Bases For Market Segmentation


The first step in developing a segmentation strategy is to select the most appropriate base on which to segment the market. Nine major categories of consumer characteristics provide the most popular bases for marketers market segmentation. They include geographic factors, demographic factors, psychological factors, psychographic (lifestyle) characteristics, sociocultural variables, userelated characteristics, use-situation factors, benefits sought and forms of hybrid segmentation such as demographic-psychographic profiles and geodemographic factors. 

Hybrid segmentation formats each use a combination of several segmentation bases to create rich and comprehensive profiles of particular consumer segments (e.g. a combination of a specific age range, income range, lifestyle and profession). Table 1 lists the nine segmentation base, divided into specific variables with examples of each. The following section discusses each of the nine segmentation bases. (Various psychological and sociocultural segmentation variables are examined in greater depth in later plengdut.com post.)

TABLE 1 Market segmentation categories and selected variables

SEGMENTATION BASE
SELECTED SEGMENTATION VARIABLES
GEOGRAPHIC SEGMENTATION

Region
Scandinavia, Benelux, Middle East
City size
Major metropolitan areas, small cities, towns
Density of area
Urban, suburban, exurban, rural
Climate
Temperate, hot, humid, rainy


DEMOGRAPHIC SEGMENTATION

Age
Under 12, 12–17, 18–34, 35–49, 50–64, 65–74, 75–99, 100+
Sex
Male, female
Marital status
Single, married, divorced, living together, widowed
Income
Under €25,000, €25,000–€34,999, €35,000–€49,999,
€50,000–€74,999, €75,000–€99,999, €100,000 and over
Education
Some high school, high school graduate, some university,
university graduate, postgraduate
Occupation
Professional, blue-collar, white-collar, agricultural, military


PSYCHOLOGICAL SEGMENTATION

Needs-motivation
Shelter, safety, security, affection, sense of self-worth
Personality
Extroverts, novelty seekers, aggressives, low dogmatics
Perception
Low-risk, moderate-risk, high-risk
Learning-involvement
Low-involvement, high-involvement
Attitudes
Positive attitude, negative attitude


PSYCHOGRAPHIC SEGMENTATION

Combines psychology and demographics, hence psychodemographics (Lifestyle) Segmentation
Economy-minded, couch potatoes, outdoors enthusiasts, status seekers
VALS™
Innovator, Thinker, Believer, Achiever, Striver, Experiencer, Maker, Survivor


SOCIOCULTURAL SEGMENTATION

Cultures
Danish, Italian, Chinese, Australian, French, Pakistani
Religion
Catholic, Protestant, Moslem, Jewish, other
Subcultures (race/ethnic)
African, American, Caucasian, Asian, Hispanic
Social class
Lower, middle, upper
Family life cycle
Bachelors, young marrieds, full nesters, empty nesters


USE-RELATED SEGMENTATION

Usage rate
Heavy users, medium users, light users, non-users
Awareness status
Unaware, aware, interested, enthusiastic
Brand loyalty
None, some, strong


USAGE-SITUATION SEGMENTATION

Time
Leisure, work, rush, morning, night
Objective
Personal, gift, snack, fun, achievement
Location
Home, work, friend’s home, in-store
Person
Self, family members, friends, boss, peer


BENEFIT SEGMENTATION


Convenience, social acceptance, long lasting, economy, value-for-money


HYBRID SEGMENTATION

Geodemographics
‘New empty nests’, ‘Boomtown singles’, ‘Movers and Shakers’






Note: VALS™ is an example of a psychographic/demographic profile.
Source : Reprinted with permission of Strategic Business Insights (SBI); www.strategicbusinessinsights.com/VALS .

Geographic segmentation

In geographic segmentation the market is divided by location. The theory behind this strategy is that people who live in the same area share some similar needs and wants and that these needs and wants differ from those of people living in other areas. For example, certain food products and/or varieties sell better in one region than in others, or are used differently in different geographic areas. More specifically, mayonnaise is frequently used with chips in Belgium, whereas this combination is seldom seen in Norway. Furthermore, while curry-fl avoured ketchup has been a well-known product in Belgium for years, the same product has until recently been difficult to find in Norwegian supermarkets.

Some marketing scholars have argued that direct-mail merchandise catalogues, national tollfree telephone numbers, satellite television transmission, global communication networks, and especially the Internet have erased all regional boundaries and that geographic segmentation should be replaced by a single global marketing strategy. Clearly, any company that decides to put its catalogue on the Internet enables individuals all over the world to browse its site and become customers. For example, shops offering collectables like first editions of old books may increase their target segment substantially by making their inventory searchable on the Internet.

A shop in Greece may find that orders start coming in from Sweden, Japan, New Zealand and Ireland not long after posting its offer on the Internet. Other marketers have, for a number of reasons, been moving in the opposite direction and developing highly regionalised marketing strategies. For example, due to the variety of consumer preferences, government regulations and brand images, General Motors segments the European market into a multitude of regions. Within each region, GM sales managers have the authority to develop specific advertising and promotional campaigns geared to local market needs and conditions, using local media ranging from newspapers to television commercials. In addition, the product specifications are adapted to the different local markets. For example, the Astra model is offered under the Vauxhall brand in the UK and comes with the steering wheel on the right-hand side of the car. In contrast, the same model is marketed under the Opel brand in Germany, and in compliance with the needs of German drivers the steering wheel is on the left. If we look beyond Europe, the Astra model is offered under a third GM brand in Australia, where it is called Holden Astra. Again, the steering wheel is on the right-hand side.

Marketers have observed divergent consumer purchasing patterns among urban, suburban and rural areas. For example, while Norwegians have often associated cognac consumption with urban lifestyles or upscale restaurants, sales reports indicate that consumers in more rural areas consume more of this product than people living in more densely populated areas like the capital city of Oslo. In fact, the average inhabitant of Finnmark, the most northern and least populated part of Norway, consumes a total of 0.8 litres a year, while the average Norwegian consumes only 0.3 litres annually. In contrast, the average Swede consumes only 0.06 litres a year. Such geographically different consumption patterns have implications for the producers and distributors of the product in question.
In summary, geographic segmentation is a useful strategy for many marketers. It is relatively easy to find geographically based differences for many products. In addition, geographic segments can be easily reached through the local media, including newspapers, television and radio, and regional editions of magazines.

Demographic segmentation

Demographic characteristics , such as age, sex, marital status, income, occupation and education, are most often used as the basis for market segmentation. Demography refers to the vital and measurable statistics of a population. Demographics help to locate a target market, whereas psychological and sociocultural characteristics help to describe how its members think and how they feel. Demographic information is often the most accessible and cost-effective way to identify a target market.

Indeed, most secondary data, including census data, are expressed in demographic terms. Demographics are easier to measure than other segmentation variables; they are invariably included in psychographic and sociocultural studies because they add meaning to the findings. Demographic variables reveal ongoing trends that signal business opportunities, such as shifts in age, gender and income distribution. For example, demographic studies consistently show that the ‘mature-adult market’ (the 50+ segment) has a much higher proportion of disposable income than its younger counterparts. This factor alone makes consumers over the age of 50 a critical market segment for products and services that they buy for themselves, for their adult children and for their grandchildren. In fact, some marketing scholars have termed the 50+ segment ‘Power consumers’, based on the high purchasing power this segment possesses.

Age segmentation

Product needs and interests often vary with consumers’ age. For instance, investors younger than 55 have been found to base their investment decisions on long-term gain and consider current income and intermediate gain less important, whereas investors over 55 tend to be more cautious and place more importance on the intermediate gain and current income of a potential investment.1 Because of such age motivated differences, marketers have found age to be a particularly useful demographic variable for market segmentation. Many marketers have carved themselves a niche in the marketplace by concentrating on a specific age segment. For example, although children often consume boxed juice drinks, Minute Maid Company ( www.minutemaid.com ) offers single-serve drinks in pouches, rather than boxes, in order better to appeal to the ‘tween’ market. And one of the reasons why Heinz introduced EZ Squirt ketchup (which included one version green in colour) was the better to appeal to tweens. Still further, in seeking to cater to consumers under 25 years of age, Pepsi (www.pepsi.com) understood that the Internet represented the primary medium of choice and, therefore, increased its effort to create online programmes directed at this audience.

TABLE 2 Segmentation by seven life development stages

MAJOR PHASE NAME
AGE
LIFE DEVELOPMENT STAGE (AGE)
MAJOR STAGE TASK
Provisional Adulthood
18–29
Pulling Up Roots
Detaching from family, searching for identity, choosing a career
First Adulthood
30–49
Reaching Out (30–35)
Selecting a mate, working on career


Questions/Questions (36–44)
Searching for personal values, re-evaluating relationships


Midlife Explosion (45–49)
Searching for meaning, reassessing marriage, relating to teenage children, with depression
being common in this stage
Second Adulthood
50–85+
Settling Down (50–55)
Adjusting to realities of work, adjusting to an
empty nest, being active in community


Mellowing (56–64)
Adjusting to health problems, approaching retirement


Retirement (65+)
Adjusting to retirement, reassessing finances, being concerned with health
Source : Adapted from Linda Morton, ‘Segmenting Publics by Life Development Stages’, Public Relations Quarterly , Spring 1999, 46; as based on Gail Sheehy, New Passages: Mapping Your Life Across Time (New York: Ballantine Books, 1995).

Age, especially chronological age, implies a number of underlying forces. In particular, demographers have drawn an important distinction between age effects (occurrences due to chronological age) and cohort effects (occurrences due to growing up during a specific time period). Examples of the age effect are the heightened interest in leisure travel that often occurs for people (single and married) during middle age (particularly in their late fifties or early sixties) and the interest in learning to play golf. Although people of all ages learn to play golf, it is particularly prevalent among people in their fifties. These two trends are examples of age effects because they especially seem to happen as people reach a particular age category.5 Table 2 presents a series of life development stages related to age effects.

In contrast, the nature of cohort effects is captured by the idea that people hold on to the interests they grew up to appreciate. If 10 years from today it is determined that many rock and roll fans are over 60, it would not be because older people have suddenly altered their musical tastes but because the baby boomers who grew up with rock and roll have become older.

It is important for marketers to be aware of the distinction between age effects and cohort effects: one stresses the impact of ageing, whereas the second stresses the infl uence of the period when a person is born and shared experiences with others of the same age. Table 3 presents a sample of ‘defining moments’ that shaped particular age cohorts in specific countries or regions. If we try to expand the list presented in Table 3 , events like September 11, 2001, the tsunami in 2004, the financial crisis in 2008, Michael Jackson’s death in 2009 and the Haiti earthquake in 2010, may all be more recent examples of such defining moments for those who were affected. We must remember that cohort effects are ongoing and lifelong.

TABLE 3 Examples of country-specific or region-specific cohort-defining moments

EVENT*
DATE
COUNTRY AFFECTED
John Profumo scandal
1963
UK
Nelson Mandela’s imprisonment and release
1964 and 1990
South Africa
Cultural Revolution
1966–1976
China
Six Days War
1967
Jordan, Israel and Egypt
Khmer Rouge Rule
1975–1979
Cambodia and South East Asia
Assassination of Anwar Sadat
1981
Egypt
Falklands War
1982
UK and Argentina
Assassination of Olof Palme
1986
Sweden
Tiananmen Square massacre
1989
China
Manuel Noriega’s arrest and extradition to USA
1989
Panama
Japanese Economic ‘bubble’ bursts
1991
Japan
Irish legalisation of divorce
1995
Ireland
*These events are not ranked in order of importance, but by date. Source : Adapted from Charles D. Schewe and Geoffrey Meredith, ‘Segmenting Global Market by Generational Cohorts: Determining Motivations by Age’, Journal of Consumer Behavior , 4, October 2004, 56. Copyright 2004. Copyright John Wiley & Sons Limited. Reproduced with permission.

Sex segmentation

Gender is quite frequently a distinguishing segmentation variable. Women have traditionally been the main users of such products as hair colouring and cosmetics, and men have been the main users of tools and shaving preparations. However, sex roles have blurred, and gender is no longer an accurate way to distinguish consumers in some product categories. For example, women are buying household repair tools and men have become significant users of skin care and hair products.

It is becoming increasingly common to see magazine advertisements and television commercials that depict men and women in roles traditionally occupied by the opposite sex. For example, many advertisements refl ect the expanded child-nurturing roles of young fathers in today’s society. Much of the change in sex roles has occurred because of the continued impact of dualincome households. One consequence for marketers is that women are not so readily accessible through traditional media as they once were. Because working women do not have much time to watch television or listen to the radio, many advertisers now emphasise magazines in their media schedules, especially those specifically aimed at working women. 

Direct marketers have also been targeting time-pressured working women who use mail-order catalogues, convenient toll free numbers and Internet sites as ways of shopping for personal clothing and accessories, as well as many household and family needs. Recent research has shown that men and women differ in terms of the way they look at their Internet usage. Specifically, men tend to click on a website because they are ‘information hungry’, whereas women click on because ‘they expect communications media to entertain and educate’.

Marital Status

Traditionally, the family has been the focus of most marketing efforts, and for many products and services the household continues to be the relevant consuming unit. Marketers are interested in the number and kinds of households that buy and/or own certain products. Marketers also are interested in determining the demographic and media profiles of household decision makers (those involved in the actual selection of the product) to develop appropriate marketing strategies.

Marketers have discovered the benefits of targeting specific marital status groupings, such as singles, divorced individuals, single parents and dual-income married couples. For instance, singles, especially one-person households with incomes greater than €50,000, comprise a market segment that tends to be above average in the use of products not traditionally associated with supermarkets (e.g. cognac, books, loose tea) and below average in their consumption of traditional supermarket products (e.g. ketchup, peanut butter, mayonnaise). Such insights can be particularly useful to a supermarket manager operating in a neighbourhood of one-person households when deciding on the merchandise mix for the store. Some marketers target one person households with single serving prepared foods and others with mini appliances such as small microwave ovens and two cup coffee makers.

Income, Education and Occupation

Income has long been an important variable for distinguishing between market segments. Marketers commonly segment market on the basis of income because they feel that it is a strong indicator of the ability (or inability) to pay for a product or a specific model of the product. For instance, initially marketers of home computers under €1,000 felt that such products would be particularly attractive to homes with modest family incomes. However, low-priced PCs also proved to be quite popular with higher-income families who wanted additional computers for younger family members.

Income is often combined with other demographic variables to define target market more accurately. To illustrate, high income has been combined with age to identify the important affl uent elderly segment. It also has been combined with both age and occupational status to produce the so called yuppie segment, a sought after sub-group of the baby boomer market.

Education, occupation and income tend to be closely correlated in almost a cause-andeffect relationship. High-level occupations that produce high incomes usually require advanced educational training. Individuals with little education rarely qualify for high-level jobs. Insights on Internet usage preferences tend to support the close relationship among income, occupation and education. Research reveals that consumers with lower incomes, lower education and blue-collar occupations tend to spend more time online at home than those with higher incomes, higher education and white collar occupations. One possible reason for this difference is that those in blue-collar jobs often do not have access to the Internet during the course of the working day.

Psychological segmentation

Psychological characteristics refer to the inner or intrinsic qualities of the individual consumer. Consumer segmentation strategies are often based on specific psychological variables. For instance, consumers may be segmented in terms of their motivations, personality, perceptions, learning and attitudes. ( Part 2 examines in detail the wide range of psychological variables that inf uence consumer decision-making and consumption behaviour.)

Psychographic segmentation

Marketing practitioners have heartily embraced psychographic research, which is closely aligned with psychological research, especially personality and attitude measurement. This form of applied consumer research (commonly referred to as lifestyle analysis) has proved to be a valuable marketing tool that helps identify promising consumer segments likely to be responsive to specific marketing messages.

The psychographic profile of a consumer segment can be thought of as a composite of consumers’ measured activities, interests and opinions (AIOs) . As an approach to constructing consumer psychographic profiles, AIO research seeks consumers’ responses to a large number of statements that measure activities (how the consumer or family spends time, e.g. golfing, gardening), interests (the consumer’s or family’s preferences and priorities, e.g. home, fashion, food) and opinions (how the consumer feels about a wide variety of events and political issues, social issues, the state of the economy, ecology). In their most common form, AIO-psychographic studies use a battery of statements (a psychographic inventory ) designed to identify relevant aspects of a consumer’s personality, buying motives, interests, attitudes, beliefs and values. Table 4 presents a portion of a psychographic inventory designed to gauge ‘techno-road-warriors’, business people who spend a high percentage of their working week travelling, equipped with laptop computers, mobile phones with broadband network connection and electronic organisers. Table 5 presents a hypothetical psychographic profile of a techno-road-warrior. The appeal of psychographic research lies in the frequently vivid and practical profiles of consumer segments that it can produce.


TABLE 4 A portion of an AIO inventory used to identify techno-road-warriors

Instructions: Please read each statement and place an ‘x’ in the box that best indicates how strongly you ‘agree’ or ‘disagree’ with the statement.

AGREE COMPLETELY





DISAGREE COMPLETELY
I feel that my life is moving faster and faster, sometimes just too fast
[1]
[2]
[3]
[4]
[5]
[6]
[7]
If I could consider the ‘pluses’ and ‘minuses’, technology has been good for me
[1]
[2]
[3]
[4]
[5]
[6]
[7]
I find that I have to pull myself away from email
[1]
[2]
[3]
[4]
[5]
[6]
[7]
Given my lifestyle, I have more of a shortage of time than money
[1]
[2]
[3]
[4]
[5]
[6]
[7]
I like the benefits of the Internet, but I often don’t have the time to take advantage of them
[1]
[2]
[3]
[4]
[5]
[6]
[7]
I am generally open to considering new practices and new technology
[1]
[2]
[3]
[4]
[5]
[6]
[7]

TABLE 5 A hypothetical psychographic profile of the techno-road-warrior

• Goes on the Internet more than 20 times a week
• Sends and/or receives 50 or more email messages a week
• Regularly visits websites to gather information and/or to comparison shop
• Often buys personal items via 800 numbers and/or over the Internet
• May trade stocks and/or make travel reservations over the Internet
• Earns €75,000 or more a year
• Belongs to several rewards programmes (e.g. frequent flyer, hotel and hire-car programmes)


AIO research has even been employed to explore pet ownership as a segmentation base. One study has found that people who do not have pets are more conservative in nature, more brand loyal, and more likely to agree with statements such as ‘I am very good at managing money’ and ‘It is important for me to look well dressed’. Such findings can be used by marketers when developing promotional messages for their products and services.

The results of psychographic segmentation efforts are frequently refl ected in firms’ marketing messages. Psychographic segmentation is further discussed later in the plengdut post, where we consider hybrid segmentation strategies that combine psychographic and demographic variables to create rich descriptive profiles of consumer segments.

Sociocultural segmentation

Sociological (group) and anthropological (cultural) variables that is, sociocultural variables provide further bases for market segmentation. For example, consumer markets have been successfully subdivided into segments on the basis of stage in the family life cycle, social class, core cultural values, subcultural memberships and cross cultural affiliation.

Family Life Cycle

Family life cycle segmentation is based on the premise that many families pass through similar phases in their formation, growth and final dissolution. At each phase, the family unit needs different products and services. Young single people, for example, need basic furniture for their first apartment, whereas their parents, finally free of child rearing, often refurnish their homes with more elaborate pieces. Family life cycle is a composite variable based explicitly on marital and family status but implicitly refl ects relative age, income and employment status. Each of the stages in the traditional family life cycle (bachelorhood, honeymooners, parenthood, post-parenthood and dissolution) represents an important target segment to a variety of marketers. For example, the financial services industry segments customers in terms of family life-cycle stages because it has been found that families’ financial needs tend to shift as they progress through the various stages of life.

Social Class

Social class (or relative status in the community) can be used as a base for market segmentation and is usually measured by a weighted index of several demographic variables, such as education, occupation and income. The concept of social class implies a hierarchy in which individuals in the same class generally have the same degree of status, whereas members of other classes have either higher or lower status. Studies have shown that consumers in different social classes vary in terms of values, product preferences and buying habits. Many major banks and investment companies, for example, offer a variety of different levels of service to people of different social classes (e.g. private banking services to the upper classes). Some investment companies appeal to upper-class customers by offering them options that correspond to their wealthy status. In contrast, a financial programme targeted to a lower social class might talk instead about savings accounts.

Culture and Subculture

Some marketers have found it useful to segment their markets on the basis of cultural heritage because members of the same culture tend to share the same values, beliefs and customs. Marketers who use cultural segmentation stress specific, widely held cultural values with which they hope consumers will identify. Cultural segmentation is particularly successful in international marketing, but it is important for the marketer to understand fully the target country’s beliefs, values and customs (the cross-cultural context).

Within the larger culture, distinct subgroups (subcultures) are often united by certain experiences, values or beliefs that make effective market segments. These groupings could be based on a specific demographic characteristic (such as race, religion, ethnicity or age) or lifestyle characteristic (teachers, joggers). Research on subcultural differences, which will be discussed more fully in next plengdut post , tends to reveal that consumers are more responsive to promotional messages that they perceive relate to their own ethnicity.

Culturally distinct segments can be prospects for the same product but are often targeted more efficiently with different promotional appeals. For example, a bicycle might be promoted as an efficient means of transport in Asia and as a health-and-fitness product in Finland. Similarly, a fishing rod or shotgun could be advertised in many parts of the world as a way to put food on the dinner table but might be promoted in the UK as leisure-time sporting equipment.

In a study that divided China’s urban consumers into four segments (‘working poor’, ‘salary class’, ‘little rich’, and ‘yuppies’), the researchers found that for all four groups television was the most popular medium of entertainment and information. However, the working poor spent the most time listening to radio, while yuppies and the little rich spent the most time reading newspapers and magazines.

Cross-cultural or Global Marketing Segmentation

As the world has become smaller, a true global marketplace has developed. For example, as you read this you may be sitting on an IKEA chair or sofa (Sweden), drinking Earl Grey tea (England), wearing a Swatch watch (Switzerland), Nike trainers (China), a Polo golf shirt (Mexico) and Dockers trousers (Dominican Republic). Some global market segments, such as teenagers, appear to want the same types of products, regardless of which nation they call home products that are trendy, entertaining and image-oriented. This global ‘sameness’ allowed Reebok, for example, to launch its Instapump line of trainers using the same global advertising campaign in approximately 140 countries.

Use-related segmentation

An extremely popular and effective form of segmentation categorises consumers in terms of product, service or brand usage characteristics, such as level of usage, level of awareness and degree of brand loyalty.

Rate of usage segmentation differentiates among heavy users, medium users, light users and non-users of a specific product, service or brand. For example, research has consistently indicated that between 25 and 35 per cent of beer drinkers account for more than 70 per cent of all beer consumed. For this reason, most marketers prefer to target their advertising campaigns to heavy users rather than spend considerably more money trying to attract light users. This also explains the successful targeting of light beer to heavy drinkers on the basis that it is less filling (and, thus, can be consumed in greater quantities) than regular beer. Recent studies have found that heavy soup consumers were more socially active, creative, optimistic, witty and less stubborn than light consumers and non-consumers, and they were also less likely to read entertainment and sports magazines and more likely to read family and home magazines. Likewise, heavy users of travel agents in Singapore were more involved with and more enthusiastic about holiday travel, more innovative with regard to their selection of holiday travel products, more likely to travel for pleasure, and more widely exposed to travel information from the mass media.

Marketers of a host of other products have also found that a relatively small group of heavy users accounts for a disproportionately large percentage of product use; targeting these heavy users has become the basis of their marketing strategies. Other marketers take note of the gaps in market coverage for light and medium users and profitably target those segments. Table 3-6 presents an overview of a segmentation strategy especially suitable for marketers seeking to organise their
database of customers into an action-oriented framework. The framework proposes a way to identify a firm’s best customers by dividing the database into the following segments:
  1. L oLows (low current share, low-consumption customers),
  2. HiLows (high current share, low-consumption customers),
  3. LowHighs (low current share, high-consumption customers), and
  4. HiHighs (high current share, high-consumption customers).

Moreover, the framework suggests the following specific strategies for each of the four segments: ‘starve’ the LoLows , ‘tickle’ the HiLows , ‘chase’ the LowHighs , and ‘stroke’ the HiHighs.

In addition to segmenting customers in terms of rate of usage or other usage patterns, consumers can also be segmented in terms of their awareness status. In particular, the notion of consumer awareness of the product, interest level in the product, readiness to buy the product or whether consumers need to be informed about the product are all aspects of awareness.

Sometimes brand loyalty is used as the basis for segmentation. Marketers often try to identify the characteristics of their brand-loyal consumers so that they can direct their promotional efforts to people with similar characteristics in the larger population. Other marketers target consumers who show no brand loyalty (‘brand switchers’) in the belief that such people represent greater market potential than consumers who are loyal to competing brands. Also, almost by definition, consumer innovators – often a prime target for new products – tend not to be brand loyal. ( plengdut post next discusses the characteristics of consumer innovators.)

Increasingly, marketers stimulate and reward brand loyalty by offering special benefits to consistent or frequent customers. Such frequent usage or relationship programmes often take the form of a membership club (e.g. Hertz Number 1 Club Gold, KLM and Air France’s joint programme ‘Flying Blue’, or the Hilton HHonors). Relationship programmes tend to provide special accommodation and services, as well as free extras, to keep these frequent customers loyal and happy.

TABLE 6 A framework for segmenting a firm’s database of customers

SEGMENT NAME
SEGMENT CHARACTERISTIC
COMPANY ACTION
LoLows
Low current share, low-consumption customers
Starve
HiLows
High current share, low-consumption customers
Tickle
LowHighs
Low current share, high-consumption customers
Chase
HiHighs
High current share, high-consumption customers
Stroke
Source : Adapted from Richard G. Barlow, ‘How to Court Various Target Markets’, Marketing News, 9 October 2000, 22.

Usage-situation segmentation

Marketers recognise that the occasion or situation often determines what consumers will purchase or consume. For this reason, marketers sometimes focus on usage-situation segmentation as a variable. The following three statements reveal the potential of situation segmentation: ‘Whenever our daughter Jamie gets a rise or a promotion, we always take her out to dinner’; ‘When I’m away on business for a week or more, I try to stay at a Radisson hotel’; ‘I always buy my wife flowers on her birthday’. Under other circumstances, in other situations and on other occasions, the same consumer might make other choices. Some situational factors that might infl uence a purchase or consumption choice include whether it is a weekday or weekend (e.g. going to the cinema); whether there is sufficient time (e.g. use of regular mail or express mail); whether it is a gift for a girlfriend, a parent or a self-gift (a reward to one’s self).

Many products are promoted for special usage occasions. The greetings card industry, for example, stresses special cards for a variety of occasions that seem to be increasing almost daily (Grandparents’ Day, Secretaries’ Day, etc.). The fl orist and confectionery industries promote their products for Valentine’s Day and Mother’s Day, the diamond industry promotes diamond rings as an engagement symbol, and the wristwatch industry promotes its products as graduation gifts. The Volvo car advertisement in Figure 1 is based on situational, special usage segmentation. It appeared in Norwegian newspapers prior to Christmas, covering two consecutive pages. The first picture portrays Rudolph the Reindeer pulling an empty sleigh, with both Santa Claus and the Christmas presents obviously missing. The second picture shows a Volvo XC90 speeding through the snow-covered landscape with someone that might be Santa Claus sitting behind the wheel. The text, which can’t be misunderstood, simply says ‘Sorry Rudolf ’.

FIGURE 1 A Volvo occasion-specific advertising campaign telling consumers that Santa Claus has replaced Rudolph the Reindeer with a Volvo XC90 Source : Volvo Personbiler Norge AS/TWBA.
FIGURE 1 A Volvo occasion-specific advertising campaign telling consumers that Santa Claus has replaced Rudolph the Reindeer with a Volvo XC90 Source : Volvo Personbiler Norge AS/TWBA.


Benefit segmentation

Marketing and advertising executives constantly attempt to identify the one most important benefit of their product or service that will be most meaningful to consumers. Examples of benefits that are commonly used include financial security, data protection, good health, fresh breath and peace of mind.

In an article dealing with brand strategies in India, the point is made that ‘nothing is as effective as segmentation based on the benefits a group of customers seek from your brand’. To illustrate, the article points out that in India Dettol soap is targeted at the hygiene conscious consumer – the individual seeking protection from germs and contamination – rather than the consumer looking for beauty, fragrance, freshness or economy.

Changing lifestyles also play a major role in determining the product benefits that are important to consumers and provide marketers with opportunities for new products and services. For example, the microwave oven was the perfect solution to the needs of dual-income households, where neither the husband nor the wife has the time for lengthy meal preparation. Food marketers offer busy families the benefit of breakfast products that require only seconds to prepare.

Benefit segmentation can be used to position various brands within the same product category. The classic case of successful benefit segmentation is the market for toothpaste, and one article suggested that if consumers are socially active, they want a toothpaste that can deliver white teeth and fresh breath; if they smoke, they want a toothpaste to fight stains; if disease prevention is their major focus, then they want a toothpaste that will fight germs; and if they have children, they want to lower their dental bills.

Hybrid segmentation

Marketers commonly segment markets by combining several segmentation variables rather than relying on a single segmentation base. This section examines three hybrid segmentation approaches that provide marketers with richer and more accurately defined consumer segments than can be derived from using a single segmentation variable. These include psychographic demographic profiles, geodemographics and VALS.

Psychographic–Demographic Profiles

Psychographic and demographic profiles are highly complementary approaches that work best when used together. By combining the knowledge gained from both demographic and psychographic studies, marketers are provided with powerful information about their target markets.

Demographic psychographic profiling has been widely used in the development of advertising campaigns to answer three questions: ‘Who should we target?’; ‘What should we say?’; ‘Where should we say it?’ To help advertisers answer the third question, many advertising media vehicles sponsor demographic–psychographic research on which they base very detailed audience profiles. By offering media buyers such carefully defined dual profiles of their audiences, mass media publishers and broadcasters make it possible for advertisers to select media whose audiences most closely resemble their target markets.

Morever, advertisers are increasingly designing advertisements that depict in words and/or pictures the essence of a particular target market lifestyle or segment that marketers want to reach. For example, Bavac has several advertisements that appeals to specific active and outdoor lifestyles, and the advertisement presented in Figure 2 is one example.

FIGURE 2 This advertisement targets an active outdoor lifestyle Source : Jagged Globe.  Geodemographic Segmentation
FIGURE 2 This advertisement targets an active outdoor lifestyle Source : Jagged Globe.

Geodemographic Segmentation


This type of hybrid segmentation scheme is based on the notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits (similar to the old adage, ‘Birds of a feather fl ock together’). This segmentation approach uses computers to generate geodemographic market clusters of like consumers.

Specifically, computer software clusters a region or nation’s neighbourhoods into lifestyle groupings based on postal area codes. Clusters are created based on consumer lifestyles, and a specific cluster includes area codes that are composed of people with similar lifestyles widely scattered throughout the country. Marketers use the cluster data for direct-mail campaigns, to select retail sites and appropriate merchandise mixes, to locate banks and restaurants and to design marketing strategies for specific market segments.

Geodemographic segmentation is most useful when an advertiser’s or marketer’s best prospects (in terms of consumer personalities, goals and interests) can be isolated in terms of where they live. However, for products and services used by a broad cross-section of the public, other segmentation schemes may be more productive.

Strategic Business Insights VALS™ System

Drawing on Maslow’s need hierarchy and the concept of social character, in the late 1970s researchers at SRI International developed a generalised segmentation scheme known as Values and Lifestyles ( VALS™ ). This original system was designed to explain the dynamics of societal change and was quickly adapted as a marketing tool.

Over the years the VALS™ system (currently owned and operated by Strategic Business Insights (SBI), a spin-out of SRI International) was revised to focus more explicitly on explaining consumer purchase behaviour. The current US VALS™ typology classifies the population into eight distinctive subgroups (segments) based on consumer responses to 35 attitudinal and four demographic questions. 


igure 3 depicts the VALS™ classification scheme and offers a brief profile of the consumer traits of each of the VALS™ segments.
Figure 3 depicts the VALS™ classification scheme and offers a brief profile of the consumer traits of each of the VALS™ segments.


The major groupings are defined in terms of three primary motivations and a new definition of resources: the ideals-motivated (consumers whose choices are motivated by their beliefs rather than by desires for approval), the achievement motivated (consumers whose choices are guided by the actions, approval and opinions of others) and the self-expression-motivated (consumers who are motivated by a desire for social or physical activity, variety and risk-taking). Resources (from most to least) include the range of psychological, physical, demographic and material means and capacities consumers have to draw upon, including education, income, self-confidence, health, eagerness to buy and energy level.

Members of each of the eight VALS™ segments have different mindsets that drive different consumption patterns – lifestyles, decision-making styles, communication styles, etc. For instance, Believers are slow to alter their consumption-related habits, whereas Innovators are drawn to top-of-the-range and new products, especially innovative technologies. Therefore, it is not surprising that marketers of intelligent in-vehicle technologies (e.g. global positioning devices) must first target Innovators, because they are early adopters of new products.

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