Professor Richardson
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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What is a Market?
PEOPLE
Professor Richardson
SEGMENTATION
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What is a Market?
PEOPLE
BUT - not just ANY people, they have to have
• Willingness to buy
• Purchasing power (money)
• Authority to buy
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SEGMENTATION
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Types of Markets
• Consumer Goods and Services
• Industrial Goods and Services
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SEGMENTATION
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Classes of Consumer Products
14-1
Goods
Shopping
Specialty
POP
Convenience
ATM
Services
$
Professor Richardson
$
SEGMENTATION
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Various Classes of Consumer and
Industrial Goods and Services
G o o d s a n d S e r v ic e s
Consumer Goods
Consumer Services
Convenience Goods
Shopping Goods
Specialty Services
Convenience Services
eg. Mac's Milk
eg. clothing
eg. banking
eg. fast foods
eg. newspaper
eg. groceries
eg. travel
raw material
grain, steel
Industrial Goods
Industrial Services
Production Goods
Support Services
component
parts
materials
nuts, bolts
accessory equipment
tools, computers
installations
eg. buildings
eg. circuit board
eg. wiring
harness
Def’n - industrial goods are products used in the production of other
products
Professor Richardson
SEGMENTATION
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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 PCs
2 categories of industrial goods
• Production Goods
• Support Goods
Professor Richardson
SEGMENTATION
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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
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SEGMENTATION
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Market Segmentation Defn
• “Grouping people according to their
similarity related to a particular
product category”
Professor Richardson
SEGMENTATION
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Market Segmentation
Characteristics
•
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•
•
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•
•
•
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•
age
gender
geographic location
income
spending patterns
cultural background
demographics
marital status
education
language
mobility
Professor Richardson
SEGMENTATION
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Market Segmentation
4 commonly used bases for Segmentation
Descriptive
geographic location
demographic
Behavioural
psychographic
benefits
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SEGMENTATION
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Slide 3-7
Professor Richardson
Figure 3.1 Bases for Market Segmentation
SEGMENTATION
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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)
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SEGMENTATION
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Market Segmentation
Psychographic / lifestyles - based on people’s
opinions, interests, lifestyles
eg, 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 them
eg. People who want to but “lite” food cause ti will help
them lose weight
Professor Richardson
SEGMENTATION
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Geographic location of Canadians
• most live in Toronto - Montreal axis
• + Vancouver
• most live along east-west line close
to the American border
Professor Richardson
SEGMENTATION
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Slide 3-8
Percentage Distribution of the
Population of Canada by Province
Geographic Segmentation
+, Ontario
contains
52% of
foreign born
people in
Canada
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SEGMENTATION
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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 reasons
1. Immigrants come to Canada and
make their homes in the cities
2. Canadians are moving out of the rural
areas and in to the cities
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SEGMENTATION
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Slide 3-9
Figure 3.4 Urban–Rural Population Distribution, 1871–1991
Geographic Segmentation
Professor Richardson
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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Demographic Segmentation
Demographic Segmentation is the most common
approach to 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
Professor Richardson
Examples ??
SEGMENTATION
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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”
Professor Richardson
Examples ??
SEGMENTATION
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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
SEGMENTATION
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Slide 3-10
Figure 3.5 Population Projections by Age Group
Demographic Segmentation
Professor Richardson
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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Demographic Segmentation
•household (family - style) size
FAMILY LIFE CYCLE STAGES
5. Older
a. older married
b. older unmarried (divorced, widowed)
6. other
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SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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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
SEGMENTATION
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Psychographic Segmentation
“The use of psychological attributes,
lifestyles and attitudes in determining
the behavioral profiles of different
customers” TEXT
psychological
The use of detailed information to understand
differences in what people buy
WTGR
Professor Richardson
SEGMENTATION
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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
SEGMENTATION
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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.
Professor Richardson S E G M E N T A T I O N
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Psychographic Segmentation
LIFESTYLE PROFILES
Table 3.8 - HOW DO YOU FIT?
Professor Richardson
SEGMENTATION
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Benefit Segmentation
“It is based on the Attributes (characteristics) of
products, as seen by the customers”
example, people buy something because it
causes a benefit
ie. Diet coke - less sugar, lose weight
ie. Extra white toothpaste, whiter teeth, better smile
Professor Richardson
SEGMENTATION
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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 planmodern example would be price of PCs for home use biggest use is entertainment NOT schoolwork or home based
businesses
Professor Richardson
SEGMENTATION
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Benefit Segmentation of the Toothpaste Market
Benefit Segmentation
Segment Name
The
Independent
Segment
The Sensory
Segment
The
Sociables
The Workers
Principal benefit sought
Flavour, product
appearance
Brightness
of teeth
Decay
prevention
Price
Demographic strengths
Children
Teens, young
people
Large families
Men
Special behavioural
characteristics
Users of
spearmintflavoured
toothpaste
Smokers
Heavy users
Heavy users
Brands disproportionately
flavoured
Colgate,
Stripe
MacLean’s,
Plus White,
Ultra Brite
Crest
Brands
on sale
Personality characteristics
High selfinvolvement
High
sociability
High
hypochondriasis
High
autonomy
Lifestyle characteristics
Hedonistic
Active
Conservative
Valueoriented
Professor Richardson
SEGMENTATION
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Slide 3-12
Figure 3.9 Segmentation Bases for Industrial Markets
Segmentation for Industrial Markets
Professor Richardson
SEGMENTATION
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Segmentation for Industrial Markets
• 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
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SEGMENTATION
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