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5.2: How Markets Are Segmented

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  • Learning Objectives

    1. Understand and outline the ways in which markets are segmented.
    2. Explain why marketers use some segmentation bases versus others.

    Sellers can choose to pursue consumer markets, business-to-business (B2B) markets, or both. Consequently, one obvious way to begin the segmentation process is to segment markets into these two types of groups.

    Different factors influence consumers to buy certain things. Many of the same factors can also be used to segment customers. A firm will often use multiple segmentation bases, or criteria to classify buyers, to get a fuller picture of its customers and create real value for them. Each variable adds a layer of information. Think of it as being similar to the way in which your professor builds up information on a PowerPoint slide to the point at which you are able to understand the material being presented.

    There are all kinds of characteristics you can use to slice and dice a market. “Big-and-tall” stores cater to the segment of population that’s larger sized. What about people with wide or narrow feet, or people with medical conditions, or certain hobbies? Next, we look primarily at the ways in which consumer markets can be segmented. Later in the chapter, we’ll look at the ways in which B2B markets can be segmented.

    Types of Segmentation Bases

    Table 5.1 “Common Ways of Segmenting Buyers” shows some of the different types of buyer characteristics used to segment markets. Notice that the characteristics fall into one of four segmentation categories: behavioral, demographic, geographic, or psychographic. We’ll discuss each of these categories in a moment. For now, you can get a rough idea of what the categories consist of by looking at them in terms of how marketing professionals might answer the following questions:

    • Behavioral segmentation. What benefits do customers want, and how do they use our product?
    • Demographic segmentation. How do the ages, races, and ethnic backgrounds of our customers affect what they buy?
    • Geographic segmentation. Where are our customers located, and how can we reach them? What products do they buy based on their locations?
    • Psychographic segmentation. What do our customers think about and value? How do they live their lives?

    Table 5.1 Common Ways of Segmenting Buyers

    By Behavior By Demographics By Geography By Psychographics
    • Benefits sought from the product
    • How often the product is used (usage rate)
    • Usage situation (daily use, holiday use, etc.)
    • Buyer’s status and loyalty to product (nonuser, potential user, first-time users, regular user)
    • Age/generation
    • Income
    • Gender
    • Family life cycle
    • Ethnicity
    • Family size
    • Occupation
    • Education
    • Nationality
    • Religion
    • Social class
    • Region (continent, country, state, neighborhood)
    • Size of city or town
    • Population density
    • Climate
    • Activities
    • Interests
    • Opinions
    • Values
    • Attitudes
    • Lifestyles