What is meant by Customer (Market) Segmentation?

1. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? Contents of learning…

2. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? A) What is wrong with the following promotional strategies: B) What would you recommend for each business? • Marks and Spencer's using TV adverts between children's programs. • Laundry B based in Warrington using a UK wide national newspaper to advertise the shop. This part of the topic gets you to understand target customer segments for businesses and why it is important to target specific customers rather than general adverts aimed at everyone in the hope that they will buy the product. M&S customers are mainly older people and so they should not advertise in between children's programs. Laundry B only sells to people in the local area so it is a waste of money trying to advertise throughout the UK. A business must undertake market research to find out their specific type of customer.

3. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? Different Customer Segments Demographic segmentation: (Grouping customers into their different characteristics) Is the customer another business (B2B) or the general public (B2C)? Grouping customers based on: Age Gender Income Social Class Ethnicity Religion Family size Grouping customers based on: Age: Smiths toys - children Gender: Barbie - females Income – Ferrari – high income Social Class – first class train tickets Ethnicity – Bollywood - Indian Religion – Halal - Islam Family size: Family bucket KFC, individual meals – KFC. B2B: Selling to other businesses (e.g. Farmers selling to Asda) B2C: Selling to the general public (E.g. any high street shop) Why is TV advertising normally for B2C rather B2B? Why is presentations such as dragons den suitable for B2B?

4. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? Different Customer Segments Behavioral segmentation: Group customers into their loyalty and how often they buy from the business. Psychographic segmentation: Customers lifestyles, hobbies, attitudes and personalities. Geographical segmentation: Grouping customers to their locations? Sports store for extreme sports only (snowboarding) hobbies / lifestyle. Recycled / fair trade / organic goods for people concerned (attitudes). Newspaper and magazines for different hobbies e.g. golf magazine.18 Cold climates: warmer clothes. E.g. Burtons up north sell more jackets. Warm climates: convertible cars. Near the sea: Surf shops. Cities – Football teams. China town – Chinese food. Usage rates: E.g. membership cards. Award customers that are members for longer with more discounts. Loyalty: Group customers into loyal customers and one-off customers. E.g. Tesco club card, store cards, air miles. The business can then try and get the one-off customers to come back and keep the loyal customers loyal.

5. MARKET SEGMENTATION Where markets are divided into different sections. FOR EXAMPLE: • What type of holiday would a newly-wed couple go onto? • Would this differ for someone who has a wife and 4 kids? 4 types of segmentation: • Demographic segmentation • Geographic segmentation • Psychographic segmentation • Behavioural segmentation

6. DEMOGRAPHIC SEGMENTATION Segmentation based on the characteristics of a population: • Age - clothes • Gender - toiletries • Income - high wage = luxury brands • Social class - high, middle, low class = based on income and occupation • Ethnicity - culture • Religion - halal, kosher meat • Family size - big families buy in bulk

7. GEOGRAPHIC SEGMENTATION Segmentation based on where people live. FOR EXAMPLE: • People in warm countries will have different needs as compared to people in cold countries. • Convertible cars in warm countries • 4x4 cars in countries with rocky land • Food will be different in different parts of the world. Also includes how far customers live from business (local businesses will target people living close by).

8. PSYCHOGRAPHIC SEGMENTATION Segmentation based on attitudes, lifestyle and opinions. FOR EXAMPLE: • Sports equipment • Newspapers/magazines • Luxury cars • Chocolate manufacturers

9. BEHAVIOURAL SEGMENTATION Segmentation based on how people relate to a product. FOR EXAMPLE: • Usage rate – how often a person buys a product • Loyalty – how loyal a person is to a brand • Desired benefits – how a person uses a product

10. What type of market is occurring in this picture? B2C OR B2B B2B v B2C Explain 3 reasons why do you think this market trader decided to set up here?

11. TYPES OF MARKET B2B (Business to Business) Trading between businesses. B2C (Business to Consumer) Trading between businesses and consumers.

12. ACTIVITY You are going out for a Nandos with 3 friends. What 5 factors are important to you when making a purchase? CHALLENGE: Explain, using a connective, why they are important to you? What could they lead to? EXTENSION: How might promotion in a B2B market be different to a B2C market?

13. Diamond 9 Factors for a B2C Business

14. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? Different Customer Segments

15. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation? 1. Describe three different market segments (ways to group customers) e.g. demographic, behavioral etc. 2. Identify two benefits to businesses of being in a business to consumer market rather than business to business market? 3. Identify the benefits to a shop selling sports equipment of segmenting its market based on geographical locations. (hint think of different sports for different locations e.g. surf shops, snowboarding sports equipment) 4. Identify the benefits to a Cake selling business of segmenting its market based on demographic factors such as age And income.

16. BTEC Enterprise – Component 3 LA A What is meant by Customer (Market) Segmentation?