Week 2 Project
Market Segmentation
© 2016 South University
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Marketing Management
©2016 South University
2 Market Segmentation
Week 2 Lecture 3
Different consumers have different product needs and use products differently. Segmentation seeks to group different demands and needs into clusters with similar demand patterns. The groups are called market segments and the process of dividing a market into segments is called market segmentation.
Market managers segment markets on the basis of four different dimensions: demographic, geographic, psychographic, and behavior.
1. Demographic The buyer’s age, gender, family, education, and socioeconomic conditions Demographic dimensions consist of the different variables and socioeconomic conditions used to describe markets. Variables commonly used include age, gender, income, family, marital status, and education. Demographics are the most commonly used segmenting dimension because of the ease with which this information can be collected. Demographic information is readily available in the United States through the U.S. Census Bureau.
2. Geographic The location and climate The geographic dimensions consist simply of the location. The region of the world, the climate, the state, or the country where consumers are located will influence their needs and desires. Geographic segmentation is often used in business-to-business marketing because of the large volume of goods needed by organizations. Industrial goods, in particular, because of their weight and size, are especially suited for geographic segmentation in relation to access to major transportation routes.
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Marketing Management
©2016 South University
3 Market Segmentation
Week 2 Lecture 3
3. Psychographic The buyer’s personality, beliefs, and standard of living Psychographic dimensions are based on an individual's personality, standard of living, and beliefs. This is a more difficult segmentation dimension to use because it requires a firm to do primary research on its consumers’ attitudes and personalities. This is expensive and time consuming, and these are the reasons organizations use psychographic variables as a supplement to geographic or demographic dimensions.
4. Behavior The buyer’s consumer attitude, behavior, and status Behavioral segmentation focuses on consumer attitudes and behaviors toward a firm's products. One behavioral segmentation variable is the buying situation. Individuals buying products for gifts approach the process differently than individuals buying products for themselves. Stores like Hallmark are geared toward market segments that buy products as gifts for others. The status of the buyer may also influence where and how the products are purchased. Behavioral segmentation is used often for products used as gifts or for building status.
Marketing managers use multiple variables within each dimension as the actual basis for segmentation. One of the key applications of marketing research in marketing management is determining a combination of four dimensions that works best for the purposes of market segmentation.
Once the marketing manager segments a market, the next step is to select the specific target market that will be the focus of the
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Marketing Management
©2016 South University
4 Market Segmentation
Week 2 Lecture 3
marketing plan.The selection of the target markets is based on different criteria.
1. Organization’s Objectives What are the financial goals of the firm and its market objectives? Is the firm seeking to pursue a global or a domestic strategy? This is the starting point for the selection evaluation. Once the organization’s objectives are applied, the next step is to determine the cost to service the different market segments.
2. Cost of Serving the Market Segments Particular attention is paid to the economies of scale that might be accomplished by serving multiple market segments. For example, a single production line could be used to produce products that may then be customized to meet the needs of different markets. Once the cost of serving market segments is identified, the next step for marketing managers is to identify the organizational resources available for serving the different market segments.
3. Organizational Resources Organizational resources include not only financial resources but also product experience, market knowledge, and distribution channels. These resources are then matched to specific market segments to determine the best match.
4. Determine the Market Size The final step in the process is to determine the market size. This looks at not only the profit potential of the market segment but also its growth potential and the level of its competition. Segments having the potential to expand or deliver high-profit levels are the most desirable