Segmentation criteria begin by identifying all potential buyers of the product. That is, people who have the need and the means to buy what the market offers. In most cases, this is a large collection of people or organizations that are similar in some respects but different in many other ways. This is a process that helps marketers focus their attention on the most promising groups in this universe.
There is no single right criterion for segmentation of goods. Determining the target consumer base can be performed using various methods. Several common criteria and methods for market segmentation are discussed below. Marketers can use a combination of these methods to better understand the target market and the customers they want to serve. In fact, good employees usually try different combinations to find out which approach is most successful. As people and their needs change, effective criteria for market segmentation can also evolve over time.
Geographic process
Segmentation criteria - countries, states, regions, cities, quarters or postal codes. They determine the geographical processes of the market. The concept is the oldest basis for segmentation. Regional differences in consumer tastes for products are well known, such as a tendency to barbecue in southern Russia or preferences for a healthy menu in the Leningrad Region. Geographic criteria for market segmentation of goods suggest that in areas exposed to rain, things such as raincoats, umbrellas and rubber boots can be sold. And in hot regions - summer clothes.
Geographic criteria for market segmentation are easily identifiable, and usually large amounts of data are available thanks to them. Many companies simply do not have the resources to expand beyond local or regional zones, so they should focus only on this one segment. Marketing efforts are minimized, as the product and supporting actions, such as advertising, physical distribution and repair, can be directed to the client. In addition, geography provides a convenient organizational structure. Products, sellers, and distribution networks can be organized around a central specific location.
The disadvantages of using the basic criteria for market segmentation also deserve attention. There is always the possibility that consumer preferences are not dictated by location - other factors, such as ethnicity or income, may be more important. For example, a stereotypical Siberian is difficult to find in Tyumen, where a third of the population immigrated to earn money. Another problem is that geographical areas can be identified as very large locations. The participants in the process may be too heterogeneous to be considered a significant target audience.
Demographic component, signs and criteria of market segmentation
Demographics are statistics that describe various characteristics of a population. This segmentation consists of dividing the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, ethnicity and nationality. It is demographic segmentation criteria that are one of the most popular bases for dividing customer groups. This is due to the fact that the data are plentiful. And consumer market segmentation criteria are often closely related to these variables.
For example, the youth market (from about five to thirteen years old) affects not only how parents spend money, but also how children shop on their own. Manufacturers of products such as toys, records, snacks and video games have developed promotions aimed at this group. Adolescents are children aged ten to fourteen who discover what it means to be a consumer and form the attitude and perception of the brand that they will carry with them as they grow older and increase their purchasing power. The market for the elderly (sixty-five years of age and older) is becoming increasingly important for manufacturers of goods such as cheap housing, cruises, hobbies and healthcare.
The stage of life is another demographic trait related to age, gender and marital status. There is evidence that people go through predictable patterns of behavior related to the buying movement. For example, a young couple with one small child has completely different shopping needs than retirees at the age of fifty or single middle-aged professors.
Income is perhaps the most common demographic basis for the criterion of segmentation of consumer goods, since it indicates who a particular person can or cannot afford. For example, it is reasonable to assume that people who receive the minimum wage cannot easily buy a sports car for $ 80,000. Income is especially useful as input to the main criteria for market segmentation, as the price of a product increases. It can also help in understanding certain types of buying behavior, for example, the most prone to use coupons.
Similarly, other demographic characteristics may influence other criteria for consumer segmentation.
Despite the obvious advantages of this process (i.e., low cost and ease of implementation), there is uncertainty about its effectiveness. The method may not be used for its intended purpose. For example, one can say that a typical Thai food consumer is under thirty-five years old, has a college degree, earns more than $ 10,000 a year, lives in a suburb of a small community in the West. Although these characteristics may describe a typical Thai food consumer, they also describe many other consumer segmentation criteria. And they can draw too wide or inaccurate portrait of the prospective buyer. When the selection is too wide, it loses its defining characteristics and therefore does not allow to differentiate the target segment from the population as a whole.
Psychographic component
Such criteria for segmentation of the consumer goods market are divided in accordance with the general characteristics of their lifestyle, personality, attitude and social class. Available data indicate that the attitude of potential buyers to certain products affects their subsequent acquisition. If people with a similar attitude can be isolated, they represent an important psychological segment. Touching can be defined as a predisposition to behave in a programmed way in response to a given stimulus.
Segmentation criteria for consumer markets are defined as long-term characteristics and human behavior that establish how they cope with their environment and respond to it. The consumption of certain products or brands is related to the individuality of the consumer. For example, people who are at risk are attracted to extreme sports and travel, and extroverts tend to dress visibly.
Segmentation of a social class identifies people based on a combination of socio-economic factors, such as education, profession, income, marital status, and attitudes related to these points.
Another view
Signs and criteria for lifestyle segmentation relate to the orientation that a person or group has to eat products, work and play. And they can be defined as a model of relationships, interests and opinions supported by a person. Lifestyle segmentation has become very popular among marketers because of the availability of consumer data, measuring instruments and tools, as well as the intuitive categories that arise from this process. Mostly manufacturers orient versions of their products and advertising on various segments of their lifestyle.
Analysis usually begins with questions about the activities, interests and opinions of the consumer. If a woman earns $ 100,000-150,000 a year as a leader, is married and has two children, what does she think of her role as a professional, wife and mother? How does she spend her free time? What groups does it belong to? What is she reading? How does she use electronic devices? What brands does she prefer and why? AIO stocks (activities, interests, opinions) reveal huge volumes of information regarding the relationship to product categories, brands, and user characteristics.
In general, psychographic segmentation tends to focus on how people spend their money. Their models of work and leisure, their main interests, opinions on social and political problems, institutions and themselves. Although the process can create intuitive groupings and useful information about consumer behavior, it can also require significant research and effort to formulate a more complex and detailed approach to determining criteria for market segmentation.
Behavioral system
Consumers are divided into groups according to the common actions that they share. Typically, this behavior is related to their knowledge, attitude, use or reaction to the product.
The most common type of behavioral segmentation is the user process. In 1964, a market researcher Twedt made one of the earliest departures from the demographic system when he suggested that an intensive or frequent consumer is an important foundation. He wanted product consumption to be measured directly in order to determine levels of use. Thus, promotion should be directed directly to the intensive user. This approach has since become very popular. Significant research has been conducted on people who purchase various products. The results show that the search for other characteristics that correlate with level of use often significantly increases marketing efforts.
Other behavioral bases for market segmentation include the following, which are described below.
User status
If you look not only at active buyers, it can be useful to identify segments based on a wider range of application patterns, such as, for example, disposable consumers. Mobile service providers are exploring usage patterns to create optimal plans and targeting based on specific sets of user needs - family, individual plans, unlimited conversations, etc.
Manufacturers of new cars have become very sensitive to the need to provide buyers with a lot of useful information after the sale in order to minimize unhappiness after the purchase.
Acquisition case
This approach consists in trying to determine the reason for purchasing the product and the way to use it. For example, airlines, as a rule, divide customers into segments depending on the motives of the passenger’s trip - business versus personal travel. Someone traveling on business usually has different needs, unlike someone traveling for pleasure. Business people tend to be less price sensitive and pay more attention to timing, location and convenience.
Loyalty
With this approach, consumers fall into the categories of promotion depending on their purchase models of certain brands. The key criterion for segmenting the service market is a brand-loyal consumer. Companies suggest that if they can identify people who prefer a particular firm and then identify their similarities, they will find the perfect target market. There is still high uncertainty about the most reliable way to measure brand loyalty.
Readiness
This segmentation assumes that potential customers can be segmented depending on how they are ready to purchase a product:
- they don’t know;
- knowledgeable;
- informed;
- interested;
- wish;
- intend to buy.
Using this approach, the marketing manager can develop an appropriate market strategy to go through the various stages of readiness. These steps are rather vague and difficult to measure accurately. But willingness can be a useful lens for understanding the customer’s thinking and how to push them to purchase, especially when a learning process is required before purchasing.
Decision maker segmentation
This approach groups people according to who makes the purchase decision in an organization or household. Usually there is a “main consumer”: a person who makes the final decision on what to purchase and allocates a budget. Many of the plans also involve "influential people." These are people who do not make the final purchase decision, but can influence the choice of products.
For example, in families, small children can influence whether a parent buys Cheerios, Chex, or Fruit Loops. In companies, the department manager may be the main consumer of the software product. But this employee’s working group can influence choices, helping to evaluate options to determine which one best suits their needs. Segmentation by the role of decision making helps marketers understand who really matters in the buying process, and figure out which one is most important.
Additional process
All of the above approaches to segmentation are applicable to consumer markets. There is much in common between the behavior of an ordinary buyer and a business consumer. And therefore, similar fundamentals and variables apply. Common business segmentation approaches include:
- Organization size - separation by large, medium and small customers by income, number of employees, global reach, etc.
- Geography: Organizing segments based on location.
- Industry - segmentation by the sector in which the organization operates, for example, manufacturing, retail, hospitality, education, technology, healthcare, government, professional services, etc.
- User status - the frequency of use of volume, loyalty, durability. Products that are already in use, willingness to buy, etc. For example, long-standing regular customers with “strategic” relationships are often treated differently and receive preferred terms compared to new customers.
- Required benefits - grouping by common elements that they are looking for in the product, or shopping experience.
- End use - identifying segments based on how they plan to use the product and where it fits into their operations and supply chain. For example, a motor manufacturer has learned that customers operate engines at different speeds. After visiting the field and confirming these applications, he decided to divide the market into slow and high-speed segments. In the first industry, the manufacturer singled out a product at a competitive price with an advantage in service, and in the second case, excellence.
- Procurement Approaches - Market organization according to how corporations prefer to shop. These preferences, in turn, determine how the seller builds relationships with the buyer and works on the transaction.
The set of several bases
Marketers may find it most useful to combine the various fundamentals for segmentation to create a more complete picture of their target market. For example, the geocluster approach combines demographic data with geographic data to create a more accurate profile of a particular consumer. The second paragraph, combined with behavioral information, can indicate to companies where customers are clustered, demonstrating an action that makes them a good target for the company's product. .
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