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November 2005 |
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Mapping the Process - "New Product Development"
Market Segmentation
Definition - The process of selecting a group or groups having
similar characteristics representative of a desired market from a
population of mixed characteristics.
- The purpose of market segmentation is to determine specific
segments of the market upon which to concentrate marketing efforts.
- Adopt a customer-oriented philosophy.
- Divide the mass market into small sub-markets.
- The goal of every entrepreneur is to develop a dominant position
in a specialized market segment.
i) Three Requirements for Effective Market Segmentation
| a) |
Market Measurements - Identify and measure
the characteristics and size of the market segment. |
| b) |
Economic Opportunity - The market segment
or segments that you plan to target must be large enough and have
enough discretionary income to make your product profitable. |
| c) |
Market Access - Your target market segment
must be "reachable". |
ii) How To Segment Your Market
- Entrepreneurs may segment their market on the basis of
demographic characteristics such as age, income, race, or sex and
geographic concentrations of consumers with the desired attributes.
- Demographic variables are a critical component to market
segmentation because DEMAND for most products is related to
factors such as age, income, and race.
Step 1 - Create Demographic Profile
- Determine a detailed demographic profile of your target market:
i.e. income level, average age, education level and other factors.
- By using resource information describing both consumer trends
and food trends, determine the demographic characteristics of the
consumer most likely to purchase your product.
| Case Study Example: |
"Buckwheat Cookie" Consumer
Profile |
Average Age:
Income Level:
Education Level: |
40-65 Years
30,000+
- Post Secondary Education
- People who are educated and interested in better health and
nutrition. |
Step 2 - Identify Where High Concentrations of These Potential
Customers Live
- i.e. If you determine the average income level of your target
market to be $40,000-60,000 per year, it is possible to pinpoint
locations where high concentrations of this target market can be
found.
- By using this information you can supply your product to the
appropriate retail locations.
Step 3 - Determine How, Where, and When Consumers Prefer to Buy
- What are the type of stores your target market usually shops in.
- Examine buying habits - i.e. Do they tend to compare prices?
- To what extent do economic conditions affect buying?
Where Does An Entrepreneur Find The Information Required To
Segment The Market?
- Daily Newspapers
- Weekly Newspapers
- Government Agencies
- Banks
- Universities
- Trade Associations
- Suppliers and Other Small Businesses
| Case Study Example: "Buckwheat Cookie" Consumer
Trends |
| By comparing the attributes
of a Buckwheat Cookie with current consumer trends it is possible
to determine the market possibilities for the product. |
BAKERY ITEMS
- Total consumption of sweet goods has increased by 1/3 in the
last decade.
- In-store bakeries have experienced recent tremendous growth.
- People are baking less, real spending on scratch baking
products is declining at about 2% per year.
- There has been an increase in popularity of "guiltless
snacks" and self indulgence.
- The increase in demand for a variety of baked goods provides
opportunities for product innovation.
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THE AGING POPULATION
- People over 50 make up 25% of Canada's population.
- People over 50 control 55% of the discretionary spending
power. (i.e. mortgages paid off, dependents have left home).
- The aging population will heighten the demand for product
with health-related advantages.
- Demand is increasing for healthy, single serve, ready to
use, and new products.
- The aging population values attributes such as quality and
personal service, characteristic of small retail stores such as
Health Food and Gourmet Food stores.
- The aging population favours small sizes, easy opening
access and legible type.
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NUTRITION AND QUALITY
- Products with health attributes are in demand.
- Continuing demand for product variety provides opportunity
for product innovation.
- Products with health attributes are in demand.
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