Professor Richardson SEGMENTATION slide 1

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 slide 2

 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 slide 3

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 slide 4

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 slide 5

 What is a Market?

PEOPLE

Professor Richardson SEGMENTATION slide 6

 What is a Market?

PEOPLE
BUT - not just ANY people, they have to have
• Willingness to buy
• Purchasing power (money)
• Authority to buy
Professor Richardson SEGMENTATION slide 7
 Types of Markets

• Consumer Goods and Services

• Industrial Goods and Services

Professor Richardson SEGMENTATION slide 8

 Classes of Consumer Products
14-1

Convenience Shopping Specialty

POP

Goods

ATM

Services $
$

Professor Richardson SEGMENTATION slide 9

 Various Classes of Consumer and
Industrial Goods and Services

G o o d s a n d S e r v i c e s

C o n s u m e r G o o d s C o n s u m e r S e r v i c e s I n d u s t r i a l G o o d s I n d u s t r i a l S e r v

C o n v e n ie n c eS hG o o p o p d i sn g G S op o e d c si a l t y S C e o r vn i vc ee ns i e n c e S e r v i c e s P r o d u c t io n G o o d s S u p p o r t S e r v i c

e g . M a c 's M ei l kg . c l o t h in g e g . b a n k in ge g . f a s t f o o rd a s w m a t e r ci a o l m p o n e n mt a t e r i a l sa c c e s s o r y e q iu n i sp t m a l e l a n t t i o
g r a i n , s t e e lp a r t s n u t s , b o l t st o o l s , c o m p u t e r s

e g . n e w s p a pe eg r. g r o c e r i e se g . t r a v e l e g . c i r c u it b o a r d e g . b u il d i

e g . w ir in g
h a r n e s s

Def’n - industrial goods are products used in the production of other

products

Professor Richardson SEGMENTATION slide 10

 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 slide 11

 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

Professor Richardson SEGMENTATION slide 12

 Market Segmentation Defn

• “Grouping people according to their

similarity related to a particular
product category”

Professor Richardson SEGMENTATION slide 13

 Market Segmentation
Characteristics
• age
• gender
• geographic location
• income
• spending patterns
• cultural background
• demographics
• marital status
• education
• language
• mobility

Professor Richardson SEGMENTATION slide 14

 Market Segmentation
4 commonly used bases for Segmentation

Descriptive
geographic location
demographic

Behavioural
psychographic
benefits

Professor Richardson SEGMENTATION slide 15

Slide 3-7 Figure 3.1 Bases for Market
Segmentation

Professor Richardson SEGMENTATION slide 16

 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)

Professor Richardson SEGMENTATION slide 17

 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 slide 18

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 slide 19

 Slide 3-8 Percentage Distribution of the
Population of Canada by Province

Geographic Segmentation

+, Ontario
contains
52% of
foreign born
people in
Canada

Professor Richardson SEGMENTATION slide 20

 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

Professor Richardson SEGMENTATION slide 21

Slide 3-9

Figure 3.4 Urban–Rural Population

Distribution, 1871–1991

Geographic Segmentation

Professor Richardson SEGMENTATION slide 22

 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 slide 23

 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 slide 24

 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 slide 25
 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 Examples ??
Professor Richardson SEGMENTATION slide 26
 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”
Examples ??
Professor Richardson SEGMENTATION slide 27
 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 slide 28
Slide 3-10
Figure 3.5 Population Projections
by Age Group
Demographic Segmentation

Professor Richardson SEGMENTATION slide 29

 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 slide 30
 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 slide 31
 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 slide 32

 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 slide 33

 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 slide 34
 Demographic Segmentation
•household (family - style) size
FAMILY LIFE CYCLE STAGES
5. Older
a. older married
b. older unmarried (divorced, widowed)

6. other

Professor Richardson SEGMENTATION slide 35

 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 slide 36

 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 slide 37
 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 slide 38

 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 slide 39

 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 slide 40

 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 slide 41

 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 slide 42

 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 slide 43
 Psychographic Segmentation

LIFESTYLE PROFILES

Table 3.8 - HOW DO YOU FIT?

Professor Richardson SEGMENTATION slide 44

 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 slide 45

 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 plan-
modern example would be price of PCs for home use -
biggest use is entertainment NOT schoolwork or home based
businesses

Professor Richardson SEGMENTATION slide 46

 Benefit Segmentation of the
Toothpaste Market
Benefit Segmentation
Segment Name
The
The Sensory The Independent
Segment Sociables The Workers Segment

Principal benefit sought Flavour, product Brightness Decay Price

appearance of teeth prevention
Demographic strengths Children Teens, young Large families Men
people
Special behavioural Users of Smokers Heavy users Heavy users
characteristics spearmint-
flavoured
toothpaste
Brands disproportionately Colgate, MacLean’s, Crest Brands
flavoured Stripe Plus White, on sale
Ultra Brite
Personality characteristics High self- High High High
involvement sociability hypochondriasis autonomy
Lifestyle characteristics Hedonistic Active Conservative Value-
oriented

Professor Richardson SEGMENTATION slide 47

 Slide 3-12
Figure 3.9 Segmentation Bases for
Industrial Markets
Segmentation for Industrial Markets

Professor Richardson SEGMENTATION slide 48

 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

Professor Richardson SEGMENTATION slide 49