Consumer Market Segmentation | Segmentation variables for the consumer market and the industrial market


Consumer Market Segmentation | Segmentation variables for the consumer market and the industrial market

Consumer Market Segmentation | Segmentation variables for the consumer market and the industrial market

1. Segmentation variables for the consumer market

Segmentation variables are characteristics of customers. Selecting suitable variables is a significant decision of market segmentation. The consumer market consists of end consumers who buy products for personal or household use. There is a number of variables involved in consumer market segmentation. These variables are:

a. Geographic variables:

A company, either serving a few or all geographic segments, needs to put attention to the variability of geographic needs and wants. After segmenting the consumer market on a geographic basis, -companies localize their marketing efforts (product, advertising, promotion, and sales efforts). In geographical segmentation, the market is divided into different geographical units like:

i. Area

The geographic area is considered or focused on while segmenting the market. The purpose of area segmentation is to determine the location of consumers in a particular geographical area. The needs want, capacity, and attitudes of the consumers differ from area to area. On the basis of the area also consumer market can be segmented. The market can be segmented on the basis of country, zone, district VDC, etc. Nepalese market can be segmented as follows: Province, zones, districts, several cities, etc.

ii. Topography / Climate:

Topography and climate highly affect the needs and wants of the customer. The climate of a certain state is different according to their topography and so is their need as well as the variation in the packaging and distribution system. Regarding topography Nepalese market can be segmented as terai, hill, and mountain regions. Regarding temperature, the consumer market can be segmented as tropical temperature and alpine temperature.

iii. Population density:

Population density means the number of people per square kilometer. Population determines the size of demand for the product. Thus, marketing activities are highly influenced by the number of people in a certain area. Population density becomes high in cities but low in villages. The market can be divided into three segments an urban area, suburban area, and rural area.

b. Demographic Variables:

Demography is concerned with the human population and its distribution. In demographic segmentation, the market is divided into small segments based on demographic factors. Demographic factors are the most important factors for segmenting consumer groups. Consumer needs want and usage rate all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial. Market segmentation can be done according to the following demographic variables:

i. Age:

Consumers need differs regarding the age of the consumer. Young people’s need is totally different from old people’s. Due to the difference in product needs of consumers of different age groups, extensively use age variables for segmenting the consumer market. Age segmentation is implemented in many consumer items, such as clothing, shoes, cosmetics, entertainment, food items, etc. So, on the basis of age, the market can be segmented into young, teenage, mid-age, and old age markets.

ii. Gender:

Segregating a market into different groups based on gender has long been common for many products including cosmetics, clothing, and magazines to automobiles. The physical structure and psychoanalysis between males and females are different. Thus, the male market and the female market are distinctly different from each other with differences in product need, buying motives, and consideration. Gender is a commonly used segmentation variable in the consumers market. The market can be segmented into the male market and the female market. In the 1960s car companies such as Toyota began to realize the purchasing power of women, creating marketing campaigns, and then cars, specially targeted at the female market.

iii. Income and social class:

Income and social class influence the need of consumers, product use, usage rate, and buying behavior. Income provides purchasing power and level Of spending. People differ in their occupation and so is their income level. So, according to their income level market can be segmented into low, middle, and high-income level markets. Social class affects consumer aspiration for a certain lifestyle to be achieved by consumption of products coherent with the desired lifestyle. Social class is the rank within a society determined by its members. It reflects income, education, occupation, and area of residence. The market can be classified according to the social class of people as upper, lower, and middle-class markets.

iv. Family size and family life cycle:

The family size differs from location to location. In some locations, people like to live together, whereas in some societies people live alone or in small sizes. Regarding family, the size market can be segmented into the big and small family markets. Family size affects the size of the packages to be sold in the market. It even affects the product’s usage rate of grocery and other household items. Besides, the pattern of the family life cycle also differs. According to the pattern of family life cycle’ the need and wants of people differ and the market can be segmented accordingly. The family life cycle can be classified as follows:-

Life Cycle Stages

Bachelor Stage: young, single people not living at home

Newly Married Couples: young, no children

Full Nest I: youngest child under six

Full Nest Il: youngest child six or above

Full Nest Ill: older married couples with dependent children

Empty Nest I: older married couples, no children living with them

Empty Nest Il: older married couples, retired, no children living with them

Solitary Survivor I: in the labor force

Solitary survivor Il: retired

v. Occupation:

Occupation denotes the means of earning a livelihood or generating income via rendering service of expertise. People of society are involved in various jobs or occupations. The occupation of people influences their needs and wants. Buying pattern differs with occupation. The product choice of people from the noble professions and other professions differs. Similarly, the need for products like tools, books, machines, magazines, etc. differs on the basis of occupation. Therefore, the market can be segmented on the basis of their occupation as follows:-

• Employed, unemployed
• Students, services holders, professionals, etc.
• Farmer, retired men, etc.

vi. Education:

The level of educational achievement is different from customer to customer. People behave differently according to the education level they possess. Education is also an important variable of consumer market segmentation. On the basis of education, the consumer market can be segmented as illiterate, iterate, and highly literate market.

vii. Ethnicity and religion:

Ethnicity and religion: People’s behavior and activities are led by the ethnicity and religion they follow. Needs differ according to their ethnicity and religion. There are several castes, races, and ethnic groups in Nepal. Similarly, people believe in various religions such as Hinduism, Muslim, and Buddhism, etc. The consumer market can be segmented on the basis of various ethnic groups and religions.

c. Psychographic variables:

Psychographic segmentation describes consumers in terms of the human psychological dimension. It is based on the assumption that the types of products and brands an individual purchases will reflect that person’s characteristics and patterns of living. Human psychology exhibits their needs and wants. Psychology is a dynamic factor. It differs from person to person. It defines why the different consumers differ in how they want a product delivered, where they want to buy it, their available resources, their buying needs, or their location. In psychographic segmentation, segments are defined on the basis of buying motive, lifestyle, and personality characteristics.

i. Buying motive:

The buying motives are the causes of consumers buying a product. The buying motives differ significantly from each other regarding the hierarchy of needs developed by Maslow. Consumers purchase goods and services for different purposes. Generally, their purpose can be classified as:

Rational motive:- economy, convenience, efficiency, etc.

Emotional motive:- love, affection gratitude, etc

Ego motive:- r- status, image, self-respect, etc.

ii. Personality:

Personality is the sum total of ways in which an individual reacts and interacts with others. Personality is the combination of several characters who differ from others. It is an individual’s pattern of traits. People can be differentiated from each other by their personalities. When marketers attempt to segment markets by personality variables, they try to offer brands whose images or brand personalities will appeal to the consumer personalities they identify. People are masculine, feminine, extremely shy, friendly, introverted, extroverted, gregarious, authoritarian, ambitious, compulsive, competitive, and aggressive. According to that nature, people need differs and market can be segmented.

iii. Lifestyle:

Lifestyle variable involves classifying people according to their values, beliefs, opinions, and interests. There is no standardized lifestyle segmentation model, instead of market research, firms and advertising agencies are constantly devising new categories. Lifestyle segmentation is a more recent method of identifying aspects of people’s lives that affect their buying behavior. Lifestyle refers to the distinctive mode of orientation an individual has towards fulfilling basic needs or living life. The lifestyle of people is not the same with all. It differs from person to people and it is also a factor of market segmentation. Lifestyle of a person is revealed through three aspects they are:-

Activities they are involved in / what somebody is doing

The interest they are fond of doing / what somebody is willing

Opinions they take about society and social problems as / what somebody is thinking or saying

On the basis of lifestyle, the consumer market can be segmented as an economical, social-ecological, and recreational market.

d. Behavioral variables:

Behavioral variables refer to the response of consumers to the product. Behavioral segmentation is considered the most favorable segmentation tool as it uses those variables that are closely related to the product itself. It is also known as product-related segmentation. The market is segmented on the basis of consumers’ behavioral patterns related to products. Behavioral segmentation divides the market into groups based on their knowledge, attitudes, uses, and responses to the product. In this segmentation variables commonly used are: purchase occasions, product benefits’ status of users, loyalty status, usage rate, market factor sensitivity, etc

i. Benefits:

People purchase products with the hope of several benefits from that product. The benefit variable addresses the fact that different customers will seek different attributes from a product. The market can be segmented on the basis of the benefits required by the customer from a certain product. An obvious example of this kind of behavioral segmentation is shampoo, which serves broadly the same purpose of washing hair, but is marketed differently towards customers who have dry hair, greasy hair, colored or damaged hair.

ii. Occasions:

The occasion is when a product is consumed or purchased. Various occasions also affect the purchase and use of goods. Consumers show considerable differences in buying a product. Special occasions develop product need, purchase, and use. For example, Horlicks has traditionally been marketed as an energy and stamina diet for old and sick people especially. More recently Horlicks is promoting to encourage consumers to eat it as a breakfast diet taken regularly with milk.

iii. User status:

User status reflects the frequency of product purchases. Consumer shows the difference in terms of purchasing frequency of the product. All consumers are not general users. It can be divided into regular users, first-time users, ex-user, potential users, nonusers, and so on.

iv. Usage rate:

It is the quantity of the product purchased or consumed by the consumers. Consumers are divided distinctly between those customers who use the product heavily or frequently and those who are less loyal but only use the product occasionally. This could be the difference between a young family, who take their holiday in the same hotel chain twice a year, and a business executive who uses the same hotel chain twice a week. Consumers show differences in terms of the purchase and consumption quantity of the product. Marketers consider the rate and regularity at which consumers use a product or access a service. Regarding the consumption or uses of the product, it can be segmented as a heavy user, average user, light user, and so on.

v. Loyalty status:

A person’s attitude towards a brand is different. By the benefits gained through the consumption of the product develop faith in the product. According to the faith, the market can be segmented as:-
Full or undivided loyalty (Hard-core) market: Consumers who buy the same brand all time (A A A A A A)

Divided loyalty (Split) market: Consumers who are loyal to two brands (A B A B A B)

Shifting loyalty (Shifting) market: Consumers who shift their loyalty from one brand to another (A A A B B B)

No loyalty (Switchers) market: Consumers who constantly switch from one brand to another (A B C D E F)

vi. Market factor sensitivity:

Consumers are encouraged or inspired to buy by using several marketing tools. Generally, consumers quickly respond to price, promotion, and services. Consumer shows different degrees of response to various marketing inputs directed at them. According to marketing factor sensitivity, the market is divided into the following groups:

Price sensitive: consumers who are driven by the price of the product.

Service sensitive: consumers who demand various services along with the product.

Promotion sensitive: consumers who do not buy an unadvertised products.

2. Segmentation variable for the industrial market

Industrial markets buy products for business use, resell, or make other products. Industrial market segmentation is a scheme for categorizing industrial and business customers to guide strategic and tactical decision-making, especially in sales and marketing. While similar to consumer market segmentation, segmenting industrial markets is different and more challenging because of greater complexity in buying processes, buying criteria, and the complexity of industrial products and services themselves. It includes the industrial, institutional, and reseller markets. The goal for every industrial market segmentation scheme is to identify the most significant differences among current and potential customers that will influence their purchase decisions or buying behavior. This will allow the industrial marketer to differentiate their prices, programs, or solutions for maximum competitive advantage. Since the buying activities are mostly guided by logical reasoning, the segmentation variables used are much simpler than in the consumer market, the common segmentation variables for the industrial or business markets can be grouped into geographic, demographic operating, and purchase procedure variables.

a. Geographic variable:

The industrial market can be segmented on the basis of geography. The geographic variables for industrial market segmentation are:

i. Area or Location:

Geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location. In industrial markets, customer location may be important in many cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so the distance from the vendor may be critical. In some industries, firms tend to cluster together geographically and therefore may have similar needs within a region. The marketer has to decide where to conduct business: rural areas or urban or nationally or internationally.

ii. Topography and Climate:

The industrial market can be segmented on the basis of terrain to be served. According to topography, the industrial market can be segmented as mountains, hills, and plain markets. Similarly, climate can also be considered for industrial market segmentation since it affects packaging and various other aspects. According to climate market can be tropical temperature, alpine temperature, etc.

Geographic segmentation for the industrial market

Variables Typical market segments

Area Rural, Sub-urban, Urban, Local, National, Regional, International

Climate Tropical, Alpine

Topography Mountain, Hill, Terai

b. Demographic variables:

The industrial market can be segmented on the basis Of demography. The demographic variables for industrial market segmentation are:

i. Type of business:

Industries vary in their operation and production, Industries can be classified as agriculture, fishing, forestry, mining, construction, transportati011′ communication, finance, real estate, insurance, etc. Further, the business or organization can be government-run, social, non-government, etc. Regarding these varieties, the industrial market can be segmented.

ii. Size of business:

The size of a business can be measured by such factors as sales volume, number of employees, number of production facilities, and number of sales offices. Many sellers divide their potential market into large and small accounts using separate distribution channels to reach each segment. The seller’s sales force may sell directly to large-volume accounts. But to reach the smaller accounts, the seller may use a middleman. According to the size of business/customers, industrial market can be segmented as small (cottage and small units) industry, medium-size industry, large size industry, and global industry.

Demographic segmentation for the industrial market

Variables Typical market segments

Types of business Agriculture, Construction, Mining, Manufacturing, Finance, Insurance, Services, Government Organization

Size of business Very small, Small, Medium, Large, very large

c. Operating variables:

The industrial market can be segmented on the basis of industrial operation. The operating variables for industrial market segmentation are:

i. Technology:

Technology refers to the process, the organization adopts in producing or manufacturing goods and services. The organization operates in various modes of technology. The technology adopted by industries is manual technology, mechanical technology, automated technology, computerized technology, robotics technology, digital technology, etc. Technology determines the product requirements of buyers. So, the market can be segmented on the basis of technology in which industries are operated.

ii. Usage rate:

The requirements of any goods and services for industries are different. Some organizations may require something in huge quantities, whereas others may need it in small quantities. Therefore, the industrial market can be segmented on the basis of materials consumed by the industries. The industrial market can be segmented as no users, light users, average users, and heavy users.

iii. Service demand:

The industrial market can demand several services such as installation, delivery, credit, warranties, etc. Industries on the basis of the service they demand can be grouped. So, on the basis of service requirements also industrial market can be segmented.
Operating segmentation for the industrial market

Variables Typical market segments

Technology Labor incentive, Capital incentive Automatic ultra-modern technology, Computer technology

Requirement of services Warranties, Installation, Repair, After service sale

Usage rate Heavy users, Medium users, Light users, Non-users

d. Purchase procedure variables:

The industrial market can be segmented on the basis of the purchase procedure. The purchase procedure variables for industrial market segmentation are:

i. Documentation:

It is related with paper works required for the completion of the transaction. Generally, tenders and quotations are invited in modern buying. Government purchases are based on formal or systematic procurement. In such a transaction, the seller has to present several documents regarding the product and the producer, whereas some organizations may purchase without making any document. So, the market can be segmented on the basis of documentation also.

ii. Time:

It is related to the time for getting a product purchased. Some products require a long time to sell such as the purchase of capital items such as plant and machinery, helicopters, land, and buildings, etc. Similarly, the time undertaken to purchase by an organization is also different. Government organizations generally take a longer time to make purchases. So, a market can be segmented on the basis of the time required for sale.

iii. Purchase organization:

Different industries adopt different purchase procedures. The purchase organization adopted determines the complexity of the buying act. Some industries buying can be centralized and some may be decentralized. Purchase authority can also be delegated to individuals. In some industries, a purchase committee or purchase department can be established.
Purchase-related segmentation for the industrial market

Variables Typical market segments

Purchase organization Individual, Purchase Committee, Purchase Department

Purchase procedures and organizations Negotiation, Tender, Quotation, Centralization Purchase, Decentralization Purchase

Negotiation Short, Long


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