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Leg 2 from Lisbon to Cape Town. Theme 1: Segmentation Consumer Markets. Part 7.

Hello!!! We will continue today with the topic I promised from yesterday. Let´s start because we have a lot to cover today.

Bases for segmentation and the 4 main categories to identify and segment consumer markets: Behavioristic, geographic, demographic and psychographic.

How to segment markets? How can we segment our markets so that tailor-made strategies can be developed? “Unfortunately, segmentation is an art rather than a science”.  Professor Kotler said, “It takes a lifetime to master the art of marketing”. I can share my knowledge with you on this website, but many things I have learned have been through life experiences and I won´t stop learning from them until God wishes to grant me life. I just know we are always a work in progress.

getting back to basics.jpgThe society has evolved through several disruption events lately, and in segmentation themes, the new advancement in communications and technology have given us more options to understand our markets. Now the information of your future or current customers is at your fingertips whenever you wish, wherever you wish and using the data analytics tools.  For the purpose of this blog, I will stick to the basics. I always find refuge in my teacher´s lessons: “when in complex and innumerable options, always go back to the basics”.  Of course, you will find sophisticated practitioners who will give you other knowledge material, but it is not my role to complicate the “art of segmentation”. 

How to segment markets?

The bottom line task is to find the variables or variables, which split the market into actionable segments.  The concept of shared characteristics is critical to market segmentation.

Consumers leave “footprints in the sand” based on their needs, wants, behavior, mental files, etc. The footprints are signs of where they live and work, what they buy and how they spend their leisure time. If we follow these footprints, we can define groups of consumers with similar footprints. The goal is to find the particular niche or space in the market where we will sell our products and services. The characteristics are grouped into 4 categories to identify and segment consumer markets: (1). Behavioristic Segmentation, (2). Geographic segmentation, (3). Demographic segmentation and (4). Psychographic segmentation.

Bases for customer segmentation

1.Behavioristic Segmentation

The Behavioristic Segmentation is one of the best ways to organize consumer markets by purchase behavior. Behavioral segments are determined by many variables, but the most important categories I have read in several books and sources used are user status, usage rate, decision roles, purchase occasion, benefits sought, buyer readiness stage, attitudes, loyalty status and multiple bases. These categories tell us who our customers are, when and why they buy and how much they consume.

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If you wish to download the Behavioristic Segmentation slides click here: Eliescalante Segmentation Theme 1. Behavior Segmentation

2.Geographic segmentation

One simple way to segment markets is by geography. People in one region of the country (or the world) have needs, wants and purchasing habits that differ from those in other regions. People, who live by the coast, will buy more seafood for their quotidian diet, than people who live in the mountains.  People who live in the central American tropics may use light fabric clothing and colorful designs, compared to the people who live in cold weather countries where they use neutral or dark colors. Marketers analyze geographic data studying sales by region, country size, city size, specific locations and type of stores or distribution channels.

There is a growing trend called grassroots marketing, such activities concentrate on getting as close and personally relevant to individual customers as possible.

In the USA, there are specialized companies, which have made the geographic-demographic segmentation easier. Nielsen Claritas has developed a geo-clustering approach called PRIZM (Potential Rating Index by Zip Markets). PRIZM classifies over half a million U.S. residential neighborhoods into 14 distinct groups and 66 distinct lifestyle segments called PRIZM Clusters. The groupings take into consideration 39 factors in five broad categories: (1) education and affluence, (2) family life cycle, (3) urbanization, (4) race and ethnicity, and (5) mobility. The neighborhoods are broken down by zip code or census tract and block group. The clusters have descriptive titles such as Blue Blood Estates, Winner’s Circle, Hometown Retired, Shotguns and Pickups, and Back Country Folks.

examples of PRIZM Clusters.jpg

The inhabitants of a cluster tend to lead similar lives, drive similar cars, have similar jobs, and read similar magazines. Marketers can use PRIZM to answer questions such as: Which geographic areas (neighborhoods or zip codes) contain our most valuable customers? How deeply have we already penetrated these segments? Which distribution channels and promotional media work best in reaching our target clusters in each area? Geoclustering captures the increasing diversity of the U.S. population. For more information visit Nielsen website.  If you live in another part of the world, rely on your marketing specialists, they will give you an overview of how they segment geographically for your country.

3.Demographic Segmentation

Demographics refer to a population´s statistical characteristic as sex, age, ethnicity, education, occupation, income and other quantifiable factors. As people grow older, their responsibilities and incomes change, and so do their interests in various product categories. In demographic segmentation, we divide the market on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. Here is how marketers have used these demographic categories to segment markets.

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If you wish to download the Demographic Segmentation material, click here: Eliescalante Segmentation Theme 1. Demographic Segmentation

4.Psychographic Segmentation

“For certain products, customers are more likely to be swayed by appeals to their emotions and cultural values. The psychographics variables are their values, attitudes, personality, and lifestyle. This segmentation views people as individuals with feelings and tendencies. One classification system VALS  (Values and Lifestyles)  originated by Stanford Research Institute, now SRI International was quickly adopted by everyone in the 1990s. The VALS has been updated over time”.

One of the most popular commercially available classification systems based on psychographic measurements is Strategic Business Insight’s (SBI) VALS™ framework. The main dimensions of the VALS segmentation framework are consumer motivation (the horizontal dimension) and consumer resources (the vertical dimension). Consumers are inspired by one of three primary motivations: ideals, achievement, and self-expression. Those primarily motivated by ideals are guided by knowledge and principles. Those motivated by achievement look for products and services that demonstrate success to their peers. Consumers whose motivation is self-expression desire social or physical activity, variety, and risk. Personality traits such as energy, self-confidence, intellectualism, novelty seeking, innovativeness, impulsiveness, leadership, and vanity—in conjunction with key demographics—determine an individual’s resources. Different levels of resources enhance or constrain a person’s expression of his or her primary motivation.

Psychographic Segmentation VALS Eliescalante 5

The four groups with higher resources are:

  1. Innovators—Successful, sophisticated, active, “take-charge” people with high self-esteem. Purchases often reflect cultivated tastes for relatively upscale, niche-oriented products and services.
  1. Thinkers—Mature, satisfied, and reflective people motivated by ideals and who value order, knowledge, and responsibility. They seek durability, functionality, and value in products.
  1. Achievers—Successful, goal-oriented people who focus on career and family. They favor premium products that demonstrate success to their peers.
  1. Experiencers—Young, enthusiastic, impulsive people who seek variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment, and socializing.

The four groups with lower resources are:

  1. Believers—Conservative, conventional, and traditional people with concrete beliefs. They prefer familiar, U.S.-made products and are loyal to established brands.
  1. Strivers—Trendy and fun-loving people who are resource-constrained. They favor stylish products that emulate the purchases of those with greater material wealth.
  1. Makers—Practical, down-to-earth, self-sufficient people who like to work with their hands. They seek U.S. local made products with a practical or functional purpose.
  2. Survivors—Elderly, passive people concerned about change and loyal to their favorite brands.

This is all for today. Tomorrow we will cover the last topic of this outline: Criteria for Segmentation and we will finally do a wrap up of this theme Segmentation Customer Markets. The race continues….

Source References:

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