Market Segmentation

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Chapter 2
Market
segmentation
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk:
Consumer Behaviour 4e © 2007 Pearson Education Australia

Chapter Objectives
To define market segmentation
To review the uses of segmentation
To outline the nine main bases of segmentation
To understand the main segmentation approaches
To outline the criteria for effective market
segments
To distinguish between concentrated and
differentiated marketing
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 2

What is market segmentation?
Market Segmentation is defined as:
“The process of dividing a market into
distinct subsets of consumers with
common needs and selecting one or more
segments to target with a distinct
marketing strategy”
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 3

Progression of
market segmentation
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 4

Who uses segmentation?
Cars
David Jones
Charities
Equipment
Shoes
Big W
Theatre
Machinery
Shampoo
Kmart
Sports
Tools
Watches
Target
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 5

Uses of segmentation
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 6

Nine main bases for
segmentation
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 7

Geographic segmentation
Where the market is divided by location
Assumes that people who live in the same area
share some similar needs and wants
Geographic markets can be easily reached by
local media
Some firms use geographic segmentation to
adopt a ‘localised’ strategy, however other
firms adopt a ‘global’ strategy
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 8

Possible geographic
segmentation bases
Housing density
Region
•High
•Capital cities
•Medium
•Towns
•Low
•Rural
State
Location
Climate
•NSW
•Inner-city
•Hot
•Victoria
•Suburban
•Cold
•Queensland
•Outer-urban
•Wet
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 9

Demographic segmentation
Demography refers to the identifiable and
measureable characteristics of a population
Includes characteristics such as: age, income,
marital status, education
Demographic information is very accessible
and cost-effective to obtain
Demographic segmentation is one of the most
popular ways to segment customer groups
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 10

Possible demographic
segmentation bases
Age
Marital Status
•12-17
•Single
•18-34
•Married
•And so on
•De facto, etc.
Education
Income
Occupation
•Secondary
•$20,001-$30,000
•Professional
•TAFE
•$30,001-$40,000
•White-collar
•Bachelors, etc.
•And so on
•Blue-collar
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 11

Age
Age is often a strong determinant of product choice
Health club/gym example...
Aged 55 and
Aged 18-34
Aged 35-54
over
Goal is to
To help ‘deal
For ‘medical-
‘look good’
with stress’
physical
therapy’
Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia 12

Age cohorts
Age cohorts are born during the same period
and travel through life together
-
Examples include, ‘baby boomers’, Generation X and
Generation Y
Therefore, they ‘share’ similar events and
general changes in lifestyle
-
May include war, depression, the “1960’s”,...
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