Conducting a Segmentation
Determining Segmentation Variable(s)
Markets can be segmented primarily according to geographic, demographic, usage, and psychological segments—or a combination of the above.
Break down market segmentation variables
- Geography is probably the oldest basis for segmentation, and is often useful for marketers due to the amount of data available. However, there are drawbacks with focusing solely on geography.
- Demographic segmentation is also useful for certain products. However, marketers should be aware that demographics tend to change with society, and thus be aware of these changes and respond to them accordingly.
- Psychological segmentation, such as lifestyle and attitudinal variables, are also useful for particular types of products. However, obtaining information on such bases can often prove challenging.
- geographic segments: Segmentation of consumers based on geographical factors such as location, weather, topography, population density, etc.
- demographic segmentation: The division of the market into subsets based on characteristics of the population.
- psychological segments: Segmentation of markets based on psychological influences, such as personality, lifestyle choices, and attitudinal variables.
Bases of Segmentation
There are many different ways by which a company can segment its market, and the chosen process varies from one product to another (see ). Also, since markets are very dynamic, and products change over time, the bases for segmentation must likewise change.
Regional differences in consumer tastes for products as a whole are well-known. Markets according to location are easily identified and large amounts of data are usually available. Also, many companies simply do not have the resources to expand beyond local or regional levels.
Closely associated with geographic location are inherent characteristics of that location: weather, topography, and physical factors such as rivers, mountains, ocean proximity, and population density.
Geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location. However, there are drawbacks. Consumer preferences may bear no relationship to location. Other factors, such as ethnic origin or income, may overshadow location. The stereotypical Texan, for example, is hard to find in Houston, where one-third of the population has immigrated from other states. Another problem is that members of a geographic segment often tend to be too heterogeneous to qualify as a meaningful target for marketing action.
Demographics can be used to help companies develop products that meet current and future consumer needs. It can alert a company to a new segmentation, one that was not originally connected to the product. For example, women using power tools as home owners. Segmenting the consumer market by age groups is useful for several products. For example, the youth market (approximately 5 to 13) influences how their parents spend money, and when they make purchases on their own (e.g. toys and snacks). Presently, the senior market (age 65 and over) has grown in importance for producers of low-cost housing, cruises, and health care.
Gender has historically been a good basis for market segmentation. Many traditional gender-based boundaries are changing, and marketers must be aware of these changes. The emergence of the working woman, for instance, has made determining how the family income is spent more difficult. Thus, the simple classification of male versus female may be useful only if several other demographic and behavioral characteristics are considered. Income seems a better basis for segmenting markets as prices for a product increases. Income may also may uncover other buying behaviors.
Education affects product preferences and desired characteristics for certain products. Occupation is important: individuals who work in hard physical labor may demand a different set of products than a teacher or bank teller. Race, religion and national origin have also been associated with product preferences and media preferences.
- The heavy user is an important basis for segmentation. This approach is very popular, particularly in the beverage industry (e.g beer, soft drinks, and spirits).
- Purchase occasion: determining the reason for an airline passenger’s trip, may be the most relevant criteria for segmenting airline consumers.
- User status: communication strategies must differ when directed at different use patterns, such as nonusers versus ex-users, or one-time users versus regular users.
- Loyalty: if companies can identify customer loyalty to their brand, and then delineate other characteristics these people have in common, they will locate the ideal target market.
- Stage of readiness: potential customers may be unaware, aware, informed, interested, desirous, and intending to buy. If a marketing manager is aware of where the specific segment of potential customers is, he or she can design the appropriate market strategy to move them through the various stages of readiness.
Segmentation should recognize psychological as well as demographic influences. For example, Phillip Morris has segmented the market for cigarette brands by appealing psychologically to consumers in the following way:
- Marlboro: the broad appeal of the American cowboy
- Benson & Hedges: sophisticated, upscale appeal
- Parliament: for those who want to avoid direct contact with tobacco
Attitudes of prospective buyers towards certain products influence their subsequent purchase of them. If people with similar attitudes can be isolated, they represent an important psychological segment.
Measurements of demographic, personality, and attitudinal variables are convenient measurements of less conspicuous motivational factors. People with similar physical and psychological characteristics may be similarly motivated. Motives can be positive (convenience), or negative (fear of pain). So marketers attempt to observe motivation directly and classify market segments accordingly.
Lifestyle segmentation has become very popular with marketers, because of the availability of measurement devices and instruments, and the intuitive categories that result from this process. Producers are targeting versions of their products and their promotions to various lifestyle segments. Lifestyle analysis begins by asking questions about the consumer’s activities, interests, and opinions. Research reveals vast amounts of information concerning attitudes toward product categories and user and non-user characteristics, which marketers can use in targeting their products.