Marketing Segmentation

Chapter 3

Marketing Segmentation

©2000 Prentice Hall

What is Marketing Segmentation?

• Who uses market segmentation?• How does market segmentation operate?


Market Market SegmentationSegmentation

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.


Mass Mass MarketingMarketing

Offering the same product and marketing mix to all

consumers.


PositioningPositioningEstablishing a specific image

for a brand in relation to competing brands.


Who Uses Market Segmentation?

• Marketers of consumer goods• Retailers• Hotels• Industrial Manufacturers


RepositioningRepositioning

Changing the way a product is perceived by consumers in

relation to other brands or product uses.


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 3.1 Market Segmentation Categories and Selected Variables

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESGeographic Segmentation

Climate

Density of area

City Size

Region Southwest, Mountain States, Alaska, Hawaii

Major metropolitan areas, small cities, towns

Urban, suburban, exurban, rural

Temperate, hot, humid, rainy

Demographic Segmentation

Income

Marital statusSexAge Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+

Male, femaleSingle, married, divorced, living together, widowed

Under $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,000, $100,000 and over

Occupation

Education Some high school, high school graduate, some college, college graduate, postgraduate

Professional, blue-collar, white-collar, agricultural, military


Table 3.1 continued

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESPsychological Segmentation

Learning-involvement

Perception

Personality

Needs-motivation Shelter, safety, security, affection, sense of self-worth

Extroverts, novelty seeker, aggressives, low dogmatics

Low-risk, moderate-risk, high-risk

Low-involvement, high-involvement

Psychographic

Subcultures (Race/ethnic)

Religion

Cultures

(Lifestyle) Segmentation Economy-minded, couch potatoes outdoors enthusiasts status seekers

American, Italian, Chinese, Mexican, French, Pakistani

Catholic, Protestant, Jewish, Moslem, other

African-American, Caucasian, Asian, Hispanic

Family life cycle

Social class Lower, middle, upper

Bachelors, young married, full nesters, empty nesters

Attitudes Positive attitude, negative attitude

Sociocultural Segmentation


Table 3.1 continued

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLESUse-Related Segmentation

Brand loyalty

Awareness status

Usage rate Heavy users, medium users, light users, non users

Unaware, aware interested, enthusiastic

None, some, strong

Use-Situation Segmentation

Location

Objective

Time Leisure, work, rush, morning, night

Personal, gift, snack, fun, achievement

Home, work, friend’s home, in-store

Person Self, family members, friends, boss, peer

Benefit Segmentation Convenience, social acceptance, long lasting, economy,value-for-the-money


Table 3.1 continued

SEGMENTATION BASESEGMENTATION BASE SELECTED SEGMENTATION VARIABLESSELECTED SEGMENTATION VARIABLES

Geodemographics “Money and Brains,” “Black Enterprise,” “Old Yankee Rows,” “Downtown Dixie-Style”

Demographic/psychographic Combination of demographic and psychographic profiles of consumer segments profiles

SRI VALSTM Actualizer, fulfilled, believer, achiever, striver, experiencer, maker, struggler

Hybrid Segmentation

VALSTM is an example of a demographic/psychographic profile. PRIZM is an example of a geodemographic profile.


Geographic Geographic SegmentationSegmentation

The division of a total potential market into smaller

subgroups on the basis on geographic variables (e.g.,

region, state, or city).


Micro-Micro-marketingmarketing

Highly regionalized marketing strategies that use advertising and promotional

campaigns specifically geared to local market needs

and conditions.


Demographic Segmentation

• Age• Sex• Marital Status• Income, Education, and Occupation


Age

• Age effects– occurrences due to chronological age

• Cohort effects– occurrences due to growing up during a specific

time period


Sex

• Traditional roles of men and women in purchases

• Changing sex roles– Dual-income households

• Working women less accessible through traditional media


Marital Status

• Households as a consuming unit– Singles– divorced– single parents– dual-income married


Income, Education, and Occupation

• Income often combined with other variables for segmentation

• The three variables tend to be correlated


Psychological Segmentation

• Motivations• Personality• Perceptions• Learning• Attitudes


AIOsAIOs

Psychographic variables that focus on activities, interests, and opinions. Also referred

to as Lifestyle.


Table 3.2 A Portion of an AIO Inventory Used to Identify Techno-Road-Warriors

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.

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.

I like the benefits of the Internet, but I often don’t have the time to take advantage of them.

I am generally open to considering new practices and new technology.

[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]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

Agree Completely

Disagree Completely


Table 3.3 A Hypothetical Psychographic Profile of the Techno-Road-Warrior

•Goes on the Internet 6-plus times a week•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•Belongs to several rewards programs (for example, frequent flyer programs, hotel programs, rent-a-car programs)


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


Culture, Subculture, an Cross-Culture

• Segmenting on the basis of cultural heritage– assumes members of the same culture share the

same values, beliefs, and customs• Subcultures are united by certain experiences,

values, or beliefs.– e.g., Hispanic subculture, African American

subculture, etc.


Use-Related Segmentation

• Rate of Usage– Heavy vs. Light

• Awareness Status– Aware vs. Unaware

• Brand Loyalty– Brand Loyal vs. Brand Switchers


Usage-Situation Segmentation

• Segmenting on the basis of special occasions or situations


Benefit Segmentation

• Segmenting on the basis of the most important benefit sought by consumers when purchasing the product or service– Toothpaste can be bought for

• Good Taste (e.g., Colgate)• Fresh Breath (e.g, Close Up)• White Teeth (e.g, Rembrandt)• Cavity Protection (e.g., Crest)


Hybrid Segmentation Approaches

• Psychographic-Demographic Profiles• Geodemographic Segmentation• SRI Consulting’s Values and Lifestyle System

(VALSTM)


Table 3.4 Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber

DEMOGRAPHICSDEMOGRAPHICS PercentPercent

SEX (BASE 990)Men 86Women 13

PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

USE A COMPUTER 100At home 96At work 89On vacation/traveling 46AGE

Under 25 525 - 34 1835 - 44 2945 - 54 3155 - 64 1265 or older 5Mean age 44.1

SELECTED USE OF COMPUTERWord Processing 96Connect to Internet 86E-mail 84For work 80Accounting/record keeping 75Reference 68Recreation/games 66


Table 3.4 continued

DEMOGRAPHICSDEMOGRAPHICS PercentPercent PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

EDUCATIONSome college or less 27Graduate college 27Education beyond college graduate 46

EMPLOYMENT STATUSEmployed by someone else 68Self-employed 21Other 11

PORTABLE DEVICES USES WHEN TRAVELING ON BUSINESSLaptop/notebook computer 57Cellular phone 47Beeper or pager 30Personal Digital Assistant/ electronic organizer 14


Table 3.4 continued

DEMOGRAPHICSDEMOGRAPHICS PercentPercent PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

OCCUPATION/BUSINESS DEPT.Computer related- professional 22Senior or corporate management 16Engineering-related professional 13Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales 26Others 23

TRAVEL FOR BUSINESS/PLEASUREBusiness Travel5 or more days per month 315 or more nights away from home per month 17Pleasure/Vacation Travel15 or more days per year 37Mean number of days per year 15.5

MEMBER OF FREQUENT FLYER PROGRAMS 90


Table 3.4 continued

DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent

INCOMEUnder $30,000 7$30,000 - $49,999 15$50,000 - $74,999 24$75,000 - $99,999 19$100,000 or more 24Mean income $87,700

PRIMARY RESIDENCEOwn 74Rent 18Other 3No answer 5

FINANCIAL SERVICESCurrently ownMutual funds 48Stocks 44Bonds 24Life insurance/annuities 44Currently useBrokerage services 36On-line investment services 16Retirement/financial planning 41


Table 3.4 continued

RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTS Percent

Research before choose brand of new product to buy 41Other people ask my opinion about which computer products to buy 41Usually buy products based on quality, not price 26Prefer products that are latest in new technology 26Among group I am one of first to try new product 19

Walking/running/jogging 63Exercise/fitness/weight training 44Bicycling 7Swimming 37Golf 27Fishing 23Boating/sailing 19Skiing 19Tennis 14

SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEAR Percent


Table 3.4 continued

Listen to music 77Reading 61Going to movies 60Surfing the Internet 50Games-videos on computer 48Gardening 32Going to the theater 32Cooking 30Photography 30Collecting stamps/coins 11Sewing needlecraft 6

HOBBIES/OTHER ACTIVITIES PARTICIPATED IN Percent

Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis,

Inc., June 1997.


Table 3.5 Sample Geodemographic Clusters

BLUE BLOOD ESTATES•0.8% of United States households•Predominant employment: Professional•Elite super-rich families•Key education level: College grads•Adult age range: 35-44, 45-54, 55-64

Characteristics: America’s wealthiest suburbs are populated by established executives, professional, and heirs to “old money.” These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines.

BLUE BLOOD ESTATES•0.8% of United States households•Predominant employment: Professional•Elite super-rich families•Key education level: College grads•Adult age range: 35-44, 45-54, 55-64

Characteristics: America’s wealthiest suburbs are populated by established executives, professional, and heirs to “old money.” These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines.


Table 3.5 continued

MID-CITY MIX•1.3% of United States households•Predominant employment: Service, white-collar•African American Singles and families•Key educational level: High school, some college•Adult age range: 35-54

Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines.

MID-CITY MIX•1.3% of United States households•Predominant employment: Service, white-collar•African American Singles and families•Key educational level: High school, some college•Adult age range: 35-54

Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines.


Table 3.5 continued

GRAY COLLARS•2.1% of United States households•Adult age range: 55-64, 65+•Median household income: $31,400•Aging couples in inner suburbs

Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial “Rust Belt,” Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950’s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines.

GRAY COLLARS•2.1% of United States households•Adult age range: 55-64, 65+•Median household income: $31,400•Aging couples in inner suburbs

Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial “Rust Belt,” Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950’s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines.


Table 3.5 continued

YOUNG INFLUENTIALS•1.1% of United States households•Predominant employment: Professional, white-collar•Upwardly mobile singles and couples•Key education level: College grads•Adult age range: 24, 25-34

Characteristics: This cluster is dubbed the “Young Urban Professional.” Before getting married they were the educated, high-tech, metropolitan sophisticates, the “swingers” and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines.

YOUNG INFLUENTIALS•1.1% of United States households•Predominant employment: Professional, white-collar•Upwardly mobile singles and couples•Key education level: College grads•Adult age range: 24, 25-34

Characteristics: This cluster is dubbed the “Young Urban Professional.” Before getting married they were the educated, high-tech, metropolitan sophisticates, the “swingers” and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines.


Table 3.5 continued

SHOTGUNS AND PICKUPS•1.6% of United States households•Predominant employment: Blue-collar, farm•Rural blue-collar workers and families•Key education level: High school grade school•Adult age range: 35-44, 45-54

Characteristics: The least affluent of the “Country Families” clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the “Country Families” group in blue-collar jobs; the majority are married with school-age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines.

SHOTGUNS AND PICKUPS•1.6% of United States households•Predominant employment: Blue-collar, farm•Rural blue-collar workers and families•Key education level: High school grade school•Adult age range: 35-44, 45-54

Characteristics: The least affluent of the “Country Families” clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the “Country Families” group in blue-collar jobs; the majority are married with school-age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines.

Source: Courtesy of Claritas Inc. (PRIZM and 62 Cluster nicknames are registered trademarks of Claritas Inc.). Reprinted by permission.


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STRUGGLERS

FULFILLEDS

BELIEVERS

ACHIEVERS EXPERIENCERS

STRIVERS MAKERS

Low Resources

High Resources

Action OrientedStatus OrientedPrinciple Oriented


Figure 3.11 VALSTM 2 Segments and Participation in Selected Sports

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

0 2 4 6 8 10 12 14

Strugglers

Believers

Strivers

Fulfilleds

Makers

Achievers

Experiencers

Actualizers

Mountain/rock climbing Jet skiing/wave running/water biking Inline skating


Table 3.6 The Size of Each VALSTM Segment as Percent of the United States

Population

VALSVALSTMTM SEGMENT SEGMENTPERCENT OF PERCENT OF POPULATIONPOPULATION

Actualizer10.511.7%

StrugglerMakerExperiencerStriverAchieverBelieverFulfilled

9.512.012.911.814.717.0


Criteria For Effective Targeting of Market Segments

• Identification• Sufficiency• Stability• Accessibility


Implementing Segmentation Strategies

• Concentrated Versus Differentiated Marketing• Countersegmentation


Counterseg-Counterseg-mentation mentation StrategyStrategy

A strategy in which a company combines two or

more segments into a single segment to be targeted with

an individually tailored product or promotion

campaign.

Marketing Segmentation

Business

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