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Types of Consumer Segmentation (General Criticisms of Segmentation…
Types of Consumer Segmentation
Market Segmentation in Consumer Markets
To segment consumer markets, we use market info based around key customer, product or situation related criteria
These are classified as segmentation bases and include
profile criteria, behavioural criteria + psychological criteria
Transforms understanding into a good marketing mix that customers value [if successful]
Haven't got a good relationship w/ a customer until you do smth they value - segmentation helps businesses find out what customers value through its research
Behavioural
WHO, HOW, WHERE + WHEN
Product-related methods of segmenting consumers
Segmenting consumers based on the way they interact w/ your brand
Purchase/Transaction:
Data about customer purchases + transactions provide scope for analysing who buys what, when, how often + through what transactional channel
Development of electronic tech like Electronic Point of Sale [EPOS] Systems has facilitated massive growth in the collection of purchase/transaction data
EXAMPLE: Browsing + purchase data allows Amazon to make recommendations of products that will appeal to customers
Product Usage:
Customer usage of the offering, brand or product category; frequency, time of usage + usage situations
May segment a market into how often a customer uses the offering: high, medium + low users. Can develop marketing mixes for each group.
May take an Experiential Consumption Perspective: considering emotional + sensory experiences like satisfaction, feelings + fun [Holbrook + Hirschman 1982]
EXAMPLE:
Oxo gravy campaigns emphasised how usage of Oxo brings families together, + expressed family values like love, sharing + quality time
Tech + Media Usage:
What media channels are used by whom, when, where + for how long. Can provide insights into the reach potential for certain market segments through different media channels
Advantages
Observing consumers as they use products can be an important source of new ideas for new uses or product design
Opportunities to open up new potential the customer may not have realised :
Can further build on brand loyalty
Can capture customers based on their needs + thus market products in a very streamlined manner
Anticipate consumer needs before they even know themselves
Transactional/Purchase Info: Can assess who the most profitable customers are, + get an insight into purchasing trends
Monitoring/Understanding the behaviour of consumers online has become much more precise bc of advances in tracking tech + data collection [e.g cookies]
Disadvantages
Dynamic Behaviour of Consumers: Consumer behaviour is constantly changing w/ time, location etc + so companies must take this into account. Can only give a framework.
Primarily qualitative data + so making forecasts, budgets etc would be based on assumptions to an extent
Can track consumer behaviour, but it isn't easy to pinpoint the motivations behind the behaviours as they can vary from person to person
Profile
WHO + WHERE
Demograpic:
Key variables like age, sex, occupation, education level, religion, social class + income
Age
Chronological Age:
No. of years lived since birth
Social Age:
Age in terms of social roles + habits during the lifecycle
Cognitive Age:
Self-perceived age. Different kinds - Feel age [how old you feel]; Look age [how old you look]; Do age [how involved you are in doing things favoured by someone important in your life] + Interest age [how similar your interests are to those of a particular age group]
EXAMPLE:
Arcadia Group
own various clothing brands to target customers of different ages - Topshop for younger women, Wallis aimed at women in their 30s/40s + Evans for women sizes 14-32 ["plus size"]
Can be generation-based: Baby Boomers, Millennials, Gen X's etc
Socio-Economic Status
Profile classification based on occupation, income level + education level
Retirement = straight back to the bottom
Important bc it determines whether or not a consumer can afford a product
Many companies target high net-worth ppl, but targeting low-income segments can be profitable.
EXAMPLE:
Aldi
[+ other German discount supermarkets] make a good profit from targeting these ppl, + even some ppl who have disposable income but would rather save it for luxuries + save on necessities
E.g Social Grade 'A' = higher managerial, administrative or professional, for example a Company Director
But, Social Grade "E" refers to state pensioners w/ no other income, widows, casual earners etc who are technically Unemployed
Lifestage:
Based on the principle that ppl need different offerings at different stages in their lives. e.g childhood vs adulthood
Geographic:
Needs of potential customers in one geographic area are often different from those in another area due to climate, customs or tradition
Advantages
Age:
Can't be ignored as consumer preferences continually change w/ age
Typically easy to collect/measure compared to other segmentation techniques
Consumer profiles are easy to understand, which helps make the strategy development process easier in terms of collaboration w/ departments [sales, customer service etc]
Disadvantages
Age:
Females generally mature a lot quicker than males + so age isn't a reliable indicator of whether they're going to want the same things
Lifecycles
: The demographic is moving + ppl aren't doing the same things at the same times. More liberal attitude - women focusing on careers instead of motherhood for example. Retirement age is rising drastically - most ppl won't be retiring at 65. Average life expectancy rising
Only tells companies who consumers are + what they've done in the past, not how needs + interests have changed
Demographics:
Similar demographics don't always imply similar needs/motives within a group. Effectiveness of the marketing message may be hampered by a "one size fits all" approach
Psychological
WHY + WHO
Psychographic:
Analysing consumer's activities, interests + opinions to understand individual lifestyles + patterns of behaviour. Grouping by shared personality traits + life stages
EXAMPLE:
Facebook users share interests, opinions, lifestyles etc + this personal data is saved by the company + used to tailor individual content. Allows marketers to focus messages based on a massive amount of consumer data
Benefits Sought:
The motivations customers derive from their purchases provide insight into the benefits they want from a product
Based on the principle that we should provide customers w/ exactly what they want, based on the benefits they derive from use [Haley 1968]
EXAMPLE
: Major airlines often use this approach by differentiating between the First-Class Passenger [extreme luxury], the Business-Class Passenger [some of that luxury] + the Economy-Class Passenger [none of that luxury, but enjoys the same flight]
[Lifestyle, personality, perceptions, attitudes, motives]
Advantages
Able to choose the correct channels, products etc to market to key segments
Can better communicate w/ target audience by understanding their motives, needs + wants. Can create extremely personalised content
Can increase brand engagement, enter new target markets, improve customer experiences
Monitors social trends + attitudinal shifts
Potential problems in existing markets can be identified, as well as future opportunities/market gaps
Identifies why certain brands are attractive to particular consumer groups + how best to design promotional campaigns that appeal to prospective buyers
Disadvantages
Companies such as FB storing so much consumer data can cause ppl to feel like their privacy has been invaded + thus they begin to rethink what they share online.
Cambridge Analytica Scandal
: FB let the company access personal data which they used to try + influence public opinion on political matters
Has been traditionally more difficult to obtain than other 'a priori' methods like demographics
Need clear rules regarding the interpretation of data to ensure consistency of approach among the ppl that engage in customer segmentation analysis
Intersection between Profiling + Behavioural
Looks at the past but tries to position on a continuum: what ppl might also do in the future based on life stages etc
General Criticisms of Segmentation
Segments aren't necessarily reliable indicators of demand
Can't guarantee what ppl are going to do: customers may not act on their needs
Argument that segmentation variables rely on/reproduce stereotypes, which aren't always accurate
Approximates offerings to the needs of customer groups, rather than individuals: risk that customer individual needs aren't fully met
BUT,
Customer Relationship Marketing [CRM]
processes + software allow companies to develop customised approaches for individual customers. This does take extra planning though
It's an organisational capability + some organisations are better at it than others [Poenaru + Baines 2011] - the money spent on it can be a waste if managers don't assimilate the results into the organisation's strategy development processes [Incite, 2009]
In an age of publicity we like to feel private - want companies to anticipate our needs but not know too much. Customers can feel invaded if they get excessive attention from a business. Can also obsess so much over one segment that you alienate them
Segments must be 'profitable' or they're ignored, which can have social implications
BUT, there may be segments that are initially unprofitable for a short period of time, e.g banks getting teens to sign up for accounts that will be profitable eventually as they are unlikely to move banks