Marketing Segmentation Criteria

As mentioned in the previous video an enterprise needs to be clear what criteria

to use to divide a market into segments or groups.

Whatever criteria you use it must help to distinguish between the requirements

of different customer groups.

Let's look at those different criteria that can be used to help segment markets.

There are three main types of criteria the demographic profile of

the customer the psychographic profile of the customer and the behavioral profile.

In different words we can segment markets on the basis of who the customers

are what they say or think or what they do and how they behave.

I'll talk about the first two and then hand over to Asanka.

Demographic segmentation.
The simplest way of segmenting markets is based on demographic characteristics for

example age income the type of job a customer has or where they live.

This is an easy form of segmentation because the information about customer

demographics is readily available in most countries. In terms of age we know

that as one progresses from being a child to a teenager to a young married couple to

parents and eventually to becoming retired our needs and desires change.

Certainly at different demographic stages we might have more or less money or

more or less time marketeers can divide the market according to these stages and

focus on serving one stage or another.

A great example is the holiday company Club Eighteen Thirty

which focuses explicitly on one particular age group

offering exciting holidays focused on sun beach and clubbing.

Another age focused supplier is SAGA which offers a range of products and

services exclusively for the over fifty's.

The problem with demographic segmentation is that

it focuses on the who people are and not how they think or behave.
Just because you're over fifty doesn't mean you don't have the desire

of a thirty year old.

Psychographic segmentation.
This form of segmentation considers customers interests values attitudes and

lifestyles.

Marketeers consider a range of these issues to understand how different groups

of customers think and how it might affect what they might buy

as an example they can consider what customers think about themselves

about social issues about politics about business about culture or

the future to understand the customer's interests and attitudes or
the priority that customers give to family home life their job.
The community recreation fashion or achievements all these different factors

help marketeers define groups of customers based on the way they think take a look

at the VALS system of segmentation you can find the web link in the course resources

here the consultancy companies strategic business insights divides consumers into

one of eight different types innovators thinkers believers

achievers strivers experiencers makers survivors which group do you belong to.
Some critics argue that in some circumstances

psychographics can be weak at predicting customer purchases.

Just because someone thinks in a particular way it doesn't mean they will

act in a particular way when it comes to buying a product or

service these critics advocate behavioral based segmentation as

an alternative discriminator of different groups of customers.

I'm going to talk about behavioral segmentation this

form of segmentation divides the market based on customer's behavior

in purchasing a product or service.

Some of the common basis in behaviorial segmentation are occasions

usage loyalty benefits sought and readiness.

Let's look at some of them.

Occasions different customers use the same product category

at different locations based on their requirements at the time as

an example customers drink soft drinks for breakfast mid-morning for

refreshment at lunch time for afternoon refreshment or as a mixer at night time.

On each of these occasions customers will have different requirements and

marketers should approach them differently.

Loyalty as discussed in week one customers differ in their loyalty status

enterprises can use these different groups to help target products or services.

As customers in each group will behave differently to one another.

The airline industry commonly uses loyalty status to target products and

Services, benefits sought one of the most popular bases of behavioral segmentation

is benefits sought companies very commonly divide markets into different benefit.

Toothpaste is a good example of a market using benefits sought

one market segment will buy toothpaste for

whitening another segment will buy principally to help prevent to decay.

Another segment for children might prefer to buy on the basis of taste.

A key principle under behavioral segmentation is

Edward Rogers concept diffusion of innovation.

It helps understand how customers may differ in their approach to new and

innovative products and services.

Let's look at the different categories we've seen in the graph.

Innovators some customers are very keen to be and

also seem to be the very first buyers in a market to have the latest

technology and to be the very first to benefit.

They're willing to take risks they are well educated in the category and often
happy to absorb the cost if the product doesn't match up to their expectations.

Early Adopters also tend to be well educated in category and

self-confident but more discreet in their buying behavior compared to innovators.

They may wait until the any problems with the new technology are resolved before

buying early adopters can be powerful opinion leaders and role models in

the market and their purchases may will encourage others. The early

majority wait until innovators and early adopters have tried the product or

service before adopting their thoughtful and careful in what they buy and

will only buy once they fully understand the benefits either through advertising or

through recommendations by friends or role models the late majority are often

older consumers who have a high degree of skepticism and buy products.

After the majority there are often less educated in

category have low social status and limited resources

they tend to adopt innovations only when the benefits are very obvious.

For example to save money they are rarely saved by advertising but

can be persuaded by friends and relatives like gods are the last to adopt.

Laggards
Indeed they typically have an aversion to change criticise new

ways of doing things and prefer old ways or traditions.

Sometimes the only reason why they buy into categories.

When there aren't any other alternatives available.

We all assume different roles and diffusion.

Depending on category successful marketers recognize these differences of

customers in tailoring their marketing efforts often combining

with other segmentation approaches.

Let's talk about B.

to B. segmentation briefly when marketing to

businesses rather than consumers we similarly have to consider market

segmentation and the same principles apply business markets might be

segmented by geography or business time for example you might want to target only.

The business customers who are working for profit.

As opposed to public sector organizations or charities business markets might

be segmented by size of all of their players companies the place regular and

very large orders may have different requirements to those who play small and

how all this understanding how to say meant a market and choosing the best

segment for your product and service will help set your enterprise apart.