Criteria for Market Segmentation: Demographic Segmentation - Term Paper Example

? CRITERIA FOR MARKET SEGMENTATION Demographic Criteria One of the major methods and the most frequently used method of segmentation isdemographic segmentation. This method is based on the assumption that market can be divided on the basis of the variables of demographics such as age, sex, income, occupation, education, religion, race, nationality, family size and marital status. It is the most popular method because of the easy availability and interpretation of the data. Most of the consumer markets can be divided on the basis of demographics but it is also one of the deciding forces behind the purchase behavior of the consumer as well. In recent years studies have been made to refine these demographic variables so that they can be more effectively used. Example of the companies who make effective use of demographic segmentation are Lego, Toys ‘R’ Us, and the early learning centre who not only recognize the differences between children of various age group but also design their products for highly specific defined age categories (Richard M. S. Wilson, 2005). Age segmentation is an important tool for segmenting the consumer market. A variety of terms are used to refer to various age groups. Examples are newborns, infants, young children, tweens, teens and young adults also called Generation Y in United States of America (USA), Adults or Generation X and the baby boomers or the Seniors. Various studies have been conducted which age group consume exactly how much and has influence on how much consumption. For example in USA the total population of tween, the children aged 9-12, this age group spend $20 billion in an year and further influence the consumption of $ 200 billion. To cater to their needs brands like Limited design clothes that are more fun like teens. In this each age segment has different specific need in everything ranging from basics like food and clothing to entertainment etc (Charles W. Lamb, 2010). Sex is another important market segmentation tool that helps in helps designing the product and services according to the specific need of the consumer. The segmentation on the basis of gender is most useful in clothing, apparels, and accessories etc. The most evident example is completely different range of toiletries and perfumes for males and females. Now a days gender segmentation is even visible in mobile phones with varying skins for each gender. A common basis of segmenting the consumer market is income. Income is an important determinant of consumption pattern. Companies design their product features, define prices and determine positioning strategy based on the income of the target market. Example of this segmentation is HLL different washing powders sunlight, Wheel, Rin and Surf Ultra for different market segments based on income (Saxena, 2008) Profession and education are also important determinants of market segment. Education level defines taste not only in books but various other consumer goods. For example highly technical and multiple featured mobile phones are popular among highly educated people whereas basic phones are more popular in less educated people that fulfill their needs. Young executives and business professional also prefer multi features internet enabled cell phones that can cater to their mobility needs. Family size and marital status also defines consumption patterns. Single male and females spend more on their personal needs such as slimming equipment, cosmetics items etc and prefer fast food (Johan Botha, 2004). Nationality and religion also play an important role. For example Hall food for Muslims and Kocher for Jews is an important segment. Nationality also defines our tastes in food, clothing and preferences for entertainment etc. Geographical Segmentation Geographic based segmentation splits the market on the physical location of the potential consumers. This segmentation is based on the assumption that consumer living in close geographic proximity has some similarities in their needs and preferences for the products and services. Boundaries defined by cities, districts, towns, countries, regions and continents are an important source of segmentation for companies. For example Procter and Gamble have different formulation of its Tide detergent based on the regional quality of water and types of washing machines used (Frank Kardes, 2011). On the basis of geography the most important segmentation is country. It does not mean that the residents of one geographic region will have similar preferences but there will definitely be some similarities. Based upon the opportunity the potential market is divided into three categories primary market, secondary market and tertiary market. Some companies follow one international product but some companies modify their product for each country. For example McDonalds and Pizza Hut have varying product according to local taste in each country (Sonny Nwankwo, 2011). Region is a broad base of segmentation. Beverage companies sell non-alcoholic drinks in Arab countries where alcohol is prohibited and sell alcoholic drinks in the rest of the world. Cities and towns are other criteria for segmentation. Metropolis cities all over the world have similar consumption patterns and that is different from small towns. For example fast food and Starbucks are popular in all big cities of the world. Population density is another source of market segmentation. Distribution of worldwide population reveals how many companies pursue customers all around the globe. For example China and India are the most populated countries of the world. Many company come to these countries in search of large customers. Example is McDonalds, Levis etc who have come to these countries for investment (David L. Kurtz, 2010). Climate is another important segmentation. For example people living in chilly areas consume more soup, coffee etc than the people living in warm areas. Psychographic Criteria Demographic and geographic segmentation are although very useful criteria but sometimes they do not depict the full picture. The segmentation based upon the lifestyle, personality, motives and geodemographics is called psychographic segmentation. Personality defines a person’s traits, attitudes and habits. According to a survey conducted half of the Americans believe that their car reflect their personality. An example is that SUV is considered a symbol of independence and wealth. Motives also serve as a source of segmentation. For example insurance companies and manufacturers of baby products appeal to the emotional motive and ask to care for their loved ones. Some companies use the appeal of economy and durability while others use the appeal of being status symbol, mostly car manufacturers. Life segmentation divides people according to the basis of how people spend their lives, beliefs and values and what is important to them. Socio economic characteristics are also important in determining the life style. For example with growing number of female workers in the developing countries has changed the socio economic conditions and lifestyle. For example frozen food is more acceptable and gaining popularity in developing countries with changing life styles. Geodemographics actually clusters people with the lifestyle of the neighboring region. For example stores in predominant in Asian, Latino, or African American neighborhoods carry the merchandise that is specific to each geodemographic target market (Charles W. Lamb J. F., 2009). Dependency and non dependency and conservatism are other important factor of psychographic segmentation. More conservative and dependent people are late adopters whereas independent and less conservative are early adopters of new things and technology. Behavioral Criteria Another commonly used form of segmentation is behavioral segmentation. It focuses on objective and observable characteristics. They are not as blur and indeterminate a psychographic segmentation. For example it is very easy to objectively find out whether a potential customer for luggage has travelled in the past 12 months or not. Behavioral segmentation also uses demographic features such as whether a potential customer for acne is a teenage customer or middle aged etc. Behavioral segmentation is useful because it is based on information that is readily available (Docters, 2004). The important determinants of behavioral criteria are expected benefits from the products, user status, frequency of use, amount of use, brand loyalty, attitude to product and communication status. What consumers expect from the product is an important determinant. People with varying behavior will have different expectations from the same product. So differentiating people based upon their expectation is a good criterion. User status also defines the behavior. User status can be defined in various categories such as regular user, potential user, one time user etc. Regular user only emphasizes on consistency in quality and is brand loyal whereas potential users have to be given something extra to attract. Amount of use determines how many times in a year a customer uses a certain product. For example how frequently a person travels in a year. Attitude towards product also determines behavior. For example if the attitude towards junk food is of disliking and avoidance it will ultimately lead to lesser consumption but if there is no such awareness then it is not likely to affect consumption. Communication status also defines consumption pattern. If the consumer is fully aware of the features and benefits of the product it affects the amount of consumption (Lantos, 2011). References Charles W. Lamb, J. F. (2009). Essentials of Marketing. USA: South Western Cengage Learning. Charles W. Lamb, J. F. (2010). Marketing. USA: South Western Cegage Learning. David L. Kurtz, H. F. (2010). Contemporary Marketing. USA: Nelson Education. Docters, R. G. (2004). Winning the profit game: smarter pricing, smarter branding. USA: McGraw-Hill. Frank Kardes, R. F. (2011). Consumer Behavior. USA: South Western Cengage learning. Johan Botha, J. S. (2004). Introduction to Marketing. Cape Town: Juta & Co. Lantos, G. P. (2011). Consumer Behavior in Action: Real-Life Applications for Marketing Managers. USA: M.E. Sharpe. Richard M. S. Wilson, C. G. (2005). Strategic marketing management: planning, implementation and control . Oxford: Elsevier Butterworth- Heinemann. Saxena. (2008). Marketing Management 4E . New Delhi: Tata McGraw-Hill. Sonny Nwankwo, T. G. (2011). Entrepreneurship Marketing: Principles and Practice of Sme Marketing. New York: Routledge. Read More