Is segmentation effective?

  Content  

  I Introduction: Definition of segmentation  3

  II Conditions for effective marketing segmentation  3

1.Segmenting  consumer markets  3

1.1.  Geographic Segmentation  3

1.2.  Demographic Segmentation  3

1.3.  Behavioral Segmentation  4

1.4.  Psychographic Segmentation  4

2.The  necessarily criterions for effectiveness  4

2.1  Measurable and identifiable  4

2.2.  Accessible  5

2.3.  Substantial  5

2.4.  Responsive  6

  III Conclusion: The opportunities of segmentation  7

  IV References  8

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I. Introduction: Definition of segmentation

If you have a market for a product with one or more consumers you have the possibility to segment this market, because the consumers wanted different types of a product. If you ask twenty people why they want for example a special kind of a car you probably would receive twenty different answers. Some see a car as a status symbol or others wanted to have a comfortable car and for a few people the price is the most important factor. Such a market called ‘heterogeneous market’. For this kind of market companies make market segmentation. But what is market segmentation? Market segmentation is the process of splitting customers in different groups, segments consisting of people who have relatively similar product needs. The purpose is to design a marketing mix that more precisely matches the needs of individuals in a selected segment. 1

II. Conditions for effective marketing segmentation

1.Segmenting consumer markets 2

To make segmentation effective you have to divide the market in different segments. The major bases for segmenting consumer markets can be grouped into four categories. demographic, geographic, psychographic and behavior segmentation. As next I want to give you a short explain about these types of segmentation.

1.1. Geographic Segmentation

The first one is the geographic segmentation. This is one of the earliest and still most commonly used methods of segmentation. It involves dividing markets into different geographic variables, such as regions, city size, population density and climate.

1.2. Demographic Segmentation

The second major method of segmentation is also one of the most frequently used method of segmenting markets. Demographics variables are for example age, sex, income, education, occupation, religion, race, nationality, family size and stage reached in the family life cycle. 1 Mc Donald, M./ Dunbar, I. (1995), Market Segmentation, Britain: The Bath Press, page 10 2 Wilson, R./ Gilligan, C. (1997-second Edition), Strategic Marketing Management, page 280-291

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1.3. Behavioral Segmentation

This kind of Segmentation including behavioral measures, such as attitudes, knowledge, benefits sought by the buyer, a willingness to innovate, usage rates, loyalty status and response to a product.

1.4. Psychographic Segmentation

There are a lot of psychographic factors which could be used to segment markets, but normally the three common factors are personality characteristics, motives and lifestyle. This three factors are identifies the living patterns of individuals as expressed by their activities, interests and opinions.

Lifestyle has been defined in a variety of ways, but is in essence as Kotler states: “the person’s pattern of living in the world as expressed in (their) activities, interest and opinion… [it] portrays the ‘whole person’ interacting with his or her environment. Lifestyle reflects something beyond the person’s social class, on the one hand, or personality, on the other … [it] attempts to profile a person’s way of being and acting in the world.”

2.The necessarily criterions for effectiveness

Whether a firm uses one segment or a mix of different segments, several conditions must exist for market segmentation to be effective.

2.1 Measurable and identifiable

Segmenting a market in different groups is only effective, when these groups are identifiable and measurable. This means, that is must be possible to find out which kind of people and how many people there are in the segment and where they are. Otherwise there is no possibility of knowing how big the market is going to be. 3

Marketers use demographics characteristics frequently because they are closely related to consumers product needs and purchasing behavior and because of this they can readily measured. Such information than age or sex can be obtained through observation or questioning. And it is often important to know such information. For example the variable ‘sex’ segments a number of markets like clothes, deodorants and magazines. 3 Wilson, R./ Gilligan, C. (1997-second Edition), Strategic Marketing Management, page 275

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