ch02

MARKET
SEGMENTATION
AND THE
MARKETING
Copyright 2005 McGraw-Hill Australia Pty Ltd
ENVIRONMENT
PPTs t/a Consumer Behaviour by Karen Webb
Slides prepared by Sarah Fletcher and Morena
Market segmentation and the

marketing environment
At the end of this session, you should understand:
What is meant by the marketing environment and its

relationship to consumer behaviour
The trends in consumption behaviour and the marketing
environment in the noughties
The underlying principles of consumer behaviour and how
to explain the concept of segmentation
The broad approaches to segmentation in consumer and
business markets
The conditions for effective segmentation and the advantages
and limitations of segmenting markets
The ways that various target marketing strategies are used to
satisfy customer
Copyright
2005needs
McGraw-Hill Australia Pty Ltd

2-2
The marketing environment in

the noughties
The marketing environment

includes all factors
that influence the operation
of a business and its
effectiveness in the
marketplace
See EXHIBIT 2.1 Peppercorn Food Company

addresses the trend towards healthier eating,
page 35.
PowerPoint slides supplied on the Instructor
Resource CD to accompany Consumer
Behaviour include advertisement images.

2-3
Technology boom
Technology - affordable, accessible and user
friendly
Changing the way consumers, live, buy and consume,

i.e. SMS competition promotions, searching for products
and buying them online (globally), match to lifestyle

2-4
Social/cultural factors
Focus on healthier lifestyles
nutritional issues, natural medicine, healthy fast food, psychology,

relaxation therapies
Multicultural
wide variety of foods, activities and product/service

experiences from all over the world
Time poor consumers
work to leisure time ratio, fast paced lifestyle
Changing gender roles
role changes in family units, single families
Household consumption
media consumption becoming fragmented, Internet buying
Environmental issues

2-5
Changing gender roles

See EXHIBIT 2.10 Marketers of skin care products are
now successfully targeting men, page 40.
PowerPoint slides supplied on the Instructor Resource
CD to accompany Consumer Behaviour include
advertisement images.

2-6
Segmentation
The process of dividing the market into different groups

Allows the marketer to better respond to the needs of the
consumer through different marketing mixes
Five steps
1.
2.
Research needs or buying motivations i.e. for toilet paper price conscious, softest and best quality, or environmentally friendly
Consider how the needs relate to the segmentation bases
3.
4.
5.
Geographic
Demographic
Psychographic
Product-related benefit segmentation
Describe segments as distinct groups i.e. budget conscious

Determine which segment will be targeted and the positioning
approach
Develop an appropriate marketing mix

2-7
Geographic
Grouping people according to their geographic
location
International country or region, state, regional area
within a state, city/town, suburb, rural, urban

2-8
Demographic
Age
Gender
Family life cycle
Occupation
Education
Ethnic background
EXHIBIT 2.11 Using demographic criteria to

segment the market, page 43

2-9
Geodemographic
Combining geographic and demographic
information
Based on the assumption that people living in
similar areas have similar needs, wants and

purchasing behaviour

210
Psychographic
Profiles developed by
considering attitudes,
interests and opinions
Grouping consumers
according to similar lifestyle
traits, i.e health conscious,
environmentally aware,
adventure seekers
See EXHIBIT 2.12 American Express appeals to
lifestyle segments, page 43
Resource CD to accompany Consumer Behaviour
include advertisement images.

211
Product-related benefit
segmentation
Based on the benefits

desired from the product
category
These can vary with usage

situation
See EXHIBIT 2.13 An example of productrelated segmentation, page 44.


212
Describe segments - activity
List the needs and motives for:

budget conscious or home beautifuls

213
Determine which segments to

target and the positioning
approach
All segments? One segment? A couple of
segments? What should an organisation do when

customers can be clearly segmented?
Considering home beautifuls or budget conscious
renovation segments, how could an organisation

serve both with its approach to meeting their
needs?
Would this be different if they chose to only serve
one of these
segments?
How?
Copyright
2005
McGraw-Hill
Australia Pty Ltd
214
Determine the appropriate

marketing mix
The target market is that group of customers
chosen as the focus of the organisations marketing

effort
A clear or distinct identity must be achieved,
showing clear benefits to the target market

this is the positioning strategy
The marketing mix is used to:

Communicate and deliver this strategy
Differentiate the organisations offering from competitors
Maximise
satisfaction
with the Australia
offering Pty Ltd
Copyright
2005
McGraw-Hill

215
Market aggregation
Market aggregation:
Treating the total market as one unit

Useful when customers have similar perceptions
about the offering
Profitable if economies of scale can be achieved

216
Broad approaches to
segmentation
What business is the company really in?
What is the psychological basis of the wants and
needs of the customers?

What is happening in the market? Is the structure
changing?
Will technology, new products, or competitor
Copyright
2005 McGraw-Hill
threats
change
the market? Australia Pty Ltd
217
Changes in the market and

impact for marketers
See EXHIBIT 2.15 Yates provides water-saving
solutions, page 48.
PowerPoint slides supplied on the Instructor Resource
CD to accompany Consumer Behaviour include
advertisement images.

218
Conditions for effective

segmentation
Measurable
Accessible
Large enough to be profitable

219
Advantages and limitations of

segmenting markets
Benefits
Allows better satisfaction of customers

More efficient use of marketing resources
Limitations
Expensive to produce small quantities for limited

market size
Difficult to know where to identify a segment
Smaller business may have difficulty segmenting

220
Business market segmentation

Geographic segmentation
Regional variables
Customer concentration
Regional industrial growth
International macroeconomic factors
Useful if customers have similar needs

Not effective where customers needs not considered
Customer type and size

Size of organisation
Industry of customer
The offering
the customer (what
they make
or sell)
Copyright
2005ofMcGraw-Hill
Australia
Pty Ltd

221

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MARKET

Market segmentation and the

What is meant by the marketing environment and its

PPTs t/a Consumer Behaviour by Karen Webb

The marketing environment in

The marketing environment

See EXHIBIT 2.1 Peppercorn Food Company

Copyright 2005 McGraw-Hill Australia Pty Ltd

Changing the way consumers, live, buy and consume,

Copyright 2005 McGraw-Hill Australia Pty Ltd

nutritional issues, natural medicine, healthy fast food, psychology,

wide variety of foods, activities and product/service

Time poor consumers

work to leisure time ratio, fast paced lifestyle

Changing gender roles

role changes in family units, single families

media consumption becoming fragmented, Internet buying

Copyright 2005 McGraw-Hill Australia Pty Ltd

Changing gender roles

Copyright 2005 McGraw-Hill Australia Pty Ltd

The process of dividing the market into different groups

Describe segments as distinct groups i.e. budget conscious

Copyright 2005 McGraw-Hill Australia Pty Ltd

within a state, city/town, suburb, rural, urban

Copyright 2005 McGraw-Hill Australia Pty Ltd

EXHIBIT 2.11 Using demographic criteria to

Copyright 2005 McGraw-Hill Australia Pty Ltd

similar areas have similar needs, wants and

Copyright 2005 McGraw-Hill Australia Pty Ltd

Copyright 2005 McGraw-Hill Australia Pty Ltd

Based on the benefits

These can vary with usage

See EXHIBIT 2.13 An example of productrelated segmentation, page 44.

Copyright 2005 McGraw-Hill Australia Pty Ltd

Describe segments - activity

List the needs and motives for:

Copyright 2005 McGraw-Hill Australia Pty Ltd

Determine which segments to

segments? What should an organisation do when

Considering home beautifuls or budget conscious

renovation segments, how could an organisation

Would this be different if they chose to only serve

Determine the appropriate

chosen as the focus of the organisations marketing

A clear or distinct identity must be achieved,

showing clear benefits to the target market

The marketing mix is used to:

PPTs t/a Consumer Behaviour by Karen Webb

Treating the total market as one unit

Copyright 2005 McGraw-Hill Australia Pty Ltd

needs of the customers?

Changes in the market and

Copyright 2005 McGraw-Hill Australia Pty Ltd

Conditions for effective

Copyright 2005 McGraw-Hill Australia Pty Ltd

Advantages and limitations of

Allows better satisfaction of customers

Expensive to produce small quantities for limited

Copyright 2005 McGraw-Hill Australia Pty Ltd

Business market segmentation

Useful if customers have similar needs

Customer type and size

PPTs t/a Consumer Behaviour by Karen Webb