4 Types of Market Segmentation: Bases of Consumer Market Segmentation

A market segment means a homogeneous group consisting of buyers who seek the same offering.

In market segmentation, the aim is not merely to divide the market into sub-classes based on product differentiation but to distinguish want categories that correspond to the distinct demands of various groups in the market.

For proper market segmentation, the marketer needs to know the bases of market segmentation.

The 4 types/bases of market segmentation are:-

  1. Geographic Market Segmentation
  2. Demographic Market Segmentation
  3. Psychographic Market Segmentation
  4. Behavioral Market Segmentation

What are the Bases of Market Segmentation? – 4 Types of Market Segmentation

After you have gathered comprehensive knowledge about what they want and who is in the market, you have to tackle another important criterion for grouping the buyers into segments.

There is no single base to segment a market. For effective segmentation, a marketer has to use different segmentation variables alone and in combination.

The 4 types/bases of market segmentation are:-

  1. Geographic Market Segmentation
  2. Demographic Market Segmentation
  3. Psychographic Market Segmentation
  4. Behavioral Market Segmentation

The table and chart show the major variables that might be used in segmenting consumer markets.

4 Types of Market Segmentation - What are the Bases of Market Segmentation?

 

4 Types of Market Segmentation
VariableTypical Breakdowns
Geographic Market Segmentation
Region
  • Pacific,
  • Mountain,
  • West North Central,
  • West South Central,
  • East North Central,
  • East South Central,
  • South Atlantic,
  • Middle Atlantic,
  • New England.
County size
  • Huge (USA, INDIA, BRAZIL, Russia),
  • Big (France, South Africa, Saudia Arabia, Mexico),
  • Medium (Vietnam, Bangladesh)
  • Small (Nepal, Estonia, Tunisia)
City Size
  • Under 20,000;
  • 20,000-50,000;
  • 50,000-100,000;
  • 100,000-250,000;
  • 250,000 – ­500,000;
  • 500,000-1,000,000;
  • 1,000,000 – 4,000,000;
  • 4,000,000 and over.
Population DensityUrban, Suburban, Rural
ClimateNorthern, Southern
Demographic Market Segmentation
Age
  • Below 13
  • 14 – 18
  • 19 – 25
  • 26-35
  • 36-45
  • 46-55
  • 56+
GenderMale, Female
Family size1-2, 3-4, 5+
Family life cycle
  • Young, single;
  • young, married, no children;
  • young, married, the youngest child under 6;
  • young married, youngest child 6 or over;
  • older, married, with children;
  • older, married, no children under 18;
  • older, single;
  • other
Income
  • Under $10,000;
  • $10,000-$20,000;
  • $20,000 – $35,000;
  • $35,000-$50,000; $50,000 – $70,000;
  • $ 70,000 – $100,000;
  • $100,000 and over
Occupation
  • Professional and technical;
  • managers,
  • officials, and proprietors;
  • clerical, sales;
  • artisans, craftsmen, forepersons;
  • operatives;
  • farmers;
  • retired;
  • students;
  • homemakers;
  • unemployed,
Education
  • Grade school or less;
  • some high school;
  • high school graduate;
  • some college;
  • college graduate
ReligionMuslim, Catholic, Protestant, Jewish, others
RaceWhite, Black, Asian, Hispanic
NationalityAmerican, British, French, German, Scandinavian, Italian, Latin American, Middle Eastern, Japanese
Psychographic Market Segmentation
Social classLower lowers, upper lowers, working-class, middle class, upper middles, lower uppers, upper uppers
LifestyleAchievers, believers, strivers
PersonalityCompulsive, gregarious, authoritarian, ambitious
Behavioral Market Segmentation
Purchase occasionA regular occasion, special occasion
Benefits soughtQuality, service, economy
User statusNonuser, ex-user, potential user, first-time user, a regular user
Usage rateLight user, medium user, heavy user
Loyalty statusNone, medium, strong, absolute
Readiness stateUnaware, aware, informed, interested, desirous, intending to buy
Attitude toward productEnthusiastic, positive, indifferent, negative, hostile

Let’s try to understand the major geographic, demographic, and behavioral variables in detail.

Geographic Segmentation

Based on geographic variables, the market is segmented by dividing it into different geographical units such as nations, regions, states, countries, cities, or neighborhoods.

A company may choose one or a few geographical areas to operate in. Or it can decide to operate in all areas but pay attention to geographical differences in needs and wants.

For example, Campbell sells Cajun gumbo soup in Louisiana and Mississippi and makes its nacho cheese soup spicier in Texas and California.

Geographic segmentation emphasis the right products in the right geographic areas at the right times.

By adopting geographic segmentation, many companies regionalize their marketing programs by localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods.

Geographic segmentation also enables a company to avoid areas where competition is severe and to select areas where competition is low.

Demographic Segmentation

Demographic segmentation involves dividing the market into groups based on different variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality. Demographic factors are the most popular bases for segmenting customer groups and are, therefore, widely used. Demographic segmentation has certain merits.

First, consumer needs, want, and usage rates often vary closely with demographic variables.

Second, demographic variables are easier to measure than most other types of variables.

Even if market segments are initially defined using other bases, such as personality or behavior, their demographic characteristics must be considered to assess the size of the target market and to reach it efficiently.

Now we will examine some important demographic variables used for market segmentation;

Age and life-Cycle Stage

Human needs and wants change with age. Using age and life-cycle segmentation, some companies offer different products or adopts different marketing approaches for different age and life-cycle groups.

For example, McDonald’s targets children, teens, adults, and seniors with different ads and media. Its ads directed at teens feature dance-beat music, adventure, and fast­paced cutting from scene to scene; ads to seniors are softer and more sentimental.

Despite its merits, age, and life-cycle segmentation has the problem of stereotyping, which should be kept in mind.

Two individuals, if the same age, may not have similar needs, wants, habits, lifestyles, etc. It is often found that age can not precisely predict a person’s life cycle, health, word or family status, needs, and buying power.

Gender

Gender segmentation involves dividing a market into different groups based on sex. Gender segmentation is extensively used in clothing, cosmetics, and magazines. Other marketers are also adopting gender segmentation.

For example, although early toilet soaps were used by both sexes, many companies are now featuring unisex brands. Procter & Gamble was among the first with Secret, a brand specially formulated for a woman’s chemistry, packaged and advertised to reinforce the female image.

Gender segmentation is also widely used in the automobile industry. More and more car manufacturers are directing their advertisements to women.

Income

Income segmentation involves dividing a market into different income groups. Marketers of products and services such as automobiles, clothing, cosmetics, and travel have found income segmentation very useful.

Companies with luxury goods and convenience services target well off consumers. Income segmentation is also used to identify and target lower-income groups so that they can be approached with appropriate products, prices, and distribution outlets.

Multivariate Demographic Segmentation

Each of the demographic variables has merits and limitations. For maximum effectiveness, most companies combine two or more demographic variables in segmenting a market. Consider the market for deodorant soaps.

Many different kinds of consumers use top-selling deodorant soap brands. Still, two demographic variables – gender and age – coupled with geographic region, are most useful in distinguishing the users of one brand from those of another.

Psychographic Segmentation

In psychographic segmentation, buyers are divided into different groups based on social class, lifestyle, or personality characteristics. People belonging to the same demographic group may have very different psychographic characteristics.

Social Class

Social class has a strong effect on preferences in products, services, and retail outlets—many companies design products or services for specific social classes, incorporating features that appeal to these classes.

Life style

People’s interest in various products is affected by their lifestyles, and products bought by the buyers reflect their lifestyles. Consumer lifestyles are being increasingly used by marketers to segmenting their markets. For example, Duck Head apparel targets the casual student lifestyle, claiming, “You can’t get them old until you get them new.”

Personality

Marketers also use personality factors for segmenting their markets. They attribute personalities to their products that correspond to consumer personalities. Market segmentation on the basis of personality has been proved successful for products such as cosmetics, cigarettes, insurance, and liquor.

Honda’s marketing campaign for its motor scooters provides a good example of personality segmentation. Honda appears to target its Spree, Elite, and Aero motor scooters at the hip and trendy 14-to22-year- olds.

But it actually designs ads for a much broader personality group. One ad, for example, shows a delighted child bouncing up and down on his bed while the announcer says, “You’ve been trying to get there all your life.”

The ad reminds views of the euphoric feelings they got when they broke away from authority and did things their parents told them not to do. It suggests that they can feel that way again by riding a Honda scooter.

So even though Honda seems to be targeting young consumers, the ads appeal to trendsetters and independent personalities in all age groups.

Over half of Honda’s scooter sales are too young professionals and older buyers – the over-50 group purchases 15 percent. Honda is appealing to the rebellious, independent kid in all of us.

Behavioral Segmentation

Behavioral segmentation involves dividing a market into groups based on consumer knowledge, attitude, use, or response to a product. Here, we will discuss some behavioral variables that are used in segmenting markets.

Occasions

Buyers can be divided based on occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation helps boost product usage.

For example, orange juice is most often consumed at breakfast, but orange growers have promoted drinking orange juice as a cool and refreshing drink at other times of the day. In contrast, Coca-Cola’s “Coke in the Morning” advertising campaign attempts to increase Coke consumption by promoting the beverage as an early morning pick-me-up.

Benefits Sought

Buyers can also be grouped according to the different benefits that they seek from the product. Benefit segmentation calls for finding the major benefits people seek in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

The following table provides an example of benefit segmentation in the toothpaste market:

Market Segmentation for Toothpaste
Benefit SegmentsDemogra­phicsBehaviorPsychographicsFavored Brands
Economy
(low price)
MenHeavy usersHigh autonomy, value-orientedBrands on sale
Medicinal
(decay prevention)
large familiesHeavy usersHypochondriacal, conservativeCrest
Cosmetic
(bright teeth)
Teens, Young adultsSmokersHigh sociability, activeAqua-Fresh, Ultra Brite
Taste
(good tasting)
childrenSpearmint loversHigh self-involvement hedonisticColgate, Aim

Marketers can use benefit segmentation to identify the benefits segment to which they are appealing, its characteristics, and the major competing brands. They also can look for new benefits and launch brands that deliver them.

User Status

Market segmentation can also be done according to user statuses such as nonusers, ex-users, potential users, first-time users, and regular users of a product. Potential users and regular users need to be approached through different kinds of marketing appeals.

For example, one study found that blood donor are low in self-esteem, low-risk takers, and more highly concerned about their health; nondonors tend to be the opposite of all three dimensions. This suggests that social agencies should use different marketing approaches for keeping current donors and attracting new ones.

A company’s current market position will also influence its focus on segments. The market leader will focus on attracting potential users, while smaller companies will focus on diverting current users away from the market leader.

Usage Rate

Market segmentation can also be done according to usages such as light, medium, and heavy user groups. Although heavy users are often a small percentage of the market, they account for a high percentage of total buying.

In one study, product users were divided into two halves, a light-user half and a heavy-user half, according to their buying rates for the specific products. Using beer as an example, it was found that 41 percent of the households studied buy beer.

However, the heavy-user half accounted for 87 percent of the beer consumed – almost seven times as much as the light-user half.

A beer company would prefer to attract one heavy user to its brand rather than several light users. Thus, most beer companies target the heavy beer drinker, using appeals such as Schaefer’s “one beer to have when you’re having more than one.”

Loyalty Status

A market can also be segmented based on consumer loyalty. Consumers can be loyal to brands (Jet), stores (Aarong), and companies (Liver). Buyers can be divided into groups based on their degree of loyalty. Some consumers are completely loyal, and they buy one brand all the time.

Some consumers are somewhat loyal, and they are loyal to two or three brands of a given product or favor one brand and may sometimes buy others. Some buyers are not loyal to any brand. They look for something different each time they buy, or they buy whatever is there on sale.

A Company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its loyal customers. Colgate finds that its loyal buyers are more middle class, have larger families, and are more health-conscious.

These characteristics pinpoint the target market for Colgate. By studying its less loyal buyers, the company can detect which brands are most competitive with its own.

If many Colgate buyers also buy Crest, Colgate can attempt to improve its positioning against Crest, possibly by using direct-comparison advertising.

By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses. As for non-loyal, the company may attract them by putting its brand on sale.

Brand loyalty should be carefully used in segmenting markets. Habit, indifference, a low price, or unavailability of other brands should not be

Urgency

Should we focus on companies that need quick delivery or misconstrued as brand-loyal purchase patterns. Similarly, frequent or regular purchasing should not be understood as brand loyalty. Motivations underlying observed purchase patterns need to be seriously examined.

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