June 4, 2012

MK0012 [Retail Marketing] Set2 Q2

Q.2 Mention the different segmentation dimensions with examples.

Ans:

Dimensions of Segmentation
Markets are complex entities that can be segmented in a variety of ways. It is an important issue to find an appropriate segmentation scheme that will facilitate target-marketing, product positioning, and developing successful marketing strategies and action programmes.

A segmentation variable is a characteristic of individuals, groups or organisations that marketers use to divide and create segments of the total market. One approach to segmentation is on “a priority” basis. In this case, the marketer may assume that differences must exist among heavy users and light or medium users of a product category. Segmentation descriptors fall under four major categories and include geographic variables, demographic variables, psychographic variables, and behaviouristic variables. 
  • Geographic variables focus on where the customers are located.
  • Demographic variables identify who the target customers are.
  • Psychographic variables refer to lifestyle and values.
  • Behaviouristic variables identify benefits customers seek, and product usage rates.


Before collecting any data on the market, the basis for segmentation is analysed. The marketer can also assume that dual-income households are growing in urban areas and then develop a programme for this segment.

Selecting the right segmentation variable is critical. For example, small car producers might segment the market on the basis of income but they probably would not segment it on the basis of political beliefs or religion because political leanings or religious beliefs do not normally influence consumers’ automobile needs. Segmentation variable must also be measurable to segment the market accurately. For example, segmenting the market on the basis of intelligence would be difficult because this characteristic cannot be measured accurately. 


Marketers can use one or more variables to segment the market. Different variables are used to segment consumer markets. Broadly speaking, segmentation variables fall under two categories: consumer characteristics or consumer responses. The most popular bases for market segmentation include geographic factors, demographic factors, psychological characteristics, social/cultural variables; use related factors, use situation variables, benefits sought and combination of several segmentation bases called hybrid formats, such as demographic/psychographic profiles, geo-demographic variables, values and lifestyles. 


Table 1 lists the variables that can be used to segment the market.

The subsequent sub-sections discuss various bases for market segmentation.


Geographic segmentation
Geographic segmentation focuses on dividing markets into different geographic units, such as regions, nations, states, urban, rural, etc. Customers located in different geographic areas vary in terms of climates, terrain, natural resources, population density, culture, service needs, sales potential, growth rates, competitive structure of the market, frequency of purchases for a variety of goods and services. For example, Jeeps are more popular in rural areas in India than in urban areas. Shopping malls are located only in larger cities in India, and raincoats are sold more in rainy areas. Geographic segmentation is used both in consumer and organisational markets, particularly where customers are not willing to travel far to acquire goods and services.


Geo-demographic segmentation 
Many segmentation approaches involve both geographic and demographic descriptors.

This approach is based on the premise that people who live close to one another are likely to have similar economic status, tastes, preferences, lifestyles and consumption behaviour. Geo-demographic segmentation is particularly useful when a marketer is capable of isolating its prospects with similar personalities, goals, interests, and in terms of where they live. For products, and services used by a wide cross-section of society, this approach may not be suitable. For example, some retailers who propose to open new stores are interested in knowing something about the people who live within a defined area whom they aim to attract.


Demographic segmentation
Demographic characteristics are commonly used to segment the market. Factors such as age, sex, education, income, marital status, household life cycle, family size, social class, etc., are used singly, or in a combination, to segment a market. Shaving products for women are based on the demographic variable of gender. Toy manufacturers such as Funskool and Mattel Toys segment the market on the basis of age of children. Auto manufacturers segment the market by considering income as an important variable. Producers of refrigerators, washing machines, microwave ovens etc., take income and family size as important variables in segmenting the market. Ready-to-wear garment producers often segment the market on the basis of social class. Examples are Chirag Din, Arrow, Van Heusen, Louis Philippe, Levis and others. In general, the social class can represent lower, middle and upper class depending on education, income, status, etc. For example, an engineer and a clerk are considered as members of different social classes. 


Below figure depicts the classification of the Indian population in a pyramid form.

Psychographics segmentation
When segmentation is based on personality or lifestyle characteristics, it is called psychographic segmentation. Consumers have a certain self-image and this describes their personality. There are people who are ambitious, confident, aggressive, impulsive, conservative, modern, gregarious, loners, extrovert, introvert, etc. Some motorcycle manufacturers segment the market on the basis of personality variables such as macho image, independent and impulsive. Some producers of liquor, cigarettes, apparel, etc., segment the market on the basis of personality and self-image. Marketers, are often not concerned about measuring how many people have the characteristic as they assume that a substantial number of consumers in the market either have the characteristic or want to have it.


Lifestyle: It is an indicator of how people live and spend their time and money. What people do in their spare time is often a good indicator of their lifestyle. For example, John L. Lastovicka, John P. Murray, Erich A. Joachimsthaler, Gaurav Bhalla and Jim Sheurich in their study, were identified two lifestyle segments that were most likely to drink and drive: good timers and problem kids. Good timers are partygoers, macho and high on sensation seeking. Problem Kids frequently display troublesome behaviours. 


According to Morris B. Holbrook, people who have an affinity for nostalgia, or the desire for old things, also represent a lifestyle segment and can be a key market for old movies, antiques and books. Surfing on the Internet has also created a new type of lifestyle. Another study by Rebecca Piirto of fashion consumers found six major groups: yesteryears (older consumers), power purchasers (married households with college degree), fashion foregoers, social strivers, dutifuls (highly practical) and progressive patrons (high-income/quality buyers). Consumers in different countries and cultures may have characteristic lifestyles. 


For example, Indian women are home focused, less likely to visit restaurants, more price-sensitive, spend time preparing meals at home and fond of movies.

AIO inventories are useful additions to demographic data but marketers have found the original AIO inventories as being too narrow. 


Now, psychographics or lifestyle studies generally include the following:

  • Attitudes include evaluative statements about people, products, ideas, places, etc.
  • Values refer to widely held beliefs about what is right/acceptable/desirable, etc.
  • Activities and interests cover behaviours with respect to activities other than occupation to which consumers devote time and effort, such as hobbies, interests, social service, etc.
  • Demographics cover gender, age, education, occupation, income, family size, geographic location, etc.
  • Media preferences describe which specific media the consumers prefer to use.
  • Usage rate focuses on measurements of consumption level within a particular product category and is generally recorded as heavy, medium, light, or non-user.

Table 2 lists various lifestyle dimensions that are of interest to the marketers.

The sample size is often 500 or more individuals who provide this information and are placed in groups whose members have similar response patterns. According to F. W. Gilbert and W. E. Warren, most studies use the first two or three dimensions mentioned above to group individuals. The use of other dimensions provides more complete profiling of each group.

Generally, the AIO measurements are product or activity specific. For example, W. A. Kamakura and M. Wedel have reported a study related to fashion clothing which included 40 statements and respondents reported their degree of agreement or disagreement. Five of the statements are mentioned here:

  • I like parties with music and chatting.
  • I like clothes with a touch of sensuality.
  • I choose clothes that match my age.
  • No matter where I go, I dress the way I want to.
  • I think I spend more time than I should on fashion.


In this study, statements relevant to activities and demographics were also included. General lifestyle studies can be used to spot new product opportunities, while product specific lifestyle analysis may help repositioning decisions regarding existing brands.

The VALS (Values and Lifestyles)
Stanford Research Institute (SRI) developed a popular approach to psychographics segmentation called VALS (Values and Lifestyles). This segmented consumers according to their values and lifestyles in USA. Researchers faced some problems with this method and SRI developed the VALS2 programme in 1978 and significantly revised it in 1989. VALS2 puts less emphasis on activities and interests and more on a psychological base to tap relatively enduring attitudes and values. To measure it, respondents are given 42 statements with which they are required to state a degree of agreement or disagreement. 


Some examples of the statements are:
· I am often interested in theories.
· I often crave excitement.
· I liked most of the subjects I studied in school.
· I like working with carpentry and mechanical tools.
· I must admit that I like to show off. 
· I have little desire to see the world. 
· I like being in charge of a group.
· I hate getting grease and oil on my hands.


VALS2 has two dimensions. The first dimension, self-orientation, determines the type of goals and behaviours that individuals will pursue, and refers to pattern of attitudes and activities which help individuals reinforce, sustain, or modify their social self-image. This is a fundamental human need. The second dimension – resources – reflects the ability of individuals to pursue their dominant self-orientation that includes the full range of physical, psychological, demographic and material means such as self-confidence, interpersonal skills, inventiveness, intelligence, eagerness to buy, money, position, education, etc. 


The questions above are designed to classify respondents based on their self-orientation. Stanford Research Institute (SRI) has identified three basic self-orientations:

  • Principle-oriented individuals are guided in their choices by their beliefs and principles and not by feelings, desires and events.
  • Status-oriented individuals are heavily influenced by actions, approval and opinions of others.
  • Action-oriented individuals desire physical and social activity, variety and risk taking. Based on the concepts of self-orientation and resources, Values and Lifestyle typology breaks consumers into eight groups. VALS2 suggests that a consumer purchases certain products and services because the individual is a specific type of person. The purchase is believed to reflect a consumer’s lifestyle, which is a function of self-orientation and resources. People with most resources are at the top and the ones with least resources are at the bottom of this typology. Each of the eight groups exhibits a distinctive behaviour, decision-making approach and product or media usage attributes. VALS2 represents an interconnected network of segments, which means that adjoining segments have many similar characteristics and can be combined to suit particular marketing objectives.


Behaviouristic segmentation
Dividing the market on the basis of such variables as use occasion, benefits sought, user status, usage rate, loyalty status, buyer readiness stage and attitude is termed as behaviouristic segmentation.

Buyers can be identified according to the use occasion when they develop a need and purchase or use a product. For example, Archies greeting cards are used on many different occasions. User status, such as non-users, potential users, or first time users can be used to segment the market. Markets can also be segmented into light, medium, or heavy users of a product. Brand loyalty of varying degree can be presented among different groups of consumers and may become the basis to segment the market. There are consumers, who are very loyal to cigarette brands, beer and even toothpaste. Markets may also be divided on an imaginary Likert-type scale by considering level of product awareness such as unaware of the product, aware, interested, desirous, or contemplating to purchase the product. Based on attitude, consumers may be enthusiastic, indifferent, or hostile towards the product, and these differences can be used to segment the market. 

Benefit Segmentation: By purchasing and using products, consumers are trying to satisfy specific needs and wants. In essence, they look for products that provide specific benefits to them. Identifying consumer groups looking for specific benefits from the use of a product or service is known as benefit segmentation and is widely used by marketers. For example, there are distinct groups of auto buyers. One group might be more interested in economy, the other in safety and still other in status.

Segmentation bases, such as demographics are descriptive. These variables are useful but do not consider why consumers buy a product. Benefit segmentation has the potential to divide markets according to why consumers buy a product. Benefits sought by consumers are more likely to determine purchase behaviour than are descriptive characteristics.

Marketers should also appreciate that many benefits sought by consumers are subject to change with changing technologies, changing social values and competitive offers. This requires that marketers must constantly reassess benefit segments. The present scenario in the computer market is an example. With the introduction of faster and better products, the benefits consumers seek, are constantly changing. Benefit segmentation can be seen in the toothpaste market; fresh breath, decay prevention and whiter teeth are some examples and the leading brands involved are Colgate Total, Close-Up and Promise. 


Table 3 presents the benefit segmentation of the toothpaste market.

Demographic-psychographics segmentation (Hybrid pproach) 
Demographic and psychographic profiles work best when combined together because combined characteristics reveal very important information about target markets. Demographic-psychographics information is particularly useful in creating consumer profiles and audience profiles. Combined demographic-psychographic profiles reveal important information for segmenting mass markets, provide meaningful direction as to which type of promotional appeals are best suited and selecting the right kind of advertising media that is most likely to reach the target market.

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