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TH ~ A R K E T SEGMENTATIONP roESS

llw. m ~ t r k c t e r : . ;tnd advenbcrs [lee :1 dilemma. 111cy must find groups ofr>c-"'plc Wtth simil:ir l l L ~ d s and ta:-tcs th;tt c:m he satisfied by the product. Andthey must a m : t , ~ l ' llflllgiJ of the:-;(, groups to make the product marketingprocess suct-cssful-:md profitable. Hc:lli7.ing they can't appeal to everybody,n ~ a r k e t c r s nmM turn to marl >el . ~ t [ . I I I W I I W / I r m :md w ~ e l marketi g tech u s ~ t h subjccL' of this chapwr.

Marketing and advenbing people com;t:ntly scan the marketplace to see whatneeds and wanL various consumer groups have :md ho.v they might be bettersatisfied One of the techniques they usc 1:; market segmen tation, a t\vo-stepstrategic process of I ) idemljyfng groups of p m:ukctmg activities on only one or a few segments. Eithertask is far from stmple. We saw how young Levi Strauss Identified and targeted asingle market segment and catered to I with specific products and scnices. Thediverse markets Levi\ serves uxby arc rc:tlly combinations of numerous smallergroups that share certain interests or product needs. Cmering to all theseneeds-on a global level-requires :t suphistic:ttcd m:uketing and communications system.

dentifying Consumer Market Segments finding the Right NicheThe concept of sbared cbamctcrisllcs is critiC'.tl to the market segmentationprocess. Marketing and :dvenising pt.'Oplc know that. based on their needs,wanL'>, and mental f i l e ~ . consumers leave many "footprints in the sand -thevariable char:tcterbtic:o. of where they live :md work. wh:tt they buy, and ho''they spend their leisure time, for cx:tmple. By following these fOOlprims,rn:trketer.; can ]oc:tte :md define group:-. of consumers with similar needs andwants, create messages for them, and know ho'' and w h ~ r c to send themessages. They try to find that particular niche -or space m the marke.twhere the advertiser's product or M rvice will fit (thus the buzzword ntcbemarkeli11g . . _ .As E.xhibit ;-4 shows, marketers group these van:thle charactensucs into :tvariety of C'Jtegories (JJ,l ogmpbic, demogmpbic behattioristic. and psydw-

~ r a p b i c ) to identify behavior.: I g r o u p ~ and ~ c g m e m consumer markets

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--....._

.........._.............

lllllo,..,.,.,----.oot..... .._ usar.fJrst-trmeusl f regularuseru.w .. ... ..... h llvyus r........__......... nfartnm. interested.desirous rntendrng to lxly~ - I W C t . I I M r t i s i n g s a l e s p r o m o t i o n

.. .lfldlhakers.successfutsingles.socralsect.l lty t t............ ' '~ l l l l l l l r l a u l . l l l l h a n t a r i a n a m b n i o u s

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llrom r8llllllREC11'117 ow IOfllll\00 hlllllll ot yourUlfllliJp; TnrtrMons M N o cHowiOIICilhebetil fofVO'JIIOO IISpilfl

n ~ ~ ~ l h . l l ' l l l l l l c kf ~ S l b r ~ J ~ llrs a n : : e n \ I ~ H o n

B r b . d o d ~ - t h e b o n l e o i M o t f s.,.,.,,

S e c o n d . r : r e a t e a ~ k l g r c a l b i l r r r l f"lt'sr.JteaS'IIOplay\YIIonr 'shotAren'tyou t h r r s t y ~ "Thrrd,lrnrshhrmctfw.thabIIUiaMolMcn'sC amaro"Bobt"Heworltw.thstaodtheblowAhhl'l lll

lllomtrame\AOOSOMESPICf.ANNCR VOMot 'sCiamatoadd.lsome5pK:8MOITSMANOC''Mon'sCiamatollh'o:l you.Bob,beneronocet"

try size, city si7.l". SJX.

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8 b v l o o d I O V S , I I I . J S 8 ' f f u n u ~ ~ . q)otNng, spor1Hlg goods, 'ectlldspiiCIS.fastfood.soltl)rnQ.carn,.

C.s.tumrtura.housrng, OQ(IIIO'ds.homllentenarrmem-.rpment. ~ r d l a s e s ~ ~ ~ 'l.lrgefhomm:.be1tl ftaiS. satQrO

c o m p u t e r s r e c r e a t i O a l fo dandwrne

~ ~ ~ t a m purch ses 1MediCal S ll\llces. navel. pl\armacemyounger age groups

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anodu.:r pmmott.--s t o u r i ~ m . Tile purchase OL-rnsion c:m be afft.-ctt.-d by sea.;on.water skis. snow k i i . raincoats), by fn.qucncy of nt. t.-d (regular or occ-.J.;,ional).hy ;.omc fad-and-fade cycle (candy, computer g_.1mes). A marketer whodi.Covcrs common purchase OCC .J.Sion.-. for certain groups or organizations has apotential target >t:J.trncnt One consultinp. firm. Adveniming, I C(:ommends

appmpnatc timing of mt.-dia :1dvcnising by correlating consumer purchaseJ>:lllt:m:. wuh w ~ u h c r fon.. C:t:.L ..B nefitsSought Variables Con:.umers seck many bc:ncnt.s in the products theyhuy-htgh quality, low price, status, spct.'tl, sex appeal, good taste. Forcx,unplc, J>L Oplc huy Levi :. j c : n . ~ for work, for play, or to make a fashionst,ttcmcm. M:trkctcr.. c:m duMcr C X l t l ~ m n c r group;, imo .segmentS based on thebenefits being s o u ~ h t Dcnent segmcn t... lon i;, the prime objt:etive of manyconsun1er attitude studies :md, as ~ x h i b i t s-7 shows, the basis fo r manyMLCC Cs. >fU\ ad C : t n 1 p : t i g n ~Use r-Status Variables M:my m : 1 r k c t ~ can be segmented by the us er-starus ofprospective customers (i.e., nonusers, new users, regular users, potential users,:md ex-users). Uy targetinJ.; one or another of these groups, marketers developnew products for nonusers or new uses for old productS.Usage-Rate Variables It's usua lly easter to get a heavy user to increase usage than toget a light user to do so. In a process calle as light, medium, or heavy users ofproducts. In many product categories. 20 percent of the po pulation consumesSO percent of the product. Marketers want to define who comprises that 20percent and aim their advenising at them. For example, one-third of allhouseholds purchase 83 percent of Levi's annual p r o d u c t s ~ w o r l d w i d e Aco m p::my that markets dog food wants to anract heavy s e r s ~ t h e 17 percent ofthe popula tion that buys 87 percent of all dog food see Exhibit 5-8).By finding common c h : ~ r a c t c r i s t i c s among heavy users of their productS,marketers can define product differences and focus their ad campaigns moreeffectively. For example, heavy users of bowling alleys are working-class men

is a powerful advertising tool. anda cherished Amencan right. But we

O u t ~ s t i o n s)_ CurNLkrinM that all d ~ r c t t e maker.; use market

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The VAL.das.. > ifi

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. 'Tile \ A L S ~ (\'alues and life >tyiL-sJcl -'''ifiauion ~ y ; t e m places consumer:.with abundant resources ncar th e topof the ch:Ht and those with minimal

r c w u r c e ~ near the bonom . lloriton t;J IJ y,the chan segments consumers by thdrh a . ~ i . ~ for dth;lt '>uppun tll.lt lm.l,l.(l'- O ne Mudy found that consumer.; thought GE brand,lltr;lutd nn ly t. 'n-.crv.uivc. ulder. business types. To change that image-and.I Pl.,..' I to .1 hroadcr m n ~ o t e o f co nsumers-G E ad opted Its now famous DringsC;ood Ihtng to Ufc l i ~ n

ll y di '(IJ\-l'TinJ.t ,,. . man y dc-.criptivc qualities of their prospects as possible,tllMkt.tt'l'l e nd Ufl with rich 1 r ~ c t market pronlcs that enable them to focus theirrn.trkttlnu .nd ; t d v c n l s l n ~ ac..1ivhics.Jor y c o ~ r ' > , m;trkctcrs attcmp1Cd to ca tego rize consumer.; by personality andl l f t ~ t y l t . t y p e ~ to 11nd :1 co mmon basis for dctcnnining advertising appeals .Monllut , .1 M:rvice dcvclop1..-d by Yankclovich, Skelly and White, was the 11rstma1r1r study of changing U.S. values HI

Anotlll'r d :s. lnc uion system, VA I.S (values and lifestyles), originated by SRIlntt.'rn:ntonal, was quickly adopted by marketers across the country. In 1989."H I urxbtcd the progr.un, renaming it VALS2, and offered a new psychographicpr fle for -.cgmc ntlng U.S. co nsumers and predictmg the tr purchase behavior'>t l' 1-.xh ihll ' )-9). IInw V;ducs and csty lcs (VAIS) system breaks consumers into ei gh tgruup'l b;t';cd on thei r financial resou rces and self-orientation . Each group

tXhlbll'l d i ~ t i d i v c lx: havio r, decision-making pauems, and product consumplltllltt:ndent.teo;.

To r c ; ~ e h o;.omc o f the VALS2 lifes tyle groups, radio is a n excellent medium

Minimal Reao urc

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litlitlfiDn tJf C JniUI1tff s1gmllltltion M thods, t2tion method has supponer. ;mel dctr: ctors. Ad vocates of \ . I J . ~~ ~ = c h o g r . t p h i c ml'thods d ~ i m t i n ~ methods h_dp them :dd rt: ~emoctonal fartof ' that morivate consumers: Howcvt.:r,_ ~ m c c the mark,

many product."i compn...e a hroad CRJ.'i...,SL"Ctlon of o n . ~ u m c r s . piychOMr:nuy offer hnle real ' a l u c - - e ~ p c . . > < : i a l l y when d c a h ~ g w_h m a r k e t o u L ~ t nbA m e r i c a - ~ \'AL.

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~ ~ ~ : a ~ l ~ a t e the n

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t nkina r r r seneraJ le n a varlecy o n u ~ l r i hai decision 01)1 (_ _ h o u l d b e p ~ o c m

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The ~ l J l ~ . . ' t h i ~ m;tp arc reprc-,cnlL-d in proportlon 10 tht.- \-:1.\ue of thc1r J l l . l n u f : ~ c t u r c : . - d product:.s . 1 . \ e ~ and profit. Let's take .t look at how thL'i process might work for Lt:vi Straussin the L'.S. nurketFirs . the company's m.mag:emem needs to know the ma rket potential fort e = m ~ and ctSual panb in various market areas regtonally and nationally; that is,the)' need to disl-o' er the primary demand trend of the total U.S. market for

c a s u : ~ l pants. To do thb they use :: ~ . t r i c t y of t ~ w r k e l i l l 8 ~ ' l 1 r c b techniquesd i s c u ~ in Chapter 6l.l11en. nun:tg:ement ha o; to identify the needs, wants, and sharL'ar

the r o m p : ~ n y : . retail outk'"b. The}' may use the services of a large marketsegmenution company like "";nional Decision Systems, which collects d:Ita onfX-"'plcs purchas ing beha\"ior and creates profiles of geograph1c markets acrossthe countrThe c o ~ p a n y finds a huge nurket of prospecthe customers throughout theL'nited St:ues: students. bl.ue. and so on. II then measure:. and analy-Les household groups mt>: 1ch m:tjor retail are:a by demographic, lifestyle. :md purchasing characteristics,son.s them into 50 different goo-demographic segments. and refers 10 them withtcmlS like those in ExhibLt '---13: E:>Uhlished \\"cahh, r-.tovers Shakers, FamilyTies. Inne:rcity S i n ~ l e : - . and so on. Some o u s e h o l d ~ are comforub\e financially;

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THE T RGET MPROCESS

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H RG ' \ ARKETING~ f : S

~ markcl\ iLS I()()Seofitling jeanslr tbr J8 ID 36 comfort-orientedlltJPIICII ab modl:r.ue to high incomesilndeduclllo who like the srylc, com- d IICI i lity of Lev i:; apparel.

~ ~ ~ : = ~ : ~ : ~ o t prime targcL' for pn:mium hr.mdL-d products sold m betterh But other segmenrs S

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~ ~ ~ : . Ilk.:.- hi.' compcutof'l and ;a c;ompku' dl5lrlbutionFin.-man >;.;l (t:ly ret,:O (Oil..ed that the ;athiC1 C roocwear mar

kct conum .d a ,utftdl'Tit number nf marker o e g n ~ to~ u ~ ~ l f t Rl-ehok tUfll."nl product l i m : - h ~ fit' ( offering tothe. l ."' puhhc-and any mow produc.t.

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~ ' p

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CoovenencegQOdsPurchases made frllQI eroeffortltgarettes.IOQd.

Shoppmggoodslnfrequefltlypurthased ~ . "isspent tompanngprlt

l f u r M u r e c a r s d o t l 1 ~Specta1tygoads

P r o d u t U W i t h S l d J s u m e r s W i 1 1 m a k e ~e v e n i l t h e y r e m o r e e q u p m e n t , s p e c , a l 1y phys CBI u ript on

Package goodsC e r e a l s , h a u t o r n c s a

Hard goodsFurnuure,apphances

Soh goodsClotfung.bedd ing

ServicesNontangrble Pfoducts

There's something about auam tilt..magAll Aboard Amtrak

x ~ n lC o m p ;compkt "tp

o r i ~ m

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Xl I OX dbplap 11 - ~ I O ) l : m 1 1 1 ~ DocumentCn111pany." (m 1b ; ~ d . \ to fl."J>Ol>llion thelUilp:iny into a dm"llmcnt-lundling mark

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products ~ n d c r the s:unc umhrcl1:1 name When Heinl promote., it., l ; l t ~ U i lroducts. t hopes to help iL' rcli

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TI1cf.uniquAmcnn f f chtcr lofp;aUiffcrc

Rdatt.lUI

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The t J m n u - ~ ('.()(.a-Cola boule \\ith itsun1quc, c J ~ ) - t o - h o l d .,hapc fJdcd from_-I.ITICnC; O market.' ; 1 ~ consumers wereifl;: l.-d Jluminum cans and pl:l. >tic onelt'f c o n l ; . ~ i n e r . In 1992, howcver, one

p a c k : ~ d e ~ i w , . ~ classic: examples ofai Icrentl from Quaker Oa S u:secok1r ha to indicuc differem navorslhlut- for regular, magenl:l for raisin and~ p i t : c fla\'or, etc.) and a consistent packJlt' r.:olor to create an overall product

dent f}'

;tis_ cnsurc tlu1 11 will kt:ep he J>roduct frco,h and protL'Ct l l UlnlenL. fromsluppmg danugc. WJtcr v ; ~ p o r L'Ct comaminated food. IL-:1ky p : t t k a g c ~ . nu fin}(t't".,or lampering hy c r i m i n ; ~ b . And p ; a c k a ~ e s muM adhere to the protection reqmrement:; e s a h l i . ' i h ~ c - d by lxxh the gon:mment :md trade a_ with a secondary use in mind Kr.1ft':-cheese jar, once emptied, can he used for SCIVing fruit juice. Some tins andbonles even become collectibles (Chivas Regal)_ These packages are reallpremiums that give the buyers extr.l value for the dollars they spend.

EconomyThe costs of the features we discuss-protection, identification. conveniencand consumer appeal-add to basic production costs.

Sometimes a small increase in production costs may be more than o f f s c ~ 'increased customer appeal. These benefits may make a considerable differento the consumer and affect both the product concept and the way the producadvert ised. For e.xample, a variety of medicines now come in child-proof plasbottles. And many companies advertise their packages as en v ironmentafriendly.j8

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fhll _ph l n f ~ d

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MUSICN ~

netldtodream aICatDflDni Ana httle lsome tysome ofSIICkyStpaper A

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MI.ISC STIAAING THROIJGHOlmA O ,(:R rosvr;t:81 Jdll'ltllslness.youdon'tfteedtcl:eblg Allyouneedrsadream Justafiam nll te pi 5S1011 to pcnue II And the dedil:lbltltotlhroughAndthetalenttollJrldII t And h ~ q n w y ro use talent Anda .,;;t And some pencils And pens Maybe

smeljpi WirterrobbDnandtorrBCtrOnflurd Ands o m ~ o f t h o s e hUJeyerlownotepadswrth thel b : : < y s t u f f a ~ t M b i d And some computerptp t AndSOillll laSIII punters ro put II m. AndstWOOile'.tltoputthepuntsonAndalaKmacllrrra AlldsomeolthosellOenveropeswrththe lrnle wun,ws rn them so you can send outbtllsAndvoucansaveabundleonalloltheselhrfJIISat Staples. lheOftrceSuperstOI'e BecauseSraplesoftersguarantoedlowttStl)frcesonovef5.1mbas1Cbusrnessnecessrtms With suchnretllllly low IJIICI , you can take all that moneyOOiill'&andput rtrnto your dream, mstead

S l a p l a . J ~ O f f r c e S t l p e r s t o r e Corwenr&ntlykciredonCIIltlnnaUandSPfrngdaleorcalllordelilf r(atH0).33J.33lJ Oreamssoklsep-

~ t e l y

'Uuh ;r lrult lm ol humor, ~ t ; t p l l s ~ r v c : .r r c m m d o u ~ pNmHJiron;tl ..up1xm to the

b r ~ n n l r r n t ~ wtthour l'Vl'r mcmioninHrlJ.tk "'It' hy l l . l l l l t

I Rt'\'IC ... the Rtehnk '>tnr; rn Ad Lab ')-A and detcribeho..., t h ~ rmxlut"' s lc;uurt"s rusrtfied ~ ~ hqdlef price toRt:chok li 'l(ct m;rrkct uf dcrohics p a n t c i p a n t . ~

1 \ IMI IWO I>T lhl'(.'t: "1011 '> when Reehok.Cntatives. brokers, jobbers. and distribmors, (Note that gender has no bearing on the teml middleman, A distribu tio n channe l comprises a lithe finns and individuals that take title. or assist intaking title, to the product as it moves from the producer to the consumer.Various types of indtrect distribution channels make the massive flow ofproducts available to customers more economic-ally than manufacturers canthrough direct marketing. Appliance companies. for example. contract withexclusive regional distributors who buy the productS from the factory and resellthem to loc::tl dealers who. in turn, resell them to consumers. Many industrialcompanies market their produru through reps or distributors to origin l-equipmeu/ mtwtifaclurers OEMs) These OEMs, in turr., may incorporate theproduct as a component in their own product, wbrch is then sold to theircustomers.

The advertising a company u.st s depends on its meth of distribution. Muchof the advertising we see is not prt pared or paid for by the manufacturer but bythe distributor or retailer as in Exhibit 5-27. Members of a distribmion channelgive enormous promot ional support to the m:umfacturers they represent.

As part of tht:ir m:rrkcting strategy, manufacturers must determine theamount of market C O \ ~ r : t g e necessary for their products, Procter Gamble, forexample defines :tdL"ers at every possible location bectuse of mte.nsive distribution. 111ey are so widely available, consumers C'.ln buy them \Vttha minimum of effon. The profit on each unit is usually very low. bm the \'Oiume

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n tr.md ''iVt ul a L ~ w n p . . ~ m ~ name,ljl C a ~ > J \ \ 1 \ ol o p c . . T . I I J n ~ . J I O \ \ ~ COI Il

p;lil ' ' : ~ ; p a n d hc r dL

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I . I J i j i ? , f l i h ; ; : l l t h J

=.:;: : : : - . = . " " ' : = . = .

Ubortory App ictionsI ll5inJt ~ p h M : lkmognphic. ~ h o l r a p h i c . and

bdlOI't

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16 is a broad category Ctltrade deals, free s r plloupo s and premiumu l sweepstakes design L tJ

distri ute over 300 billion. owever that 4 pen:1

I .