It is a mirror through which the population of customers can be seen in an industry. Thus it is an art. The variables on which segmentation can be done are numerous.
To define customers who they are, they are segmented on the basis of demography; to define where they are, they are segmented on the basis of geography; and how they behave, they are segmented on the basis of behaviour; and to segment differently we have to go in for innovative segmentation.
1. Geographic Demographics Segmentation:
It consists of defining customers according to their location, dividing a country into regions, states, or states. Location does not mean that all consumers in a location will behave the same way, but the approach helps identify certain general patterns. In case of large companies these regions may be further subdivided into sizes – small, medium, and large.
In case of international marketing or global business different countries might be taken up as different market segments. In case of Indian Railways, they have northern railway, southern railway, eastern railway, Western Railway, North-Eastern^ Railway, Central Railway and so on so forth. Customers in different regions may have different cultures and may require marketing differently. India is a country of diversities. Another basis may be geographical density – urban, suburban, and rural.
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It may be a good basis as the low-density markets require different price, promotion and distribution strategies. The next base may be locality (about which we have talked afterwards). Next basis may be climate – warm, cold, and rainy.
The other base may be urban, suburban, or rural. India’s urban population may be further divided on the basis of cities – Tier I (8 cities -8% India’s population), Tier II (26 cities – 4% of India’s population), Tier III (33 cities -7% population), and Tier IV (5094 cities -11% population). The rest 70% is the rural population residing in India’s 6,38,000 villages across India. In terms of types of commerce (Tourist, local worker, residents, businesses), retail establishments (downtown shopping districts, shopping malls), competition (underdeveloped, saturated), legislation (stringent, lax), and cost of living /operation (low/moderate/high) are the other bases of geographical demographics).
2. Personal Demographics Segmentation:
It offers a wide variety of bases for segmentation.
i. Age:
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Today virtually every age band from life to death is the focus of a marketing campaign. The requirements are different in different age groups. In case of readymade garments, it may be for new borne babies, teens, youth, middle age people, old people. All of them have different needs.
Young people like to make use of credit cards. Older people use cash. Children consume more of carbonated drinks. That is why — Youngistan and Yeh Dil Mange More” work. People at 50 and above are referred to ‘grey’ market or ‘third age’ group. The ‘grey’ market is itself categorised further according to lifestyle and other criteria. This market offers opportunities to personal care (hair dying, anti-ageing creams), pharmacy, telemarketing, nursing industries.
ii. Gender:
In case of clothes, it may be male and female, In case of fashionable clothes the two segments vary a lot. Women prefer scooties, and boys use motorcycles. By 2015, India will have 80 million working women in the age group of 18-44 year age band. The roles are changing because of womenfolk joining working groups. Now males do many jobs earlier performed by womenfolk.
iii. Family Structure:
The family life cycle concept charts the progress of family development from birth to death. A family may be in bachelor stage (young and single people), newly married couple -marriage alters the needs. Married couples need white goods and durable goods to begin with), Full Nest I (young married couple with dependent children -once a child is born, they would require baby food, baby clothes, toys, etc.), Full Nest II (older married couples with dependent children), Empty Nest (older married couples with no children living with them) and solitary survivor (older single People).
iv. Race:
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The ethnic background is a good base for segmentation. Hindus celebrate Diwali, and Chinese celebrate their New Year differently and the two are good segments.
v. Political:
Different political party members have their liking for different members and commodities. For example Congress party members in India prefer white caps, Samajwadi Party goes for red cap, BSP members want a blue cap, whereas BJP members wear a saffron colour cap.
vi. Family Size:
Two segments may be small family and the large family segments. Smaller the family small size packs would be preferred, and larger the family.
vii Family Life Cycle or Family life-stage:
People at different stages of different life cycle have needs different from each other. Wells and Gubar (1996) have put forward an internationally recognised classification.
viii. The Psychological Life cycle:
Here the chronological age may not necessarily be the factor of greatest importance in determining consumption patterns. Rather it is the transformation of attitudes and expectations that becomes a more important factor. The emergence of kids adults’, and old younsters represent the psychological lives.
ix. Segacity:
It is a refinement of the family life cycle grouping system, showing different behavioural patterns and aspirations to people as they proceed through life. These stages may be Dependent, Pre-family, Family, and Late. The family and late may be further classified into Better off and worse off and these two bases may be further classified on the basis of occupation as White Collar and Blue Collar.
x. Type of Neighbourhood and Dwelling:
Geodemography may also be used for segmentation by focusing on local neighbourhood geography. The proposition is that the neighbourhood area in which a consumer lives will be reflected in one’s professional status, income, life-stage and behaviour. People living in different localities or different types of dwellings have different needs, but in one kind of dwelling situated in one locality they have similarity of needs.
This basis of segmentation uses the house or locality as the basis of segmentation, rather than the individuals. It is popularly known as ACORN (A Classification of Residential neighbourhood).
According to Indicus Analytics, top three neighbourhoods in Delhi include Greater Kailash I, Greater Kailash II, and Preet Vihar; in Mumbai – Ward D-Grant Road- Walkeshwar, Ward-H-West Bandra Jetty; and in U.P. – Sector 19, 27 of Noida.
3. Socioeconomic:
i. Income:
Segmenting by income is very popular, expecially for cars, luggage, vacations and fashion goods. There may be people belonging to lower class, middle class and high net worth individuals. The housing boards offer low-income houses, middle income houses and high income houses. The base for segmentation is income. It may be skill as well, like skilled workers, semi-skilled workers, unskilled workers, and subsistence workers (those living on state pension, casual or lowest grade workers), rich and poor.
A German statistician, Ernst Engel has made the following observations about what happens when household income increases:
1. Smaller percentage of expenditure goes for food.
2. The percentage spent on housing, household operations and clothing remains constant.
3. The percentage spent on other items (recreation, vacation, education) increases.
ii. Education:
College- going students have different demands than the people who after good higher education join the companies as executives, and those who are illiterates.
iii. Occupation:
The requirements for executives and a school teacher would altogether be different. The executive class would require Armani suit, whereas the other one would require a suit of any brand which is cheaper.
iv. Social Class:
Social class indicates one’s social position, and is objectified through income, occupation, and location of residence. A policeman might be earning more than a college professor, off course through accepting under the table challans, but he belongs to a social class lower than that of a professor. The social class of professor will demand purchases of items and place of purchases different from that of a policeman.
4. Behavioural Segmentation:
Devid Kurtz likes to call it as production related segmentation. It takes into consideration
the purchasing behaviour as the starting point. The bases include:
i. Usage status:
The segmentation may be done on the basis of ‘light’, ‘medium’, and ‘heavy’ users of a product. The other way can be non-users, first-time users and regular users. Airlines ‘frequent flyer’ schemes are based on this philosophy.
ii. Brand Loyalty Levels:
The segments may be made on the basis of ‘Hard Core Loyals’ (same brand every time), ‘Soft Core Loyals’ (loyalty divided between two or more brands), ‘Shifting Loyals’ (Brand switchers), and ‘Switchers (no particular preference).
iii. Benefit Sought:
The kind of benefit one wants to seek. Benefit segmentation depends on benefit sought is identifiable, using these benefits , marketers must be able to divide the customers into recognisable segments, and one or more of the resulting segments must be accessible to the firm. For Example in case of baking soda one may be using for bakery products, where the other one may be using as deodorant in the fridge.
In case of baby wool, it may be used for baby care, child care and cosmetic use. These are the benefits received from using. The other benefit seekers purpose might only be possessing the goods. In case of gold, silver, and precious stones this segment is as important as the actual users or wearers are.
iv. Occasions for Purchase:
Some of the products are purchase only on certain occasions. These occasions may be used as the basis for segmentation. Gifts are normally exchanged on Diwali, – but colours are purchased only on Holi. Demand for dates increase during the month of Ramadan. On the occasion of wedding lot of things are purchased including Lehenga and Choli.
The segmentation may be done not only on the basis of culture, but also the subculture (religion, race, nationality). Occasion can thus be an event. An event may be routine or emergency. Muslims do not eat pork and drink alcohol on Friday, but European Catholics do eat fish on Friday. Valentine’s Day, Mother’s Day, and Father’s Day are the critical events used by Greeting Card companies and the chocolate companies.
v. Frequency of Purchasing:
People may buy for the whole year, or for one quarter or one month or one week. In India there are some households who buy rice at the time of harvesting for the whole year. They buy in 35 or 50 kg. Bags, Those who buy only for a month buy 5kg. Bags. Thus, frequency of purchasing is a good basis for segmentation.
vi. Willingness to Buy:
A few people might not know the product, a few know it but never used, and some people know it and have used it. Each one of these segments requires a different marketing strategy.
5. Psychographic Segmentation:
Psychographic segmentation is related with similarity of values and lifestyles. People buy things because of the personality, lifestyle and the consumer values they hold.
i. Personality Characteristics:
Advertising agency, Young & Rubicam has classified customers into Mainstreamers (not to stand out of crowd), Reformers (creative and caring, many doing charities, and buying private labels), Aspirers (young, ambitious, and keen to get on, and buy latest designs and models), and success achievers (achieved in life, feel no need for status symbols or bother for what people will say). Companies marketing cigarettes, liquor, cosmetics and high priced watched create a personality for the brand to match it with the personality of the customer.
Briggs and Myers have developed four personality dimensions:
a. Extrovert/introvert
b. Sensitive/intuitive
c. Thinking/feeling
d. Judging/perceptive
There are two problems associated with personality characteristics. One, it is not possible to measure such traits in general population. And two, there is no medium to access people with a personality trait. But companies do target people through their ads. L’Oreal ad says “Because I’m worth it” and Hallmark Greeting Card ad says, “When you care enough to send the very best.”
ii. Lifestyle:
Lifestyle and consumption are closely related, and therefore, marketers adopt it for segmentation. AIO (Activities, interests, and opinions) reflect lifestyles of people. People are grouped on the basis of how they spend their time, the importance of things in their surrounding, beliefs about themselves and broad issues and some demographic characteristics, such as income and education.
The most popular consumer lifestyle framework is a survey from SRI Consulting Business Intelligence. It classifies customers into eight groups – Innovators, Thinkers, Achievers, Experiences, Believers, Strivers, Makers, and Survivors. A detailed profile of customers is necessary for developing effective advertising campaigns.
iii. Values:
Values reflect the realities of life. Researchers at Survey Research Centre at University of Michigan have identified nine basic values: Self Respect, security, Excitement, Fun and enjoyment in life, having warm relationships, Self-fulfilment, Sense of belonging, Sense of accomplishment, and being well respected.