Consumer markets are segmented on one or more of the following dimensions:
Geographic segmentation, which divides the market into different geographical units like nations, states, regions, counties, cities, or neighbourhoods.
Demographic segmentation, which divides the market into groups based on demographic variables like age, life-cycle, gender, income, and generation [Generation Y or Baby Boomers].
Psychographic segmentation - dividing the market into different groups on the basis of lifestyle, personality, or values.
Behavioural segmentation, where the market is 'divided into groups on the basis of
their knowledge of, attitude toward, use of, or response to a product' [Kotler et al,
2013, p. 273]. Who makes the purchase decision is an important variable, as well as
the usage occasion [family dinner or anniversary], user status [non-user, ex-user,
potential user, etc.], usage rate [light, medium, or heavy users] and so on.
Multi-attribute
segmentation [geo-clustering], which divides the market on a
combination of variables [i.e. geographic and demographic data] in an effort to identify smaller and better defined target
groups.
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Unit 3: Consumer Behavior and Market Segmentation
Competency 3061.1.3: The graduate analyzes how consumer behavior affects
marketing and market research processes, and can identify target markets
through segmentation.
Chapter 9 Learning Objectives
1. Define market segmentation and
target market.
2. Describe the geographic approach to market segmentation.
3. Describe the demographic approach to market segmentation.
4. Describe the psychographic approach to market segmentation.
5. Describe the product-related approach to market segmentation.
6. Identify the four steps in the market segmentation process.
7. Define positioning.
1
Identify the two essential components of a market.
A market consists of people and organizations with the necessary purchasing power, willingness, and authority to buy. Consumer products are purchased by the ultimate consumer for personal use. Business products are purchased for use directly or indirectly in the production of other goods and services. Certain products may fall into both categories.
2
Outline the role of market segmentation in developing a marketing strategy.
Market segmentation is the process of dividing a total market into several homogeneous groups. It is used in identifying a target market for a good or service. Segmentation is the key to deciding a marketing strategy.
3
Describe the four components necessary for effective segmentation.
Effective segmentation depends on these four basic requirements:
1. the segment must have measurable
purchasing power and size,
2. marketers can find a way to promote to and serve the market,
3. marketers must identify segments large enough for profit potential, and
4. the firm can target a number of segments that match its marketing capabilities.
4
Explain the *geographic approach* to segmenting consumer markets.
Geographic segmentation divides the overall market into homogeneous groups according to population locations.
5
Discuss the *demographic approach* to segmenting consumer markets.
Demographic segmentation classifies the market into groups based on characteristics such as age, gender, and income level.
6
Outline the *psychographic approach* to segmenting consumer markets.
Psychographic segmentation uses behavioral profiles developed from analyses of consumers' activities, opinions, interests, and lifestyles to identify market segments.
7
*Describe product-related segmentation.*
Product-related segmentation can take three basic forms: segmenting based on the benefits people seek when buying a product, segmenting based on usage rates for a product, and segmenting according to consumers' brand loyalty toward a product.
8
*Identify the four steps in the market segmentation process.*
Market segmentation is the division of markets into relatively homogeneous groups. Segmentation follows a four-step sequence:
1. developing user profiles
2. forecasting the overall market potential,
3. estimating market share, and
4. selecting specific market segments.
9
Discuss four basic strategies for reaching target markets.
Four strategies are
1. undifferentiated marketing—uses a single marketing mix;
2. differentiated marketing—produces numerous products, each with its own mix;
3. concentrated marketing—directs all the firm's marketing resources toward a small segment; and
4. micromarketing—targets potential customers at basic levels, such as ZIP code or
occupation.
10
Explain the four types of *positioning* strategies and the reasons for positioning and repositioning products.
Positioning strategies include positioning a good or service according to attributes, price/quality, competitors, application, product use, and product class.
Positioning helps distinguish a firm's products from those of competitors and provides a basis for marketing communications.
Repositioning a product—changing the position it holds in consumers' minds—may be necessary to gain greater market share.
1.1
*Define target market.*
A target market is the specific segment of consumers most likely to purchase a particular product.
1.2.
Distinguish between a consumer product and a business product.
A consumer product is purchased by the ultimate buyer for personal use. A business product is purchased for use directly or indirectly in the production of other goods and services.
2.1.
*Define market segmentation*.
Market segmentation is the process of dividing a total market into several homogeneous groups.
2.2.
Describe the role of market
segmentation.
The role of market segmentation is to identify the factors that affect purchase decisions and then group consumers according to the presence or absence of these factors.
3.1.
Identify the four criteria for effective segmentation.
The four criteria for effective segmentation are:
the market segment must present measurable purchasing power and
size,
marketers must find a way to promote effectively and serve the market segment,
marketers must identify segments sufficiently large to give them good profit potential, and
the firm must aim for segments that match its marketing capabilities.
3.2.
Give an example of a market segment that meets these criteria.
Examples might include women, teenagers, Hispanics, empty nesters, and NASCAR enthusiasts.
4.1.
Under what circumstances are marketers most likely to use *geographic segmentation*?
Marketers usually use geographic segmentation when regional preferences exist and when demand for categories of goods and services varies according to geographic region.
4.2.
What are the five main categories for classifying urban data?
The five categories are core based statistical area [CBSA], metropolitan statistical area [MSA], micropolitan statistical area, consolidated metropolitan statistical area [CMSA], and primary metropolitan statistical area [PMSA].
5.1.
What is *demographic segmentation*?
Demographic segmentation defines consumer groups according to demographic variables such as gender, age, income, occupation, household, and family lifecycle.
5.2.
What are the major categories of *demographic segmentation*?
The major categories of demographic segmentation are gender, age, ethnic group, family lifecycle, household type, income, and expenditure patterns.
6.1.
What is *psychographic segmentation*?
Psychographic segmentation divides a population into groups with similar values and lifestyles.
6.2.
Name the eight *psychographic* categories of the U.S. VALS framework.
The eight categories are innovators, thinkers, achievers, experiencers, believers, strivers, makers, and survivors.
7.1.
List the three approaches to *product-related
segmentation*.
The three approaches are segmenting by benefits sought, segmenting by usage rates, and segmenting by brand loyalty.
7.2.
What is the 80/20 principle?
The 80/20 principle states that a big percentage [80 percent] of a product's revenues comes from a relatively small number [20 percent] of loyal customers.
8.1.
Identify
the four stages of market segmentation.
The four stages are developing user profiles, forecasting the overall market potential, estimating market share, and selecting specific market segments.
8.2.
Why is forecasting important to market segmentation?
Forecasting is important because it can define a preliminary "go" or "no-go" decision based on sales potential. It can help a firm avoid a disastrous move or point out opportunities.
9.1.
Explain the difference between undifferentiated and differentiated marketing strategies.
Undifferentiated marketing promotes a single product line to all customers with a single marketing mix. Differentiated marketing promotes numerous products with different marketing mixes designed to satisfy smaller segments.
9.2.
What are the benefits of concentrated marketing?
Concentrated marketing can allow a firm to focus on a single market segment, which is especially appealing to smaller firms and those that offer highly specialized goods and services.
10.1.
What are the four determinants of a market-specific strategy?
The four determinants are company resources, product homogeneity, stage in the product lifecycle, and competitors' strategies.
10.2.
What is the role of *positioning* in a marketing strategy?
Positioning places a product in a certain position in the minds of prospective buyers so marketers can create messages that distinguish their offerings from those of competitors.
*positioning*
Placing a product at a certain point or location within a market in the minds of prospective buyers.
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