2.2.5 Bases of Segmentation¶

Segmentation divides a market into distinct groups based on shared characteristics. The four traditional bases of segmentation are geographic, demographic, psychographic, and behavioral, with an additional contemporary base discussed later.

1. Geographic Segmentation¶

Definition: Segmenting the market based on physical location and related geographic variables.
Key Geographic Variables:
Region: North, South, East, West.
City Size: Small, medium, large metropolitan areas.
Population Density: Urban, suburban, rural.
Climate: Hot, cold, temperate, coastal.

Examples of Geographic Segmentation¶

Climate:
Hot regions vs. cold regions.
Example:
- Hot Regions: Sunglasses, cooling appliances, and sunscreen products.
- Cold Regions: Coats, sweaters, and heating appliances.
- Coastal Regions: Products for humidity (e.g., dehumidifiers) and raincoats.
Cities like Bangalore (moderate climate) vs. northern cities with extreme climates.
Population Density:
Services like Dunzo, Swiggy, Zomato are more prevalent in areas with:
- High population density (urban cities).
- High demand for on-demand delivery services.
Region-Based Preferences:
Cultural influences tied to specific regions can shape product offerings.
Example:
- Spices tailored for regional cuisines.
- Clothing styles suited to local traditions.
City Size:
Larger cities often have services like Ola, Uber, and Dunzo due to higher population and demand.
Smaller cities may lack such services due to lower market viability.

Key Examples of Products Influenced by Geographic Variables¶

Sunglasses:
Primarily sold in sunny or hot regions.
Winter Wear:
High demand in cold regions or during winter seasons in extreme climates.
Food Delivery Services:
Swiggy, Zomato, or Dunzo thrive in densely populated cities with higher urbanization levels.
Air Conditioners/Dehumidifiers:
High demand in coastal or humid areas.

2. Demographic Segmentation¶

Demographic segmentation is one of the most widely used methods to identify and categorize customers. It involves dividing the market based on vital and measurable statistics of human populations.

Key Demographic Variables¶

Age:
Example: Products for kids, teenagers, adults, or seniors.
Gender:
Example: Specific products for men (e.g., shaving kits) and women (e.g., makeup).
Marital Status:
Example: Wedding services for singles; home appliances for married couples.
Education:
Example: Study materials for students or professional certifications for graduates.
Occupation:
Example: Office attire for professionals; tools for laborers.
Income:
Example: Budget-friendly products for lower-income groups; luxury items for higher-income groups.
Family Size:
Example: Family-sized meal packs for larger households.

Purpose of Demographic Segmentation¶

Identifying the Customer:
Demographics help in understanding who the customer is.
For example:
- Kids require toys.
- Seniors may prefer health supplements.
- High-income individuals might look for premium products.
Widely Used:
It is often combined with geographic segmentation for better targeting.
Examples:
- Gender-specific products for different regions.
- Age-specific services in specific geographies.

Limitations of Demographic Segmentation¶

Insufficient for Strategic Insights:
While demographics provide basic customer identification, they may fail to explain why customers behave in certain ways.
Example:
- A 25-year-old and a 55-year-old wearing the same Levi’s jeans.
- Demographics can identify two separate age groups but cannot explain the motivations behind their purchasing behavior.
Need for Additional Insights:
Demographics must be paired with other segmentation methods (e.g., psychographic or behavioral) for a deeper understanding of customer preferences.

Examples of Demographic Segmentation¶

Age-Specific Products:
Baby diapers for infants.
Gaming consoles for teenagers.
Retirement plans for seniors.
Gender-Specific Products:
Grooming products like razors for men and makeup for women.
Income-Specific Products:
Affordable smartphones for low-income groups.
Luxury cars for high-income groups.
Family Size:
Family-sized grocery packs vs. individual portions.

3. Psychographic Segmentation¶

Psychography focuses on understanding why customers behave the way they do.
While demographics explain who the customer is, psychographics delve deeper into their motivations, preferences, and psychological traits.

Key Psychographic Parameters¶

Personality Traits:
Extroverts: Outgoing, sociable, seek group experiences.
Introverts: Reserved, introspective, value privacy.
Outer-Directed: Focused on external validation and social status.
Inner-Directed: Independent, driven by personal values and goals.
Lifestyle:
Health-conscious: Prioritizes fitness, healthy eating, and well-being.
Adventurous: Enjoys travel, outdoor activities, and new experiences.
Minimalist: Prefers simplicity and avoids excess.
Values:
Sustainability: Preference for eco-friendly and ethical products.
Prestige: Seeks luxury and high-status items.
Community-Oriented: Values brands that support social causes.

Examples of Psychographic Segmentation¶

Personality-Based:
Extroverts: Targeted by vibrant, socially engaging products like event tickets or group-based fitness classes.
Introverts: Attracted to serene, introspective products like books or noise-canceling headphones.
Lifestyle-Based:
Health-Conscious: Marketing gym memberships, organic foods, or fitness trackers.
Adventurous: Promoting travel gear, trekking packages, or experiences like skydiving.
Value-Based:
Sustainability: Focus on eco-friendly packaging and socially responsible brands.
Prestige: Highlight exclusivity and status in luxury product marketing.

Why Psychographic Segmentation Matters¶

Goes Beyond Demographics:
Two people of the same age and income might have vastly different preferences due to their personalities or lifestyles.
Example:
- A 25-year-old and a 55-year-old both wearing Levi’s jeans might share similar lifestyles (active and youthful), which demographic segmentation alone cannot capture.
Drives Brand Appeal:
Helps identify which psychological traits align with specific brand messages or product attributes.
Example:
- A luxury watch brand appealing to individuals valuing prestige and status.

4. Behavioral Segmentation¶

Behavioral Segmentation focuses on analyzing the behavior of current and potential customers.
It provides insights into how, when, and why customers interact with products or services.
The goal is to improve customer satisfaction, increase loyalty, and influence purchasing decisions.

Key Parameters of Behavioral Segmentation¶

Needs and Benefits:
Understand the core benefit customers seek.
Example:
- Customers do not buy locks; they buy security.
- Customers do not buy cosmetics; they buy beauty or self-confidence.
Decision Roles:
Different roles in a purchase process:
- Initiator: The person who suggests the purchase.
- Influencer: The person who impacts the decision.
- Decider: The one who makes the final decision.
- Buyer: The person who purchases the product.
- User: The end consumer of the product.
Example:
- For a TV purchase:
- Initiator: Child suggesting a new TV.
- Influencer: Family members recommending brands.
- Decider: Head of the household.
- Buyer: The person paying for the TV.
- User: Entire family.
Occasions:
When do customers purchase?
- Everyday Purchases: Toothpaste, detergent.
- Seasonal/Festival Purchases: Gifts, decorations.
- Periodic Purchases: Appliances, electronics.
Example:
- Target festival seasons for discounts on electronics.
User Status:
Categories of customers based on their engagement:
- Heavy users.
- Light users.
- Non-users.
Example:
- Heavy coffee drinkers may need larger packs.
- Non-users might require promotional offers to try the product.
Usage Rate:
How frequently do customers use the product?
- Daily, weekly, monthly, or infrequent usage.
Example:
- A frequent traveler may need annual travel insurance, while occasional travelers may prefer one-time coverage.
Buyer Readiness:
Stages of a customer's purchase journey:
- Immediate Buyer: Ready to purchase now.
- Delayed Buyer: Needs time to decide (e.g., 6 months to 1 year).
Goal:
- Move customers through the stages faster by creating urgency or incentives.
- Example:
- Convert a 1-year buyer to a 6-month buyer through targeted offers.
Loyalty Status:
Hardcore Loyals: Always buy the same brand.
Split Loyals: Loyal to two or three brands.
Shifting Loyals: Switch between brands.
Switchers: Purchase based on price, discounts, or offers.
Strategy:
- Convert:
- Switchers → Shifting Loyals.
- Shifting Loyals → Split Loyals.
- Split Loyals → Hardcore Loyals.
Attitude:
How customers perceive a product or brand:
- Positive Attitude: Satisfied and likely to recommend.
- Negative Attitude: Dissatisfied or critical.
- Neutral Attitude: Indifferent but open to influence.
Strategy:
- Focus on strengthening relationships with positive customers.
- Convert neutral or negative attitudes to positive ones.

Applications of Behavioral Segmentation¶

Improving Customer Retention:
Identify dissatisfied customers and address their concerns.
Encouraging Repeat Purchases:
Target light users to increase purchase frequency.
Understanding Decision Influencers:
Tailor messages to initiators or influencers.
Targeting Non-Customers:
Focus on non-users or neutral attitudes to expand the customer base.

Examples of Behavioral Segmentation¶

Toothpaste:
Regular purchases with minimal decision-making roles.
Electronics:
Complex decision-making with multiple influencers and deciders.
Festive Discounts:
Focused on seasonal occasions to boost sales.
Coffee:
Different packs for heavy and light users.
Travel Insurance:
Designed for frequent vs. occasional travelers.

Key Takeaways¶

Geographic Segmentation:
Focus on location-based preferences.
Demographic Segmentation:
Use measurable statistics to categorize consumers.
Psychographic Segmentation:
Understand deeper consumer motivations, lifestyle, and personality.
Behavioral Segmentation:
Analyze consumer actions, purchase patterns, and loyalty.

Each segmentation base provides unique insights, and marketers often combine them to develop comprehensive strategies tailored to their target audience.

Technographic Segmentation¶

Definition: Technographic segmentation divides consumers based on their attitudes, behaviors, and usage patterns related to technology, especially in the context of online shopping and digital products.
Origin: Conceptualized by Mary Modahl in her book "Now or Never" (1999), as part of Forrester Research.
Application: Particularly relevant for internet-based economies, technology products, app-based services, and e-commerce platforms.

Key Technographic Segmentation Parameters¶

Technology Attitudes:
Technology Optimists:
- Enthusiastic about adopting and using new technology.
- Open to learning about and experimenting with new tools and platforms.
Technology Pessimists:
- Skeptical or fearful of technology.
- Reluctant to adopt or trust technological innovations.
Demographic Overlay:
Segmentation often combines technographics with demographics such as income.
Examples:
- High-income technology optimists (early adopters).
- Low-income technology pessimists (laggards).

Technographic Segmentation Matrix¶

Income	Technology Optimists	Technology Pessimists
High Income	Early adopters; ideal target market.	Mainstream 1; effort required to build trust.
Low Income	Mainstream 2; price-sensitive but willing to adopt.	Laggards; low priority for targeting.

Insights:¶

High Income Optimists:
Best target market for new technology products.
Likely to adopt early and spend on premium offerings.
High Income Pessimists:
Potentially lucrative segment if persuaded to trust technology.
Low Income Optimists:
Open to adopting technology but limited by affordability.
Attracted by discounts and affordable plans.
Low Income Pessimists:
Typically avoid technological products; least viable segment.

Example of Technographic Segmentation in Action¶

Flipkart Campaigns:
Ads featuring kids acting as adults to promote online shopping.
Target Audience:
- Middle-aged parents (mainstream 1) who are skeptical of online purchases, especially for big-ticket items or fashion products.
Messaging:
- Emphasized simplicity and safety to build trust in e-commerce.

Conditions for Effective Segmentation¶

For segmentation to be successful, it must meet the following criteria:

Identifiable and Measurable:
The segment must have distinct characteristics that are easy to recognize and measure.
Example: Age, income, occupation.
Substantial:
The segment must be large enough to generate profit.
A segment with only a handful of potential customers is not viable.
Accessible:
Marketers must be able to effectively reach the segment through communication channels.
Example: TV, radio, social media, or other marketing platforms.
Actionable:
The segment must respond positively to targeted marketing strategies.
Example: A segment with demand, purchasing power, and interest.
Stable Over Time:
The segment should remain consistent long enough to execute marketing strategies effectively.
A segment that changes rapidly may not yield successful results.
Homogeneous Within, Heterogeneous Between:
Members within a segment share common characteristics (e.g., age, income, occupation).
Different segments must have distinct differences to justify separate strategies.

This approach ensures effective targeting, better customer engagement, and maximized marketing efficiency.

VALS Framework¶

Developed by Strategic Business Insights (SBI), the VALS framework is one of the most popular psychographic classification models.
It categorizes U.S. adults into eight primary groups based on their motivations, resources, and lifestyles.

The Eight VALS Categories¶

Innovators:
Characteristics:
- Successful, sophisticated, active, and take-charge individuals.
- High self-esteem.
Marketing Focus:
- Target with premium, cutting-edge, or luxury products.
Thinkers:
Characteristics:
- Mature, satisfied, reflective individuals motivated by ideals.
- Value order, knowledge, and responsibility.
Marketing Focus:
- Products emphasizing durability, functionality, and value.
Achievers:
Characteristics:
- Goal-oriented, hardworking, and focused on career and family.
- Prefer products that show success and efficiency.
Marketing Focus:
- Practical and status-enhancing products.
Experiencers:
Characteristics:
- Energetic, enthusiastic, and motivated by self-expression.
- Enjoy new trends, experiences, and products.
Marketing Focus:
- Trendy, exciting, and adventure-oriented products.
Believers:
Characteristics:
- Conservative, predictable, and motivated by ideals.
- Prefer traditional values and established brands.
Marketing Focus:
- Simple, familiar, and reliable products.
Strivers:
Characteristics:
- Trendy and fun-loving but resource-constrained.
- Seek stylish products that emulate wealthier groups.
Marketing Focus:
- Affordable products that offer perceived prestige.
Makers:
Characteristics:
- Practical, self-sufficient, and value functionality over luxury.
Marketing Focus:
- Durable, value-driven products that emphasize utility.
Survivors:
Characteristics:
- Cautious, frugal, and focused on basic needs.
- Limited resources and conservative in choices.
Marketing Focus:
- Affordable, essential products.

Integrating Psychographics with Other Segmentation Bases¶

Multi-Variable Segmentation:
Psychographics are rarely used alone. They are combined with:
- Geography: Geopsychographic segmentation.
- Demography: Demopsychographic segmentation.
- Behavior: Psychobehavioral segmentation.
Example:
- Combine psychographics (Thinkers) with demographics (age 40–50, income $80K+) and geography (urban areas) for more precise targeting.

Summary¶

Psychographics provide deeper insights into customer motivations, values, and lifestyles.
The VALS framework categorizes consumers into eight groups, enabling targeted marketing strategies.
Effective segmentation combines psychographics with geographic, demographic, and behavioral data to create precise customer profiles.
Psychographics consist of personality (interaction with the environment) and lifestyle (manifestation of personality in daily life).

By leveraging psychographic segmentation, businesses can better understand why customers behave the way they do and develop strategies that resonate with their audience.

AIO Inventory¶

Overview¶

Psychographic segmentation, which delves into consumer personality, values, and lifestyles, can be challenging to apply commercially. To address this, marketers use the AIO Inventory and Analysis tool to measure and segment consumer psychographics.

What is AIO Analysis?¶

AIO stands for: 1. Activities: - Examines how consumers spend their time. - Example questions: - What do you do on weekdays or weekends? - What is your evening routine? - Do you follow a health or fitness regimen? - Focus: Identifying the behaviors and routines of consumers.

Interests:
Explores consumer preferences and priorities.
Example questions:
- What are your preferences in home decor, fashion, or food?
- How do you prioritize hobbies like reading, sports, or traveling?
Focus: Understanding what matters to the consumer.
Opinions:
Captures how consumers feel about various issues.
Example questions:
- What is your opinion on political events, social trends, or environmental concerns?
- How do you perceive the future of technology or society?
Focus: Identifying consumer attitudes and values.

How AIO Works¶

Inventory Creation:
A set of statements or questions is developed to measure activities, interests, and opinions.
Consumers are asked to agree or disagree with these statements.
Data Collection:
Responses are collected to create a psychographic profile for individuals or groups.
Segmentation:
Consumers are grouped into segments based on shared psychographic traits identified through their AIO responses.

Applications of AIO Analysis¶

Consumer Behavior Insights:
Provides a deeper understanding of how consumers live, what they value, and what drives their choices.
Example:
- A segment of consumers who prioritize fitness and environmental sustainability can be targeted with eco-friendly workout gear.
Targeted Marketing:
Helps businesses create tailored marketing strategies based on psychographic insights.
Example:
- Consumers interested in luxury travel can be offered high-end travel packages.
Product Development:
Aligns product features and branding with the preferences and opinions of the target market.
Example:
- Introducing plant-based food options for consumers with strong environmental values.

Benefits of AIO Analysis¶

Actionable Insights:
Translates complex psychographic traits into measurable and actionable data.
Customization:
Enables the development of personalized marketing campaigns.
Market Segmentation:
Identifies niche markets with unique psychographic traits for precise targeting.

By leveraging AIO inventory, businesses can effectively implement psychographic segmentation, ensuring campaigns resonate with the target audience's personality and values.

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