Market

Segmentation
Consider

1. the role of segmentation in marketing strategy

2. types of market segmentation in
 consumer markets B2C
 industrial B2B
1. criteria & bases for segmenting consumer markets.
2. the segmentation process & basic strategies
3. positioning & repositioning
4. factors behind segmentation strategy choices.

2
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  Mass marketing?
evolving?  econ of scale
 What new segments are  Micromarketing
emerging?  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.

6
Market Aggregation •No segmentation
•heterogenous
customers
•homogenous
The market product
•no differentiation

7
 Segments must be
Segmentation • Identifiable
• Measurable
• Accessible,
reachable
...based
• Substantial enough
on customer-based • Unique enough
characteristics or • Durable/stable
product attributes
S-1
Good market segmentation
 has internally
homogenous members
and
 is externally

S-3 heterogeneous

S-2

8
 Targeting
Choice criteria?
Focus on segment(s)
providing most value

Pareto Principle
the 20% who S-1
provide 80% of
sales value

Group e.g. by
-age
S-3
-sex
-income S-2
-lifestyle

9
Value segmentation – Pareto - illustrations

The 80/20 rule Revenue/Profits

20% Loyal 80%

Brand User
20% 20%
Semi-Loyal
Switchers
Competitive
40%
Brand User

Non User
.
of 20%
Category
Source: Garth Hallberg 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
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Positioning

Low Price premium

B convenient

Consistent quality
C
Not accessible

A accessible

Brand conscious

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
product’s 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 Psychographic
Age Segmentation
Family life cycle
 Activities
Race/Ethnic
group  Interests
Social class  Opinions, Attitudes & Values
Education
Income  (AIO) surveys for measuring
Occupation lifestyle. Lifestyles
Family size
Religion
Home ownership
Potential 

Personality
Self-image

Markets
Behavioural
actual behavior toward product itself. A
Geographicn good starting point for segmentation
Country  Benefits sought
Region  Usage rate
Urban/Suburban/ Geo-Demographic –  Brand loyalty
Rural Ethnic .. "birds of a  User status: potential, 1st-time, regular
etc.
Population feather flock together"  Readiness to buy
density  Occasions: holidays & events that
City size stimulate purchases
Climate
15
 Decisions Affected by Segmentation Choices

Basis Decisions
 sales region
Geographic
 Sales force location divides U.S. consumer into
 Retail location 14 groups & 66 segments.

Urban Uptown
 Estimate segment size Midtown Mix
Demographic  local distribution channels or catering to Urban Cores
different age, income & education groups Elite Suburbs
The Affluentials
 Middleburbs
Product/service positioning
Psychographic Inner Suburbs
 Advertising themes 2nd City Society
 Sales training City Centers
Micro-City Blues
 Product/service design--different models + different features Landed Gentry
Benefit 
Country Comfort
Advertising themes
Middle America
 Sales training Rustic Living

Product Usage Rates  Special products (sizes and quality) or services

 Frequent-user promotions
 Special financial terms

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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

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% 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%
Nova Scotia 3.0%
New Brunswick 2.4%
2001 Quebec 24.1%
Ontario 38.0%

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Provincial and Territorial Populations, 1981, 1991, 2001

POPULATION (THOUSANDS)
Region 1981 1991 2001
Newfoundland 568 568 513
Prince Edward Island 123 130 135
Nova Scotia 847 900 908
New Brunswick 696 724 729
Quebec 6 438 6 896 7 237
Ontario 8 625 10 085 11 410
Manitoba 1 026 1 092 1 120
Saskatchewan 968 989 979
Alberta 2 238 2 546 2 975
British Columbia 2 744 3 282 3 908
Yukon 23 28 29
Northwest Territories 46 36 37
Nunavut n/a 21 27
Canada 24 343 27 297 30 007

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

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Urban - Rural Population Distribution, 1871-2001

20
Canada's 25 Largest Metropolitan Areas
Area 1996 Population (Thousands) 2001 Population (Thousands)

Toronto 4445 4881

Montreal 3359 3512
1891 2079
Vancouver
1031 1107
Ottawa-Hull 852 972
Calgary 392 935
Edmonton 698 693
Quebec 677 685
650 681
Winnipeg 416 426
Hamilton 403 432
London 390 393
Kitchener 347 359
313 319
St. Catharines-Niagara 292 314
Halifax 281 305
Victoria 222 231
Windsor 199 198
178 176
Oshawa
167 159
Saskatoon 166 157
Regina 150 155
St. John’s 144 142
Chicoutimi-Jonquière 129 128
131 125
Sudbury
Sherbrooke
Trois-Rivières Source: http:www.statcan.ca/english/Pgdb/People/Population/demo05.htm
Saint John
Thunder Bay

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,
children’s wear
6 - 19 School children Clothing, sports equipment, records,
(including teenagers) school supplies, food, cosmetics, used cars
20 - 34 Young adults Cars, furniture, houses, clothing,
recreational equipment, purchases
for younger age groups.
35 - 49 Younger middle-aged Larger homes, better cars, second
adults cars, new furniture, recreational equipment
50 - 64 Older middle-aged Recreational items, presents for
adults young marrieds & infants
65+ Senior adults 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 UK Households 23 million

Young NK 29.7%
 family, job, social & consumer activities Most affluent 4.8%
 Lifestyles  values & demographics Mid-high affluent 11.2%
 AIO surveys: Activities, Interests, Opinions Farm & 4x4
 Why? Future families

Rising stars
richer descriptions of potential target
markets MOR

Urbans
behavioural profiles to target promotions,
price etc Trendy upstarts

Mid-low affluent 6.3%
detail to match company’s image &
Least affluent 7.4%
offerings with types of consumers likely to
buy High rise hopefuls

Hard choices
develop population psychographic profiles Beer & crisps
using survey instruments – see VALS - Hand-to-mouth
“Values and Lifestyles” Families 29.7%
Empty nesters 21.1%
Retired seniors 19.5%

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Geo-demographics: Lifestyle and postcodes

 Thriving e.g. 20% of population

 wealthy achievers (suburbs), affluent greys (rural);
prosperous pensioners (retirement areas)
 Expanding - 12%
 affluent execs - families
 Rising - 8%
 affluent urbanites, better off execs in inner cities
 Settling - 24%
 comfortable middle-agers in suburbia
 Aspiring 14%
 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
• Fulfilled’s, 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
 VALS Question
 How would you classify
yourself in terms of lifestyle
profile? Your parents?
 Note the URL below and do
the VALS survey tonight.
 Evaluate the result

http://www.sric-bi.com/VALS/presurvey.shtml
 How does your VALs result
represent you as a
consumer? Is it a true
reflection of yourself?
 If so, for what products does
it fit you - as a consumer?

34
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
 attributes we seek in a good or service
 benefits we expect to receive from that good or service
 Usage rates for a product e.g.
 heavy-, moderate-, light-user segments
 80/20 principle (“Pareto’s Law”) 80% of a product’s
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

Attributes of Yogurt
Individually With High- Mild Organic Contains Low Low-
packaged fruit priced bio-bifidus fat priced

Provides choice
for family members X X

Convenient to use X

Tastes good X X
Good quality X X X X
Healthy X X X X

Helps digestion X

Helps diet X

Spend less money X

OS STI F E NE B

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:
 ignorance, awareness, knowledge, preference and conviction
 Interaction segmentation:
 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 I’m away on business, I try to stay at a suites hotel.
• I always buy my wife flowers on Valentine’s Day.
 Internet usage

40
 Market Matching Strategies (1 of 2)

PRODUCT OFFERINGS
Ford Motor Company Audio/Volkswagen/Porsche
1908 Early 2000s 1955 Early 2000
Market Single-Offer Multi-OfferSingle-Offer Multi-Offer
Segment Strategy Strategy Strategy Strategy

General-Purpose Cars
Small Model T Focus Beetle Polo
Medium Model T Taurus Golf
Large Crown Victoria Passat

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

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 StrategyStrategyStrategyStrategy
Luxury Cars
Medium-priced Lincoln Continental Audi A4
Lincoln Town Car
High-priced Jaguar S-Type Audi A6
Audi A8
Vans Windstar EuroVan
Econoline
Trucks
Small Model T (Truck) Ford Ranger
Medium Ford “F” series

Sport Utility Vehicles Explorer

(SUVs) Expedition
Excursion
Lincoln Navigator
42
Segmentation for Industrial Markets

 Organizational Demographics
 industry size, location, company
Product Geographic age
Segmentation Segmentation
 Operating Variables
 Technology, process
Potential
Industrial  Purchasing Approach
Markets  Organization & DMU structure
End-Use Account Size
 Situational Variables
Application and Potential  Order size, routine vs.
Segmentation Segmentation
customized, urgency of order
 Personal Characteristics of
Buyers
 attitude to risk, champions

43
Radio Broadcast segmentation

p l e .
The Total Market for Radio

for s i m y ?
&aBenefit
The Market Segment o
t o Radio by Age
t od
x i s s s i f y
a t ri Age
c l a
Young Middle

is m
Benefit Teens
w e Adult Adults
Senior

Th would
Information

H o w
Entertainment

Companionship

44
Hypothetical Middle Adult Segment for Radio

Middle Adults

Early Hourly Business

Professional
Retiree Employee Owner

Information X X X
Desired Benefit

Entertainment X X

Companionship X

45
Hypothetical Middle Adult Segment for Information Radio

Middle Adults
Early Hourly Business
Professional
Retiree Employee Owner
Breaking news X X
Desired Information Focus

Political
commentary X X
Financial market
commentary X X X
Advice X X
Weather X X
Call-in X
Gossip X

46
Hypothetical Positioning Map: CBC versus Commercial Radio

Entertaining
Commercial Commercial
Talk Radio Talk Radio

*As it Happens *This Morning

CBC local*
After Hours*
Informational Music

*CBC News Disc Drive*

Take 5*
*Ideas

Challenging

47
 Positioning of Soap High
moisturizing
• Tone • Zest
7
4 • Lever 2000
• Dove
2
5
• Safeguard
• Lux 8
Nondeodorant 3 Deodorant

1
• Lava • Dial
“Product Space” • Lifebuoy
Representing Consumers’ Perception for 6
Different Brands of Bar Soap
Low
moisturizing
48
 Plot these cars on this Positioning Map
Expensive Inexpensive Conservative Sporty

 Honda Accord
 Jaguar Expensive
 Toyota Yaris
 VW Golf
 BMW 300 series
 Skoda Fabia
 Porche Inexpensive

 Place other cars on

the map
 What other criteria
Conservative
would we add to
improve the map's
usefulness?

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