogenous members
and
is externally
heterogeneous

S-2
8

Targeting

Choice criteria?

Focus on segment(s)
providing most value
Pareto Principle
the 20% who
provide 80% of
sales value
Group e.g. by
-age
-sex
-income
-lifestyle

S-1

S-3
S-2
9

Value segmentation Pareto - illustrations

The 80/20 rule

Brand User

20%
20%

Loyal

80%
20%

Semi-Loyal
Switchers

Competitive
Brand User

40%

Non User
.
of
Category

20%

Source: Garth Hallberg

Revenue/Profits

10

Tasks in Strategic Marketing Plans

Before implementing a marketing mix

strategy (7Ps), identify, evaluate & select a
target market.

Who has the purchasing power, authority &

willingness to buy?
What specific consumer segment is most
likely to buy the product?

Now target the market, design a

programme to fit, implement it

11

Positioning

Low Price

premium

Consistent quality

convenient

Not accessible

accessible

Brand conscious

D
12

Positioning

shaping the product &

developing a marketing
programme so that
product is perceived to be
(and is) different from
competitors products.
Positioning map: to
show differences in
consumers perceptions of
competing products
Reposition: marketing
strategy to change a
products position in
consumers minds relative
to positions of rival
product

13

B2C and B2B Goods

identify the purchaser + reasons for buying

the goods
Consumer goods (B2C)

products & services bought by the end consumer

for personal use.

Business goods (B2B)

Products/services bought to be used, directly or

indirectly, to produce or supply other
goods/services or for resale e.g. 5 litre tomato
sauce containers for food service operators
14

Bases for Market Segmentation

Demographic
Gender
Age
Family life cycle
Race/Ethnic group
Social class
Education
Income
Occupation
Family size
Religion
Home ownership

Psychographic
Segmentation

Activities
Interests
Opinions, Attitudes & Values

(AIO) surveys for measuring

Potential
Markets

lifestyle. Lifestyles

Personality
Self-image

Behavioural
Geographicn
Country
Region
Urban/Suburban/Rural
Population density
City size
Climate

Geo-Demographic
Ethnic .. "birds of a
feather flock together"

actual behavior toward product itself. A

good starting point for segmentation
Benefits sought
Usage rate
Brand loyalty
User status: potential, 1st-time, regular
etc.
Readiness to buy
Occasions: holidays & events that
stimulate purchases

15

Decisions Affected by Segmentation Choices

Basis

Decisions

Geographic

Demographic

Psychographic

Benefit

Product Usage Rates

sales region
Sales force location
Retail location

divides U.S. consumer into

14 groups & 66 segments.

Estimate segment size

local distribution channels or catering to
different age, income & education groups
Product/service positioning
Advertising themes
Sales training
Product/service design--different models + different features
Advertising themes
Sales training

Urban Uptown
Midtown Mix
Urban Cores
Elite Suburbs
The Affluentials
Middleburbs
Inner Suburbs
2nd City Society
City Centers
Micro-City Blues
Landed Gentry
Country Comfort
Middle America
Rustic Living

Special products (sizes and quality) or services

Frequent-user promotions
Special financial terms

16

Geographic segmentation - Canada

Main Inhabited Areas in Canada

Dividing overall market into homogeneous groups by location

Can identify general patterns but not all consumers in a
location will make the same buying decision.
Major brands get 40-80% of sales from core regions
Climate is a segmentation factor e.g.
Northerners eat more soup than Southerners
Southerners use more swimming pool chemicals than
Northerners

17

% Distribution of Canadian Population by Province

Manitoba 3.7%
Saskatchewan 3.3%
Alberta 9.9%
British Columbia 13.0%
Northwest Territories 0.1%
Nunavut 0.1%
Newfoundland 1.7%
Prince Edward Island 0.4%

2001

Nova Scotia 3.0%

New Brunswick 2.4%
Quebec 24.1%
Ontario 38.0%

18

Provincial and Territorial Populations, 1981, 1991, 2001

POPULATION (THOUSANDS)
Region
Newfoundland
Prince Edward Island
Nova Scotia
New Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
British Columbia
Yukon
Northwest Territories
Nunavut
Canada

1981
568
123
847
696
6 438
8 625
1 026
968
2 238
2 744
23
46
n/a
24 343

1991
568
130
900
724
6 896
10 085
1 092
989
2 546
3 282
28
36
21
27 297

2001
513
135
908
729
7 237
11 410
1 120
979
2 975
3 908
29
37
27
30 007

Source: Statistics Canada Website http://geodepot.ca/English/Pgdb/People/Population/demo05.htm.

19

Urban - Rural Population Distribution, 1871-2001

20

Canada's 25 Largest Metropolitan Areas

Area
Toronto
Montreal
Vancouver
Ottawa-Hull
Calgary
Edmonton
Quebec
Winnipeg
Hamilton
London
Kitchener
St. Catharines-Niagara
Halifax
Victoria
Windsor
Oshawa
Saskatoon
Regina
St. Johns
Chicoutimi-Jonquire
Sudbury
Sherbrooke
Trois-Rivires
Saint John
Thunder Bay

1996 Population (Thousands) 2001 Population (Thousands)

4445
3359
1891
1031
852
392
698
677
650
416
403
390
347
313
292
281
222
199
178
167
166
150
144
129
131

4881
3512
2079
1107
972
935
693
685
681
426
432
393
359
319
314
305
231
198
176
159
157
155
142
128
125

Source: http:www.statcan.ca/english/Pgdb/People/Population/demo05.htm

21

Population Projections by Age Group

Demographic segmentation: dividing consumer groups

by e.g. sex, age, income, occupation, education,
household size & stage in family life cycle

22

Family Life Cycle

young singles
young married
couples who remain childless,
single parenthood
parenthood (full nest)
post-parenthood (empty nest)
dissolution (separated, widowed, or divorced)
retirees with children still at home
able elderly

23

Buying Patterns for Different Age Groups

Age

Name of Age Group

Merchandise bought

0-5

Young children

Baby food, toys, nursery, furniture,

childrens wear

6 - 19
20 - 34

35 - 49
50 - 64
65+

School children
(including teenagers)
Young adults

Younger middle-aged
adults
Older middle-aged
adults
Senior adults

Clothing, sports equipment, records,

school supplies, food, cosmetics, used cars
Cars, furniture, houses, clothing,
recreational equipment, purchases
for younger age groups.
Larger homes, better cars, second
cars, new furniture, recreational equipment
Recreational items, presents for
young marrieds & infants
Medical services, travel, medicines,
purchases for younger age groups
24

Segmenting by age

many firms identify market

segments by age
design products to meet
specific needs of certain age
groups e.g.

baby food, toothpaste, fashion

garments, walking aids

sociologists attribute different

consumer needs & wants
across age groups to a cohort
effect

tendency among members of a

generation to be influenced &
drawn together by significant
events occurring in formative years
e.g. age 17-22
25

Demographic: The Grey Market

40%

of UK income, 70-80% of wealth

UK population split

16% 50-64 years old

16% 64 +

Grey

market wealth

20% well off (twice average income)

40% property-rich; income poor
40% poor
1% in UK (15% in US) on incomes 40% lower than
national average income

Grey

market lifestyle groups

WOOPIES (Well off older persons)

married in two person households, <75yrs, well off, 86%

Investment income
high home & car ownership

OPALS (Old people with affluent lifestyles)

JOLLIES - Jet-setting oldies with lots of loot

26

Ethnic Group Segmentation

USA Census Bureau

by 2050, nearly 50% of US population
will belong to nonwhite minority groups
three largest & fastest-growing
racial/ethnic groups African
Americans, Hispanics, Asian
Americans.

27

Generalisation
based on studying the impact of household
income changes on consumer spending
behaviour
As family income increases
1. a smaller % goes on food
2. the % spend on housing & household operations &
clothing stays constant
3. % spend on other items (such as recreation &
education) increases
28

Percentage Annual
Expenditures by Income
Groups, 1999

29

Psychographic Segmentation - Lifestyles

decisions about how to live

family, job, social & consumer activities
Lifestyles values & demographics
AIO surveys: Activities, Interests, Opinions
Why?

richer descriptions of potential target

markets
behavioural profiles to target promotions,
price etc
detail to match companys image &
offerings with types of consumers likely to
buy

develop population psychographic profiles

using survey instruments see VALS Values and Lifestyles

UK Households 23 million
Young NK 29.7%
Most affluent 4.8%
Mid-high affluent 11.2%
Farm & 4x4
Future families
Rising stars
MOR
Urbans
Trendy upstarts
Mid-low affluent 6.3%
Least affluent 7.4%
High rise hopefuls
Hard choices
Beer & crisps
Hand-to-mouth
Families 29.7%
Empty nesters 21.1%
Retired seniors 19.5%
30

Geo-demographics: Lifestyle and postcodes

Thriving e.g. 20% of population

Expanding - 12%

comfortable middle-agers in suburbia

Aspiring 14%

affluent urbanites, better off execs in inner cities

Settling - 24%

affluent execs - families

Rising - 8%

wealthy achievers (suburbs), affluent greys (rural);

prosperous pensioners (retirement areas)

new home owners

Striving (struggling?) 23%

older people in less prosperous areas; council estates

31

Lifestyle-VALS

Values and Lifestyles (1978)

based on the idea that

social class, although significant, does not determine all of our

values.
there are important value differences within a class
Fulfilleds, Achievers, Experiencers all have the same level
of resources. Why are they different?
see http://www.sric-bi.com/VALS/

32

VALS Network
TM

Source: SRI Consulting Business Intelligence http://www.sric-bi.com/VALS/presurvey.shtml

33

High-end watches for which life-style segments?

35

Other lifestyle descriptors: McCann-Erickson Men

Avant Guardians
concerned with well-being of others rather than possessions. Well educated,
self-righteous.
Pontificators
strongly held, traditional opinions. Very British and concerned with keeping
others on the right path.
Chameleons
want to be contemporary to win approval. Copiers not leaders.
Self-Admirers
High self-image, young, intolerant of others, motivated by success.
Self-Exploiters
the doers and self-starters, competitive, pressured, pessimistic
Token Triers
always willing to improve their luck, but tend to try and fail.
Sleepwalkers
actively opt out, contented under achievers.
36

Behaviour/product-related segmentation

segmentation according to the different benefits that

consumers seek from the product
focus on why a customer purchases rather than what
Benefits that we seek when we buy

Usage rates for a product e.g.

attributes we seek in a good or service

benefits we expect to receive from that good or service
heavy-, moderate-, light-user segments

80/20 principle (Paretos Law) 80% of a products

revenues comes from a relative small, loyal % of total
customers
Consumer brand loyalty toward product e.g. AirMiles,
ClubCard points

37

Band-Aid
offers
flex as a
benefit to
consumers.
38

Benefit Segmentation Applied to Yogurt

BENEFITS SOUGHT FROM YOGURT

Attributes of Yogurt
Individually
packaged

With
fruit

High- Mild
priced

Organic

Contains
bio-bifidus

Low
fat

Lowpriced

Provides choice
for family members

Convenient to use

Tastes good

Good quality

Healthy

X
X

Helps digestion

Helps diet

Spend less money

Source: Adapted from Marco Vriens and Ter Hofseted, Linking Attributes, Benefits, and Consumer Values, Marketing Research,
Chicago, Fall 2000, V. 12(3) pp. 4-10. Reprinted with permission by the American Marketing Association.

39

Other segmentation categories

Buyer-readiness segmentation:

Interaction segmentation:

ignorance, awareness, knowledge, preference and

conviction
different channels, payment methods, promotions &
communications

Occasion segmentation:

time of day, festivals, births, marriages, deaths etc.

examples:

Whenever our daughter Jamie gets a raise, we always take

her out to dinner.
When Im away on business, I try to stay at a suites hotel.
I always buy my wife flowers on Valentines Day.

Internet usage
40

Market Matching Strategies (1 of 2)

PRODUCT OFFERINGS
Ford Motor Company
1908 Early 2000s
Market
Single-Offer
Segment Strategy Strategy

1955
Early 2000
Multi-OfferSingle-Offer
Strategy Strategy

General-Purpose Cars
Small
Model T Focus
Medium Model T Taurus
Large
Crown Victoria

Beetle
Golf
Passat

Sporty Cars
Low-Priced
ZX2 Escort
GTI
Medium-Priced
Cougar
Cabrio
Mustang
Audi TT
Boxster
High-priced
Jaguar XK8
Aston Martin DB7
911

Audio/Volkswagen/Porsche
Multi-Offer

Polo

new Beetle

Porsche

41

Market Matching Strategies (2 of 2)

Ford Motor Company

Audio/Volkswagen/Porsche

1908 Early 2000s

1955
Early 2000s
Market Single-Offer
Multi-Offer
Single-Offer
Multi-Offer
Segment
Strategy
Strategy
Strategy
Strategy
Luxury Cars
Medium-priced
Lincoln Continental Audi A4
Lincoln Town Car
High-priced
Jaguar S-Type
Audi A6
Vans
Windstar EuroVan
Econoline
Trucks
Small
Model T (Truck)
Medium Ford F series

Audi A8

Ford Ranger

Sport Utility Vehicles Explorer

(SUVs)
Expedition
Excursion
Lincoln Navigator

42

Segmentation for Industrial Markets

Organizational Demographics

Product
Segmentation

Geographic
Segmentation

Potential
Industrial
Markets
End-Use
Application
Segmentation

Operating Variables

Organization & DMU structure

Situational Variables

Technology, process

Purchasing Approach

Account Size
and Potential
Segmentation

industry size, location, company

age

Order size, routine vs.

customized, urgency of order

Personal Characteristics of
Buyers

attitude to risk, champions

43

Radio Broadcast segmentation

.
e
l
p
?
y
m
i
a
d
The Market Segment o
for s
Radio by Age
&
Benefit
o
t
o
t
y
f
s
i
i
s
Young
Middle
s
x
i
r
a
l
Teens
Senior
t
c
a
Adult
Adults
e
m
w
s
i
Th would
w
o
H
The Total Market for Radio

Age

Benefit

Information

Entertainment

Companionship

44

Hypothetical Middle Adult Segment for Radio

Desired Benefit

Middle Adults

Early
Retiree

Professional

Information

Entertainment

Companionship

Hourly
Employee

Business
Owner
X

45

Hypothetical Middle Adult Segment for Information Radio

Middle Adults

Desired Information Focus

Early
Retiree
Breaking news

Business
Owner
X

Political
commentary

Financial market
commentary

Advice

Call-in

X
X
X

Gossip

Weather

Professional

Hourly
Employee

X
X

46

Hypothetical Positioning Map: CBC versus Commercial Radio

Entertaining
Commercial
Talk Radio
*As it Happens

Commercial
Talk Radio
*This Morning

CBC local*

After Hours*

Informational

Music

*CBC News

Disc Drive*
Take 5*

*Ideas

Challenging
47

Positioning of Soap

High
moisturizing

Tone
4

Zest

Lever 2000

Dove

Safeguard
Lux

Nondeodorant

Deodorant

Product Space

Lava

Representing Consumers Perception for

6
Different Brands of Bar Soap
Low
moisturizing

Dial
Lifebuoy

48

Plot these cars on this Positioning Map

Expensive

Honda Accord
Jaguar
Toyota Yaris
VW Golf
BMW 300 series
Skoda Fabia
Porche
Place other cars on
the map
What other criteria
would we add to
improve the map's
usefulness?

Inexpensive Conservative Sporty

Expensive

Inexpensive

Conservative

Sporty
49

Construct a Competitive Positioning Map

for the clothing areas of the following

retailers

Next
Marks and Spencer
Primark
Miss Selfridge
Asda (George)
H&M
La Senza
Coast
50

Non-profit market segmentation

Is segmentation for nonprofit

marketers of more, less, or the same
importance than for profit-oriented
marketers?
Examples ?

51