Marketing Essentials

Chapter 2 Basic Marketing Concepts 1

Marketing EssentialsMarketing Essentials

Chapter 2 Basic Marketing Concepts

Section 2.2 Market Segmentation


SECTION 2.2SECTION 2.2

What You'll LearnWhat You'll Learn

Market segmentation and the four methods commonly used to segment a market

Current demographic, psychographic, and geographic trends

Market SegmentationMarket Segmentation


SECTION 2.2SECTION 2.2Market SegmentationMarket Segmentation

Why It's ImportantWhy 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.



Key TermsKey Terms

market segmentation demographics Baby Boom Generation Generation X Generation Y disposable income discretionary income psychographics geographics



Dividing the total market into smaller groups of people who share specific needs and characteristics is the essence of market segmentation.

Market Segmentation



Businesses may segment a market by:

Analyzing Markets

demographics

psychographics

geographics

product benefits



Demographics refers to statistics that describe a population in terms of personal characteristics. These include:

Demographics

age

gender

income

ethnic background



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 Generation Z?: 1990-2000

Demographics: Age



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.

Demographics: Gender



Marketers want to know how much money is available for spending on different products. They look at two types of income measurement:

Demographics: Income

disposable income

discretionary income

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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

Demographics: Income

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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.

Demographics: Ethnicity


Census 2000 Census 2010


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?



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.

Psychographics



psychographic variables are any attributes relating to personality, values, attitudes, interests, or lifestyles. They are also called IAO variables (for Interests, Activities, and Opinions).

Psychographics



NetMBA

Psychographics

US Framework and VALS™ Types



Geographics refers to segmentation of the market based on where people live. Marketers study geographics in relation to:

Geographics

ethnic concentrations

age

ethnic background

income



Segmenting a market by product benefits involves studying consumers' needs and wants.

Product Benefits

Example: Different shampoos are marketed to people with different hair care needs.


2.2 ASSESSMENTASSESSMENT

Reviewing Key Terms and Concepts

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?

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Reviewing Key Terms and Concepts

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?

Slide 2 of 2



Thinking Critically

How can Procter and Gamble market household products to a male market segment?What problems might P&G encounter in that endeavor?


Marketing EssentialsMarketing Essentials

End of Section 2.2

Marketing Essentials

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