What are the bases for segmenting consumer markets?
A major step in the segmentation process is the selection of a suitable base. In this step, marketers are looking for a means of achieving internal homogeneity (similarity within the segments), and external heterogeneity (differences between segments). In other words, they are searching for a process that minimises differences between members of a segment and maximises differences between each segment. In addition, the segmentation approach must yield segments that are meaningful for the specific marketing problem or situation. For example, a person’s hair colour may be a relevant base for a shampoo manufacturer, but it would not be relevant for a seller of financial services. Selecting the right base requires a good deal of thought and a basic understanding of the market to be segmented.
In reality, marketers can segment the market using any base or variable provided that it is identifiable, substantial, responsive, actionable and stable.
- Identifiability refers to the extent to which managers can identify or recognise distinct groups within the marketplace.
- Substantiality refers to the extent to which a segment or group of customers represents a sufficient size to be profitable. This could mean sufficiently large in number of people or in purchasing power.
- Accessibility refers to the extent to which marketers can reach the targeted segments with promotional or distribution efforts.
- Responsiveness refers to the extent to which consumers in a defined segment will respond to marketing offers targeted at them.
Actionable – segments are said to be actionable when they provide guidance for marketing decisions. For example, although dress size is not a standard base for segmenting a market, some fashion houses have successfully segmented the market using women’s dress size as a variable.
However, the most common bases for segmenting consumer markets include: geographic, demographics, psychographics and behavior. Marketers normally select a single base for the segmentation analysis, although, some bases can be combined into a single segmentation with care. For example, geographic and demographics are often combined, but other bases are rarely combined. Given that psychographics includes demographic variables such as age, gender and income as well as attitudinal and behavioral variables, it makes little logical sense to combine psychographics with demographics or other bases. Any attempt to use combined bases needs careful consideration and a logical foundation.
- Sarin, S., Market Segmentation and Targeting, Wiley International Encyclopedia of Marketing, 2010
- Gavett, G., “What You Need to Know About Segmentation,” Harvard Business Review, Online: July 09, 2014
- Wedel,M. and Kamakura, W.A., Market Segmentation: Conceptual and Methodological Foundations, Springer Science & Business Media, 2010, pp 4-5
- In the early 1980s, Australian fashion designer, Maggie T, was the recipient of a Hoover Award for a segmentation study which showed that women with dress size 16+ underspent on clothes because they were unable to find suitable garments. This insight led to the establishment of ‘plus-sized’ fashion outlets. Case study reported in Australian Marketing Projects: the Hoover Award for Marketing, West Ryde, Australia, 1982