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Chapter 8

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Administrative Studies
ADMS 2200
Kim Snow

Chapter 8 – Marketing Segmentation, Targeting, and Positioning Market – Group of people with sufficient purchasing power, authority and willingness to buy. Target Market – Group of people to whom a firm decides to direct its marketing efforts, goods and services Chapter Objective 1: Identify the essential market components, outline role of market segmentation in developing market strategy, and describe the criteria necessary for effective segmentation. Types of Markets: Consumer Products – Products bought by ultimate consumers for personal use i.e. cell phone Business Products – goods and services purchased for use either directly or indirectly in the production of other goods and services for resale i.e. rubber, raw cotton Role of Market Segmentation Market segmentation – division of the total market into smaller, relatively homogenous groups - Both profit orientated and not-for-profit practice market segmentation Criteria for Effective Segmentation: - Effectiveness depends on 4 basic requirements 1. Market segment must present measurable purchasing power and size 2. Find a way to promote effectively and to serve to market segment 3. Segment must be sufficiently large to offer good profit potential 4. Firm must aim for segment that match its marketing capabilities Segmenting Consumer Markets: - Four common bases for segmenting consumer markets: o Geographic o Demographic o Psychographic o Product-related Chapter Objective 2: Explain the 4 bases for segmenting consumer markets Chapter Objective 3: Describe the product-related segmentation Geographic Segmentation - Division of an overall market into homogenous groups based on their locations - E.g. Needs in a city are different than needs in rural areas - Marketers focus on core regions = 40-80% of sales CMA – Census metropolitan area - Geographic area surrounding an urban core with population of at least 100,000 CA – Census agglomeration - Geographic area with a population over 10,000 - Smaller version of CMA Geographic Information Systems (GIS) - Computer systems that assemble, store, manipulate, and display data by location - Relate data to their locations - Example: Google Earth application Demographic Segmentation - Based on demographic variables such as gender, age, income, occupation, education, household size, and stage in family life cycle - Most common method of market segmentation - Also called socioeconomic segmentation - Can lead to stereotyping o Can alienate/miss potential market Segmenting by Gender - In some cases, segmenting is obvious i.e. lipstick for women - Recently, distinction is not as obvious Segmenting by Age - Distinctions among age group blur as consumers’ roles and needs change and as age distribution shifts - School-aged children - Teens and tweens - Generation X o Born between 1966 – 1981 o Between early 30s – early 40s - Baby boomers o Born between 1947 – 1965 o Account for 60% of consumer spending - Seniors The Cohort Effect - Tendency of members of a generation to be influenced and bound together by significant events occurring during formative years (17-22) - I.e. Video Game Generation o Also called Gen Y, 9/11 Generation Segmenting by Ethnic Group - Quebecois and English - Chinese Canadians - South-Asian Canadians - Black Canadians Segmenting by Family Life Cycle Stages - The process of family formation and dissolution - Life stage is primary concern o I.e. single, married with no children, married with children etc. Segmenting by Household Type - Households vary by life cycle stage - Vary by presence or absence of children Segmenting by Income and Expenditure Patterns Engel’s Laws – as household income increases, the following take place: 1. % spent on food decreases 2. % spent on housing, household operations, clothing remains constant 3. % spent on other items (i.e. recreation) increases - H
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