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Segmentation

Common Bases For Segmenting Consumer Markets

Type	Rationale
1. Geographic	National / regional differences in taste and product usage.
2. Demographics: — Age — Lifecycle — Education — Sex — Family composition	Can differences be distinguished between groups in each of these categories that reflect differences in propensity to purchase, or in product usage?
3. Socio-economic and income	Are consumption or media exposure related to social grade or income level?
4. Geodemographics	Does where we live condition how we live, and consequently relate to what we buy?
5. Benefits sought	Are there differences in the benefits sought by different people from the same product?
6. Usage-rate and brand loyalty	Are those who consume a lot of the product different from those who consume a little? Can highly brand-loyal individuals be distinguished?
7. Attitudes	Can groups holding distinctive attitudes about the product be isolated?
8. Lifestyle	Is consumption better considered in the context of «lifestyle» groups?
9. Situation	Does the situation in which consumption or purchase takes place vary? If so, can individuals be grouped according to these situations?
10. Responsiveness to marketing instruments	Do people respond differently to aspects of marketing activity? Are some more responsive to advertising or price? Do they use different distribution channels?

1. Geographic: The simplest approach to segmentation is to market variants of the product in different regions. Such an approach is dependent upon there being regional disparities in taste or usage. Historically this has been the case, and marked variations in commodities such as bread, cheese, beer and meats were very evident. Mass media, mass transportation and mass production have substantially eroded such strict regional differences. But some do remain. Information from Audits of Great Britain (AGB) reveal major regional differences in credit sources that people use. (See the table below).

Regional sources of credit in GB. — A Base for Geographic Segmentation of the Credit Market

% Borrowing from:
	Credit	Mail Order	Indirect	Bank	Other	Other
	Card		Lending	Loans	Direct Loans	Borrowing
All GB	21	10	11	31	21	6
London	30	11	8	23	22	6
South	23	10	8	30	19	10
East Anglia	22	10	13	20	26	8
Wales/West/S. West	12	6	7	43	26	5
Lancashire	19	10	12	38	14	7
Yorkshire	13	13	15	29	25	5
Tyne Tees	17	12	14	33	17	7
Scotland	16	16	13	39	8	7

Sharp differences in the share taken by bank loans in London and the South West, or the high penetration of credit cards in London and that of mail order in Scotland, present different competitive situations for companies in each of these markets. A uniform national marketing treatment would be expected to have quite different results in the several regions. An approach tailored to each region (regional segment) could be more effective.

Geographic differences in city size can be important for segmentation. Many of the franchised restaurant chains for example will not locate in cities of less than 100,000 people. The major petroleum retailers, such as Esso and Shell, have traffic density thresholds below which they perceive a local market as unviable. It is therefore, quite common, particularly in villages and small towns in rural areas to have petroleum retailing dominated by independent garage owners and the smaller petroleum companies.

As Oliver. G (1990) points out, however, geographic segmentation is probably now used more often for administrative ease than because consumers in the regions represent unique groups. Advertising planning can conveniently be broken down into regions, and salesforces are often structured on a regional basis, and new product launches are sometimes «rolled out» gradually across the regions.

2. Demographics: — The ease with which demographic variables can be measured has largely contributed to their widespread usage in segmenting markets. The characteristics most often used include Age, Sex, Education, Lifecycle Stage and Family Composition.

For some products, consumption is positively related to age. Clothing, holiday resorts, meals away from home and snack products are all examples. The marketing of Kelloggs ready to eat breakfast cereals provides another example. Kelloggs targets children with fun products designed to appeal to younger tastes — Frosties and Coco Pops. Meanwhile the more nutrition and fitness-conscious adult market is served with high-fibre and low-sugar products such as Nutri Grain and Fruit’n’Fibre.

Also in the service sector there is increasing use made of age segmentation. Banks no longer have a standard offering for all; but have packages tailored to the needs of very young customers, university undergraduates and the over 50s.

In some markets gender has long been a key demographic segmentation variable. Examples include cosmetics, alcohol, books, magazines and cigarettes. In other markets the use of gender segmentation is more recent. The confectionery market is one which traditionally did not segment on the basis of sex. But Cadburys changes this by developing assortments aimed primarily at men. «Tribute», with packaging and promotion designed specifically for men was one of these.

Family composition and size may additionally yield different consumption patterns, as may length of education.

A final demographic segmentation variable widely used is that of lifecycle stage. The utility of this segmentation base derives from a correlation between an individual’s lifecycle stage and his product needs. A commonly used lifecycle stage schedule is that of Wells and Gubar, illustrated below.

Tagged as: Basis of Marketing