What are the best ways to divide a consumer market into meaningful and distinct groups?

9.1 Segmentation

Segmentation (also referred to as market segmentation ) is the division of consumer markets into meaningful and distinct customer groups.

There was a time when large companies such as McDonald's, Procter &Gamble, and Coca-Cola could market and sell their products by considering only the broad wants and needs of large groups of the U.S. population, if not the entire market. These companies could advertise their messages through a small number of radio and television stations that reached much of the population. This strategy is known as mass marketing.

Mass marketingis communicating a product or service message to as broad a group of people as possible with the purpose of positively influencing sales.The idea of mass marketing is that the broader the audience,the more potential for sales.

In the past, this strategy proved successful for some businesses.

Today, there are several problems with mass marketing.For one, there is no longer the ability to easily reach a large audience. Secondly, there is an increasingly vast number of product and brand choices for the consumer.

Consumers differ in their wants, needs, perceptions, values, and expectations. It is these differences that form the foundation for segmentation. Segmentation identifies groups of consumers who have similar market responses, such as reacting to advertising or personal selling, within their group, but whose responses differ from other groups. A response could be to product characteristics, or to a projected image, or the way a group learns about, purchases, and consumes a product or service.

 

 

To qualify as a true segment, a group should fulfill several

criteria:

·Be a homogeneous set

·Be different from other segments

·Have core similarities of attitude,behavior,and economics

·Be robust and replaceable over time

Segmentation Base

DEFINED: The segmentation base is a group of characteristics that is used to assign segment members.

The choice of a segmentation base can be one of the most critical decisions that influences the success of market segmentation. Consumers are divided into groups for marketing purposes. For example, if you market Red Bull, as we saw in the opening example, then you would market to members of Generation Y, or young adults. You would focus your marketing in an effort to sell more units of Red Bul. Consumers are typically divided into groups by demographic, psychographic, values, behavioral, and needs variables.

·Demographic segmentation divides the market into groups, based on criteria such as age, gender, family size, family life cycle, income, occupation, education, religion, ethnicity, generation, nationality, and sexual orientation.

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·Psychographic segmentation assigns buyers into different groups, based on lifestyle, class, or personality characteristics. People belonging to a particular demographic group can have dramatically different psychographic characteristics. For example,18-to 24-year-old males represent a wide range of lifestyles that can dramatically influence the likelihood of whether they will select one type of product or service over another. Some may be adventurous and go camping when traveling, while others may enjoy staying in luxury hotels. In fact, these distinct groups of people may have more in common with people from a wide range of age groups rather than their fellow18 -to 24-year-olds.

·Values segmentation considers what customers prefer and what motivates customer response to marketing activities. Values segmentation criteria can be used to segment consumers effectively by reflecting consumer perception.Examples of values variables include an interest in life-long learning, integrity, respect, and honesty.

·Behavioral segmentation allocates consumers into groups, based on their knowledge, attitudes, uses, or responses to a product or service. For example,buyers can be grouped according to occasions or life events, such as graduations, when they get the idea to buy a product or service, actually make their purchase, or use the purchased item.Markets can be segmented in to nonusers, ex-users, potential users, first-time users, and regular users of a product.Consumers could be grouped into high levels of usage or lower levels of usage.A market can be segmented by loyalty because consumers can be loyal to distribution outlets or product or service brands.

· Needs segmentation assigns consumers into groups, based on their current and desired level of interaction with a particular market category. Consumers classified by needs segmentation are asked to rate their level of agreement with statements about how they feel about aspects of the category being studied. Automotive consumers can be classified based on their needs for storage space, horse power, towing capacity, and many other characteristics of products in the automotive category.

 

Segmenting Business Markets

Business markets can often be segmented using variables similar to consumer markets. The variables include the following:

·Demographics-Business size, industry group

·Geographics-Regional, national, international locations

·Benefits sought-Desire for extensive service support, cutting-edge technology, financing terms

·Loyalty-Share of total purchases

·Usage rates—Amount, frequency of purchases

There are some unique business market variables that include the following:

·Customer operating characteristics-Customer capabilities and processes, and technology requirements

·Purchasing approaches-Where power resides in an organization and general purchasing policies

·Situational factors-Size of order,sense of urgency of order

·Personal characteristics-Loyalty, risk aversion of customer Depending on the product, some businesses may place a high value on the service support offered by the supplier. That level of service may make the price less important. Like consumer markets, a combination of variables may provide the most effective segmentation.

Segmenting International Markets

Consumers in one country's market can have more in common with certain segments in another country's market than with consumers in their own country. This could be due to immigration and shared heritage. some Hispanic consumers in parts of the United States and some consumers in Mexico have the same brand preferences and consume similar media. Global

marketing strategies can be successful by identifying consumer needs and wants that span national boundaries by increasing the overall market potential.Segments that span national boundaries can sometimes be more valuable to companies than segments that exist in a single country.