CLASSIC TECHNIQUES FOR SELECTING A MARKET SEGMENT

Table 3.2 displays the four most common ways to segment a market, based on demographic, geographic, psychographic, and product attribute factors. Each of these approaches can be subdivided into additional niches. Or they can be used in various combinations to create fresh opportunities. We now examine each.

Demographic Segmentation

Demographic variables are among the most widely used segmentation approaches. They owe their popularity to two facts: First, they are easier

TABLE 3.2

Bases for Market Segmentation

Demographic Segmentation

Psychographic Segmentation

Sex

Lifestyles

Age

Psychological variables:

Family life cycle

Personality

Race or ethnic group

Self-image

Education

Cultural influences

Income

Occupation

Family size

Religion

Home ownership

Geographic Segmentation

Product Attribute Segmentation

Region

Usage rate

Urban/suburban/rural

Product benefits

Population density

City size

Climate

to observe and/or measure than most other characteristics. Second, their breakdown of gender, age, family life cycle, race or ethnic group, education, income, occupation, family size, religion, and home ownership are often closely linked to differences in behavioral patterns.

In many instances, you can combine demographic variables to produce a more meaningful breakdown than just relying on a single criterion. For example, it is common to combine the age of the head of the household with the family size and the level of household income.

If four age levels, three family sizes, and three income levels are distinguished, a total of 36 segments result. Using a combination of primary data, secondary data, and judgment, you can then determine the value of each segment and thus arrive at a well-thought-out conclusion about which segments represent primary and secondary decisive points.

Watch out, however, for unrelated demographic characteristics that could be unreliable: Gender may produce marginal differences in the usage patterns of cell phones or in the consumption of toothpaste and soft drinks. Or chronological age is not always a reliable indicator of behavioral patterns. And income level may prove relevant only when used with other variables such as social class, family life cycle, and occupation.

 
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