Marketing Segmentation

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Chapter 3

• Marketing Segmentation

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What is Marketing Segmentation?

• Who uses market segmentation?
• How does market segmentation operate?

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Market Segmentation
The process of dividing a potential market into
distinct subsets of consumers and selecting one
or more segments as a target market to be reached
with a distinct marketing mix.
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Mass Marketing
Offering the same product and marketing mix to
all consumers.
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Positioning
Establishing a specific image for a brand in
relation to competing brands.
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Who Uses Market Segmentation?

• Marketers of consumer goods
• Retailers
• Hotels
• Industrial Manufacturers

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Repositioning
Changing the way a product is perceived by
consumers in relation to other brands or product
uses.
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Bases for Segmentation

• Geographic Segmentation
• Demographic Segmentation
• Psychological Segmentation
• Psychographic Segmentation
• Sociocultural Segmentation
• Use-Related Segmentation
• Usage-Situation Segmentation
• Benefit Segmentation
• Hybrid Segmentation Approaches

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Table 3.1 Market Segmentation Categories and
Selected Variables
SEGMENTATION BASE
SELECTED SEGMENTATION VARIABLES
Geographic Segmentation
Region
Southwest, Mountain States, Alaska, Hawaii
City Size
Major metropolitan areas, small cities, towns
Density of area
Urban, suburban, exurban, rural
Climate
Temperate, hot, humid, rainy
Demographic Segmentation
Age
Under 11, 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, 75,000-99,000, 100,000 and
over
Education
Some high school, high school graduate, some
college, college graduate, postgraduate
Occupation
Professional, blue-collar, white-collar,
agricultural, military
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Table 3.1 continued
SEGMENTATION BASE
SELECTED SEGMENTATION VARIABLES
Psychological Segmentation
Needs-motivation
Shelter, safety, security, affection, sense of
self-worth
Personality
Extroverts, novelty seeker, aggressives, low
dogmatics
Perception
Low-risk, moderate-risk, high-risk
Learning-involvement
Low-involvement, high-involvement
Attitudes
Positive attitude, negative attitude
Psychographic
(Lifestyle) Segmentation
Economy-minded, couch potatoes outdoors
enthusiasts status seekers
Sociocultural Segmentation
Cultures
American, Italian, Chinese, Mexican, French,
Pakistani
Religion
Catholic, Protestant, Jewish, Moslem, other
Subcultures (Race/ethnic)
African-American, Caucasian, Asian, Hispanic
Social class
Lower, middle, upper
Family life cycle
Bachelors, young married, full nesters, empty
nesters
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Table 3.1 continued
SEGMENTATION BASE
SELECTED SEGMENTATION VARIABLES
Use-Related Segmentation
Usage rate
Heavy users, medium users, light users, non users
Awareness status
Unaware, aware interested, enthusiastic
Brand loyalty
None, some, strong
Use-Situation Segmentation
Time
Leisure, work, rush, morning, night
Objective
Personal, gift, snack, fun, achievement
Location
Home, work, friends home, in-store
Person
Self, family members, friends, boss, peer
Benefit Segmentation
Convenience, social acceptance, long lasting,
economy,value-for-the-money
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Table 3.1 continued
SEGMENTATION BASE
SELECTED SEGMENTATION VARIABLES
Hybrid Segmentation
Demographic/psychographic
Combination of demographic and psychographic
profiles of consumer segments profiles
Geodemographics
Money and Brains, Black Enterprise, Old
Yankee Rows, Downtown Dixie-Style
SRI VALSTM
Actualizer, fulfilled, believer, achiever,
striver, experiencer, maker, struggler
VALSTM is an example of a demographic/psychographi
c profile. PRIZM is an example of a
geodemographic profile.
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Geographic Segmentation
The division of a total potential market into
smaller subgroups on the basis on geographic
variables (e.g., region, state, or city).
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Micro-marketing
Highly regionalized marketing strategies that use
advertising and promotional campaigns
specifically geared to local market needs and
conditions.
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Demographic Segmentation

• Age
• Sex
• Marital Status
• Income, Education, and Occupation

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Age

• Age effects
• occurrences due to chronological age
• Cohort effects
• occurrences due to growing up during a specific
  time period

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Sex

• Traditional roles of men and women in purchases
• Changing sex roles
• Dual-income households
• Working women less accessible through traditional
  media

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Marital Status

• Households as a consuming unit
• Singles
• divorced
• single parents
• dual-income married

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Income, Education, and Occupation

• Income often combined with other variables for
  segmentation
• The three variables tend to be correlated

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Psychological Segmentation

• Motivations
• Personality
• Perceptions
• Learning
• Attitudes

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AIOs
Psychographic variables that focus on activities,
interests, and opinions. Also referred to as
Lifestyle.
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Table 3.2 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. I feel that my life is moving faster
and faster, sometimes just too fast. If I could
consider the pluses and minuses, technology
has been good for me. I find that I have to pull
myself away from e-mail. Given my lifestyle, I
have more of a shortage of time than money. I
like the benefits of the Internet, but I often
dont have the time to take advantage of
them. I am generally open to considering new
practices and new technology.
Agree Completely
Disagree Completely
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
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Table 3.3 A Hypothetical Psychographic Profile
of the Techno-Road-Warrior

• Goes on the Internet 6-plus times a week
• Sends and/or receives 15 or more e-mail messages
  a week
• Regularly visits Web sites 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 100,000 or more a year
• Belongs to several rewards programs (for example,
  frequent flyer programs, hotel programs,
  rent-a-car programs)

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Sociocultural Segmentation

• Family Life Cycle
• Social Class
• Culture, Subculture, and Cross-Culture

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Family Life Cycle

• Phases a family goes through in their formation,
  growth, and final dissolution
• Bachelorhood
• Honeymooners
• Parenthood
• Post-parenthood
• Dissolution

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Culture, Subculture, an Cross-Culture

• Segmenting on the basis of cultural heritage
• assumes members of the same culture share the
  same values, beliefs, and customs
• Subcultures are united by certain experiences,
  values, or beliefs.
• e.g., Hispanic subculture, African American
  subculture, etc.

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Use-Related Segmentation

• Rate of Usage
• Heavy vs. Light
• Awareness Status
• Aware vs. Unaware
• Brand Loyalty
• Brand Loyal vs. Brand Switchers

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Usage-Situation Segmentation

• Segmenting on the basis of special occasions or
  situations

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Benefit Segmentation

• Segmenting on the basis of the most important
  benefit sought by consumers when purchasing the
  product or service
• Toothpaste can be bought for
• Good Taste (e.g., Colgate)
• Fresh Breath (e.g, Close Up)
• White Teeth (e.g, Rembrandt)
• Cavity Protection (e.g., Crest)

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Hybrid Segmentation Approaches

• Psychographic-Demographic Profiles
• Geodemographic Segmentation
• SRI Consultings Values and Lifestyle System
  (VALSTM)

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Table 3.4 Selected Psychographic/Demographic
Characteristics of the PC Magazine Subscriber
DEMOGRAPHICS Percent
PSYCHOGRAPHICS Percent
SEX (BASE 990) Men 86 Women 13
USE A COMPUTER 100 At home 96 At work 89 On
vacation/traveling 46
AGE Under 25 5 25 - 34 18 35 - 44 29 45 -
54 31 55 - 64 12 65 or older 5 Mean age 44.1
SELECTED USE OF COMPUTER Word Processing 96 Connec
t to Internet 86 E-mail 84 For work 80 Accounting/
record keeping 75 Reference 68 Recreation/games 66
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Table 3.4 continued
DEMOGRAPHICS Percent
PSYCHOGRAPHICS Percent
EDUCATION Some college or less 27 Graduate
college 27 Education beyond college
graduate 46
PORTABLE DEVICES USES WHEN TRAVELING ON
BUSINESS Laptop/notebook computer 57 Cellular
phone 47 Beeper or pager 30 Personal Digital
Assistant/ electronic organizer 14
EMPLOYMENT STATUS Employed by someone
else 68 Self-employed 21 Other 11
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Table 3.4 continued
DEMOGRAPHICS Percent
PSYCHOGRAPHICS Percent
OCCUPATION/BUSINESS DEPT. Computer related-
professional 22 Senior or corporate
management 16 Engineering-related
professional 13 Administrative/ manufacturing,
accounting, finance, purchasing,
advertising, marketing, sales 26 Others 23
TRAVEL FOR BUSINESS/PLEASURE Business Travel 5 or
more days per month 31 5 or more nights away
from home per month 17 Pleasure/Vacation
Travel 15 or more days per year 37 Mean number of
days per year 15.5
MEMBER OF FREQUENT FLYER PROGRAMS 90
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Table 3.4 continued
DEMOGRAPHICS Percent
PSYCHOGRAPHICS Percent
INCOME Under 30,000 7 30,000 -
49,999 15 50,000 - 74,999 24 75,000 -
99,999 19 100,000 or more 24 Mean income 87,700
FINANCIAL SERVICES Currently own Mutual
funds 48 Stocks 44 Bonds 24 Life
insurance/annuities 44 Currently use Brokerage
services 36 On-line investment
services 16 Retirement/financial planning 41
PRIMARY RESIDENCE Own 74 Rent 18 Other 3 No
answer 5
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Table 3.4 continued
RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC
STATEMENTS Percent
SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN
PAST YEAR Percent
Research before choose brand of new product
to buy 41 Other people ask my opinion about
which computer products to buy 41 Usually buy
products based on quality, not
price 26 Prefer products that are latest in
new technology 26 Among group I am one of
first to try new product 19
Walking/running/jogging 63 Exercise/fitness/weight
training 44 Bicycling 7 Swimming 37 Golf 27 F
ishing 23 Boating/sailing 19 Skiing 19 Tennis 14
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Table 3.4 continued
HOBBIES/OTHER ACTIVITIES PARTICIPATED IN Percent
Listen to music 77 Reading 61 Going to
movies 60 Surfing the Internet 50 Games-videos on
computer 48 Gardening 32 Going to the
theater 32 Cooking 30 Photography 30 Collecting
stamps/coins 11 Sewing needlecraft 6
Source 1997 Lifestyles Study, PC Magazine
Subscriber Study, Ziff-Davis, Inc., June 1997.
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Table 3.5 Sample Geodemographic Clusters

• BLUE BLOOD ESTATES
• 0.8 of United States households
• Predominant employment Professional
• Elite super-rich families
• Key education level College grads
• Adult age range 35-44, 45-54, 55-64
• Characteristics Americas wealthiest suburbs are
  populated by established executives,
  professional, and heirs to old money. These
  people are accustomed to privilege and live in
  luxury, often surrounded by servants. A tenth of
  this group are multimillionaires. The next level
  of affluence is a sharp drop from this pinnacle.
  Blue blood estate people belong to a country
  club, own mutual funds (10,000), purchase a car
  phone, watch TV golf, and read business magazines.

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Table 3.5 continued

• MID-CITY MIX
• 1.3 of United States households
• Predominant employment Service, white-collar
• African American Singles and families
• Key educational level High school, some college
• Adult age range 35-54
• Characteristics These individuals and families
  are geographically centered in the Northeast and
  Great Lakes regions. They are above average
  ethnic diversity and a mix of white- and
  blue-collar employment. These rowhouse
  neighborhoods on the urban fringe are two-thirds
  black and have a high incidence of college
  enrollment. They go to pro basketball games,
  have veterans life insurance, eat canned hashes,
  listen to religious/gospel music, and read
  fashion/sports magazines.

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Table 3.5 continued

• GRAY COLLARS
• 2.1 of United States households
• Adult age range 55-64, 65
• Median household income 31,400
• Aging couples in inner suburbs
• Characteristics For nearly two decades, we read
  about the decline of the Great Lakes industrial
  Rust Belt, Decimated by foreign takeovers in
  the steel and automobile industries, the area
  lost a million jobs. Although most of the kids
  left, their highly skilled parents stayed and are
  now benefiting from a major U.S. industrial
  resurgence. They buy 1950s nostalgia, own CDs,
  eat canned cooked hams, listen to radio football,
  and read health/fitness magazines.

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Table 3.5 continued

• YOUNG INFLUENTIALS
• 1.1 of United States households
• Predominant employment Professional,
  white-collar
• Upwardly mobile singles and couples
• Key education level College grads
• Adult age range 24, 25-34
• Characteristics This cluster is dubbed the
  Young Urban Professional. Before getting
  married they were the educated, high-tech,
  metropolitan sophisticates, the swingers and
  childless live-in couples, whose double incomes
  bought the good life in Boomtown U.S.A. They are
  the last of the Yuppies. They go to college
  basketball games, have an American Express card,
  often drink imported beer, listen to progressive
  rock radio, and read style/fashion magazines.

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Table 3.5 continued

• SHOTGUNS AND PICKUPS
• 1.6 of United States households
• Predominant employment Blue-collar, farm
• Rural blue-collar workers and families
• Key education level High school grade school
• Adult age range 35-44, 45-54
• Characteristics The least affluent of the
  Country Families clusters, members of this
  group are found in the Northeast, the Southeast,
  in the Great Lakes and Piedmont industrial
  regions. They lead the Country Families group
  in blue-collar jobs the majority are married
  with school-age children. They are church-goers
  who also enjoy bowling, hunting, sewing, and
  attending auto races, smoke pipe tobacco, have
  medical loss of income insurance, drink Canadian
  whisky, listen to country radio, and read
  hunting/car truck magazines.

Source Courtesy of Claritas Inc. (PRIZM and 62
Cluster nicknames are registered trademarks of
Claritas Inc.). Reprinted by permission.
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Figure 3-10SRI Consultings Values and
Lifestyle System (VALSTM)
ACTUALIZERS
High Resources
Action Oriented
Status Oriented
Principle Oriented
FULFILLEDS
ACHIEVERS
EXPERIENCERS
BELIEVERS
STRIVERS
MAKERS
STRUGGLERS
Low Resources
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Figure 3.11 VALSTM 2 Segments and Participation
in Selected Sports
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Table 3.6 The Size of Each VALSTM Segment as
Percent of the United States Population
VALSTM SEGMENT
PERCENT OF POPULATION
Actualizer
11.7
10.5
Fulfilled
Believer
17.0
Achiever
14.7
Striver
11.8
Experiencer
12.9
Maker
12.0
Struggler
9.5
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Criteria For Effective Targeting of Market
Segments

• Identification
• Sufficiency
• Stability
• Accessibility

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Implementing Segmentation Strategies

• Concentrated Versus Differentiated Marketing
• Countersegmentation

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Counterseg-mentation Strategy
A strategy in which a company combines two or
more segments into a single segment to be
targeted with an individually tailored product or
promotion campaign.