Basis of Segmentation

Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms (Haworth Series in Segmented, Targeted, and Customized Market)The first step in developing a segmentation strategy is to identify the basis on which the market segmentation is done. There are eight categories of customer characteristics that form the basis for segmentation. The categories are:

1.Geographic segmentation: The market is divided according to the location. The classification is based on the assumption that people living in the same area share similar habits and wants. However, there’s a difference in the purchasing patterns of the consumer living in urban, semi-urban, and rural areas. For instance, as an Electrolux dealer, having a showroom in Hyderabad, you can advertise your company in and around Hyderabad via local newspapers, TV, radio, and other magazines.

On the basis of geographical spread, advertising can be classified as (a) national, (b) local and (c) global.

  • National Advertising: Some manufacturers may think that their target is the entire country. They select media with a countrywide base. Generally large, established firms belong to this category. Among them are Hindustan Lever, Brooke Bond, Larsen & Toubro, Escorts, Associated Cement Companies and the like.
  •  Local Advertising: Small firms may like to restrict their business to State or regional level. Some firms first localize their marketing efforts and once success has been achieved, they spread out to wider horizons. A classic example ‘is Nirma washing powder, which initially was sold in Gujarat and subsequently entered the other markets. Retail stores also undertake local advertising the area to be covered would generally be a city or a town and media would be selected t principally relates to that area. In recent years, several magazines have appeared which focus on a particular city and are of direct relevance to its inhabitants like the Bombay and Iskl11d.

Sometimes large firms may also go in for local advertising, e.g., when they undertake pretest of a product, especially consumer product in selected areas before embarking promotional campaign on a national level.

  • Global Advertising: Multinational firms treat the world as their market. Firms like National, IBM or Sony or Ford advertise globally, e.g., in periodicals like Times, Reader’s Digest.

However, with the increase in the popularity of the television and satellite communications, marketers strongly believe that the geographic segmentation can be replaced by a single global marketing strategy.

2. Demographic segmentation: The segmentation is based on characteristics like age, sex, marital status, income, occupation, and education. It’s the most accessible and cost-effective way to identify your target market.

3. Psychological/psycographic segmentation: Psychological characteristics refer to the inner qualities of a person. For instance, consumers are divided on the basis of their needs and motivations, personality, perceptions, learning, level of involvement, and attitudes.

As an executive dealer you can provide a questionnaire to the people residing in the area with questions like: Do you like book reading or not? How often you go out for movies and picnics? What channels do you prefer watching etc. Depending on these questions you can segment the consumers and offer products that matches their lifestyle.

4. Sociocultural segmentation: This is another basis for segmentation. Markets are divided depending on factors like family life cycle, social class, cultural values, and cross-cultural affiliations. Culturally distinct segments offer excellent growth avenues for marketers. However, care should be taken while advertising the products. For instance, if you are selling the Whirlpool refrigerator with the ‘instant cool’ feature, sell it as a means of convenience for a workingwomen family. However, the same should appeal as a ‘status symbol’ for the upper class.

5. Use-Related segmentation: It’s the most popular method of segmentation. Consumers are divided into different categories depending on the product, service, or brand usage characteristics like the rate of usage (consumers are divided depending on the number of times they use a product); Awareness status (Consumers are divided based on their knowledge level of a product. For instance, if a consumer instantly recalls all the features and models available/ yet to be launched in the market, his awareness level is high); and brand loyalty.

6. Usage-Situation Segmentation: This classification is based on the products/ services that the consumer uses depending on the situation. For instance, if you buy red roses to your wife on her birthday, you fall under one category.

7. Benefit-segmentation: The market is divided into segments depending on the benefits of the products. This sort of segmentation is used to communicate the product features to consumers. For instance, Bausch and Lomb advertises its disposable lenses as a form of convenience.

8. Hybrid segmentation: Instead of sticking to one particular segmentation style, marketers combine one or two segmentation variables and arrive at another segmentation. This style is referred to as Hybrid segmentation.