Segmentation

Segmentation

In order to find their target customer group, companies go through the process of segmentation. Here we look at methods for segmenting consumer markets.

Market segmentation is the process of dividing a market into distinct groups of buyers with similar requirements. We segment in order to reach the right customers and give them value. 

The process of segmentation consists of the following steps:

We look at the total market for our product.

The market for Automobiles or the market for beverages is both examples of consumer markets.

The market is also sometime called the industry.

Next, we consider which segments are there in this market for our product and we create the segments

Then we evaluate our segments

From the results of this evaluation, we choose one of the segments to be our target group

Through the process of segmentation, we divide people into groups with similar requirements. These groups are uniform and consist of people who have same needs and wishes in a certain subject. 

We have three segments in this figure. There may be more.

When we segment, we use variables.

A segment variable is a fact, such as gender, age, education or residence.

We place the segmentation variables into the following three main categories:

•Sociodemographic

•Behavioristic 

•Psychographic

Each of these categories is reviewed in the following sections.

The first is Sociodemographic variables.

These variables are quite easy to identify and measure.

They are divided into 3 classes:

• The first contains age, gender and residence
• The second contains education, work and income
• And the third and last contains race, ethnicity and religion  

These three classes may be reviewed as follows:

Age, gender and geographical residence are variables that traditionally have been important, and age particularly can affect certain consumption patterns. To some extent this is still true, however our lifestyles have changed and age is no longer as important for a certain lifestyle as before. In Fashion the Italian luxury brand Gucci is today bought by young teenagers as well as women in their 60’ties and 70’ties.

Education, work and income are important variables in forming individual attitudes and behavior in everyday life. Especially education in our youth influences our future attitudes and behavior.

Race, ethnicity and religion have influence on our lifestyle, our attitudes and values. But it is important to remember that there can be differences in how individuals within a certain religion think and act.

The next category is Behavioristic

Behavioristic variables reflect the behavior of customers to a specific product. We look at and divide people by their product and media uses and actions. We identify their media- and shopping habits.

We may consider consumer loyalty towards certain products and brands and the consumers frequency of use of these products and brands. We also look at the possibility that customers may change products and brands – does the customer want to try new products and new brands?

Some customers are willing to try new product types within the same brand. Some are willing to change brand but not the specific product type. Some are willing to try new product types from other brands. And a group of customers have no desire at all to change either product type or brand. Some women will always use the perfume Chanel number five.

The last of the three main categories is Psychographic

Psychographic variables are segmentation of the customer’s lifestyle, personal attitudes and personality. 

These variables are hard to measure.

We often use lifestyle segmentation models for these variables. For instance the Minerva - or the Vals model.

We have now reviewed the three main categories in the segmentation process

Segmentation is a widely used discipline in the process of determining the target group for a company. However, segmentation has been criticized because many people change their attitudes according to the buying situation and therefore purchases are often situational.

It is sometimes difficult to identify the market of the product or service we want to sell. The boundaries of a market are almost always moving.

The model gives no answer to which factors are the most important in our situation.

But if you don’t try to focus on a segment and therefore a particular group of customers, then your marketing efforts will be pure guesswork. It is like shooting in the dark.