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Marketing Essentials

Marketing Essentials. n Chapter 2 Basic Marketing Concepts. Section 2.2 Market Segmentation. SECTION 2.2. Market Segmentation. What You'll Learn. Market segmentation and the four methods commonly used to segment a market Current demographic, psychographic, and geographic trends.

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Marketing Essentials

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  1. Marketing Essentials nChapter 2Basic Marketing Concepts Section 2.2 Market Segmentation

  2. SECTION 2.2 Market Segmentation What You'll Learn • Market segmentation and the four methods commonly used to segment a market • Current demographic, psychographic, and geographic trends

  3. SECTION 2.2 Market Segmentation Why It's Important Businesses must know who their customers are to achieve success. In other words, they must know their markets. This section will introduce you to the U.S. marketplace and the different ways businesses classify and characterize its segments.

  4. SECTION 2.2 Market Segmentation Key Terms • market segmentation • demographics • Baby Boom Generation • Generation X • Generation Y • disposable income • discretionary income • psychographics • geographics

  5. SECTION 2.2 Market Segmentation Market Segmentation Dividing the total market into smaller groups of people who share specific needs and characteristics is the essence of market segmentation.

  6. SECTION 2.2 Market Segmentation Analyzing Markets Businesses may segment a market by: • demographics • psychographics • geographics • product benefits

  7. SECTION 2.2 Market Segmentation Demographics Demographics refers to statistics that describe a population in terms of personal characteristics. These include: • age • gender • income • ethnic background

  8. SECTION 2.2 Market Segmentation Demographics: Age When marketers study age, they classify everyone according to certain generations, because each generation tends to have shared experiences and common bonds. Baby Boom Generation: 1946-1964 Generation X: 1965-1976 Generation Y: 1977-1997 Generation Z?: 1990-2000

  9. SECTION 2.2 Market Segmentation Demographics: Gender • Companies can expand their markets by marketing to the other gender, or by marketing their products differently to men and women. • Example: Jockey entered the women’s market with Jockey underwear for women and doubled its sales.

  10. SECTION 2.2 Market Segmentation Demographics: Income Marketers want to know how much money is available for spending on different products. They look at two types of income measurement: • disposable income • discretionary income Slide 1 of 2

  11. SECTION 2.2 Market Segmentation Demographics: Income • Disposable Income = money left over after taxes. • Important for companies that produce and distribute necessities • Discretionary Income = money left after paying for food, shelter, and clothing. • Important for companies that produce and distribute luxury items Slide 2 of 2

  12. SECTION 2.2 Market Segmentation Demographics: Ethnicity Marketers often segment the market by ethnicity. The three largest ethnic groups within the United States are African-Americans, Hispanics, and Asian-Americans. These three groups will account for 33 percent of the U.S. population in 2005.

  13. SECTION 2.2 Market Segmentation Census 2000 Census 2010 The United States conducts a census every ten years to determine the characteristics of the population. Which ethnic group is declining? Which ethnic groups are increasing? What effects will these ethnic changes have on marketing in the United States?

  14. SECTION 2.2 Market Segmentation Psychographics Psychographics involves studies of consumers based on social and psychological characteristics. In addition to segmenting people by their leisure time interests, marketers observe trends and changes in households, the economy, politics, and the workplace.

  15. SECTION 2.2 Market Segmentation Psychographics psychographic variables are any attributes relating to personality, values, attitudes, interests, or lifestyles. They are also called IAO variables (for Interests, Activities, and Opinions).

  16. SECTION 2.2 Market Segmentation Psychographics NetMBA US Framework and VALS™ Types

  17. SECTION 2.2 Market Segmentation Geographics Geographics refers to segmentation of the market based on where people live. Marketers study geographics in relation to: • ethnic concentrations • age • ethnic background • income

  18. SECTION 2.2 Market Segmentation Product Benefits Segmenting a market by product benefits involves studying consumers' needs and wants. • Example: Different shampoos are marketed to people with different hair care needs.

  19. ASSESSMENT 2.2 Reviewing Key Terms and Concepts • 1. What do demographics, psychographics, geographics, and product benefits have in common? • 2. How can a market be segmented using demographics? • 3. What does the study of psychographics involve? Slide 1 of 2

  20. ASSESSMENT 2.2 Reviewing Key Terms and Concepts • 4. Provide one example of how a marketer can segment a market based on product benefits. • 5. Of what significance are the combined African-American, Hispanic, and Asian-American populations to marketers? Slide 2 of 2

  21. ASSESSMENT 2.2 Thinking Critically How can Procter and Gamble market household products to a male market segment? What problems might P&G encounter in that endeavor?

  22. Marketing Essentials End of Section 2.2

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