Saturday, July 25, 2009

Market Segmentation Dissertation

1) Market segmentation is the process of dividing a market into direct groups of buyers who might require separate products or market mixes, which is basically the classification of customers into groups with different needs, characteristics or behavior. There are four different types of segmentation variables, consumer markets can be segmented by: Demographics, Geography, Psychographics and Behavioral. These four points cover all the market segments for any product produced and released into a particular market place including the wine industry of Margaret River.

Demographic segmentation occurs when the market is divided into groups based on variables such as: Age e.g. needs & characteristics of teenagers vs. seniors, Gender e.g. Cosmetics, magazines aimed specifically to women, Income e.g. BMW = high income earner, Hyundai = low income earner, Household/family e.g. food products for a single household vs. a household with children, as well as Education, Religion and Nationality.

The demographic segments of the marketplace for the wine industry of Margaret River are as follows:
· Age – due to the law, to consume alcohol hence wine, you must be of 18 years of age.
· Gender – the wine industry does not target either sex, however there is the traditional Australian attitude that men drink beer and women drink wine.
· Income – influences the quality and quantity of wine you may be able to afford.
· Religion – is very much apart of many beliefs where we “drink the blood of Christ”, however some beliefs forbid the consumption of alcohol.
· Nationality – some countries are big on there wines i.e. the Italians love their red wines.

Geographic segmentation is very straight forward through that markets can be segmented based on regions which have different beliefs, cultures, behavioral patterns, etc. Many of the wineries of Margaret River are now “regionalizing” their marketing programs – localizing their products, advertising, promotion and sales efforts to fit the needs of individual regions, cities and even suburbs. A lot of these wines are sold in variety cartons throughout Australia to cover every ones favorites. A lot of red wine for example is exported to Italy to challenge the drops from France, due to the Italian culture and the behavioral drinking patterns of Italian people. However, most wineries are changing the nature of geographic segmentation by using the internet to widen their markets. E.g.

Psychographic segmentation occurs when markets are divided into different groups based on social class: reflection of income, education & occupation. Lifestyle: how consumers spend their time and brands/products used (e.g. Sanitarium vs. McDonalds) or personality characteristics: match product and consumer “personalities” (e.g. clothes we wear) Psychographic segmentation very much so occurs within the wine industry of Margaret River, being a well renowned, prestigious area for the production of wine many of the products like Eaglevale Chardonnay are designed to service a more affluent class of society. However many wines are suitably priced to make it affordable for most of society.

Behavioral segmentation divides buyers into groups based on their knowledge of the product, their attitude towards it, the way they use it and their responses to it. Many people buy products due to the benefits sought from a product (e.g. toothpaste – flavor and appearance, brightness of teeth, decay prevention and low price) Usage patterns: type of brand used (e.g. decaf vs. espresso drinkers), Usage rate: heavy vs. moderate vs. light users (e.g. season tickets to football) Many marketers believe that behavior variables are the best starting point for building market segments. Margaret River wines benefit users through the taste and flavor of the product, generally the produce is consumed in a social or intimate sense rarely on an individual basis. Wine consumers generally use the same vineyard due to there preference to a particular drop. I personally prefer the wine produced by Cape Mentelle winery Margaret River. Depending on ones desire to consume the liquids of the Margaret River region will influence there usage rate.

2) Over the next decade the likelihood of new segments emerging is slim, the wine industry of the Margaret River region is an established, stable industry, which will continue to grow within each market segment but I doubt the emergement of a new segment. The nature of geographical segmentation has really changed through the internet being a major marketing tool for the wineries of Margaret River, but further change may only be brought about through increased technology which may spell change to the emergement of a new market segment.

3) Wineries such as Cape Mentelle, Eaglevale, Evan & Tate, leeuwin Estate etc use the components of behavioral segmentation as the best starting point for building market segments. Behavioral segmentation deals with the knowledge of consumers, attitudes towards the products, uses for the product, user status, usage rate, benefit sought and loyalty status. All of these variables are used as a foundation by the vineyards in order to market there products to there perspective buyers

4) Geographic segment.
The first settlers to Western Australia brought grape vine cuttings collected en-route at Cape Town, South Africa in 1829. Consequently, Western Australians have been practicing the art of wine production since the earliest colonial times. While our wineries contribute a minuscule 2% of the total national production, they are solidly planted at the premium end of the market and have a firm hold on 57% of the national sales of premium wines and around 11% of international premium wine sales. The world seems to agree that we have perfected the formula as local wines continue to collect highly coveted awards and accolades both at home and overseas.
With this said it is easy to determine the customer characteristics, associated with the Margaret River wine industry. The table below shows the customer groups related with Geographic segmentation.

Geographic segmentation
World region or country Europe is where Margaret river has 11% of premium sales.
Country region Mainly Italy, but also France and other wine cultured European countries. Australia however is the predominate market.
Density Not relevant
Climate Doesn’t matter, as wine can be drunk in all climates. Red wine in cooler climates and white in warmer climates.
City or Metro size Not applicable.

Demographic segment
The Margaret River region is renowned as one of Western Australia’s most popular destinations. It is a place of indulgence with stunning scenery and the delights of World Class wineries and the gourmet vineyard restaurants of the Margaret River Region.

Responsible for producing 2% of Australia’s wine as already stated but over 15% of Australia’s premium wine, the 60 or so wineries in the region open for cellar door sales, and tastings offer the visitor an impressive selection. Boutique beer breweries, exquisite cheese product, jams and condiment producers, a marron (freshwater crayfish) farm, olive groves and even chocolate and fudge factories also add to the gourmet experiences. Add this with an immense array of art and craft galleries, the area offers visitors a fabulous opportunity to experience the work of local producers and artists.

The actual wineries themselves market themselves locally within Western Australia, however their produce is marketed nationally and internationally. The table below demonstrates the customer groups associated with the winery Eaglevale estate.

Demographics for Eaglevale
Age The wine: marketed towards the 18+ generations, but more towards the older middle aged people.The winery: marketed towards families and couples on holiday.
Gender The wine: both genders however Australian men tend to drink more beer than wineThe winery: both genders as there are many different activities to engage in.
Family size The wine: N/AThe winery: all family sizes from couples to families with ten children.
Family life cycle The wine: all cycles from young 18+ to older married with childrenThe winery: all cycles from young 18+ to older married with children
Income The wine: there are four wines to choose from at Eaglevale estate, starting at $19.50 and ending at $32. There are wines to cater for most income brackets.The winery: the winery itself is quite expensive to visit, if you come as a family, however single people find it quite affordable. Lower income earners are not targeted by the wineries.
Occupation The wine: not targeted to any segmentThe winery: not targeted to any segment
Education The wine: maybe universities and TAFEs but not really, as beer and spirits hold the main marketThe winery: does employ university graduates such as those completing degrees in viticulture.
Religion The wine: not marketed to non-wine drinking religionsThe winery: doesn’t discriminate between religions
Race The wine: not marketed to non-wine drinking culturesThe winery: caters for all cultures wine drinking or not.
Generation The wine: the baby boomer era and the era after that would purchase the majority of the wines.The winery: older generations generally visit the winery more regularly than any other generation, as retired people have a lot more time to travel and wine is the drink of most older people.
Nationality The wine: The Italians, French and Australians are the biggest consumers of the wines.The winery: mainly Australians visit the winery for tastings etc, however nearly as many tourists visit the winery.

Psychographic segment
Social class The wine: all classes above upper lowers.The winery: as above
Lifestyle The wine: most lifestyles such as achievers, extravagant, and flamboyant The winery: as above
Personality The wine: all personalities except the Australian beer drinkerThe winery: as above.

Behavioral segment
Occasions Wine: There are two segments in this market and they are regulars and occasional. Regulars generally are wealthier and predominantly wine drinkers whereas occasional drinkers are not as wealthy and tend to drink other forms of beverages such as beer.Winery: This also has a similar segment as above, with locals (people within the SW, from Perth to Albany) tending to visit the winery on more numerous occasions than tourists or people further away than the SW.
Benefits Wine: Well priced within the Margaret river market, also caters for most income earners. Winery: Great service, food, wine and general experience.

User status Wine: This brand of wine is very flexible with long-term users, one-time users and potential users generally enjoying the great tastes of Eaglevale wines.Winery: caters for all types of users, as it serves not only wine but beer, food and other services such as tours etc.

Usage rate Wine: an average usage rate for Eaglevale wines is one bottle per user per week. This varies depending on the person’s economic, social and behavioral background. However this wine is generally used lightly as it is quite expensive compared to other wines from the eastern states.Winery: light usage, as the winery is in a semi isolated area in the SW.
Loyalty status Wine: medium loyalty status, as there are so many competitive brands such as Evan & Tate circulating around the market.Winery: low-medium loyalty, as people tend to visit many wineries when traveling throughout the SW. There are the locals however that have a strong loyalty to the brand Eaglevale.
Readiness status Wine: Desirous; people know about the Margaret river wines, and are aware of there prestigious name, However Eaglevale is relatively new in the wine market.Winery: Unaware-Aware; Eaglevale is relatively new in the Margaret river region, so its product is not as well known as its competitors. But as people drive past the winery on the way to Margaret river and the tourist bureau is advertising its name it will soon be a desirous winery.
Attitude towards product Wine: Positive; all reviews of the wines have been very good, nationally/locally and internationally.Winery: Positive also; the wine is excellent as is the service and food.

5) Geographic customer groups.
The benefits the geographic groups receive from using the Eaglevale estate wines is the satisfaction and enjoyment of partaking in the consumption of a prestigious and well renowned wine. The customers in the cooler climates can enjoy a relaxing glass of room temperature red that is award winning and priced well among other prestigious wines, whereas the white wine can be consumed by customers in the warmer climates just as enjoyably. The point is that geographically speaking there are no disadvantages associated with the Eaglevale wines.

Demographic customer groups
The Eaglevale wines are suited for the 18+ bracket, however its predominant market is the older generations. The disadvantage here is that there is a large part of the market being missed, as under 18s are not legally able to drink and 18-mid 20s are more inclined to consume spirits or beer. The benefits however are that wine drinkers tend to be product loyal, or semi loyal as many wines are similar. This means that getting among the market is very important and Eaglevale is almost a major contender in the prestigious wine market. The company exports produce to Europe, which is the biggest wine consuming continent in the world, this inevitably gives the Eaglevale estate an edge in the wine market. As Eaglevale targets the older person, family or no family, the Winery has a broad Demographic range allowing it to try and enter into other market segments, as it is trying to do at its winery with a restaurant and proposed motel.

Psychographic customer groups
The social class segment covered is the working class and above segment, however the lower class segment can’t afford the wines so this is a disadvantage. However the lifestyle and personality segment is well covered by Eaglevale as it caters for a broad range of customers from authoritarians and ambiguous people to achievers and strivers.

Behavioral customer groups
The Wines from Eaglevale tend to have a fluctuating customer market with those that are product loyal, which is a great benefit. Also those which are one time or occasional users, which to a degree is also good as it proves that people are willing to try a new product. The usage rate and readiness of the wines is also pretty good at this stage as it is continually improving every year despite the competitiveness of the market. The overall attitude towards the product is very good, as reviews from various local wineries, as well as international wholesalers is overwhelming.

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