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Market Segmentation. Purpose of this section. 1. Introduce the Concept of the MARKETING PLAN 2. To Define Market Segmentation 3. Present 4 types of market segmentation 4. Aspects of the Canadian market 5. Main types of segmentation in industrial markets.

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slide1

Market

Segmentation

slide2

Purpose of this section

1. Introduce the Concept of the MARKETING PLAN

2. To Define Market Segmentation

3. Present 4 types of market segmentation

4. Aspects of the Canadian market

5. Main types of segmentation in industrial markets

baby boomers chicken
Purpose of this discussion is to explain the advantages of carefully watching how a market segment acts as it becomes older

You have to watch consumption trends and match this - (eg. This is the wrong time to open a steak house)

“ Companies must plan constantly and the plan must be based on an understanding of market trends and marketing segments”

Baby Boomers & Chicken
slide4

Marketing Plan - many factors involved

  • Consumer Analysis
  • Environmental Analysis
  • 1. Target Market - you have to decide on which segment
  • 2. Look at competitors, what are they doing
  • 3. Market research required
  • 4. Develop a unique marketing plan
slide5

Fundamental Tasks in Developing a Marketing Plan

1. Target Market **

2. Implement a Marketing Program

** this recognizes that you are “consumer oriented (to be able to do this, you have to recognize the difference among people and understand there are different segments)

what is a market1
PEOPLEWhat is a Market?
  • BUT - not just ANY people, they have to have
  • Willingness to buy
  • Purchasing power (money)
  • Authority to buy
types of markets
Consumer Goods and Services

Industrial Goods and Services

Types of Markets
classes of consumer products

POP

ATM

$

$

Classes of Consumer Products

14-1

Convenience

Shopping

Specialty

Goods

Services

various classes of consumer and industrial goods and services
Various Classes of Consumer and Industrial Goods and Services

Def’n - industrial goods are products used in the production of other products

industrial goods
Industrial goods are things used in the production of other products

Some products are both industrial and consumer goods - eg. electricity, water, desktop PCs2 categories of industrial goods

Production Goods

Support Goods

Industrial Goods
market segmentation
With a large country

Many different types of people

- it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market

Market Segmentation
market segmentation1
Characteristics

age

gender

geographic location

income

spending patterns

cultural background

demographics

marital status

education

language

mobility

Market Segmentation
market segmentation2
4 commonly used bases for Segmentation

Descriptive

geographic location

demographic

Behavioural

psychographic

benefits

Market Segmentation
market segmentation3
geographic location - based upon where people live (historically a popular way of dividing markets)

demographic - based upon age, gender and income level (very often used)

Market Segmentation
market segmentation4
Psychographic / lifestyles - based on people’s opinions, interests, lifestyleseg, people who like hard rock music probably prefer beer to wine

benefits - based on the different expectation that customers have about what a product/service can do for themeg. People who want to but “lite” food cause ti will help them lose weight

Market Segmentation
geographic location of canadians
most live in Toronto - Montreal axis

+ Vancouver

most live along east-west line close to the American border

Geographic location of Canadians
slide20

Percentage Distribution of the

Population of Canada by Province

Slide 3-8

Geographic Segmentation

+, Ontario contains

52% of foreign born people in Canada

impact of immigration
Ontario contains 51.8% of Canada’s living foreign-born people

Most of these people live in Toronto

Canada’s urban population is growing for 2 reasons1. Immigrants come to Canada and make their homes in the cities2. Canadians are moving out of the rural areas and in to the cities

Impact of Immigration
slide22

Slide 3-9

Figure 3.4 Urban–Rural Population Distribution, 1871–1991

Geographic Segmentation

slide23

Geographic Segmentation

The reason why we study geographic segmentation is because WHERE people live has a big effect on their consumption patterns.

Additionally, WHERE people live in a city is also a reflection of their income level and we can make certain assumptions about their ABILITY TO SPEND based upon their address.

This helps people plan store locations and the location of other services.

slide24

Geographic Segmentation

Climate:winter equipment and recreation are effected by geographic location

you will sell more snow shovels in Northern Ontario than southern Ontario , BUT, population in Northern Ontario is very smallclothing purchases are also effected by climate/geography

slide25

Demographic Segmentation

  • Demographic Segmentation isthe most common approachto Market Segmentation
  • Variables are:
  • age
  • gender (male/female)
  • income
  • occupation
  • education
  • household (family - style) size
slide26

Demographic Segmentation

  • Demographic Segmentation isthe most common approachto Market Segmentation
  • Variables are:
  • gender (male/female)
  • gender is an obvious way to divide the market into segments since so many products are gender-specific
  • clothing
  • medical products
  • sports products/services
  • entertainment

Examples ??

slide27

Demographic Segmentation

  • Demographic Segmentation isthe most common approachto Market Segmentation
  • Variables are:
  • age
  • age is another obvious way to divide the market into segments since so many products are based upon “time of life”
  • diapers for babies
  • toys for children
  • entertainment for “over 19”

Examples ??

slide28

Demographic Segmentation

  • age
  • also, people have different consumption patterns at different ages
  • eg. Milk products
  • children and teens drink a lot of milk
  • adults don’t
  • older adults need calcium, but don’t drink milk (they take pills)

Examples ??

slide29

Slide 3-10

Figure 3.5 Population Projections by Age Group

Demographic Segmentation

slide30

Demographic Segmentation

  • Demographic Segmentation isthe most common approachto Market Segmentation
  • Variables are:
  • household (family - style) size
  • Segmenting by the “stages in the family life cycle”
  • (page 45)
  • There are different buying characteristics of people in each stage of the family
slide31

Demographic Segmentation

  • household (family - style) size
  • BUYING PATTERNS
  • 0-5 young children
  • 6-19 school children
  • 20-34 young adults
  • 35-49 younger middle-aged
  • 50-64 older middle-aged
  • 65+ seniors
  • 80+ SUPER seniors
slide32

Demographic Segmentation

  • household (family - style) size
  • THE CHANGING HOUSEHOLD
  • half of the households in Canada are only one, or two people
  • number of married couples forming a household is decreasing
  • many unmarried people, and old widowed people, live by themselves
slide33

Demographic Segmentation

  • household (family - style) size
  • FAMILY LIFE CYCLE STAGES
  • 1. Young Single
  • 2. Young Married with no Children (DINKS)
  • 3. Young - married with children
  • - divorced without children - divorced with children
slide34

Demographic Segmentation

  • household (family - style) size
  • FAMILY LIFE CYCLE STAGES
  • 4. Middle Aged
  • a. married without children
  • b. divorced without children
  • c. married with children
  • d. divorced with children
  • e. married without dependent children
  • f. divorced without dependent children
slide35

Demographic Segmentation

  • household (family - style) size
  • FAMILY LIFE CYCLE STAGES
  • 5. Older
  • a. older married
  • b. older unmarried (divorced, widowed)
  • 6. other
slide36

Demographic Segmentation

  • household (family - style) size
  • SSWDs
  • single separated widowed divorcedin Canada, 1.6 million people live alone- they buy different sizes of products eg. Single serving soup, etc.
slide37

Demographic Segmentation

  • Demographic Segmentation isthe most common approachto Market Segmentation
  • Variables are:
  • age
  • gender (male/female)
  • income
  • occupation
  • education
  • household (family - style) size
slide38

Demographic Segmentation

income

Segmenting markets on the basis of income and expenditure patterns- The number of single mom families has increased by 12.8% between 1985 and 1994

- Male single parent families have more income, on average, than Female single parent families(chart 3.6)

engel s laws
As family income increases ……

a smaller % goes for food - TRUE

the % spent on housing and household operations and clothing will remain constant (that is grow as total income grows) - FALSE in reality this amount declines

the % spent on recreation, education will increase - TRUE, but there are exceptions

Engel’s Laws
engel s laws1
Why is this important……

because marketing managers can use this law to figure out what will happen (ie. What kinds of spending patterns will develop) if people’s incomes increase

also, if you are planning on going into a new market, where people have more money - this “law” helps you to plan how people’s spending patterns will be different

Engel’s Laws
slide41

Psychographic Segmentation

“The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers”TEXT

The use of detailed information to understand differences in what people buyWTGR

psychological

slide42

Psychographic Segmentation

Psychographic profiles on a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions

AIO - activities, interests, and opinions

http://ourworld.compuserve.com/homepages/finkleman/psychogr.htm

slide43

Psychographic Segmentation

Thompson Lightstone Segments

1. Passive/Uncertain

2. Mature

3. Home Economists

4. Active/Convenience

5. Modern Shoppers

6. Traditional Home/Family Oriented

http://www.goldfarbconsultants.com/who.html

slide44

Psychographic Segmentation

LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?

slide45

Benefit Segmentation

“It is based on the Attributes (characteristics) of products, as seen by the customers”example, people buy something because it causes a benefitie. Diet coke - less sugar, lose weightie. Extra white toothpaste, whiter teeth, better smile

slide46

Benefit Segmentation

“Many marketers now consider benefit segmentation one of the most useful methods of classifying markets”ie. Watches

- the benefits customers looked for where durability and product quality- older research was based on dividing the watch market according to a different segment - once they used the new segment, they changed the marketing plan- modern example would be price of PCs for home use - biggest use is entertainment NOT schoolwork or home based businesses

slide47

Benefit Segmentation of the Toothpaste Market

Benefit Segmentation

Segment Name

The

The Sensory The Independent

Segment Sociables The Workers Segment

Principal benefit sought Flavour, product Brightness Decay Price

appearance of teeth prevention

Demographic strengths Children Teens, young Large families Men

people

Special behavioural Users of Smokers Heavy users Heavy users

characteristics spearmint-

flavoured

toothpaste

Brands disproportionately Colgate, MacLean’s, Crest Brands

flavoured Stripe Plus White, on sale

Ultra Brite

Personality characteristics High self- High High High

involvement sociability hypochondriasis autonomy

Lifestyle characteristics Hedonistic Active Conservative Value-

oriented

slide48

Slide 3-12

Figure 3.9 Segmentation Bases for Industrial Markets

Segmentation for Industrial Markets

slide49
Geographic Segmentation

useful for the automotive industry

Product Segmentation

ie. Special parts and components

Segmentation by End-Use Application

ie. Paint mfg. Paint for waterproof applications, paint for rust prevention, paint which sticks to glass

Segmentation for Industrial Markets