Marketing

Management
1-1P 5-1
 Chapter 5
Market
Segmentation
P 5-2
 Why Segment?
• More precise market definition
• Better analysis of competition
• Efficient resource allocation
• Effective strategic planning
P 5-3
 A Model of the Market Segmentation Process

Delineate
Delineatefirm’s
firm’scurrent
currentsituation
situation

Determine
Determineconsumer
consumerneeds
needsand
andwants
wants

Divide
Dividemarkets
marketson
onrelevant
relevantdimensions
dimensions

Develop
Developproduct
productpositioning
positioning

Decide
Decidesegmentation
segmentationstrategy
strategy

Design
Designmarketing
marketingmix
mixstrategy
strategy
P 5-4
 Developing Market Segments for Woman’s Apparel

Conservative
Conservative Traditional
Traditional Update
Update

Size 23% of population 38% of population 16% of the

Size population
16% of total sales 40% of total sales
24% of total sales
35-55 years old 25-49 years old
25-49 years old
Conservative values Traditional values Contemporary
Age
Age
Satisfied with present Active, busy, values, Active,
Values
Values
status independent, self busy,independent
confidant very self-
confident

Employment Has job, nor career Family-and Job/ Family-and Job/

Employment
career-oriented career-oriented

(continued)
P 5-5

SOURCE: Michael Levy and Barton A. Weitz, Retailing Management, 3d ed. (Boston, MA: Irwin/McGraw-Hill, 1998), p. 148.
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments

Geographic:
Continents Africa, Asia, Europe, North America, South America
Global regions Southeast Asia, Mediterranean, Caribbean, China, Canada
Countries France, United States, Brazil,
Country regions Pacific Northwest, Middle Atlantic, Midwest
City, county, or SMSA size Under 5,000people, 5,000-19,999, 20,000-49,999, 50,000+
Population density Urban, suburban, rural
Climate Tropical, temperate, cold

(continued)
P 5-6

Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments

Demographic:
Age Under 6 years old, 6-12, 13-19, 20-29, 30-39, 40-49, 50+
Gender Male, female
Family size 1-2 persons, 3-4 persons, more than 4 persons
Family life cycle Single, young married, married with children, sole survivor
Income Under $10,000 per year, $10,000-$19,999, $20,000-$29,999,
40,000-$39,999, $40,000-49,999, $50,000+

(continued)
P 5-7

Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments
Education Grade school or less, some high school, graduated from
high school, some college, graduated from college, some
graduate work, graduate degree
Marital status Single, married, divorced, widowed
Social
Culture American, Hispanic, African, Asian, European
Subculture
Religion Jewish, Catholic, Muslim, Mormon, Buddhist
Race European-American, Asian-American, African-American,
Hispanic-American
(continued)
P 5-8

Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments

Nationality French, Malaysian, Australian, Canadian, Japanese

Social class Upper class, middle class, working class, lower class
Thoughts and feelings
Knowledge Expert, novice
Involvement High, medium, low
Attitude Positive, neutral, negative
Benefits sought Convenience, economy, prestige
Innovativeness Innovator, early adopter, early majority, late majority
laggers, nonadopter
Readiness stage Unaware, aware, interested, desirous, plan to purchase
Perceived risk High, moderate, low
(continued)
P 5-9

Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments

Behavior
Media Usage Newspaper, magazine, TV, internet
Specific media usage Sports Illustrated, Life, Cosmopolitan
Payment method Cash, Visa, MasterCard, American Express, check
Loyalty status None, some, total
Usage rate Light, medium, heavy
User status Non user, ex-user, current user, potential user
Usage situation Work, home, vacation, commuting
P 5-10

(continued)
Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Consumer Markets
Segmentation Base Examples of Market Segments

Combined approaches
Psychographics Achievers, strivers, strugglers
Person/situation College students for lunch, executives for business dinner
Geodemography Blue Blood Estates, Towns and Gowns, Hispanic Mix
P 5-11

(continued)
Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Useful Segmentation Bases for Consumer and
Organizational Buyer Markets
Organizational Buyer Markets
Segmentation Base Examples of Market Segments

Source loyalty Purchases product from one, two, three, four, or more suppliers
Company size Small, medium, large relative to industry
Purchase quantity Small, medium, large account
Product application Production, maintenance, product component
Organization type Manufacturer, retailer, government agency, hospital
Location North, south, east, west sales territory
Purchase status New customer, occasional purchaser, frequent purchaser,
nonpurchaser
Attribute importance Price, service, reliability of supply
P 5-12

Irwin/McGraw-Hill Figure 5-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 VALS 2 Eight American Lifestyles Figure 5-4

Actualizers Abundant resources

Principle oriented Status oriented Action oriented

Fulfilleds Achivers Experiencers

Believers Strivers Makers

Strugglers
Minimal resources
P 5-13

(continued)
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
 Claritas PRIZM Cluster 36-Towns and Gowns Figure 5-5

The “towns and gowns” cluster describes most of our college towns and university campus
neighborhoods. With a typical mix of half locals (towns) and half students (gowns). It is
wholly unique, with thousands of penniless 18- to 24-year-old kids, plus highly educated
professionals, all with a taste for prestige products beyond their evident means.

Predominant Characteristics
• Households (% U.S.) 1,290,200 (1.4%)
• Population: 3,542,500
• Demographic caption: College-town singles
• Ethnic Diversity: Dominant white, high Asian
• Family type: Singles
•Predominant age ranges: Under 24, 25-34
• Education: College graduates
• Employment level: White collar/service
• Housing type: Renters/multiunit 10+
• Density percentile: 58 (1=sparse, 99 = dense)
(continued)
P 5-14

SOURCE: Valarie Walsh and J. Paul Peter, “Claritas Inc.: Using Compass and PRIZM,” in Marketing Management: Knowledge and Skills,
5th ed., eds. J. Paul Peter and James H. Donnelly, Jr. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 334
 Claritas PRIZM Cluster 36-Towns and Gowns Figure 5-5

More Likely to:

Lifestyle Products and Services
Go to college football games Have personal education loan
Play racquetball Use an ATM card
Go skiing Own a Honda
Play billiards/pool Buy 3+ pairs of jeans annually
Use cigarette rolling paper Drink Coca-Cola Classic
Use a charter/tour bus Eat Kraft Macaroni and Cheese
Radio/TV Print
Watch VH1 Read Self
Listen to alternative rock music Read newspaper comic section
Watch “Jeopardy” Read Rolling Stone
Listen to variety radio Read GQ
Watch “The Simpsons”
P 5-15

SOURCE: Valarie Walsh and J. Paul Peter, “Claritas Inc.: Using Compass and PRIZM,” in Marketing Management: Knowledge and Skills,
5th ed., eds. J. Paul Peter and James H. Donnelly, Jr. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998), p. 334
 Positioning Map for Automobiles Figure 5-6

Luxurious
•Lexus
• Mercedes
Cadillac • •BMW •Porsche
Lincoln •
•Chrysler
•Pontiac
Oldsmobile • • Buick
Traditional Sporty
Mercury • Ford • •Chevrolet
•Nissan
•Toyota
Dodge •
•Saturn
Plymouth •
•VW
Functional
P 5-16

SOURCE: Gilbert A. Churchill, Jr., and J. Paul Peter, Marketing: Creating Value for Customers, 2d ed. (Burr Ridge, IL: Irwin/McGraw-Hill,
1998), p. 221.
 Differences in Marketing Strategy for Three Segmentation
Alternatives
Multiple
Strategy Mass Single Market Market
Elements Marketing Segmentation Segmentation
Market definition Broad range of One well-defined Two or more well-
defined
consumers consumer group consumer groups

Product strategy Limited number of One brand tailored Distinct brand for each
products under one to one consumer consumer group
brand for many types group
of consumers

Pricing strategy One “popular” price One price Distinct price range for
range range tailored to each consumer group
the consumer group

(continued)
P 5-17

SOURCE: Joel R. Evans and Barry Berman, Marketing, 5th ed. (New York: Macmillan, 1992), p.
219. © 1992. Reprinted by permission of Prentice Hall, Inc., Upper Saddle River, NJ.
 Differences in Marketing Strategy for Three Segmentation
Alternatives
Multiple
Strategy Mass Single Market Market
Elements Marketing Segmentation Segmentation
Distribution strategy All possible outlets All suitable outlets All
suitable outlets
differs by segment

Promotion strategy Mass media All suitable media All suitable media
differs by segment

Strategy emphasis Appeal to various Appeal to one specific Appeal to

two or more types of consumers consumer group
distinct market seg- through a uniform, through a highly spe-
ments through different
broad-based cialized, but uniform marketing plans
catering
marketing program marketing program to each segment
P 5-18

SOURCE: Joel R. Evans and Barry Berman, Marketing, 5th ed. (New York: Macmillan, 1992), p.
219. © 1992. Reprinted by permission of Prentice Hall, Inc., Upper Saddle River, NJ.