Companies cannot connect with all customers in large, broad, or diverse markets. They need to identify the market segments or in other, they have to do market segmentation so they can serve effectively. This decision requires a keen understanding of consumer behavior and careful strategic thinking about what makes each segment unique and different. Identifying and uniquely satisfying the right market segments are often the key to marketing success. In this blog, you will be going to know the 4 key bases for segmenting consumer markets.
Bases for Segmenting Consumer Markets
Market segmentation divides a market into well-defined slices. A market segment consists of a group of customers who share a similar set of needs and wants. The marketer’s task is to identify the appropriate number and nature of market segments and decide which one(s) to target.
We use two broad groups of variables to segment consumer markets. Some researchers define segments by looking at descriptive characteristics-geographic, demographic, and psychographics and asking whether these segments exhibit different needs or product responses. For example, they might examine the differing attitudes of “professionals,” “blue collars,” and other groups toward, say, “safety as a product benefit.
Other researchers define segments by looking at behavioral considerations, such as consumer responses to benefits, usage occasions, or brands, then seeing whether different characteristics are associated with each consumer-response segment. For example, do people who want “quality” rather than “low price” in an automobile differ in their geographic, demographic, and/or psychographic makeup?
Regardless of which type of segmentation scheme we use, the key is adjusting the marketing program to recognize customer differences. The major segmentation variables-geographic, demographic, psychographic, and behavioral segmentation are described in this article.
1. Geographic Segmentation
Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local variations. In that way, it can tailor marketing programs to the needs and wants of local customer groups in trading areas, neighborhoods, and even individual stores. In a growing trend called grassroots marketing, marketers concentrate on making such activities as personally relevant to individual customers as possible.
Much of Nike’s initial success came from engaging target consumers through grassroots marketing efforts such as sponsorship of local school teams, expert-conducted clinics, and provision of shoes, clothing, and equipment to young athletes. Citibank provides different mixes of banking services in its branches depending on neighborhood demographics. Retail firms such as Starbucks, Trader Joe’s, and Costco have all found great success emphasizing local marketing initiatives, and other types of firms have also jumped into the action.
More and more, regional marketing means marketing right down to a specific zip code. Many companies use mapping software to pinpoint the geographic locations of their customers, learning, say, that most customers are within a 10-mile radius of the store and are further concentrated within certain zip+4 areas. By mapping the densest areas, the retailer can rely on customer cloning, assuming the best prospects live where most of the customers already come from.
Marketing to microsegments has become possible even for small organizations as database costs decline, software becomes easier to use, and data integration increases. Going online to reach customers directly can open a host of local opportunities.
Those who favor such localized marketing see national advertising as wasteful because it is too “arm’s length” and fails to address local needs. Those against local marketing argue that it drives up manufacturing and marketing costs by reducing economies of scale and magnifying logistical problems. A brand’s overall image might be diluted if the product and message are too different in different localities.
2. Demographic Segmentation
One reason demographic variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class are so popular with marketers is that they’re often associated with consumer needs and wants, Another is that they’re easy to measure. Even when we describe the target market in non-demographic terms (say, by personality type), we may need the link back to demographic characteristics to estimate the size of the market and the media we should use to reach it efficiently. Here’s how marketers have used certain demographic variables to segment markets.
Nevertheless, age and life cycle can be tricky variables. The target market for some products may be the psychologically young. To target 21-year-olds with its boxy Element, which company officials described as a “dorm room on wheels”, Honda ran ads depicting sexy college kids partying near the car at a beach. So many baby boomers were attracted to the ads, however, that the average age of Element buyers turned out to be 42! With baby boomers seeking to stay young, Honda decided the lines between age groups were getting blurred. When sales fizzled, Honda decided to discontinue sales of the Element. When it was ready to launch a new subcompact called the Fit, the firm deliberately targeted Gen Y buyers as well as their empty-nest parents.?
AGE AND LIFE-CYCLE STAGE – Consumer wants and abilities change with age. Toothpaste brands such as Crest and Colgate offer three main lines of products to target kids, adults, and older consumers. Age segmentation can be even more refined. Pampers divides its market into a prenatal, new baby (0-5 months), baby (6-12 months), toddler (13-23 months), and preschooler (24 months+). Indirect age effects also operate for some products. One study of kids ages 8-12 found that 91 percent decided or influenced clothing or apparel buys, 79 percent grocery purchases, and 54 percent vacation choices, while 14 percent even made or swayed vehicle purchase decisions.”
LIFE STAGE – People in the same part of the life cycle may still differ in their life stage. The life stage defines a person’s major concerns, such as going through a divorce, going into a second marriage, taking care of an older parent, deciding to cohabit with another person, buying a new home, and so on. These life stages present opportunities for marketers who can help people cope with the accompanying decisions.
For example, the wedding industry attracts marketers of a vast range of products and services. No surprise the average U.S. couple spends almost $27,000 on their wedding (see Table 9.3 for some major wedding expenditures).” But that’s just the start. Newlyweds in the United States spend a total of about $70 billion on their households in the first year after marriage-and they buy more in the first six months than an established household does in five years!
GENDER – Men and women have different attitudes and behave differently, based partly on genetic makeup and partly on socialization. Research shows that women have traditionally tended to be more communal-minded and men more self-expressive and goal-directed; women have tended to take in more of the data in their immediate environment and men to focus on the part of the environment that helps them achieve a goal.
A research study of shopping found that men often need to be invited to touch a product, whereas women are likely to pick it up without prompting. Men often like to read product information; women may relate to a product on a more personal level.
Gender differences are shrinking in some other areas as men and women expand their roles. One Yahoo survey found that more than half of men identified themselves as the primary grocery shoppers in their households.
Nevertheless, gender differentiation has long been applied in clothing, hairstyling, and cosmetics. Avon, for one, has built a $6 billion-plus business by selling beauty products to women. Gillette has found similar success with its Venus razor.
INCOME – Income segmentation is a long-standing practice in such categories as automobiles and clothing. cosmetics, financial services, and travel. However, income does not always predict the best customers for a given product. Blue-collar workers were among the first purchasers of color television sets; it was cheaper for them to buy a television than to go to movies and restaurants.
Many marketers are deliberately going after lower-income groups, in some cases discovering fewer competitive pressures or greater consumer loyalty. Procter & Gamble launched two discount-priced brand extensions in 2005-Bounty Basic and Charmin Basic-which have met with some success. Other marketers are finding success with premium-priced products. When Whirlpool launched a pricey Duet washer line, sales doubled their forecasts in a weak economy, due primarily to middle-class shoppers who traded up.
GENERATION – Each generation or cohort is profoundly influenced by the times in which it grows up the music, movies, politics, and defining events of that period. Members share the same major cultural, political, and economic experiences and often have similar outlooks and values. Marketers may choose to advertise to a cohort by using the icons and images prominent in its experiences. They can also try to develop products and services that uniquely meet the particular interests or needs of a generational target.
Although the beginning and ending birth dates of any generation are always subjective. And generalizations can mask important differences within the group.
RACE AND CULTURE – Multicultural marketing is an approach recognizing that different ethnic and cultural segments have sufficiently different needs and wants to require targeted marketing activities and that a mass market approach is not refined enough for the diversity of the marketplace. Consider that McDonald’s now does 40 percent of its U.S. business with ethnic minorities. Its highly successful “I’m Lovin’ It” campaign was rooted in hip-hop culture but has had an appeal that transcended race and ethnicity.
Marketers need to factor the norms, language nuances, buying habits, and business practices of multicultural markets into the initial formulation of their marketing strategy, rather than adding these as an afterthought. All this diversity also has implications for marketing research; it takes careful sampling to adequately profile target markets.
Multicultural marketing can require different marketing messages, media, channels, and so on. Specialized media exist to reach virtually any cultural segment or minority group, though some companies have struggled to provide financial and management support for fully realized programs. Fortunately, as countries become more culturally diverse, many marketing campaigns targeting a specific cultural group can spill over and positively influence others. Ford developed a TV ad featuring comedian Kevin Hart to launch its new Explorer model that initially targeted the African American market, but it became one of the key ads for the general market launch too.”
3. Psychographic Segmentation
Psychographics is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into groups based on psychological/personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles.
4. Behavioral Segmentation
Although psychographic segmentation can provide a richer understanding of consumers, some marketers fault it for being somewhat removed from actual consumer behavior. In behavioral segmentation, marketers divide buyers into groups based on their knowledge of, attitude toward, use of, or response to a product.
NEEDS AND BENEFITS – Not everyone who buys a product has the same needs or wants the same benefits from it. Needs-based or benefit-based segmentation identifies distinct market segments with clear marketing implications. For example, Constellation Brands identified six different benefit segments in the U.S. premium wine market ($5.50 a bottle and up).
a) Enthusiast (12 percent of the market) – Skewing female, their average income is about $76,000 a year. About 3 percent are “luxury enthusiasts” who skew more male with a higher income.
b) Image Seekers (20 percent) – The only segment that skews male, with an average age of 35. They use wine basically as a badge to say who they are, and they’re willing to pay more to make sure they’re getting the right bottle.
c) Savvy Shoppers (15 percent) – They love to shop and believe they don’t have to spend a lot to get a good bottle of wine. Happy to use the bargain bin.
d) Traditionalist (16 percent) – With very traditional values, they like to buy brands they’ve heard of and from wineries that have been around a long time. Their average age is 50, and they are 68 per cent female.
e) Satisfied Sippers (14 percent) – Not knowing much about wine, they tend to buy the same brands. About half of what they drink is white zinfandel.
f) Overwhelmed (23 percent) – A potentially attractive target market, they find purchasing wine confusing.
DECISION ROLES – It’s easy to identify the buyer for many products. In the United States, men normally choose their shaving equipment and women choose their pantyhose, but even here marketers must be careful in making targeting decisions because buying roles change. When ICI, the giant British chemical company now called AkzoNobel, discovered that women made 60 percent of decisions on the brand of household paint, it decided to advertise its Dulux brand to women.
People play five roles in a buying decision: Initiator, Influencer, Decider, Buyer, and User. For example, assume a wife initiates a purchase by requesting a new treadmill for her birthday. The husband may then seek information from many sources, including his best friend who has a treadmill and is a key influencer in what models to consider. After presenting the choices to his wife, he purchases her preferred model, which ends up being used by the entire family. Different people are playing different roles, but all are crucial in the decision process and ultimate consumer satisfaction.
USER AND USAGE-RELATED VARIABLES – Many marketers believe variables related to users or their usage – occasions, user status, usage rate, buyer-readiness stage, and loyalty status – are good starting points for constructing market segments.
Occasions – Occasions mark a time of day, week, month, year, or other well-defined temporal aspects of life. We can distinguish buyers according to the occasions when they develop a need, purchase a product, or use a product. For example, air travel is triggered by occasions related to business. vacation, or family. Occasion segmentation can help expand product usage.
User Status – Every product has its nonusers, ex-users, potential users, first-time users, and regular users. Blood banks cannot rely only on regular donors to supply blood: they must also recruit new first-time donors and contact ex-donors, each with a different marketing strategy. The key to attracting potential users, or even possibly nonusers, is understanding the reasons they are not using. Do they have deeply held attitudes, beliefs, or behaviors or just lack knowledge of the product or brand benefits?
Included in the potential-user group are consumers who will become users in connection with some life stage or event. Mothers-to-be are potential users who will turn into heavy users. Producers of infant products and services learn their names and shower them with products and ads to capture a share of their future purchases. Market-share leaders tend to focus on attracting potential users because they have the most to gain from them. Smaller firms focus on trying to attract current users away from the market leader.
Usage Rate – We can segment markets into light, medium, and heavy product users. often a small slice but accounting for a high percentage of total consumption. Heavy beer drinkers account for 87 percent of beer consumption-almost seven times as much as light drinkers. Marketers would rather attract one heavy user than several light users. A potential problem, however, is that heavy users are often either extremely loyal to one brand or never loyal to any brand and always looking for the lowest price. They also may have less room to expand their purchase and consumption. Light users may be more responsive to new marketing appeals.
Buyer-Readiness Stage – Some people are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. To help characterize how many people are at different stages and how well they have converted people from one stage to another, marketers can employ a marketing funnel to break the market into buyer-readiness stages.
The proportions of consumers at different stages make a big difference in designing the marketing program. Suppose a health agency wants to encourage women to have an annual Pap test to detect cervical cancer. In the beginning, most women may be unaware of the Pap test. The marketing effort should go into awareness-building advertising using a simple message. Later, the advertising should dramatize the benefits of the Pap test and the risks of not getting it. A special offer of a free health examination might motivate women to sign up for the test.
Loyalty Status – Marketers usually envision four groups based on brand loyalty status:
1. Hard-core loyals- Consumers who buy only one brand all the time
2. Split loyals – Consumers who are loyal to two or three brands
3. Shifting loyals-Consumers who shift loyalty from one brand to another
4. Switchers – Consumers who show no loyalty to any brand63
A company can learn a great deal by analyzing degrees of brand loyalty: Hard-core loyals can help identify the products’ strengths; split loyals can show the firm which brands are most competitive with its own; and by looking at customers dropping its brand, the company can learn about its marketing weaknesses and attempt to correct them. One caution: What appear to be brand-loyal purchase patterns may reflect habit, indifference, a low price, a high switching cost, or the unavailability of other brands.
Attitude – Five consumer attitudes about products are enthusiastic, positive, indifferent, negative, and hostile. Workers in a political campaign use attitude to determine how much time and effort to spend with each voter. They thank enthusiastic voters and remind them to vote, reinforce those who are positively disposed of, try to win the votes of indifferent voters and spend no time trying to change the attitudes of negative and hostile voters.
Multiple Status – Combining different behavioral bases can provide a more comprehensive and cohesive view of a market and its segments.
So, in this blog, you knew the four most important pillars of market segmentation i.e., geographic segmentation, demographic segmentation, psychographic segmentation, and behavioral segmentation. You gained knowledge of all the parts included in market segmentation.
Team Vedaon hopes that this blog helps you to understand the 4 bases of market segmentation. If you have any queries regarding this article or if you want to give feedback to us then please comment in the comment section. We would love to talk with you.
Credits* – Concepts of this blog are taken from the famous marketing book Marketing Management by Philip Kotler and Kevin Lane keller.