Market Segmentation

Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk:

Consumer Behaviour 4e © 2007 Pearson Education Australia

Chapter 2

Market segmentation

Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk: Consumer Behaviour 4e © 2007 Pearson Education Australia2

Chapter Objectives

To define market segmentation

To review the uses of segmentation

To outline the nine main bases of segmentation

To understand the main segmentation approaches

To outline the criteria for effective market segments

To distinguish between concentrated and

differentiated marketing


Market Segmentation is defined as:

“The process of dividing a market into distinct subsets of consumers with

common needs and selecting one or more segments to target with a distinct

marketing strategy”

What is market segmentation?


Progression of market segmentation


Who uses segmentation?

Cars

Shoes

Shampoo

Watches

David Jones

Big W

Kmart

Target

Charities

Theatre

Sports

Equipment

Machinery

Tools


Uses of segmentation


Nine main bases for segmentation


Geographic segmentation

Where the market is divided by location

Assumes that people who live in the same area share some similar needs and wants

Geographic markets can be easily reached by local media

Some firms use geographic segmentation to adopt a ‘localised’ strategy, however other firms adopt a ‘global’ strategy


Possible geographic segmentation bases

Region

•Capital cities

•Towns

•Rural

Housing density

•High

•Medium

•Low

Climate

•Hot

•Cold

•Wet

Location

•Inner-city

•Suburban

•Outer-urban

State

•NSW

•Victoria

•Queensland


Demographic segmentation

Demography refers to the identifiable and measureable characteristics of a population

Includes characteristics such as: age, income, marital status, education

Demographic information is very accessible and cost-effective to obtain

Demographic segmentation is one of the most popular ways to segment customer groups


Possible demographic segmentation bases

Age

•12-17

•18-34

•And so on

Marital Status

•Single

•Married

•De facto, etc.

Education

•Secondary

•TAFE

•Bachelors, etc.

Occupation

•Professional

•White-collar

•Blue-collar

Income

•$20,001-$30,000

•$30,001-$40,000

•And so on


Age

Age is often a strong determinant of product choice

Health club/gym example...

Aged 18-34

Goal is to ‘look good’

Aged 35-54

To help ‘deal with

stress’

Aged 55 and over

For ‘medical-physical therapy’


Age cohorts

Age cohorts are born during the same period and travel through life together- Examples include, ‘baby boomers’, Generation X and

Generation Y

Therefore, they ‘share’ similar events and general changes in lifestyle- May include war, depression, the “1960’s”, and so on

Age cohorts will generally hold the same interests through life- An example is they will probably enjoy the same style

of music as they get older


Segmenting age cohorts

This is an example of segmenting the Baby Boomers age cohort...

“Looking for balance”•27% of cohort•Active, busy

•Want more time to enjoy great experiences

“Confident and living well”•23% of cohort

•Big incomes, trendy•Like travel and luxuries

“At ease”•31% of cohort

•Home/family-based•Enjoy traditional life

“Overwhelmed”•19% of cohort

•Low incomes, worried about the future and finances

•Looking for security and health


Sex/Gender

Many products have been traditionally targeted at males or females only

Examples include:- Cosmetics, shavers, tools, magazines

However, traditional male/female roles in the household are not as clearly defined as in the past


An example of changing sex roles

A large increase in

dual income families

Families become

time-poor

Traditional household sex roles need to change

More women enter (or

remain in) the workforce

Fathers take more child-care related

activities


Marital status

Many decisions are made on the behalf of a households

Therefore, marital status is an important indicator of how household purchases are made

In recent years, single one-person households have become an attractive segment


Income, education, occupation

These three demographics variables tend to be highly interrelated

A high level of education provides…

The opportunity for a better job, which..

Is likely to generate a

higher income

Note: These three variables are often combined in a composite index to measure social class of the consumer


Income, education, occupation

Income is important because it provides an indication of the consumer’s ability to purchase the product

By combining income with education and occupation (a social class measure), an understanding of the consumer’s lifestyle can be determined

Sometimes the occupation variable is used as a proxy measure of social class


Possible psychological segmentation bases

Needs-motivation

•Self-worth

•Affection

•Safety

Risk perception

•Low

•Moderate

•High risk

Attitudes

•Positive

•Negative

•Neutral

Personality

•Extrovert

•Feeling

•Intuitive

Involvement

•Low

•High involvement


Psychographic segmentation

Psychographic research is also referred to as ‘lifestyle analysis’

Often considers consumers’ AIO’s- AIO = activities, interests, opinions

Used to help structure appropriate marketing messages

Activities

•Work

•Internet

•Sport

Interests

•Home

•Fashion

•Food

Opinions

•Politics

•Social events

•The future


The profile of the‘techno-road-warrior’

On the internet 6+ times per week

Sends/receives more than 15 emails per week

Regularly visits websites to gather information

Often buys personal items over the internet

May buy shares or book travel over the internet

Earns $100,000+ per year

Belongs to several reward programs


Figure 2.6


Possible sociocultural segmentation bases

Culture

•Australian

•Italian

•Vietnamese, etc.

Religion

•Jewish

•Catholic

•Muslim, etc.

Family life cycle

•Empty nest

•Young married

•Single, etc.

Subculture

•Asian

•Indigenous Australian,

etc.

Social Class

•Lower

•Middle

•Upper


Family life cycle

Based on the premise that families go through similar phases and will have similar needs during those phases

As a simple example...

Singles

Need first car, basic furniture,

travel

Young Married

First home, household

goods, finance needs

Full Nest

Baby needs, child-care,

2nd car


Culture and sub-culture

Cultures share common values, beliefs and customs

Very important for success in international marketing

Important sub-cultures in Australia include...- Greek-Australians

- Italian-Australians

- Asian-Australians

- The elderly


Possible use-related segmentation bases

Usage Rate

•Heavy

•Medium

•Light users

Awareness Status

•Enthusiastic

•Interested

•Unaware

Brand Loyalty

•Strong

•Some

•None


Rate of usage

Non-users Light Medium Heavy users

In the beer market, the group of heavy users account for around 30% of consumers, but over 70% of consumption

Therefore, heavy users are an attractive (but competitive) target market

Also need to consider whether non-users are a viable segment- Should we attract new consumers (non-users) , or try

to win heavy users from competition?


Possible use-situation segmentation bases

Time

•Morning/night

•Leisure

•Work

Location

•In-store

•At work

•At home, etc.

Objective

•Personal

•Gift

•Fun, etc.

Person

•By self

•With friends

•With family, etc.


User-situation segmentation

Consumers will often make different decisions in different situations (or occasions)

Consider...- Wine for self, or as a gift

- Food when in a hurry, or when have 1-2 hours free

Occasions are a key marketing opportunity- Mother’s Day

- St Valentine’s Day

- Easter


Benefit segmentation

Benefit (or needs-based) segmentation is based on providing/communicating the major benefits that consumers are seeking

A good example is the toothpaste market...

Close-up

Social appeal of

bright teeth

Aim

Nice taste, so kids will brush their

teeth

Colgate Tartar Control

•Healthy, plague-free

teeth


Demographics

Hybrid segmentation

PsychographicsPossible

hybrid

Geographic

Po

ssib

le

hyb

rid

Hybrid segmentation uses multiple bases to generate

far more insightful and powerful information about target markets


Figure 2.12: VALSTM SRIC-BI segments

•ACTUALISERS

•FULFILLEDS

•BELIEVERS

•ACHIEVERS •EXPERIENCERS

•STRIVERS •MAKERS

•Low Resources

•Most Resources

•Action Oriented•Status Oriented•Principle Oriented

•STRUGGLERS

Reprinted with permission of SRI Consulting-Business Intelligence


Criteria for market segments

Identification

Able to identify and measure the

characteristic

Stability

Segment is stable in terms of needs, demographics and

psychological factors

Sufficiency

Sufficient size and profitability

of segment

Accessibility

Able to access and reach the segment in an

economical way


Implementing segmentation strategies

Target one or more segments?

Concentrated marketing •One segment only

•Good for small firms•Good for firms new to the

industry

Differentiated marketing

•Two or more segments, with a different marketing mix

•For stronger, more established, firms

•Used to defend the traditional markets of the firm


Countersegmentation

When target markets become less viable, or the firm’s resources are too stretched

Countersegmentation is when a firm combines two or more segments together

These combined segments still need a common underlying need or similarity


Summary

The definition of market segmentation

The uses of segmentation

The nine main bases of segmentation

An outline of the main segmentation approaches

The criteria for market segments

The difference between concentrated and

differentiated marketing

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Market Segmentation

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