MARKETING SEGMENTATION AND PROMOTIONAL SEGMENTATION
Marketing Segmentation:
 Marketing segmentation is dividing large, heterogeneous groups of
potential buyers into smaller more homogeneous groups. Ideally, these
groups share one or more key similarities on issues that our enterprise can
offer superior benefits.
 Reasons for segmentation:

Customers vary in wants and needs, and successful firms must address
these differences by choosing whom they will go after, and with what
product/service type.

No firm can meet all potential customers wants and needs, and firms that try
run the high risk of being “niched” by a competitor.

Niches in which firms have relatively high market share of loyal customers
are nearly always the most profitable.

Strategically, niches give a firm specific areas to build on and enlarge, rather
than having to pare down segments that were ill defined. Successful niches
also help build brand recognition with specific associations in customers’
minds.
Marketing segmentation has three basic steps:
1. Step 1—identifying the key customer-product relationship(s). Building
superiority enables an enterprise to establish differential advantage in the
marketplace. However, in order to accomplish differential advantage, the
enterprise must make strategic decisions about which groups of consumers it
will go after and which groups the enterprise will not pursue. Note that may
not be a planned decision—some firms make product or service-oriented
decisions that unknowingly impact consumers. These decisions are often
made with the product or cost accounting in mind rather than their current or
targeted customer base. Segmentation should always begin with
ascertaining some key customer-product relationships such as benefits
sought or shopping behaviors where the firm has some differential advantage
over the competition. Here are examples of customer-product relationships:
 Product benefits: Psychological (how owning or using product makes us
feel, how others respond to us), and functional benefits (what product
actually does for us). Note that business or industrial products can also
have psychological consequences such as pride in highly efficient
computing facilities, or state-of-the-art production equipment.
Products usually have multiple benefits and these benefits may cluster
homogeneously into one marketing segment, or may cluster
heterogeneously into multiple segments.
 Shopping behaviors (e.g., place issues)
 Price preferences or issues
2. Step 2—identifying the demographics. Demographic analysis should
never be the starting point of a segmentation analysis. Many marketers
mistakenly begin with demographic analysis because they have done
marketing research on existing customer bases, and that research has
centered on demographic variables rather than customer-product relationship
variables. This assumes that the existing customer base is the ideal one.
However, demographic analysis alone cannot separate buyers from nonbuyers, and is not helpful in devising promotional strategy.
Once key customer product relationships have been identified, then the
demographic analysis is conducted. This tells us what are the demographic
characteristics of buyers or potential buyers that share these relationships to
the product. Demographic analysis also tells us the size and approximate
buying power of our target markets. Finally, media is generally sold by its
ability to deliver a certain demographic profile in a geographic region. Also,
demographic analysis is easier than true customer analysis. Psychographic
(lifestyle) analysis is used to get an idea of the lifestyles of target segments
and how products fit into their lives.
3. Step 3—identifying psychographic profiles. Psychographic information
tells about the lifestyles of our target market(s). This information is generally
the activities, interests and opinions of target market members. In a perfect
world of great resources, psychographic analysis is conducted either with or
after demographic analysis. Psychographic information tells us about
individuals and households lifestyles, and helps us to show how our product
can fit into those lifestyles. Psychographic information is particularly helpful
in devising advertisements when we have to portray buyers in day-to-day
activities, and when we want to convey to receivers what “types” of people
may be appropriate for our products. However, as with demographic
analysis, psychographic analysis is a poor primary segmentation device.
Promotional Segmentation:
 Promotional segmentation and promotional strategy puts customers into
similar groups based on marketing communication objectives. The goal of
promotional segmentation is to move customers closer to being a loyal customer—
helping them go through the various learning emotional steps required to truly
understand whether or not a product is appropriate for their situation. While ideally
this implies making customers into brand loyal buyers, the realities of many products
and their benefits is that the more realistic goal is keeping our brand in the choice set
or purchased with some reasonable frequency. Promotional strategy is derived from
the marketing strategy. As marketing segmentation puts customers into groups
based on some customer product relationship, promotional strategy classifies them
by some communication objective that helps move them closer to being a loyal
buyer. The need for promotional segmentation comes from having customers in the
same general marketing segment that have differing degrees of knowledge about a
product, differing perceptions/attitudes about a product’s benefits, differing media
habits (e.g., read different magazines, watch different TV shows, live in different
areas serviced by different media such as rural/urban, east coast I95 corridor versus
off the corridor) and different susceptibilities to communication mix elements (e.g.,
personal selling versus reading written materials, video product demonstration, etc.).
Some examples of promotional segments:

Varying degrees of awareness: customers may vary from being new to the
product category all the way up to a straight rebuy.

Different hierarchies: some customers may prefer product trial, while others may
want turnkey installation. Some may have a strong need to feel comfortable (a
hierarchy with a strong “feel” component) while others may be exceptionally
information-bound (“analytics”). Some may want to make the decision
themselves while others may want participative decisions between the buying
center and the seller.

Different communication channels: Some customers may gain most of their
immediate information from trade journals (in a B2B situation), while others may
use trade shows. Media preferences and habits may vary and require different
approaches.