Chapter 3
Marketing Segmentation
What is Marketing Segmentation?
• Who uses market segmentation?
• How does market segmentation operate?
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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.
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Mass
Marketing
Offering the same product
and marketing mix to all
consumers.
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Positioning
Establishing a specific image
for a brand in relation to
competing brands.
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Who Uses Market Segmentation?
•
•
•
•
Marketers of consumer goods
Retailers
Hotels
Industrial Manufacturers
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Repositioning
Changing the way a product
is perceived by consumers in
relation to other brands or
product uses.
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Bases for Segmentation
•
•
•
•
•
•
•
•
•
Geographic Segmentation
Demographic Segmentation
Psychological Segmentation
Psychographic Segmentation
Sociocultural Segmentation
Use-Related Segmentation
Usage-Situation Segmentation
Benefit Segmentation
Hybrid Segmentation Approaches
©2000 Prentice Hall
Table 3.1 Market Segmentation Categories
and Selected Variables
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-$99,000, $100,000 and over
Education
Some high school, high school graduate, some college,
college graduate, postgraduate
Occupation
Professional, blue-collar, white-collar, agricultural,
military
©2000 Prentice Hall
Table 3.1 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
©2000 Prentice Hall
Table 3.1 continued
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, friend’s home, in-store
Person
Self, family members, friends, boss, peer
Benefit Segmentation
Convenience, social acceptance, long lasting,
economy,value-for-the-money
©2000 Prentice Hall
Table 3.1 continued
SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES
Hybrid Segmentation
Demographic/psychographic Combination of demographic and psychographic profiles
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
VALSTM is an example of a demographic/psychographic profile. PRIZM is an
example of a geodemographic profile.
©2000 Prentice Hall
Geographic
Segmentation
The division of a total
potential market into smaller
subgroups on the basis on
geographic variables (e.g.,
region, state, or city).
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Micromarketing
Highly regionalized
marketing strategies that use
advertising and promotional
campaigns specifically
geared to local market needs
and conditions.
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Demographic Segmentation
•
•
•
•
Age
Sex
Marital Status
Income, Education, and Occupation
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Age
• Age effects
– occurrences due to chronological age
• Cohort effects
– occurrences due to growing up during a specific
time period
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Sex
• Traditional roles of men and women in
purchases
• Changing sex roles
– Dual-income households
• Working women less accessible through
traditional media
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Marital Status
• Households as a consuming unit
–
–
–
–
Singles
divorced
single parents
dual-income married
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Income, Education, and Occupation
• Income often combined with other variables
for segmentation
• The three variables tend to be correlated
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Psychological Segmentation
•
•
•
•
•
Motivations
Personality
Perceptions
Learning
Attitudes
©2000 Prentice Hall
AIOs
Psychographic variables that
focus on activities, interests,
and opinions. Also referred
to as Lifestyle.
©2000 Prentice Hall
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.
Agree
Completely
Disagree
Completely
[1] [2] [3] [4] [5] [6] [7]
If I could consider the “pluses” and “minuses,”
technology has been good for me.
[1] [2] [3] [4] [5] [6] [7]
I find that I have to pull myself away from e-mail.
[1] [2] [3] [4] [5] [6] [7]
Given my lifestyle, I have more of a shortage of
time than money.
[1] [2] [3] [4] [5] [6] [7]
I like the benefits of the Internet, but I often don’t
have the time to take advantage of them.
[1] [2] [3] [4] [5] [6] [7]
I am generally open to considering new practices
and new technology.
[1] [2] [3] [4] [5] [6] [7]
©2000 Prentice Hall
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)
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Sociocultural Segmentation
• Family Life Cycle
• Social Class
• Culture, Subculture, and Cross-Culture
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Family Life Cycle
• Phases a family goes through in their
formation, growth, and final dissolution
–
–
–
–
–
Bachelorhood
Honeymooners
Parenthood
Post-parenthood
Dissolution
©2000 Prentice Hall
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.
©2000 Prentice Hall
Use-Related Segmentation
• Rate of Usage
– Heavy vs. Light
• Awareness Status
– Aware vs. Unaware
• Brand Loyalty
– Brand Loyal vs. Brand Switchers
©2000 Prentice Hall
Usage-Situation Segmentation
• Segmenting on the basis of special occasions
or situations
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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)
©2000 Prentice Hall
Hybrid Segmentation Approaches
• Psychographic-Demographic Profiles
• Geodemographic Segmentation
• SRI Consulting’s Values and Lifestyle System
(VALSTM)
©2000 Prentice Hall
Table 3.4 Selected Psychographic/Demographic
Characteristics of the PC Magazine Subscriber
DEMOGRAPHICS
SEX (BASE 990)
Men
Women
AGE
Under 25
25 - 34
35 - 44
45 - 54
55 - 64
65 or older
Mean age
Percent
86
13
5
18
29
31
12
5
44.1
PSYCHOGRAPHICS Percent
USE A COMPUTER
100
At home
96
At work
89
On vacation/traveling
46
SELECTED USE OF
COMPUTER
Word Processing
96
Connect to Internet
86
E-mail
84
For work
80
Accounting/record keeping 75
Reference
68
Recreation/games
66
©2000 Prentice Hall
Table 3.4 continued
DEMOGRAPHICS
EDUCATION
Some college or less
Graduate college
Education beyond
college graduate
Percent
27
27
46
EMPLOYMENT STATUS
Employed by someone else 68
Self-employed
21
Other
11
PSYCHOGRAPHICS Percent
PORTABLE DEVICES USES
WHEN TRAVELING ON
BUSINESS
Laptop/notebook
computer
57
Cellular phone
47
Beeper or pager
30
Personal Digital Assistant/
electronic organizer
14
©2000 Prentice Hall
Table 3.4 continued
DEMOGRAPHICS
Percent
OCCUPATION/BUSINESS
DEPT.
Computer relatedprofessional
22
Senior or corporate
management
16
Engineering-related
professional
13
Administrative/
manufacturing,
accounting, finance,
purchasing, advertising,
marketing, sales
26
Others
23
PSYCHOGRAPHICS Percent
TRAVEL FOR
BUSINESS/PLEASURE
Business Travel
5 or more days per month 31
5 or more nights away
from home per month
17
Pleasure/Vacation Travel
15 or more days per year 37
Mean number of days
per year
15.5
MEMBER OF
FREQUENT FLYER
PROGRAMS
90
©2000 Prentice Hall
Table 3.4 continued
DEMOGRAPHICS
Percent
INCOME
Under $30,000
7
$30,000 - $49,999
15
$50,000 - $74,999
24
$75,000 - $99,999
19
$100,000 or more
24
Mean income
$87,700
PRIMARY RESIDENCE
Own
74
Rent
18
Other
3
No answer
5
PSYCHOGRAPHICS Percent
FINANCIAL SERVICES
Currently own
Mutual funds
48
Stocks
44
Bonds
24
Life insurance/annuities
44
Currently use
Brokerage services
36
On-line investment
services
16
Retirement/financial
planning
41
©2000 Prentice Hall
Table 3.4 continued
RESPONSE OF SELECTED
CONSUMER
PSYCHOGRAPHIC
STATEMENTS
Percent
Research before choose
brand of new product
to buy
Other people ask my opinion
about which computer
products to buy
Usually buy products based
on quality, not price
Prefer products that are
latest in new technology
Among group I am one of
first to try new product
41
41
26
26
SELECTED
SPORTS/ACTIVITES
PLAYED/PARTICIPATED IN
PAST YEAR
Percent
Walking/running/jogging 63
Exercise/fitness/weight
training
44
Bicycling
7
Swimming
37
Golf
27
Fishing
23
Boating/sailing
19
Skiing
19
Tennis
14
19
©2000 Prentice Hall
Table 3.4 continued
HOBBIES/OTHER ACTIVITIES
PARTICIPATED IN
Percent
Listen to music
77
Reading
61
Going to movies
60
Surfing the Internet
50
Games-videos on
computer
48
Gardening
32
Going to the theater
32
Cooking
30
Photography
30
Collecting stamps/coins
11
Sewing needlecraft
6
Source: 1997 Lifestyles Study, PC
Magazine Subscriber Study, Ziff-Davis,
Inc., June 1997.
©2000 Prentice Hall
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.
©2000 Prentice Hall
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.
©2000 Prentice Hall
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.
©2000 Prentice Hall
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.
©2000 Prentice Hall
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 schoolage 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.
©2000 Prentice Hall
Figure 3-10:
SRI Consulting’s Values and
Lifestyle System (VALSTM)
ACTUALIZERS
High Resources
Principle Oriented Status Oriented Action Oriented
FULFILLEDS
BELIEVERS
ACHIEVERS EXPERIENCERS
STRIVERS
STRUGGLERS
MAKERS
Low Resources
©2000 Prentice Hall
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.
Actualizers
Experiencers
Achievers
Makers
Fulfilleds
Strivers
Believers
Strugglers
0
2
Mountain/rock climbing
4
6
8
10
Jet skiing/wave running/water biking
12
14
Inline skating
©2000 Prentice Hall
Table 3.6 The Size of Each VALSTM
Segment as Percent of the United States
Population
VALSTM
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
©2000 Prentice Hall
Criteria For Effective Targeting of
Market Segments
•
•
•
•
Identification
Sufficiency
Stability
Accessibility
©2000 Prentice Hall
Implementing Segmentation Strategies
• Concentrated Versus Differentiated Marketing
• Countersegmentation
©2000 Prentice Hall
Countersegmentation
Strategy
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.
©2000 Prentice Hall