Propose segmentation criteria to be used for two products in different markets?

Answer 1

Demography is not the only or the best way to segment markets. Even more crucial to

marketing objectives are differences in buyer attitudes, motivations, values, patterns of usage,

aesthetic preferences, and degree of susceptibility.

The director of marketing in a large company is confronted by some of the most difficult

problems in the history of U.S. industry. To assist him, the information revolution of the past decade

puts at his disposal a vast array of techniques, facts, and figures. But without a way to master this

information, he can easily be overwhelmed by the reports that flow in to him incessantly from

marketing research, economic forecasts, cost analyses, and sales breakdowns. He must have more

than mere access to mountains of data. He must himself bring to bear a method of analysis that cuts

through the detail to focus sharply on new opportunities.

In this article, I shall propose such a method. It is called segmentation analysis. It is based on

the proposition that once you discover the most useful ways of segmenting a market, you have

Produced the beginnings of a sound marketing strategy.

Unique Advantages

Segmentation analysis has developed out of several key premises:

• In today's economy, each brand appears to sell effectively to only certain segments of any

market and not to the whole market.

• Sound marketing objectives depend on knowledge of how segments which produce the most

customers for a company's brands differ in requirements and susceptibilities from the

segments which produce the largest number of customers for competitive brands.

• Traditional demographic methods of market segmentation do not usually provide this

knowledge. Analyses of market segments by age, sex, geography, and income level are not

likely to provide as much direction for marketing strategy as management requires.

Once the marketing director does discover the most pragmatically useful way of segmenting

his market, it becomes a new standard for almost all his evaluations. He will use it to appraise

competitive strengths and vulnerabilities, to plan his product line, to determine his advertising and

selling strategy, and to set precise marketing objectives against which performance can later be

measured. Specifically, segmentation analysis helps him to-direct the appropriate amounts of promotional attention and money to the most

potentially profitable segments of his market; design a product line that truly parallels the demands of the market instead of one that

bulks in some areas and ignores or scants other potentially quite profitable segments; New Criteria for Market Segmentation.

catch the first sign of a major trend in a swiftly changing market and thus give him time

to prepare to take advantage of it.

determine the appeals that will be most effective in his company's advertising; and, where

several different appeals are significantly effective, quantify the segments of the market

responsive to each;

choose advertising media more wisely and determine the proportion of budget that should

be allocated to each medium in the light of anticipated impact;

correct the timing of advertising and promotional efforts so that they are massed in the

weeks, months, and seasons when selling resistance is least and responsiveness is likely to be

at its maximum;

understand otherwise seemingly meaningless demographic market information and apply

it in scores of new and effective ways.

These advantages hold in the case of both packaged goods and hard goods, and for

commercial and industrial products as well as consumer products.

Segmentation analysis cuts through the data facing a marketing director when he tries to set

targets based on markets as a whole, or when he relies primarily on demographic breakdowns. It is a

systematic approach that permits the marketing planner to pick the strategically most important

segmentations and then to design brands, products, packages, communications, and marketing

strategies around them. It infinitely simplifies the setting of objectives.

In the following sections we shall consider no demographic ways of segmenting markets.

These ways dramatize the point that finding marketing opportunities by depending solely on

demographic breakdowns is like trying to win a national election by relying only on the information

in a census. A modern census contains useful data, but it identifies neither the crucial issues of an

election, nor those groups whose voting habits are still fluid, nor the needs, values, and attitudes that

influence how those groups will vote. This kind of information, rather than census-type data, is the

kind that wins elections-and markets.

Consider, for example, companies like Procter & Gamble, General Motors, or American

Tobacco, whose multiple brands sell against one another and must, every day, win new elections in

the marketplace:

These companies sell to the whole market, not by offering one brand that appeals to all

people, but by covering the different segments with multiple brands. How can they prevent these

brands from cannibalizing each other? How can they avoid surrendering opportunities to competitors

by failing to provide brands that appeal to all important segments? In neither automobiles, soaps, nor cigarettes do demographic analyses reveal to the manufacturer what products to make or what

products to sell to what segments of the market. Obviously, some modes of segmentation other than

demographic are needed to explain why brands which differ so little nevertheless find their own

niches in the market, each one appealing to a different segment. New Criteria for Market Segmentation 3

I. Automobiles

The nondemographic segmentation of the automobile market is more complex than that of

the watch market. The segments crisscross, forming intricate patterns. Their dynamics must be seen

clearly before automobile sales can be understood.

Segmentation analysis leads to at least three different ways of classifying the automobile

market along nondemographic lines, all of which are important to marketing planning.

Value Segmentation. The first mode of segmentation can be compared to that in the watch

market-a threefold division along lines which represent how different people look at the meaning of

value in an automobile:

1. People who buy cars primarily for economy. Many of these become owners of the Falcon,

Ford, Rambler, American, and Chevrolet. They are less loyal to any make than the other

segments, but go where the biggest savings are to be found.

Conclusion

To sum up the implications of the preceding analysis, let me stress the points:

The demographic premise implies that differences in reasons for buying, in brand choice influences, in frequency of use, or in susceptibility will be reflected in differences in age, sex,

income, and geographical location. But this is usually not true. Markets should be scrutinized for

important differences in buyer attitudes, motivations, values, usage patterns, aesthetic preferences.

In considering cases like those described, we must understand that we are not dealing with

different types of people, but with differences in peoples' values. A woman who buys a refrigerator

because it is the cheapest available may want to buy the most expensive towels. A man who pays

extra for his beer may own a cheap watch. A Ford-owning Kellogg's Corn Flakes-eater may be

closed off to Chevrolet but susceptible to Post Toasties; he is the same man, but he has had different

experiences and holds different values toward each product he purchases. By segmenting markets on

the basis of the values, purposes, needs, and attitudes relevant to the product being studied, as in

EXHIBIT I, we avoid misleading information derived from attempts to divide people into types.

The strategic-choice concept of segmentation broadens the scope of marketing planning to include

the positioning of new products as well as of established products.

3. Marketing must develop its own interpretive theory, and not borrow a ready-made one from the

Social Sciences.

sometimes be helpful in an analysis of buying behavior in a given situation, some motivation

researchers have become oversensitive to the role of sex and, as a result, have made many mistakes.

Much the same might be said of the concept of social character, that is, seeing the world as being

"inner-directed, " "other-directed, " "tradition-directed, " "autonomous," and so forth.

One of the values of segmentation analysis is that, while it has drawn on the insights of social

scientists, it has developed an interpretive theory within marketing.

It is assumed that countless individuals comprising "the market" will be waiting and

ready-like the ideal bride-to respond to the appeal and have consummation result.

However,"the market" is not a single, cohesive unit; it is a seething, disparate,

pullulating, antagonistic, infinitely varied sea of differing human beings-every one of

them as distinct from every other one as fingerprints; every one of them living in

circumstances different in countless ways from those in which every other one of

them is living.

Book ref: New Criteria for Market Segmentation

Harvard Business Review, March/April 1964

by Daniel Yankelovich