n Chapter 2
Basic Marketing Concepts
Chapter 2 n Basic Marketing Concepts 1

SECTION 2.2
Market Segmentation
What You'll Learn
 Market segmentation and the four methods commonly used to segment a market
 Current demographic, psychographic, and geographic trends
Chapter 2 n Basic Marketing Concepts 2

SECTION 2.2
Market Segmentation
Why It's Important
Businesses must know who their customers are to achieve success. In other words, they must know their markets. This section will introduce you to the U.S. marketplace and the different ways businesses classify and characterize its segments.
Chapter 2 n Basic Marketing Concepts 3

SECTION 2.2
Market Segmentation
Key Terms
 market segmentation
 demographics
 Baby Boom Generation
 Generation X
 Generation Y
 disposable income
 discretionary income
 psychographics
 geographics
Chapter 2 n Basic Marketing Concepts 4

SECTION 2.2
Market Segmentation
Market Segmentation
Dividing the total market into smaller groups of people who share specific needs and characteristics is the essence of market segmentation.
Chapter 2 n Basic Marketing Concepts 5

SECTION 2.2
Market Segmentation
Analyzing Markets
Businesses may segment a market by:
 demographics
 psychographics
 geographics
 product benefits
Chapter 2 n Basic Marketing Concepts 6

SECTION 2.2
Market Segmentation
Demographics
Demographics refers to statistics that describe a population in terms of personal characteristics. These include:
 age
 gender
 income
 ethnic background
Chapter 2 n Basic Marketing Concepts 7

SECTION 2.2
Market Segmentation
Demographics: Age
When marketers study age, they classify everyone according to certain generations, because each generation tends to have shared experiences and common bonds.
Baby Boom Generation: 1946-1964
Generation X: 1965-1976
Generation Y: 1977-1997
Chapter 2 n Basic Marketing Concepts 8

SECTION 2.2
Market Segmentation
Demographics: Gender
Companies can expand their markets by marketing to the other gender, or by marketing their products differently to men and women.
 Example : Jockey entered the women
’ s market with Jockey underwear for women and doubled its sales.
Chapter 2 n Basic Marketing Concepts 9

SECTION 2.2
Market Segmentation
Demographics: Income
Marketers want to know how much money is available for spending on different products. They look at two types of income measurement:
 disposable income
 discretionary income
Chapter 2 n Basic Marketing Concepts 10 Slide 1 of 2

SECTION 2.2
Market Segmentation
Demographics: Income
Disposable Income = money left over after taxes.
 Important for companies that produce and distribute necessities
Discretionary Income = money left after paying for food, shelter, and clothing.
 Important for companies that produce and distribute luxury items
Chapter 2 n Basic Marketing Concepts 11 Slide 2 of 2

SECTION 2.2
Market Segmentation
Demographics: Ethnicity
Marketers often segment the market by ethnicity.
The three largest ethnic groups within the
United States are African-Americans, Hispanics, and Asian-Americans. These three groups will account for 33 percent of the U.S. population in 2005.
Chapter 2 n Basic Marketing Concepts 12

SECTION 2.2
Census 2000
Market Segmentation
The United States conducts a census every ten years to determine the characteristics of the population. Which ethnic group is declining? Which ethnic groups are increasing? What effects will these ethnic changes have on marketing in the United States?
Chapter 2 n Basic Marketing Concepts 13

SECTION 2.2
Market Segmentation
Psychographics
Psychographics involves studies of consumers based on social and psychological characteristics.
In addition to segmenting people by their leisure time interests, marketers observe trends and changes in households, the economy, politics, and the workplace.
Chapter 2 n Basic Marketing Concepts 14

SECTION 2.2
Geographics
Market Segmentation
Geographics refers to segmentation of the market based on where people live. Marketers study geographics in relation to:
 ethnic concentrations
 age
 ethnic background
 income
Chapter 2 n Basic Marketing Concepts 15

SECTION 2.2
Market Segmentation
Product Benefits
Segmenting a market by product benefits involves studying consumers
' needs and wants.
 Example: Different shampoos are marketed to people with different hair care needs.
Chapter 2 n Basic Marketing Concepts 16

Slide 1 of 2
2.2
A SSESSMENT
1.
What do demographics, psychographics, geographics, and product benefits have in common?
2.
How can a market be segmented using demographics?
3.
What does the study of psychographics involve?
Chapter 2 n Basic Marketing Concepts 17

Slide 2 of 2
2.2
A SSESSMENT
4.
Provide one example of how a marketer can segment a market based on product benefits.
5.
Of what significance are the combined
African-American, Hispanic, and
Asian-American populations to marketers?
Chapter 2 n Basic Marketing Concepts 18

2.2
A SSESSMENT
How can Procter and Gamble market household products to a male market segment?
What problems might P&G encounter in that endeavor?
Chapter 2 n Basic Marketing Concepts 19

Chapter 2 n Basic Marketing Concepts 20