Market Segmentation

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.

Three Phases of Marketing

Strategy
Phase 1: Market Segmentation
Phase 2: Target Market and Marketing Mix
Selection
Phase 3: Product/Brand Positioning

Table 3.1: Sodexhos Segmentation of

College-age Eating Patterns
Star Gazers
Light, healthy foods
Price insensitive
Brand conscious
Employed full-time
over summer
Active, out-going
Family income >
100,000

Fun Express
Variety, taste, and
nutrition
Price conscious
Work part-time over
summer
Value leisure time
Family income
$30,000 - 60,000

Best Customer Segmentation

High
High

Current Share

Low

Hi-Highs
(stroke)

Low-Highs
(chase)

Hi-Lows
(tickle)

Lo-Lows
(starve)

Consumption

Low

Segmentation Studies
Designed to discover the needs and wants of
specific groups of consumers in order to
develop specialized products to satisfy
specific group needs (e.g., Centrum)
Designed to guide the repositioning of a
product (e.g., Nintendo)
Used to identify the most appropriate media
for advertising (e.g., People and Teen People)

Bases for Segmentation

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

Table 3.2 Market Segmentation

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-$99,999, $100,000 and over
Education
Some high school, high school graduate, some college,
college graduate, postgraduate
Occupation
Professional, blue-collar, white-collar, agricultural,
military

Table 3.2, 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

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, peers
Benefit Segmentation
Convenience, social acceptance, long lasting, economy,
value-for-the-money
Hybrid Segmentation
Demographic/
Combination of demographic and psychographic profiles
Psychographics
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

Geographic
Segmentation

The division of a total

potential market into
smaller subgroups on
the basis of
geographic variables
(e.g., region, state, or
city).

Demographic Segmentation

Age
Sex
Marital Status
Income, Education, and Occupation

Age: Segmentation by Age Effects

and Cohort Effects
Seven Life Development Stages (Table 3.3)
Provisional Adulthood
Pulling up roots

First Adulthood
Reaching out, Questions/questions, Mid-life
explosion

Second Adulthood
Settling Down, Mellowing, Retirement

Marital Status
Households as a consuming unit

Singles
Divorced
Single parents
Dual-income married

Psychological Segmentation

Motivations
Personality
Perceptions
Learning
Attitudes

AIOs

Psychographic
(lifestyle) variables
that focus on
activities, interests,
and opinions.

Table 3.6 Excerpts from AIO Inventory

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.

Agree
Completely

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.

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]

I like the benefits of the Internet, but I often dont [1] [2] [3] [4] [5] [6] [7]
have the time to take advantage of them.

Table 3.7 A Hypothetical Psychographic

Profile of the Techno-Road-Warrior
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

Figure 3.1
Centrum
Targets
Lifestyle

Sociocultural Segmentation
Family Life Cycle
Social Class
Culture, Subculture, and Cross-Culture

Family Life Cycle

Phases a family goes through in their formation,
growth, and final dissolution

Bachelorhood
Honeymooners
Parenthood
Post-parenthood
Dissolution

Explicit basis: marital status, family status

Implicit basis: age, income, employment

Use-Related Segmentation
Rate of Usage
Heavy vs. Light

Awareness Status
Aware vs. Unaware

Brand Loyalty
Brand Loyal vs. Brand Switchers

Figure 3.2
Campbells
Seeks to
Create
Awareness
and Interest

Usage-Situation Segmentation
Segmenting on the basis of special
occasions or situations
Example Statements:
Whenever our daughter, Jamie, gets a raise, we
always take her out to dinner.
When Im away on business, I try to stay at a
suites hotel.
I always buy my wife flowers on Valentines
Day.

Figure 3.3
Ad Designed
to Spell Out
Rewards of
Consumer
Loyalty

Figure 3.4
OccasionSpecific
Ad

Benefit Segmentation
Segmenting on the basis of the most
important and meaningful benefit
Prudential - financial security
Iomega - data protection
Wheaties - good health
Eclipse - fresh breath

Figure 3.5
Ad Offering
Combined
Benefits

Hybrid Segmentation Approaches

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

Table 3.8 Demographic-Psychographic

Profile of Newsweek

Total adult readers 19,593,000

Men
Professionals/ Managers
Age 35-49
Household income >$100,000
Married
Own laptop PC
Spent $3000+ on vacation last year

Index

100.0
55.9
35.3
36.5
25.1
62.4
12.0
12.3

100
117
174
114
172
109
150
164

Table 3.9 Demographic-Psychographic

Internet Shopping Styles

E-bivalent Newbies
Time-Sensitive Materialists
Clicks & Mortar
Hooked, Online, & Single
Hunter-Gatherers
Brand Loyalists

Figure 3.6
Targeting
An Active
Lifestyle

Table 3.10 Sample Claritas

Geodemographic Clusters
Blue Blood Estates
.8% of U.S. households
Professional
Elite super-rich
College graduate
35-44, 45-54, 55-64
Country club members,
own mutual phones,
play golf

Young Influentials
1.1% of U.S.
households
Professional
College graduate
Under 24, 25-34
Yuppies, drink
imported beer, read
fashion magazines

Figure 3.8
VALS

ACTUALIZERS

High Resources

Principle Oriented Status Oriented Action Oriented

FULFILLEDS

BELIEVERS

ACHIEVERS EXPERIENCERS

STRIVERS

STRUGGLERS

MAKERS

Low Resources

Figure 3.9 VALS 2 Segments and

Participation in Selected Sports
Percent of adults in each VALS 2 type who participated in selected sports in 1995.

Actualizers
Experiencers
Achievers
Makers
Fulfilleds
Strivers
Believers
Strugglers
0

Mountain/rock climbing

10

Jet skiing/wave running/water biking

12

14

Inline skating

Table 3.11 Size of VALS Segment as

Percent of U.S. Population
VALS

TM

Actualizer
Fulfilled
Believer
Achiever
Striver
Experiencer
Maker
Struggler

SEGMENT

PERCENT OF
POPULATION
11.7%
10.5
17.0
14.7
11.8
12.9
12.0
9.5

Mindbase Segmentation
Monitor Mindbase based on Yankelovichs
Monitor Survey of American Values and
Attitudes
Table 3.12

Table 3.12 Eight Major Mindbase

Segments

Up and Comers
Young Materialists
Stressed by Life
New Traditionalists

Family Limited
Detached Introverts
Renaissance Elders
Retired from Life

Criteria For Effective Targeting of

Market Segments

Identification
Sufficiency
Stability
Accessibility