Target Markets & Market Segmentation What is a Market? A market is all customers who share common needs and wants and who have the ability and willingness to buy the product. Market can also be a companies percentage of total sales in their industry. Ex: Nike sells 48% of all cross trainers in the U.S. How do we determine which customers share common needs and have the ability to purchase? Target Marketing Is focusing all marketing decisions on a very specific group of people you want your product to reach. The more information you have on this group the easier it is to make marketing decisions. Businesses will frequently create what they call a CUSTOMER PROFILE, which is a breakdown of the characteristics of the target market: age, income, ethnic background, geography. Market Segmentation A way of analyzing a market by specific characteristics in order to create a target market. Think about a “Widget” Company. Once the owners decide what, where, and how to make and distribute the widgets, they need to know who has a need for them. By using MARKET SEGMENTATION to define our TARGET MARKET we can focus all our marketing activities. How do we Segment a Market? There are 4 ways to categorize potential customers Demographics Psychographics Geographics Product Benefits Demographics Refers to statistics that describe a population in terms of personal characteristics. These include: age, gender, income, ethnicity, education and occupation. It is important to understand the attributes of your target market, so you can focus your promotional dollars to the right group of people. Ex: You wouldn’t advertise BMW’s to low income teenagers. Ex: You wouldn’t advertise Barbie dolls to everyone Demographics may also include fitness level, language spoken, or religious affiliations. Demographics Age, Gender, Income Ethnicity, Education Occupation %'s will differ Age Age is a key characteristic to consider. Many products are age sensitive. – Ex: Health products to older adults Age is often broken down by generations. People from the same generation were born between a certain set of years, and commonly share similar values, lifestyles, cultural knowledge and experiences. Generations Baby Boom Generation • 76 million Americans were born between 19461964 • Most baby boomers are in their 50’s and 60’s • They are at the peak of their earning income • They are great targets for luxurious and recreational products • Looking toward retirement: investments, savings, financial plans Generations • • • • Generation X 40 million Americans were born between 19651976 Grew up during a time of widespread media They are considered savvy and skeptical consumers Reaching this group is achieved by using sharp images, music, humor, and a little irreverence. Generations • • • • • • • Generation Y 77 million Americans were born between 1977-1997 Fewer number of children per family Grew up in a computer world Extremely savvy with technology and used to doing multiple things at a time Young people have a huge amount of influence over parents purchasing decisions Marketers want to get kids hooked early and influence buying decisions All of you! Gender Surprisingly few products today are marketed to solely women or men. Ex: Women buy men’s cologne and clothing all the time. Frequently, advertisements for these products are targeted at a female demographic. Ex: Men buy flowers or jewelry for women as romantic gifts. Ex: schick razors with women stealing razors from men or vice versa. It’s important to remember the distinction between the customer (purchaser) and the consumer (user). Income Level Marketers look at two types of income Disposable income: is the money left after taking out taxes. The money used to pay for bills, basic living necessities – food, shelter, clothing. Discretionary income: is the money left after paying for basic living necessities such as food, shelter, and clothing. Cell Phones? Money given to teenagers is often times discretionary money from parent/s/guardians. Ethnic Background The U.S. is the Great Melting Pot. African, Hispanic, and Asian Americans make up 28% of the population. Marketers reach them using targeted ads on places like Spanish TV, BET or magazines like Ebony and Black Enterprise. Ethnicity and culture has a huge impact on purchasing decisions. Marketers have to understand all of the cultures in the U.S. in order to be successful. Ethnic Background http://www.usatoday.com/news/nation/census/2003-06-18-Census_x.htm Psychographics Categorizing people based on social and psychological characteristics. Consumers’ attitudes, value system, and lifestyle. Trends are also important to look at. People start placing value on new things like eating healthy, being independent, or being more casual in the workplace. Are people’s desires in line with their means? Ex: People want luxury even if they can’t truly afford it. Geographics Segmenting the market based on where people live. Ex: local, regional, national, or global markets. Ex: Small town restaurant – local Ex: Coca Cola – International Using ethnicity you can look at location by the concentration of a particular ethnic group. The trend in the U.S. has been for people to move South, West, or Southwest. There is huge growth in places like Nevada, Arizona, Colorado, Georgia, and Idaho. Marketers also have to consider people in a specific regions likelihood to use certain products. Washington – Umbrellas California/Florida – Surfboards Product Benefits Often potential customers are separated by the features they are looking for. Ex: Shampoo comes in multiple styles; w/ conditioner, scented, dry scalp, oily hair, thick hair, etc.. Often products have several appealing features and need to be marketed in different ways. Ex: To one person an Audi might be fast and luxurious, while to another the safety of passengers is paramount.