Table

Major Segmentation Variables for Consumer Markets

Geographic

World region or country Country region City or metro size

Density Climate

Demographic

Age Gender Family size Family life cycle

Income

Occupation

Education

Religion Race

Generation Nationality

Psychographic

Western Europe, Middle East, Pacific Rim, China, India, Canada, Mexico, North America East Asia, South Asia, North Asia

Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-4,000,000; over 4,000,000

Urban, suburban, exurban, rural

Northern, southern

Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+ Male, female 1-2, 3-4, 5+

Young, single; married, no children; married with children; single parents; unmarried couples; older, married, no children under 18; older, single; other

Under $20,000; $20,000-$30,000; $30,000-$50,000; $50,000-$100,000; $100,000-$250,000; $250,000 and over

Professional and technical; managers, officials, and proprietors; clerical; sales; craftspeople; supervisors; farmers; retired; students; homemakers; unemployed

Primary school or less; some secondary school; secondary school graduate; some college; college graduate

Jewish, Muslim, Hindu, Buddhist, other

Asian, Hispanic, Black, White

Baby boomer. Generation X, Millennial

South American, British, French, German, Italian, Japanese

Social class

Lifestyle

Personality

Behavioral

Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers

Achievers, strivers, survivors

Compulsive, gregarious, authoritarian, ambitious

Occasions

Benefits

User status

User rates

Loyalty status

Readiness stage

Attitude toward product

Regular occasion; special occasion; holiday; seasonal Quality, service, economy, convenience, speed Nonuser, ex-user, potential user, first-time user, regular user Light user, medium user, heavy user None, medium, strong, absolute

Unaware, aware, informed, interested, desirous, intending to buy Enthusiastic, positive, indifferent, negative, hostile

Geographic segmentation

Dividing a market into different geographical units such as nations, provinces, regions, parishes, cities, or neighborhoods.

Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, provinces, parishes, cities, or even neighborhoods. A company may decide to operate in one or a few geographical areas, or to operate in all areas but pay attention to geographical differences in needs and wants.

Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods. For example, one consumer-products company ships additional cases of its low-calorie snack foods to stores in neighborhoods near Weight Watchers (weight loss) clinics. Citibank offers different mixes of branch banking services depending on neighborhood demographics. And the ice-cream maker Baskin-Robbins practices what it calls "three-mile marketing/' emphasizing local events and promotions close to its local store locations. On a global scale, video game companies create different versions of their games depending on the world region in which the game is sold. For example, Capcom sells its Resident Evil series as Biohazard worldwide in countries, such as Japan and France, where it is played in local languages.2

Other companies are seeking to cultivate as-yet-untapped geographic territory. For example, many large companies are fleeing the fiercely competitive major cities and suburbs to set up shop in smalltowns. The home-improvement store Home Depot, for instance, is getting ready to unveil a junior version of its stores, roughly half the size of a regular store. These stores, geared toward small markets and vacation areas that can't support a full-size store, are designed to offer a more intimate neighborhood hardware store setting. "We think there's a tremendous opportunity in smaller markets where it's harder to find land for a full-size store, and where they don't need a full-size store," says a Home Depot executive.3

In contrast, other retailers are developing new store concepts that will give them access to higher-density urban areas. For example, Tesco has been complementing its superccnters by opening small, supermarket-style Fresh & Easy Neighborhood Market grocery stores in markets where full-size stores are impractical.4

Demographic segmentation

Dividing the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.

Age and life-cycle segmentation

Dividing a market into different age and life-cycle groups.

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables. Even when marketers first define segments using other bases, such as benefits sought or behavior, they must know segment demographic characteristics in order to assess the size of the target market and to reach it efficiently.

Age and Life-Cycle Stage. Consumer needs and wants change with age. Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups. For example, for kids, Oscar Mayer offers Lunchables, full of fun, kid-appealing finger food. For older generations, it markets Deli Creations, everything they need to create a "hot and melty fresh-baked sandwich in a microwave minute."

Similarly, whereas HP targets adult buyers with its "The Computer Is Personal Again" campaign, along with Sunday circular ads featuring price and value, it has developed a special "Society for Parental Mind Control" campaign targeting teenagers. Research shows that although parents are the predominant buyers of computers, teens are key recom-menders. "It's such an old story, but kids are the arbiters of cool," says one analyst. So HP wants to raise its teen cool quotient. The teen-targeted campaign uses mostly online and viral media. For example, teens can click on to the "Society for Parental Mind Control" site to pick up "fun, new ways to get a sweet computer out of your parents."5

Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation. Although some 80-year-olds fit the doddering stereoypes, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families. Thus, age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power. Companies marketing to mature consumers usually employ positive images and appeals. For example, take the cruise industry, which heavily targets baby boomers at all life stages. One Carnival Cruise Lines ad for its Fun Ships features an older adult and child riding waterslides, stating "Fun has no age limit."

Gendered Child Advertisement

Gender. Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. For example, Procter & Gamble was among the first with Secret, a brand specially formulated for a woman's chemistry, packaged and advertised to reinforce the female image. More recently, many mostly women's cosmetics makers have begun marketing men's lines. Nivea markets Nivea for Men, "an advanced line of enriching skincare and soothing aftershave products specially designed for the active, healthy men's lifestyle," and offers a four-step guide to perfect men's care.

A neglected gender segment can offer new opportunities in markets ranging from motorcycles to guitars. For example, 10 years ago, 96 percent of guitars were purchased by and for men. A Daisy Rock Guitars, The Girl Guitar Company, is changing that statistic one guitar at a time. Starting with a daisy-shaped guitar with a leafy headstock, Daisy Rock now offers a complete line of smaller, lighter, professional-quality guitars with fun shapes and glossy finishes geared toward women. Guitars range from girly butterfly, heart, and daisy shapes for younger girls to glossy red, black, purple, and pink guitars for women. Daisy Rocks sales have doubled each year since the company was founded in 2000, last year reaching $2.4 million.6

A Gender segmentation: Daisy Rock offers a complete line of smaller, lighter, professional-quality guitars with fun shapes and glossy finishes geared toward women.

Gender segmentation

Dividing a market into different groups based on gender.

Income segmentation

Dividing a market into different income groups.

Income. The marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel have long used income segmentation. Many companies target affluent consumers with luxury goods and convenience services. For example, for a price, luxury hotels provide amenities to attract specific groups of affluent travelers, such as families, expectant moms, and even pet owners:7

At the Four Seasons Hotel Chicago, guests can buy the Kids in the City package for $520 a night and, among other things, enjoy a visit in their room from the Ice Cream Man, who arrives with all the fixings to make any concoction they desire. At one spa in Scottsdale, in the U.S. state of Arizona, expectant parents can purchase the "Bundle of Joy" Babymoon package, which includes a 24-hour Cravings-Chef service, a couples massage, and breakfast in bed. The Benjamin Hotel in New York City provides dog beds in a variety of styles and doggie bathrobes, as well as canine room service and DVDs for dogs. And if that isn't decadent of enough, how about dropping $100,000 for an extravagant weekend in Vegas? A At The Ritz-Carlton, Lake Las Vegas in Henderson, in the U.S. state of Nevada, the Love at Lake Las Vegas weekend package includes two nights in the 2,400 square foot presidential suite, helicopter and gondola rides, a champagne-tasting party on a yacht complete with rose petals strewn about and a string trio, use of a luxury car throughout the stay, in-room couples spa treatment, a $5,000 casino line of credit, a $50,000 shopping spree at Neiman Marcus, 14 dozen roses, and a butler-drawn Cristal champagne bath.

A Marketing to the affluent: For only $100,000, you can experience an extravagant Love at Lake Vegas weekend at The Ritz-Carlton, Lake Las Vegas in the city of Henderson, in the U.S. state of Nevada. It includes a $50,000 shopping spree at Neiman Marcus.

Psychographic segmentation

Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

Behavioral segmentation

Dividing a market into groups based on consumer knowledge, attitudes, uses, or responses to a product.

Occasion segmentation

Dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.

Benefit segmentation

Dividing the market into groups according to the different benefits that consumers seek from the product.

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However, not all companies that use income segmentation target the affluent. For example, many retailers—such as pound and dollar stores—successfully target low- and middle-income groups. The core market for such stores is families with incomes under $30,000. When real-estate experts scout locations for new pound and dollar stores, they look for lower-middle-class neighborhoods where people wear less-expensive shoes and drive old cars that drip a lot of oil.

With their low-income strategies, stores such as these have become fast growing retailers. They have been so successful that giant discounters are taking notice. For example, Target has installed a dollar aisle—the "1 Spot"—in its stores. And supermarkets are launching "10 for $10" promotions. Some experts predict that, to meet the dollar store threat, Wal-Mart will eventually buy one of these chains or start one of its own.8

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeups.

In Chapter 5, we discussed how the products people buy reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals. For example, the shoemaker Rockport advertises that its shoes "are meant for a special occasion. It's called life. Live in Rockport." The ads feature people in everyday activities, conveying the wearable nature of Rockport shoes and how they fit into many lifestyles.

Marketers also use personality variables to segment markets. For example, cruise lines target adventure seekers. Royal Caribbean cruise line appeals to high-energy couples and families with hundreds of activities such as rockwall climbing and ice skating. Its commercials, set to the musician Iggy Pop's "Lust for Life," tells them that "this is more than a cruise" and orders them to "get out there." By contrast, the Regent Seven Seas Cruise Line targets more serene and cerebral adventurers, mature couples seeking a more elegant ambiance and exotic destinations, such as the Orient. Regent invites them to come along as "luxury goes exploring."9

Behavioral Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments.

Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation can help firms build up product usage. For example, most consumers drink orange juice in the morning but orange growers have promoted drinking orange juice as a cool, healthful refresher at other times of the day. By contrast, Coca-Cola's "Good Morning" campaign attempts to increase Diet Coke consumption by promoting the soft drink as an early morning pick-me-up.

Some holidays, such as Mother's Day and Father's Day, were originally promoted partly to increase the sale of candy, flowers, cards, and other gifts. And many marketers prepare special offers and ads for holiday occasions. For example, A Peeps creates different shaped sugar-and-fluffy-marshmallow treats for Easter, Valentine's Day, Halloween, and Christmas, when it captures most of its sales, but advertises that Peeps are "Always in Season" to increase the demand for nonholiday occasions.

Benefits Sought. A powerful form of segmentation is to group buyers according to the different benefits that they seek from the product. Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

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A Occasion segmentation: Peeps creates different shaped marshmallow treats for special holidays when it captures most of its sales but advertises that Peeps are "Always in Season" to increase the demand for non-holiday occasions.

Champion athletic wear segments its markets according to benefits that different consumers seek from their activewear. For example, "Fit and Polish" consumers seek a balance between function and style—they exercise for results but want to look good doing it. "Serious Sports Competitors" exercise heavily and live in and love their activewear—they seek performance and function. By contrast, "Value-Seeking Moms" have low sports interest and low activewear involvement—they buy for the family and seek durability and value. Thus, each segment seeks a different mix of benefits. Champion must target the benefit segment or segments that it can serve best and most profitably, using appeals that match each segment's benefit preferences.

User Status. Markets can be segmented into nonusers, ex-users, potential users, firsttime users, and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users.

Included in the potential user group are consumers facing life-stage changes—such as newlyweds and new parents—who can be turned into heavy users. For example, upscale kitchen and cookware retailer Williams-Sonoma actively targets newly engaged couples. Eight-page ad inserts in bridal magazines show a young couple strolling through a park or talking intimately in the kitchen over a glass of wine. The bride-to-be asks, "Now that I've found love, what else do I need?" Pictures of Williams-Sonoma knife sets, toasters, glassware, and pots and pans provide some strong clues. The retailer also offers a bridal registry, of course. But it plans to take its registry a step further next year. Through a program called "The Store Is Yours," it will open its stores early, by appointment, exclusively for individual couples to visit and make their wish lists. This segment is very important to Williams-Sonoma. About half the people who register are new to the brand—and they'll be buying a lot of kitchen and cookware in the future.10

Usage Rate. Markets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. For example, Burger King targets what it calls "Super Fans," young (age 18 to 34), Burger-eating males who make up 18 percent of the chain's customers but account for almost half of all customer visits. They eat at Burger King an average of 16 times a month.11 Burger King targets these Super Fans openly with ads that exalt huge burgers containing meat, cheese, and more meat and cheese.

Loyalty Status. A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Axion), stores (Carrefour), and companies (Toyota). Buyers can be divided into groups according to their degree of loyalty. Some consumers are completely loyal—they buy one brand all the time. A For example, Apple Computer has an almost cultlike following of loyal users:12

There are Mac users—folks who happen to own a Mac and use it for e-mailing, blogging, browsing, buying, and social networking. Then there are the Apple diehards—the Mac fanatics who buy Apple products and accessories that maximize their Mac lives. Some of these zealots buy two iPhones—one for themselves and the other just to take apart, to see what it looks like on the inside, and maybe, just to marvel at Apple's ingenious ability to cram so much into a tight little elegant package. These Mac fanatics (also called MacHeads or Macolytes) see Apple founder and CEO Steve Jobs as a wizard of technology. Say the word "Apple" in front of Mac fans and they'll go into rhapsodies about the superiority of the brand. Put two MacHeads together and you'll never shut them up. "The Mac [comes] not just as a machine in a box, it [comes] with a whole community," notes one observer. Such fanatically loyal users helped keep Apple afloat during the lean years, and they are now at the forefront of Apple's burgeoning iPod and iTunes empire.

Consumer loyalty: "Mac fanatics"—fanatically loyal Apple Computer users—helped keep Apple afloat during the lean years, and they are now at the forefront of Apple's burgeoning iPod and iTunes empire.

Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. Still other buyers show no loyalty to any brand. They either want something different each time they buy or they buy whatever's on sale.

A company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers. For example, by studying Mac fanatics, Apple can better pinpoint its target market and develop marketing appeals. By studying its less-loyal buyers, the company can detect which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses.

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Using Claritas's PRIZM NE system, marketers can paint a surprisingly precise picture of who you are and what you might buy. PRIZM NE segments carry such exotic names as "Kids & Cul-de-Sacs," "Gray Power," "Blue Blood Estates," "Shotguns & Pickups," and "Bright Lites L'il City."

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, better-defined target groups. Thus, a bank may not only identify a group of wealthy retired adults but also, within that group, distinguish several segments based on their current income, assets, savings and risk preferences, housing, and lifestyles.

Several business information services—such as Claritas, Experian, Acxiom, and Maplnf o—provide multivariable segmentation systems that merge geographic, demographic, lifestyle, and behavioral data to help companies segment their markets down to zip codes, neighborhoods, and even households. One of the leading segmentation systems is the PRIZM NE (New Evolution) system by Claritas. A PRIZM NE classifies households based on a host of demographic factors—such as age, educational level, income, occupation, family composition, ethnicity, and housing—and behavioral and lifestyle factors—such as purchases, freetime activities, and media preferences.

For example, PRIZM NE classifies U.S. households into 66 demographically and behav-iorally distinct segments, organized into 14 different social groups. PRIZM NE segments carry such exotic names as "Kids & Cul-de-Sacs," "Gray Power," "Blue Blood Estates," "Mayberry-ville," "Shotguns & Pickups," "Old Glories," "Multi-Culti Mosaic," "Big City Blues," and "Bright Lites L'il City." The colorful names help to bring the clusters to life.13

PRIZM NE and other such systems can help marketers to segment people and locations into marketable groups of like-minded consumers. Each cluster has its own pattern of likes, dislikes, lifestyles, and purchase behaviors. For example, "Blue Blood Estates" neighborhoods, part of the Elite Suburbs social group, are suburban areas populated by elite, super-rich families. People in this segment are more likely to own an Audi A8, take a ski vacation, shop at upscale stores, and read the magazine Architectural Digest. In contrast, the "Shotguns & Pickups" segment, part of the Middle America social group, is populated by rural blue-collar workers and families. People in this segment are more likely to go hunting, buy hard rock music, drive a Dodge Ram, watch the Daytona 500 on TV, and read North American Hunter.

Such segmentation provides a powerful tool for marketers of all kinds. It can help companies to identify and better understand key customer segments, target them more efficiently, and tailor market offerings and messages to their specific needs.

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As with any web site, SaleHoo has a number of features that will help you in buying products from around the world. Once you have an account on SaleHoo, which only costs a one-time fee, you can establish up to twenty named searches for products. After that, any time those items become available, you’ll be alerted.

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