What are the main ways of segmenting a market?
There are quite a number of potential market segmentation bases (also referred to as segmentation variables), which an organization could effectively utilize to construct market segments. As a simple guide, segmentation bases can be classified into five major categories:
- behavioral, and
- benefits sought.
By using any of these segmentation bases, either individually or in combination, an organization can construct market segments for evaluation to help them select appropriate target markets.
Note: This topic discusses segmentation bases for consumer markets, there is a separate topic area relating to business market segmentation bases/variables.
Description of each main consumer segmentation base
|Geographic||Segmenting by country, region, city or other geographic basis.|
|Demographic||Segmenting based on identifiable population characteristics, such as age, occupation, marital status and so on.|
|Psychographic||This segmentation approach involves an understanding of a consumer’s lifestyle, interests, and opinions.|
|Benefits sought||This approach segments consumers on the basis of specific benefits they are seeking from the product, such as convenience, or status, or value, and so on.|
|Behavioral||Segmenting the market based on their relationship with the product or the firm. Examples include: heavy or light users, brand loyal or brand switchers, and so on.|
Understanding market segmentation bases/variables
Probably the best approach to understanding the different segmentation bases is to view some examples, which are listed in the table below.
It is important to note that sometimes textbooks classify the lower-level bases/variables slightly differently. For example, some textbooks integrate ‘benefits sought’ as being a ‘behavioral’ segmentation base option. However, benefits sought are quite an important and commonly used segmentation approach in real business practice and should be separated out. And some texts will list geo-demographics (a combination of geographic and demographic measures) as a separate category. However, as it is possible to combine (use hybrid segmentation) any of the bases, the following examples just utilize the major categories.
|Geographic||Country/continent||England, UK, Europe|
|Region/area of the country||North India, West India, South India|
|City||New York, Los Angeles, Dallas, Chicago|
|Urban/rural||Measured by the area’s population density|
|Climate||Tropical, arid, alpine|
|Coastal/inland||Measured by distance to the coast|
|Demographic||Age group||Pre-teens, teens, young adults, older adults|
|Generation||Baby boomers, Gen X, Gen Y|
|Marital status||Married, single, widowed|
|Family life cycle||Young married no kids, married young kids|
|Family size||Couple only, small family, large family|
|Occupation||Professional, trade, unskilled|
|Education||High school, university, vocational|
|Ethnic background||African-American, Hispanic, Asian|
|Religion||Christian, Jewish, Hindu, Muslim|
|Psychographic||Lifestyle||Family, social, sporty, travel, education|
|Values (VALS)||VALS = values and lifestyles|
|Social class||Upper class, middle class, lower class|
|Personality/self-concept||Ongoing, creative, innovator, serious|
|Activities, interests, opinions (AIO)||Various hobbies, sports, interests|
|Benefits Sought||Needs/motivations||Convenience, value, safety, esteem|
|Behavioral||Occasion||Birthday, anniversary, Valentine’s Day|
|Buying stage||Ready to buy, gathering information only|
|User status||Regular, occasional, never|
|Usage rate||Heavy, light|
|Loyalty status||Loyal, occasional switcher, regular switcher|
|Brand knowledge||Strong, some, none|
|Shopping style||Enjoys shopping, functional, avoids|
|Involvement level||High, medium, low|
Please note that these are some examples only – there are many other ways to segment (divide) a consumer market. The important things to remember are: the major categories, that there are hundreds of potentially useful segmentation bases, and that these bases can be used in combination (which is known as hybrid segmentation).
Can firms use more than one segmentation base?
Yes, by using more than one approach for segmentation organizations can have a much stronger understanding of each of the segments. Please refer examples for segmentation bases and to main tools used in segmenting markets.
What is hybrid (multivariate) segmentation?
Hybrid segmentation (which is also sometimes referred to as multivariate segmentation) refers to using multiple segmentation variables in the construction of market segments. For example, using a demographic segmentation variable together with a psychographic segmentation variable in order to determine the market segment. The segmentation trees shown in the example section use hybrid segmentation.