Chapter 4

Foundations for Market

Segmentation
Sommers  Barnes
Ninth Canadian Edition

Presentation by
Karen A. Blotnicky
Mount Saint Vincent University, Halifax, NS
Copyright © 2001 by McGraw-Hill Ryerson Limited
Chapter Goals
To gain an understanding of:
• Target market identification and selection
• The underlying concept of market
segmentation
• The distinctions between the business and
consumer markets
• Methods of segmenting markets
• Segmentation by following the distribution
and composition of the Canadian
population, income distribution and
spending patterns
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The Concept of
Target Segments
• consider what makes various groups of
consumers different; why they buy as they do
• different segments are motivated by different
things and find different appeals attractive
• target should be compatible with firm’s goals
• must match market opportunity with
resources
• target segments must offer potential for profit
• must offer opportunity to compete effectively
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Nature of Market
Segmentation
• involves developing a different marketing
approach for different groups of customers
• segments should be homogeneous as possible
• more efficient use of marketing resources
• advertising and promotions can be targeted
• data bases allow even better targeting for
some firms
• but may increase marketing expenditures
in some cases as different programs
required
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Conditions for
Segmentation
• basis for segmentation must be measurable
and the data accessible
• targeted market segment itself must be
accessible through existing channels and
media
• each segment should be large enough to be
profitable; it should have good buying
potential
• easiest to look at segments in terms of location
and demographic profile
• what is important is different across segments
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 Guidelines for Market
Segmentation
• A market is people with wants, money and
willingness to spend
• A target market is the group of customers at
whom a firm aims its marketing efforts
• Need to consider:
• Compatibility with corporate goals and
image
• Company resources
• Profitability prospects
• Number and size of competitors

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Bases for Consumer
Segmentation
May segment the consumer market on:
• geographic bases: where they are
located
• demographics: what their
characteristics are
• psychographic: their attitudes and
values
• behavioural: why/how they use the
product or service
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Geographic Segmentation
• Regional distribution: people within a
given region tend to share values and
attitudes.
• Urban, suburban, and rural
distribution.
• Census Metropolitan Areas (CMAs).
• Suburban growth and back to the city.
• Geodemographic Clustering: using postal
codes to cluster segments.

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Examples: Segmenting Using
Geographics
Geographic:
Region Maritimes, Quebec, Ontario,
Prairies, B.C.

City or CMA size Under 25,000; 25,001-100,000;

100,001-500,000;
500,001-1,000,000; etc.
Urban-rural Urban, suburban, rural, farm

Climate Mountainous, seacoast,

rainy, cold

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Copyright © 1998 by The McGraw-Hill Companies, Inc.
Segmentation by Demographics
• identifying the target segment involves
developing a detailed profile of its members
• demographic differences are easiest to
observe; but are very simplistic
• consider differences across segments based
upon age, gender, stage of life cycle,
education, ethnic background, or occupation
• think about the target demographic segments
for some new products and services

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 Examples of
Age Segmentation:
• Colour discrimination: Older people have
difficulty distinguishing pastels and the
green-blue-violet part of the colour
spectrum. The marketer should use
significant colour contrast to enhance the
older consumer’s ability to see packaging,
brochures, and displays.
• Glare: The problem of glare can be found in
glossy, shiny finishes used in packaging,
posters, floors in retail stores. Glare should
be toned down or eliminated.
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More Examples of
Age Segmentation:
• Hearing: Loss is experienced by 25% of those
over 65, and is more pronounced for higher
tone frequencies. Marketers using audio
communicators should select spokespersons
who have deeper tones.
• Taste sensitivity: By age 80, two-thirds of
one’s taste buds have atrophied. Loss is
greatest for sweet tastes, least affected are sour
tastes. Marketers should consider odour
amplification as the best means of enhancing
the palatability of foods and beverages.
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Examples: Segmenting Using
Demographics
Demographic:
Income Under $10,000; $10,001-$25,000;
$25,001-$35,000; $35,001-$50,000;
over $50,000
Age Under 6, 6-12, 13-19, 20-34, 35-49,
50-64, 65 and over
Gender Male, female
Family life cycle Young, single; young, married, no
children, etc.
Ethnic Background White, black, Asian, British, Italian, etc.
Education Grade school only, high school graduate,
college graduate, university graduate
Occupation Professional, manager, clerical, sales,
student, homemaker, unemployed

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Segmentation by Gender
•Traditional buying patterns are
breaking down
•57.4% of women are
participating in the Canadian
work force

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 Family Life Cycle
• There are six traditional stages in the life an
ordinary family:
Bachelor stage – young, single people;
Young married couples – early married years before
the arrival of children;
Full nest I – young married couples with children;
Full nest II – older married couples with
dependent children;
Empty nest – older married couples with no
dependent children; and
Older single people - still working or retired
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Segmentation by Income
• income has considerable influence on how people
spend and is an important basis for segmentation
• there is an important distinction between
disposable income and discretionary income
• think about the factors that contribute to
household buying power
• people spend differently at different life cycle
stages and in different income groups
• segmenting by income doesn’t necessarily mean
targeting the high end of the market
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Examples of Psychographic and
Behavioural Segmentation
Psychographic:
Personality Ambitious, self-confident, aggressive,
introverted, extroverted, sociable
Lifestyle Activities (golf, travel); interests (politics,
art); opinions (conservation, capitalism)
Social Class Upper, upper middle, lower middle, etc.

Behavioural:
Benefits desired Examples vary widely depending on
product: appliance — cost, quality,
operating life; toothpaste — no cavities,
plaque control, bright teeth, good taste,
low price
Usage rate Nonuser, light user, heavy user
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