Market segmentation

3.4 Market segmentation

Segmenting consumers is useful for marketers to better understand the needs, desires, and wants of consumers. In fact, because it is impossible to understand each individual, market segments are designed strategies to discover the needs, wants and desires of specific groups of consumers in order to position and plan the sale of a product according to each segment. Most common variables used to classify consumers include demographic, geographic, psychological and cultural (Solomon et al., 2000). For our purposes, nine major categories in market segmentation are provided by Schiffman and Lazar (2004) which are 1) geographic, 2) demographic, 3) psychological, 4) socio-cultural, 5) use-related, 6) use-situation, 7) benefit, 8) hybrid, and 9) psychographics. In the following these segmentation categories are described in more detail.

Geographic segmentation is used to divide the market by location. The theory behind this strategy is that people who live in the same area share similar needs and wants than those who live in other areas (Schiffman et al., 2008). Within geographic segmentation, cities are the most important unit of analysis to forecast consumption. According to Blackwell et al. (2006), cities are internally segmented in terms of suburbs that have grown rapidly. Today exurbs (areas beyond the suburbs) are experiencing the fastest growth. These areas are neither metropolitan nor rural but are adjacent to suburban or metropolitan areas. A metropolitan statistical area (MSA) is defined as a freestanding metropolitan area surrounded by nonmetropolitan areas and not closely related with other metropolitan areas. A primary metropolitan statistical area (PMSA) is a metropolitan area that is closely related to another city. A grouping of closely related PMSAs is a consolidated metropolitan statistical area (CMSA). Other geographic classifications are regions, states, and cities cited basically in advertising (Blackwell et al., 2006).

Demographic segmentation refers to the use of characteristics such as age, gender, marital status, income, occupation, and education as variables in locating the target market. Thanks to national census data, information on these characteristics is the most accessible. Furthermore, they are easy to measure (Schiffman & Lazar, 2004). In addition, Blackwell et al. (2006) define demographic data as the size, structure, and distribution of population; however, they

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suggest demographics be used as additional variables in forecasting trends in consumer behavior.

Psychological segmentation refers to the inner or intrinsic qualities of people. Thus, psychological and sociological characteristics help to describe how the members of the target market think and feel. Motivation, personality, perceptions, learning, and attitudes are variables studied in this segmentation market (Schiffman et al., 2008). According to Blackwell et al. (2006) analyzing individual differences such as personality, values, and lifestyle provide a better understanding of consumer behavior (Blackwell et al., 2006), as psychoanalytic, sociological and psychological theories are useful in segmentation studies.

Sociocultural segmentation refers to the use of sociological and anthropological variables such as family lifecycle, social class, culture, subculture and religion to provide further bases for market segmentation (Schiffman et al., 2008). For instance, family lifestyle is based on the premise that many families pass through similar phases in their formation, growth, and final dissolution. Thus, among these phases there are specific needs and different usages of products and services. The concept of social class implies a hierarchy in which individuals in the same class generally have a common degree of status, while members of other classes have either higher or lower status. This is one of the reasons explaining why consumers of different social classes have different values, product preferences, and purchase habits. As a consequence, this method is commonly used in marketing and advertising. Within this type of market segmentation variables such as education, occupation, and income are used to establish a measurement index (Schiffman et al., 2008). Marketers use the concepts of culture, and sub-culture to segment domestic and international markets, due to the fact that members of a culture tend to share like values, beliefs, and customs. Thus, cultural and sub-cultural segmentations are used to segment groups of consumers on the basis of cultural heritage.

Use-related segmentation is another form of market segmentation. Within this type of segmentation, consumers can be categorized according to the use of products, brand usage characteristics and, sometimes, by brand loyalty (e.g. segmentation of heavy users, medium users, light users, and non-users). Use-related segmentation is commonly used to create marketing strategies and advertising focused on the differentiation of heavy users from light consumers (Schiffman et al., 2008). For example, Squires et al. (2002) use the concept of

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related segmentation to compare purchase frequency of organic food in New Zealand and Denmark.

Use-situation segmentation is a type of segmentation that consists of recognizing a situation and/or occasion that determines what consumers purchase or consume. Within this segmentation, occasional factors that can influence the purchase of products are analyzed (e.g.

weekday, weekend, disposition of time, place, and occasion). Some examples include Saint Valentine’s day, birthdays, Christmas, etc. In their study about food related lifestyles Grunert et al. (1993) searched for the factors influencing the usage and purchase of food products, that is, if consumption is determined by a social occasion, activity, etc.

Benefit segmentation is another category in segmenting the market, which consists of identifying the most important benefits of products and/or services as the most meaningful to consumers. For instance, features such as healthy, natural, tasty, etc., can be mentioned as benefits of organic products. This type of segmentation can be used in positioning various brands within the same product category (Schiffman et al., 2008).

As stated above, there are several categories in the segmentation of the market; however, in order to pursue precise target groups, hybrid segmentation is commonly used. “Hybrid segmentation refers to the combination of several variables [rather] than the use of only one basis of segmentation” (Schiffman et al., 2008). This segmentation has been exemplary in Germany by Sinus Sociovision (2006) in segmenting the different types of consumers of organic food according to their demographic and psychographic characteristics such as income, education, occupation, lifestyle, frequency of consumption and reasons for purchasing.

Finally, psychographic (lifestyle) segmentation is considered to be very powerful in examining individuals’ preferences. Psychographic segmentation has been successfully implemented by marketers in many fields of research and will be used in the design of our study as well. Henceforth, we will devote the following section to providing more details on psychographic data.

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