There are many ways in which a market can be segmented.
A marketer will need to decide which strategy is best for a given
product or service. Sometimes the best option arises from using
different strategies in conjunction. Approaches to segmentation
result from answers to the following questions: where, who, why
and how? Jon Weaver, Marketing Manager at Bournemouth Borough
Council applies a multi-strategy approach to identify segments.
Weaver, Marketing Manager, Bournemouth
| Figure 7.2 Types of segmentation
Geographic segmentation: Where?
A market can be divided according to where consumers are located.
On a trip abroad you might have noticed that people enjoy more
outdoor activities than back home. You could also be surprised
by the amount of people that like drinking hot coffee at the beach
in Rio de Janeiro. If you visit this website you will see differences
in food preferences around the world.
Understanding cultural differences between countries could be
pivotal for business success, consequently marketers will need
to tailor their strategies according to where consumers are.
Geographic segmentation is the division of the market according
to different geographical units like continents, countries, regions,
counties or neighbourhoods. This form of segmentation provides
the marketer with a quick snapshot of consumers within a delimited
Geographic segmentation can be a useful strategy to segment
markets because it:
- provides a quick overview of differences and similarities
between consumers according to geographical unit;
- can identify cultural differences between geographical units;
- takes into consideration climatic differences between geographical
- recognises language differences between geographical units.
But this strategy fails to take into consideration other important
variables such as personality, age and consumer lifestyles. Failing
to recognise this could hinder a company's potential for success.
For example some youth groups across the world appear to be somewhat
similar. Youth groups will tend to listen to similar music and
follow similar fashion trends. If you were to do a quick check
of people's nationalities in a 18s-30s club in Mexico, you would
find a very international clientele. You might have found that
you can befriend foreign people of your same age easily because
you share common interests.
Demographic segmentation: Who?
A very popular form of dividing the market is through demographic
variables. Understanding who consumers are will enable you to
more closely identify and understand their needs, product and
services usage rates and wants.
Understanding who consumers are requires companies to divide
consumers into groups based on variables such as gender, age,
income, social class, religion, race or family lifecycle [insert
A clear advantage of this strategy over others is that there
are vast amounts of secondary data available that will enable
you to divide a market according to demographic variables
| Figure 7.3 Demographic
Newly Wed: No kids
Full Nest 1: w/child
Full nest 2: Youngest
child over 6
Full nest 3: Older
married couples with
Empty nest 1: Older
couples no children at
Empty nest 2: Retired
Solitary survivor: Still
in the labor force
A = Upper,
B = Upper lower
C1= middle class
C2= Working class (skilled workers)
D= upper lowers
E= Lower, lower
If you visit the National
Statistic website you should be able to find for example how
many adults have access to the Internet or how many females live
in Dorset. Marwell Zoo uses this sort of segmentation in order
to identify the specific needs of key segments.
Moore, Marketing and Promotions Officer
Marwell Zoo, Hampshire
Demographic variables are commonly used in indexes and databases
measuring consumers' preferences for brands, products and media.
See for example, the TGI
(Target Group Indexes) where marketers can find detailed information
as to who buys what.
Recently, both demographic and geographic segmentation have been
used in conjunction to create geo-demographic segmentation. CACI
Market Analysis Group (you can see CACI case studies here)
developed ACORN (a classification of residential neighbourhoods)
a widely used source for geographic segmentation that uses 40
variables to identity for example what consumers within a specific
neighbourhood earn and buy.
This type of segmentation works on the premises that čBirds
of a feather flock togetherî. If you visit www.upmystreet.com
and type your postcode, you will find out in what ACORN group
and category you fall into.
|Figure 7.4 ACORN Categories
||1. Wealthy Achievers, Suburban Areas
2. Affluent Greys, Rural Communities
3. Prosperous Pensioners, Retirement Areas
||4. Affluent Executives, Family Areas
5. Well-off Workers, Family Areas
||6. Affluent Urbanities, Town and Grey Areas
7. Prosperous Professionals, Metropolitan Areas
8. Better-off Executives, Inner City Areas
||9. Comfortable Middle Agers, Mature Home Owning Areas
10. Skilled Workers, Home Owning Areas
||11. New Home Owners, Mature Communities
12. White Collar Workers, Better off Multi-Ethnic Areas
||13. Older People, Less Prosperous Areas
14. Council Estate Residents, Better off Homes
15. Council Estate Residents, High Unemployment
16. Council Estate Residents, Greatest Hardships
17. People in Multi-Ethnic, low income ages
However, this form of segmentation does not probe into why consumers
buy what they do, hence it does not offer an understanding of
what motivates consumers to buy certain services or what types
of personalities favour a product or brand over another.
Psycho-demographic segmentation: Why?
Unlike demographic segmentation strategies that describe who is
purchasing a product or service, psycho-demographic segmentation
attempts to answer the 'why's' regarding consumer's purchasing
behaviour. Through this segmentation strategy markets are divided
into groups based on personality, lifestyle and values variables.
|Figure 7.5 Psycho-demographic
Research focuses on
and opinions (AIOs)
| E.g. Compulsive,
Segmenting consumers into lifestyles is based on the notion that
a person's lifestyle has a direct impact on their interests in
products and services. For example if an environmentalist were
to plan a perfect holiday, we would be very surprised to see a
hunting excursion or rally driving experience on the options considered.
Stuart Perl, Regional Director of Marketing for Europe, Middle
East and Africa for Cunard Line Seaborne Cruise Line, stresses
the relevance of psycho-graphics in understanding their typical
Perl, Regional Director of Marketing
(EMEA), Cunard Line Seaborne Cruise Line.
Since personality traits have been correlated to (matched with)
product categories consumers favour as well as persuasive appeals
they respond to, marketers can use personality variables to segment
their markets. Generally, this type of segmentation is successful
for image-based products, such as cosmetics, clothing, jewellery,
cigarettes, alcohol, mobile phones, etc.
Identifying personality traits can aid in the creative execution
of an ad. Consumers with a high self-esteem will respond well
to a persuasive appeal that protects their ego and helps to communicate
a suitable image. Furthermore, consumers could be targeted based
on how authoritarian they are. Take for example Club
Med's 1992 slogan, čthe anti-dote for civilisationî. This
ad appeals to consumers with a non-authoritarian personality trait
because it presents an alternative, somewhat rebellious holiday
destination that would be not approved by the more conservative
A commonly used American psycho-demographic segmentation technique
is one that places consumers within specific consumer profiles
developed according to their values and lifestyles. Two programmes
used to segment consumers are the VALs 1 and VALs 2 (values and
lifestyles systems). While the first programme just divided consumers
based on their values and lifestyles, the second version is also
based on relatively stable psychological characteristics
This type of segmentation is advantageous because it:
- provides rich data concerning the psychological make-up of
- enables marketers to better understand the reasons behind
- provides marketers with an effective way to match a variety
of marketing communication tools from packaging to taste with
consumers psycho-demographic characteristics;
- can be used to develop customer profiles that will guide promotional
efforts and ultimately strengthen a brand.
Despite these advantages, this segmentation technique does not
provide marketers with a thorough understanding of how often and
how consumers use products and services. Because product or service
usage could be situational and not related to personality traits,
psycho-demographic data does not capture the use of goods and
services in everyday life.
Behavioural segmentation: How? Answering the how of consumer
purchasing behaviour has become a prevalent consideration in the
design and positioning of products. Moreover it has become a powerful
competitive tool to expand and build markets.
This segmentation strategy divides markets into consumer groups
based on their uses, responses, knowledge and attitudes towards
products and services. There are six main techniques through which
marketers can divide the market according to behavioural variables.
For example, Expedia offers holiday packages according to the
different types of experiences people want to have.
Occasions: Segmenting a market according to the occasions when
consumers use a product or service can provide rich insight to
expand market possibilities. For example, 'early bird' dinners
offered in some restaurants have tapped into the market of consumers
who want to have an early meal but without the pomp and formality
of a regular dinner.
Benefits sought: Grouping consumers based on the benefits they
seek from a product or service provides unique opportunities to
define and position a brand's main attributes and highlight its
superiority over competitors.
Research has found four main benefit segments: economic, medical,
cosmetic and taste. While some consumers will dine in an exclusive
restaurant for its taste, others will opt to go to the trendy
bistro (cosmetic); some will go for the value for money deals
(economic) and others will prefer the organic food served in an
all-vegetarian deli (medical).
User status: Consumers can be divided based on whether or not
they are patronising a product. Hence, a consumer can be a non-user,
ex-user, potential user, first-time user or a regular user of
a given product or service. You might have found that you are
a regular user of a particular service provider, like your bank,
and an ex-user of a chocolate you used to like, but not any more.
Usage rate: Consumers can be light, medium or heavy users. Although
heavy users account for a very small percentage of a market, they
are also responsible for a high percentage of the total buying.
It is not surprising then to find that hotel chains like Holiday
Inn offer special prizes to reward their frequent visitors.
User readiness: Segments can be divided based on how ready consumers
are to make a purchase. Consumers are typecast according to their
readiness state. For example you might be aware that a tour operator
provides excellent travel packages to India, your friend might
be very well informed of its details, your father might be interested
in this product, while your sister is not. This allows marketers
to guide consumers through the many stages leading to a final
Attitudes towards the product or service: Consumers can be segmented
according to their attitudes towards products and services. For
instance you can be enthusiastic, positive, indifferent, negative
or hostile about a product or service.
Market segmentation: a critique
Products and services are constantly reinvented by consumers.
What a marketer intended to be a children’s toy becomes
a cult object among college students [to find out why UK students
love Teletubbies visit this website.]
A fizzy drink is not only drunk but is also used in imaginative
ways, it becomes the perfect cleaning companion, removing rust
spots from chrome car bumpers or cleaning corrosion from car
battery terminals [see more creative product usages at www.wackyuses.com].
Consumer’s wacky uses of product and services hint at
some of the shortcomings associated with market segmentation.
Market segmentation assumes that consumers are static and stable.
Furthermore it places very complex behaviours into neat and
categories that fail to account for all the complexities of human
behaviour. Most people find it difficult to describe their
personality. There is also an underlying supposition that human
behaviour is always rational, failing to take into consideration
spontaneous and playful behaviour.
The different roles an individual
plays everyday also conflict with the somewhat limited categories
used to segment markets.
You are a student, a friend, a sister or a brother, a citizen
or a rebel. While you recognise all these different facets,
appeals treat you mostly as an educated middle class student.
Consequently market segmentation strategies provide marketers
with the illusion of a certain and effective tool to operate,
but the question remains as to whether or not this strategy
marketers to know and talk to consumers.