professor richardson s e g m e n t a t i o n slide 1
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Professor Richardson S E G M E N T A T I O N slide 1
Professor Richardson S E G M E N T A T I O N slide 2
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
Professor Richardson S E G M E N T A T I O N slide 3
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”
Professor Richardson S E G M E N T A T I O N slide 4
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
Professor Richardson S E G M E N T A T I O N slide 5
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)
Professor Richardson S E G M E N T A T I O N slide 6
What is a Market?
PEOPLE
Professor Richardson S E G M E N T A T I O N slide 7
What is a Market?
PEOPLEBUT - not just ANYANY people, they have to have
• Willingness to buy
• Purchasing power (money)
• Authority to buy
Professor Richardson S E G M E N T A T I O N slide 8
Types of Markets
• Consumer Goods and Services
• Industrial Goods and Services
Professor Richardson S E G M E N T A T I O N slide 9
Classes of Consumer ProductsClasses of Consumer Products
ConvenienceConvenience ShoppingShopping SpecialtySpecialty
GoodsGoods
ServicesServices
PO
P
14-1
$$
ATM
Professor Richardson S E G M E N T A T I O N slide 10
Various Classes of Consumer and Industrial Goods and Services
eg . n ewsp ap er
eg . Mac's Milk
Con ven ien ce G ood s
eg . g roceries
eg . cloth in g
Sh op p in g G ood s
Consum er G oods
eg . travel
eg . b an kin g
Sp ecialty Services
eg . fast food s
Con ven ien ce Services
Consum er Services
raw m ate ria lg ra in , s tee l
eg . w irin gh arn ess
eg . c ircu it b oard
com p on en tp arts
m aterialsn u ts, b olts
P rod u c tion G ood s
Industria l G oods
accessory eq u ip m en ttools, com p u ters
eg . b u ild in g s
in stallation s
S u p p ort S ervices
Industria l Services
Good s an d S ervic es
Def’n - industrial goods industrial goods are products used in the production of other products
Professor Richardson S E G M E N T A T I O N slide 11
Industrial GoodsIndustrial GoodsIndustrial goods are things used in the Industrial goods are things used in the
production of other productsproduction of other products
Some products are both industrial and consumer Some products are both industrial and consumer goods - eg. electricity, water, desktop PCsgoods - eg. electricity, water, desktop PCs
2 categories of industrial goods2 categories of industrial goods
• Production GoodsProduction Goods
• Support GoodsSupport Goods
Professor Richardson S E G M E N T A T I O N slide 12
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
Professor Richardson S E G M E N T A T I O N slide 13
Market Segmentation Defn
• “Grouping people according to their similarity related to a particular product category”
Professor Richardson S E G M E N T A T I O N slide 14
Market SegmentationCharacteristics• age
• gender
• geographic location
• income
• spending patterns
• cultural background
• demographics
• marital status
• education
• language
• mobility
Professor Richardson S E G M E N T A T I O N slide 15
Market Segmentation4 commonly used bases for Segmentation
Descriptive
geographic location
demographic
Behavioural
psychographic
benefits
Professor Richardson S E G M E N T A T I O N slide 16
Figure 3.1 Bases for Market SegmentationSlide 3-7
Professor Richardson S E G M E N T A T I O N slide 17
Market Segmentation
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)
Professor Richardson S E G M E N T A T I O N slide 18
Market Segmentation
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
Professor Richardson S E G M E N T A T I O N slide 19
Geographic location of Canadians
• most live in Toronto - Montreal axis
• + Vancouver
• most live along east-west line close to the American border
Professor Richardson S E G M E N T A T I O N slide 20
Percentage Distribution of the Population of Canada by Province
Slide 3-8
+, Ontario contains
52% of foreign born people in Canada
Geographic Segmentation
Professor Richardson S E G M E N T A T I O N slide 21
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
Professor Richardson S E G M E N T A T I O N slide 22
Figure 3.4 Urban–Rural Population Distribution, 1871–1991
Slide 3-9
Geographic Segmentation
Professor Richardson S E G M E N T A T I O N slide 23
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.
Professor Richardson S E G M E N T A T I O N slide 24
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 small
clothing purchases are also effected by climate/geography
Professor Richardson S E G M E N T A T I O N slide 25
Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation
Variables are:
• age
• gender (male/female)
• income
• occupation
• education
• household (family - style) size
Professor Richardson S E G M E N T A T I O N slide 26
Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation
Variables are:
• gender (male/female)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 ??
Professor Richardson S E G M E N T A T I O N slide 27
Demographic Segmentation
Demographic Segmentation is the most common approach to 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 ??
Professor Richardson S E G M E N T A T I O N slide 28
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 ??
Professor Richardson S E G M E N T A T I O N slide 29
Figure 3.5 Population Projections by Age GroupSlide 3-10
Demographic Segmentation
Professor Richardson S E G M E N T A T I O N slide 30
Demographic Segmentation
Demographic Segmentation is the most common approach to 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
Professor Richardson S E G M E N T A T I O N slide 31
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
Professor Richardson S E G M E N T A T I O N slide 32
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
Professor Richardson S E G M E N T A T I O N slide 33
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
Professor Richardson S E G M E N T A T I O N slide 34
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
Professor Richardson S E G M E N T A T I O N slide 35
Demographic Segmentation
•household (family - style) size
FAMILY LIFE CYCLE STAGES
5. Older
a. older married
b. older unmarried (divorced, widowed)
6. other
Professor Richardson S E G M E N T A T I O N slide 36
Demographic Segmentation
•household (family - style) size
SSWDs
single separated widowed divorced
in Canada, 1.6 million people live alone- they buy different sizes of products eg. Single serving soup, etc.
Professor Richardson S E G M E N T A T I O N slide 37
Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation
Variables are:
• age
• gender (male/female)
• income• occupation
• education
• household (family - style) size
Professor Richardson S E G M E N T A T I O N slide 38
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)
Professor Richardson S E G M E N T A T I O N slide 39
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
Professor Richardson S E G M E N T A T I O N slide 40
Engel’s Laws
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
Professor Richardson S E G M E N T A T I O N slide 41
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
Professor Richardson S E G M E N T A T I O N slide 42
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
Professor Richardson S E G M E N T A T I O N slide 43
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
Professor Richardson S E G M E N T A T I O N slide 44
Psychographic Segmentation
LIFESTYLE PROFILES
Table 3.8 - HOW DO YOU FIT?
Professor Richardson S E G M E N T A T I O N slide 45
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
Professor Richardson S E G M E N T A T I O N slide 46
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
Professor Richardson S E G M E N T A T I O N slide 47
Benefit Segmentation of the Toothpaste Market
Segment Name
TheThe Sensory The IndependentSegment Sociables The Workers Segment
Principal benefit sought Flavour, product Brightness Decay Priceappearance of teeth prevention
Demographic strengths Children Teens, young Large families Menpeople
Special behavioural Users of Smokers Heavy users Heavy userscharacteristics spearmint-
flavouredtoothpaste
Brands disproportionately Colgate, MacLean’s, Crest Brandsflavoured Stripe Plus White, on sale
Ultra Brite
Personality characteristics High self- High High Highinvolvement sociability hypochondriasis autonomy
Lifestyle characteristics Hedonistic Active Conservative Value-oriented
Benefit Segmentation
Professor Richardson S E G M E N T A T I O N slide 48
Figure 3.9 Segmentation Bases for Industrial MarketsSlide 3-12
Segmentation for Industrial Markets
Professor Richardson S E G M E N T A T I O N slide 49
• Geographic Segmentationuseful for the automotive industry
• Product Segmentationie. Special parts and components
• Segmentation by End-Use Applicationie. Paint mfg. Paint for waterproof applications,
paint for rust prevention, paint which sticks to glass
Segmentation for Industrial Markets
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