EntrepreneurshipEntrepreneurship

Segmentation AnalysisSegmentation Analysis

Why Market Analysis?Why Market Analysis? Market analysisMarket analysis presents research findingspresents research findings about target markets. about target markets.

Market analysisMarket analysis includes a target market includes a target market profileprofile that explains the traits of the that explains the traits of the company’s potential customers.company’s potential customers.

Market analysisMarket analysis provides potential provides potential investors with a realistic forecast of the investors with a realistic forecast of the growth potentialgrowth potential for the market in which for the market in which your company will operate.your company will operate.

What is a Target Market?What is a Target Market? A A target markettarget market is a particular is a particular group of customers of interest group of customers of interest to an entrepreneur. to an entrepreneur.

Understanding the Understanding the characteristics of the desired characteristics of the desired market segment allows a company market segment allows a company to tailor its marketing effort to tailor its marketing effort to reach and appeal to the to reach and appeal to the market segment. market segment.

Segmentation analysis

What is Market Segmentation?What is Market Segmentation? Market segmentationMarket segmentation is the process is the process of grouping a market into of grouping a market into smaller subgroups defined by smaller subgroups defined by specific characteristics. specific characteristics.

Market segments are subgroups of Market segments are subgroups of buyers with similar buyers with similar characteristics.characteristics.

What are the four types of What are the four types of market segmentation? market segmentation?

GeographicsGeographics

DemographicsDemographics

PsychographicsPsychographics

Buying CharacteristicsBuying Characteristics

4 Types of Market Segmentation4 Types of Market Segmentation

GeographicsGeographics – the study of the market – the study of the market based on where customers live by based on where customers live by region, state, city, and/or area.region, state, city, and/or area.

DemographicsDemographics – the personal – the personal characteristics of a population: age, characteristics of a population: age, gender, family size, income, gender, family size, income, occupation, family life cycle, occupation, family life cycle, education, religion, race, education, religion, race, nationality, or social class.nationality, or social class.

4 Types of Market Segmentation4 Types of Market Segmentation(cont’d.)(cont’d.)

PsychographicsPsychographics – the study of – the study of consumers based on social and consumers based on social and psychological characteristics: psychological characteristics: personality, values, opinions, personality, values, opinions, beliefs, motivations, attitudes, beliefs, motivations, attitudes, and lifestyle elements, including and lifestyle elements, including activities and interests;activities and interests;

Buying characteristicsBuying characteristics – – knowledge of and personal knowledge of and personal experiences with the actual goods experiences with the actual goods or services.or services.

Guidelines to SegmentGuidelines to Segmentthe Target Market:the Target Market:

The target market should be The target market should be measurablemeasurable.. How many potential buyers are in the market?How many potential buyers are in the market?

The segment should be large enough to be The segment should be large enough to be profitableprofitable—to recover costs and make a profit.—to recover costs and make a profit.

The segment should be The segment should be reachablereachable. . Product information and product availability Product information and product availability must be considered.must be considered.

The target segment should be The target segment should be responsiveresponsive;;i.e., that people are interested in thei.e., that people are interested in theproduct.product.

Market Segment Profile Market Segment Profile (Example(Example))

SituationSituation: Clothing boutique : Clothing boutique specializes in trendy fashions for specializes in trendy fashions for teenagers. Located in a fast-growing teenagers. Located in a fast-growing metropolitan area with several high metropolitan area with several high schools and a college.schools and a college.

ProfileProfile: Girls 13-18 years old; reside : Girls 13-18 years old; reside within city, nearby suburbs, or rural within city, nearby suburbs, or rural areas; part-time annual income of areas; part-time annual income of $1500; rarely buy expensive items; $1500; rarely buy expensive items; aware of current trends and attitude aware of current trends and attitude toward toward where to buy influenced by peers.where to buy influenced by peers.

SourcesSources Allen, Kathleen R., & Meyer, Allen, Kathleen R., & Meyer, Earl (2006). Earl (2006). Entrepreneurship and Entrepreneurship and small business management. small business management. New York: New York: Glencoe.Glencoe.

Green, Cynthia L. Green, Cynthia L. Entrepreneurship: Entrepreneurship: ideas in action. ideas in action. Boston: Thompson/Boston: Thompson/

South-Western.South-Western.