P 5

-1P

1-1

MarketingManagement

P 5

-2

Chapter 5

Market Market

SegmentationSegmentation

P 5

-3

Why Segment?

• More precise market definition• Better analysis of competition• Efficient resource allocation• Effective strategic planning

P 5

-4

A Model of the Market Segmentation Process

Decide segmentation strategyDecide segmentation strategy

Develop product positioningDevelop product positioning

Divide markets on relevant dimensionsDivide markets on relevant dimensions

Determine consumer needs and wantsDetermine consumer needs and wants

Delineate firm’s current situationDelineate firm’s current situation

Design marketing mix strategyDesign marketing mix strategy

P 5

-5

Developing Market Segments for Woman’s Apparel

ConservativeConservative TraditionalTraditional UpdateUpdate

SizeSize

AgeValues

AgeValues

EmploymentEmployment

23% of population

16% of total sales

35-55 years old

Conservative values

Satisfied with present

status

Has job, nor career

38% of population

40% of total sales

25-49 years old

Traditional values

Active, busy,

independent, self

confidant

Family-and Job/

career-oriented

16% of the population

24% of total sales

25-49 years old

Contemporary values, Active,

busy,independent

very self-confident

Family-and Job/

career-oriented

(continued)

SOURCE: Michael Levy and Barton A. Weitz, Retailing Management, 3d ed. (Boston, MA: Irwin/McGraw-Hill, 1998), p. 148.

P 5

-6

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Geographic:

Continents

Global regions

Countries

Country regions

City, county, or SMSA size

Population density

Climate

Examples of Market Segments

Africa, Asia, Europe, North America, South America

Southeast Asia, Mediterranean, Caribbean, China, Canada

France, United States, Brazil,

Pacific Northwest, Middle Atlantic, Midwest

Under 5,000people, 5,000-19,999, 20,000-49,999, 50,000+

Urban, suburban, rural

Tropical, temperate, cold

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-7

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Examples of Market Segments

Under 6 years old, 6-12, 13-19, 20-29, 30-39, 40-49, 50+

Male, female

1-2 persons, 3-4 persons, more than 4 persons

Single, young married, married with children, sole survivor

Under $10,000 per year, $10,000-$19,999, $20,000-$29,999, 40,000-$39,999, $40,000-49,999, $50,000+

Segmentation Base

Demographic:

Age

Gender

Family size

Family life cycle

Income

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-8

Examples of Market Segments

Grade school or less, some high school, graduated from high school, some college, graduated from college, some graduate work, graduate degree

Single, married, divorced, widowed

American, Hispanic, African, Asian, European

Jewish, Catholic, Muslim, Mormon, Buddhist

European-American, Asian-American, African-American, Hispanic-American

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Education

Marital status

Social

Culture

Subculture

Religion

Race

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-9

Examples of Market Segments

French, Malaysian, Australian, Canadian, JapaneseUpper class, middle class, working class, lower class

Expert, noviceHigh, medium, lowPositive, neutral, negativeConvenience, economy, prestigeInnovator, early adopter, early majority, late majority laggers, nonadopterUnaware, aware, interested, desirous, plan to purchaseHigh, moderate, low

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Nationality Social classThoughts and feelings Knowledge

Involvement Attitude Benefits sought Innovativeness

Readiness stage

Perceived risk

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-10

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Behavior

Media Usage

Specific media usage

Payment method

Loyalty status

Usage rate

User status

Usage situation

Examples of Market Segments

Newspaper, magazine, TV, internet

Sports Illustrated, Life, Cosmopolitan

Cash, Visa, MasterCard, American Express, check

None, some, total

Light, medium, heavy

Non user, ex-user, current user, potential user

Work, home, vacation, commuting

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-11

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Combined approaches

Psychographics

Person/situation

Geodemography

Examples of Market Segments

Achievers, strivers, strugglers

College students for lunch, executives for business dinner

Blue Blood Estates, Towns and Gowns, Hispanic Mix

Consumer Markets

(continued)

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-12

Useful Segmentation Bases for Consumer and Organizational Buyer Markets

Segmentation Base

Source loyalty

Company size

Purchase quantity

Product applicationOrganization typeLocationPurchase status

Attribute importance

Examples of Market Segments

Purchases product from one, two, three, four, or more suppliers

Small, medium, large relative to industry

Small, medium, large account

Production, maintenance, product componentManufacturer, retailer, government agency, hospitalNorth, south, east, west sales territoryNew customer, occasional purchaser, frequent purchaser,nonpurchaserPrice, service, reliability of supply

Organizational Buyer Markets

Figure 5-2Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-13

VALS 2 Eight American Lifestyles

orientedoriented Status oriented ActionPrinciple

Minimal resources

Abundant resources

(continued)

Figure 5-4

Actualizers

Makers

Strugglers

Strivers

Experiencers Achivers Fulfilleds

Believers

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

P 5

-14

Claritas PRIZM Cluster 36-Towns and GownsThe “towns and gowns” cluster describes most of our college towns and university campus neighborhoods. With a typical mix of half locals (towns) and half students (gowns). It is wholly unique, with thousands of penniless 18- to 24-year-old kids, plus highly educated professionals, all with a taste for prestige products beyond their evident means.

Predominant Characteristics• Households (% U.S.) 1,290,200 (1.4%)• Population: 3,542,500• Demographic caption: College-town singles• Ethnic Diversity: Dominant white, high Asian• Family type: Singles•Predominant age ranges: Under 24, 25-34• Education: College graduates• Employment level: White collar/service• Housing type: Renters/multiunit 10+• Density percentile: 58 (1=sparse, 99 = dense)

(continued)SOURCE: Valarie Walsh and J. Paul Peter, “Claritas Inc.: Using Compass and PRIZM,” in Marketing Management: Knowledge and Skills, 5th ed., eds. J. Paul Peter and James H. Donnelly, Jr. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 334

Figure 5-5

P 5

-15

More Likely to:Lifestyle Products and ServicesGo to college football games Have personal education loanPlay racquetball Use an ATM cardGo skiing Own a HondaPlay billiards/pool Buy 3+ pairs of jeans annuallyUse cigarette rolling paper Drink Coca-Cola ClassicUse a charter/tour bus Eat Kraft Macaroni and Cheese

Claritas PRIZM Cluster 36-Towns and Gowns

SOURCE: Valarie Walsh and J. Paul Peter, “Claritas Inc.: Using Compass and PRIZM,” in Marketing Management: Knowledge and Skills, 5th ed., eds. J. Paul Peter and James H. Donnelly, Jr. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 334

Radio/TV PrintWatch VH1 Read SelfListen to alternative rock music Read newspaper comic sectionWatch “Jeopardy” Read Rolling StoneListen to variety radio Read GQWatch “The Simpsons”

Figure 5-5

P 5

-16

Positioning Map for Automobiles

Traditional Sporty

Luxurious

Functional

Cadillac •

• Mercedes

Lincoln •

Oldsmobile • •Chrysler • Buick

Ford •

Plymouth •

Dodge •

Mercury •

•Pontiac

•BMW •Porsche

•Lexus

•Chevrolet •Nissan

•Toyota

•Saturn

•VW

SOURCE: Gilbert A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers, 2d ed. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 221.

Figure 5-6

P 5

-17

Differences in Marketing Strategy for Three Segmentation Alternatives

MultipleStrategy Mass Single Market MarketElements Marketing Segmentation Segmentation

Market definition Broad range of One well-defined Two or more well-defined

consumers consumer group consumer groups

Product strategy Limited number of One brand tailored Distinct brand for eachproducts under one to one consumer consumer groupbrand for many types group

of consumers

Pricing strategy One “popular” price One price Distinct price range forrange range tailored to each consumer group

the consumer group

SOURCE: Joel R. Evans and Barry Berman, Marketing, 5th ed. (New York: Macmillan, 1992), p. 219. © 1992. Reprinted by permission of Prentice Hall, Inc., Upper Saddle River, NJ.

(continued)

P 5

-18

Differences in Marketing Strategy for Three Segmentation Alternatives

MultipleStrategy Mass Single Market MarketElements Marketing Segmentation Segmentation

Distribution strategy All possible outlets All suitable outlets All suitable outlets

differs by segment

Promotion strategy Mass media All suitable media All suitable mediadiffers by segment

Strategy emphasis Appeal to various Appeal to one specific Appeal to two or more types of consumers consumer group distinct market seg- through a uniform, through a highly spe-

ments through different broad-based cialized, but uniform marketing plans

cateringmarketing program marketing program to each segment

SOURCE: Joel R. Evans and Barry Berman, Marketing, 5th ed. (New York: Macmillan, 1992), p. 219. © 1992. Reprinted by permission of Prentice Hall, Inc., Upper Saddle River, NJ.