Market Segmentation

1. Market Segmentation Today you will know what market segmentation is. You will understand how and why businesses segment their markets. You will be able to apply this to the Levi’s case study.

2. Market Segmentation (1) Market Segmentation is the division of larger markets into smaller clearly identifiable sections. Producers will use segmentation to identify people with similar needs and characteristics. The purpose of market segmentation : • Few goods are truly mass-market products. A business that attempts to produce a good that is all things to all people will probably fail. • Segmenting helps businesses to differentiate (To make noticeable or different) their products and to market them effectively. • May also help firms to identify niche markets (often very profitable.) • Through market research firms aim to find info out about customers • E.g. What TV they watch, magazines they read, how much they earn, where do they shop, who does the shopping, what products they use and why. • This info can be used to develop products and marketing strategies that appeal directly to specific consumer groups. • E.g. actors chosen for adverts to appeal

3. Market Segmentation (2) Businesses can segment their markets in the following ways: • Age e.g. Saga holidays for over 50s, club 18-30 holidays for younger segment • Gender – Clothes, alcoholic drinks e.g., Baileys aimed at females • Income – Certain goods aimed at individuals with certain income. e.g. Rolex, Porsche, Aldi, Lidl • Disposable income – cash available to spend after all bills paid • Socio-economic group – Households are characterised by the major earners job linked to income • Geographical region – ACORN – segments markets according to types of households and the characteristics of the families that live in them • Usage rate – Firms such as Bt and Cigarette companies distinguish between heavy users and light users, may affect promotion used • Purchase occasions – when do people buy e.g. card companies increasingly increasing occasions where cards should be sent.

4. Socio-economic groups Institute of Practitioners in Advertising (IPA) Grouping A: Higher managerial, professional and administrative B: Middle management, professional and administrative C1: Supervisory, clerical and junior management C2: Skilled Manual Workers D: Semi and unskilled manual workers E: Pensioners, casual workers, unemployed

5. Reasons for segmenting a market Businesses segment their markets for the following reasons: • To increase market share - you can adapt products and marketing to reach new market segments e.g. Mothercare increasing its age range • To assist new product development - can provide incentives your particular market segment would want to encourage purchase • To extend products into new markets - mobile phones originally aimed at business people, then teenagers now whole family • To identify ways of marketing a product -If you know the characteristics of your market segment you can use media and types of marketing that will appeal to them e.g. Advertise in The Times for Socio-economic group A

6. Problems with Market Segmentation • Difficulty in identifying the most important segments for a product • Knowing how to reach your chosen segment with your marketing • Recognising changes in the segments interested in your product - recquire constant research to stay in touch with market segments as markets are dynamic • Failure to meet the needs of customers not included in your chosen segment

7. Task: Levi’s Case Study Read the case study and complete all questions.