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Copyright © 2003 by Nelson, a division of Thomson Canada Limited.
foun
datio
nsof Chapter
M A R K E T I N G
Market Segmentation: Finding a Base to Start
3
Copyright © 2003 by Nelson, a division of Thomson Canada Limited.
Chapter
Objectives
1. Explain the concept of the marketing plan.
2. Define market segmentation.
3. Discuss and apply five types of market segmentation in consumer markets.
4. Illustrate some aspects of the Canadian market in terms of the five types of consumer market segmentation.
5. Discuss and apply the main types of segmentation in industrial markets.
Market Segmentation: Finding a Base to Start 3
3-1
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Chapter
Implementation and Control• Measurable goals• Benchmarks • Feedback
Marketing Plan• Product or service
management• Price • Distribution• Communications
The Strategic Marketing Planning Process
3Market Segmentation: Finding a Base to Start
Figure 3.1
Marketing Objectives & Strategies
• Objectives• Strategies
– Retrenchment– Status quo– Growth
Situation Analysis• Internal• Environmental• Customer• Competitive
Input from Corporate Strategies
• Mission• Corporate objectives • Strategic business
unit(SBU) objectives
3-2
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Chapter
Fundamental Tasks in Developing a Strategic Marketing Plan1. Target Market
2. Implement a Marketing Program
3Market Segmentation: Finding a Base to Start
3-3
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Chapter
What is a Market?
• People with the willingness, purchasing power, and the authority to buy.
3Market Segmentation: Finding a Base to Start
3-4
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Chapter
Consumer Goods
• Those products and services purchased by the ultimate consumer for personal use.
3Market Segmentation: Finding a Base to Start
3-5
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Chapter
Industrial Goods
• Those products purchased to be used, either directly or indirectly, in the production of other goods or for resale.
3Market Segmentation: Finding a Base to Start
3-6
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Chapter
Market Segmentation
• Grouping people according to their similarity in one or more dimensions related to a particular product category.
3Market Segmentation: Finding a Base to Start
3-7
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Chapter
Bases for Market Segmentation
3Market Segmentation: Finding a Base to Start
PotentialMarkets
Demographic SegmentationGenderAgeFamily life cycleRace/Ethnic groupEducationIncomeOccupationFamily sizeReligionHome ownership
Descriptive Behavioural
Figure 3.2
Geographic SegmentationCountryRegionUrban/Suburban/RuralPopulation densityCity sizeClimate
Psychographic SegmentationLifestylesPsychological variables:
PersonalitySelf-image
Benefit SegmentationExpected benefits from product
use
Usage RateHeavy usersBrand loyalty
3-8
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Chapter 3Market Segmentation: Finding a Base to Start
Figure 3.3
3-9
Main Inhabited Areas in Canada
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Chapter
Percentage Distribution of the Canadian Population by Province
3Market Segmentation: Finding a Base to Start
Figure 3.4
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Manitoba 3.7%
Saskatchewan 3.3%
Alberta 9.9%
British Columbia 13.0%
Northwest Territories 0.1%
Nunavut 0.1%
Newfoundland 1.7%
Prince Edward Island 0.4%
Nova Scotia 3.0%
New Brunswick 2.4%
Quebec 24.1%
Ontario 38.0%
2001
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Chapter 3Market Segmentation: Finding a Base to Start
Provincial and Territorial Populations, 1981, 1991, 2001
POPULATION (THOUSANDS)
Source: “Provincial and Territorial Populations, 1981, 1991, 2001” adapted from the Statistics Canada Website http://geodepot.ca/English/Pgdb/People/Population/demo05.htm. Reprinted with permission of the Minister of Industry Canada.
Region 1981 1991 2001Newfoundland 568 568 513Prince Edward Island 123 130 135Nova Scotia 847 900 908New Brunswick 696 724 729Quebec 6 438 6 896 7 237Ontario 8 625 10 085 11 410Manitoba 1 026 1 092 1 120Saskatchewan 968 989 979Alberta 2 238 2 546 2 975British Columbia 2 744 3 282 3 908Yukon 23 28 29Northwest Territories 46 36 37Nunavut n/a 21 27Canada 24 343 27 297 30 007
Table 3.1
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Chapter
Urban - Rural Population Distribution, 1871-2001
3Market Segmentation: Finding a Base to Start
Figure 3.5
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Chapter
The 25 Largest Metro Areas in Canada, 1996, 2001
TorontoMontrealVancouverOttawa-HullCalgaryEdmontonQuebecWinnipegHamiltonLondonKitchenerSt. Catharines-NiagaraHalifaxVictoriaWindsorOshawaSaskatoonReginaSt. John’sChicoutimi-JonquièreSudburySherbrookeTrois-RivièresSaint JohnThunder Bay
3Market Segmentation: Finding a Base to Start
1996 Population (Thousands)
4881351220791107
972935693685681426432393359319314305231198176159157155142128125
2001 Population (Thousands)Area
4445335918911031
852392698677650416403390347313292281222199178167166150144129131
Source: Adapted from the Statistics Canada publication Canada Year Book 1999, Catalogue No. 11-402, page 94 and from the Statistics Canada Website http:www.statcan.ca/english/Pgdb/People/Population/demo05.htm. Reprinted with permission of the Minister of Industry Canada.
Table 3.2
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Chapter 3Market Segmentation: Finding a Base to Start
Figure 3.6
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Population Projections by Age Group
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Chapter
Buying Patterns for Different Age GroupsAge Name of Age Group Merchandise
0 - 5 Young children Baby food, toys, nursery, furniture,
children’s wear
6 - 19 School children Clothing, sports equipment, records, (including teenagers) school supplies, food, cosmetics,
used cars20 - 34 Young adults Cars, furniture, houses, clothing,
recreational equipment, purchases for younger age groups.
35 - 49 Younger middle-aged Larger homes, better cars, second
adults cars, new furniture, recreational
equipment
50 - 64 Older middle-aged Recreational items, purchases for adults young marrieds and infants
65+Senior adults Medical services, travel, drugs, purchases for younger age groups
3Market Segmentation: Finding a Base to Start
Table 3.3
3-15
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Chapter
Family Life Cycle
• The process of family formation, development, and dissolution.
3Market Segmentation: Finding a Base to Start
3-16
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Chapter
SSWDs
• Single, separated, widowed, or divorced people.
3Market Segmentation: Finding a Base to Start
3-17
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Chapter
Engel’s Laws
As family income increases
1. a smaller percentage goes for food
2. the percentage spent on housing and household operations and clothing will remain constant, and
3. the percentage spent on other items will increase.
3Market Segmentation: Finding a Base to Start
3-18
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Chapter 3Market Segmentation: Finding a Base to Start
Figure 3.7
3-19
Percentage Annual Expenditures by Income
Groups, 1999
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Chapter
Lifestyle
• The mode of living
3Market Segmentation: Finding a Base to Start
3-20
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Chapter
Psychographics
• The use of psychological attributes, lifestyles, attitudes, and demographics in determining the behavioural profiles of different consumers.
3Market Segmentation: Finding a Base to Start
3-21
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Chapter
AIO Statements
• Statements about activities, interests, and opinions that are used in developing psychographic profiles.
3Market Segmentation: Finding a Base to Start
3-22
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Chapter
VALSTM Network
3Market Segmentation: Finding a Base to Start
ACTUALIZERS
FULFILLEDS
STRUGGLERS
EXPERIENCES
STRIVERS
ACHIEVERS
BELIEVERS MAKERS
Principle Oriented Status Oriented Action Oriented
High Resources
High Innovation
Low Resources
Low Innovation
Figure 3.8
3-23 Source: SRI Consulting Business Intelligence. Http://www.sric-bi.com/VALS/types.shtml
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Chapter
The Environics Segments
• Elders
• Boomers
• Generation X
3Market Segmentation: Finding a Base to Start
3-24
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Chapter
Provides choice
for family members X X
Convenient to use X
Tastes good X X
Good quality X X X X
Healthy X X X X
Helps digestion X
Helps diet X
Spend less money X
Benefit Segmentation Applied to Yogurt
3Market Segmentation: Finding a Base to Start
Attributes of Yogurt
BE
NE
FIT
S S
OU
GH
T F
RO
M
YO
GU
RT
Individually packaged
With
fruit
High-
pricedMild Organic Contains
bio-bifidus
Low
fat
Low-
priced
Table 3.5
3-25
Source: Adapted from Marco Vriens and Ter Hofseted, “Linking Attributes, Benefits, and Consumer Values,” Marketing Research,
Chicago, Fall 2000, V. 12(3) pp. 4-10. Reprinted with permission by the American Marketing Association.
Copyright © 2003 by Nelson, a division of Thomson Canada Limited.
ChapterConsumer Marketing Decisions Affected by Segmentation Choices
Segmentation Basis
Geographic
Demographic
Psychographic
Benefit
Product Usage Rates
3Market Segmentation: Finding a Base to Start
Decisions Affected• Choice of sales region• Sales force location• Retail location
• Estimates of segment size• Choice of local distribution channels or channels that cater to different
age, income, and education groups
• Product/service positioning• Advertising themes• Sales training
• Product/service design--different models with different features• Advertising themes• Sales training
• Special products (sizes and quality)• Special services• Frequent-user promotions• Special financial terms
Table 3.6
3-26 Source: Adapted from Marketing Management, 2nd ed. By Peter R.Dickson, p. 187. Copyright © 1997. Reprinted with permission of
South-Western, a division of Thomson Learning: www.thomsonrights.com Fax 800-730-2215.
Copyright © 2003 by Nelson, a division of Thomson Canada Limited.
Chapter
Segmentation Bases for Industrial Markets
3Market Segmentation: Finding a Base to Start
End-Use Application Segmentation
Product Segmentation
Account Size and Potential Segmentation
GeographicSegmentation
Potential Industrial Markets
3-27
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Chapter 3Market Segmentation: Finding a Base to Start
Consumer Marketing Decisions Affected by Segmentation ChoicesSegmentation Basis
Geographic
Product (including NAICS)
End-Use Application
Account Size & Growth Potential
Decisions Affected
• Choice of sales region
• Sales force organization
• Product design
• Media choices
• Trade show choices
• Product design
• Sales force training
• Advertising emphasis
• Account and relationship management
Table 3.7
3-28 Source: Adapted from Marketing Management, 2nd ed. By Peter R.Dickson, p. 187. Copyright © 1997. Reprinted with permission of
South-Western, a division of Thomson Learning: www.thomsonrights.com Fax 800-730-2215.
Copyright © 2003 by Nelson, a division of Thomson Canada Limited.
Chapter
North American Classification System (NAICS)• A coding system used to categorize
different types of business and products (formerly the Standard Industrial Classification, or SIC)
3Market Segmentation: Finding a Base to Start
3-29
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