A company that practices segment marketing recognizes that buyers differ in their needs, perceptions, and buying behaviors. The company tries to isolate broad segments that make up a market and adapts its offers to more closely match the needs of one or more segments. Thus, General Motors has designed specific models for different income and age groups. In fact, it sells models for segments with varied combinations of age and income. For instance, GM designed its Buick Park Avenue for older, higher-income consumers. Marriott markets to a variety of segments – business travelers, families, and others – with packages adapted to their varying needs.
Segment marketing offers several benefits over mass marketing. The company can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best. The company can also market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. The company may face fewer competitors if fewer competitors are focusing on this market segment.
Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race and nationality. Demographic factors are the most popular bases for segmenting customer groups, largely because consumer needs, wants, and usage rates often vary closely with demographic variables. Also, demographic variables are easier to measure than most other types of variables. Even when market segments are first defined using other bases, such as personality or behavior, their demographic characteristics must be known in order to assess the size of the target market and to reach it efficiently.