Buyer Behaviour: A Basis for Market Segmentation

Consumers value different aspects of products and services and they can generally be divided into three groups:  the very price conscious consumers, the loyal consumer who will stay loyal to a specific brand all their lives, and lastly the quality and reliability concerned consumers.  Marketers have become aware of these differences in consumers by conducting research, and today most companies have done away with mass marketing by focussing their product offerings to satisfy the different needs of consumers.

 

Mass marketing has its advantages, and have been successfully used in the past by companies that engage in mass production, mass distribution and mass promotion.  Think of Henry Ford with his mass produced black Fords.    Some argue that mass marketing is a good approach, because economies of scale can ensure that cost and price can be kept as low as possible to achieve maximum profitability.   However, this approach is not a widely accepted philosophy, and the modern consumer will be reached even more effectively with a more sophisticated approach – market segmentation.

 

A market segment is a component within a market that shares similar wants or needs for specific products or services.  The process of dividing a market into identifiable and meaningful groups or segments is referred to as Market Segmentation.

 

Market segmentation enables marketers to direct their promotional efforts at the different needs of consumers more precisely.  This helps decision makers to clearly define marketing objectives and more efficiently allocate resources.  The choice of segmentation characteristics is very important, for incorrect segmentation can lead to wasted resources and missed profit opportunities.  The characteristics that are most commonly used for segmentation are: behaviour; geography; demographics; psychographics and benefits sought.  Each of these will be described below.

 

Behavioural segmentation

Behavioural segmentation involves dividing potential buyers into groups which define their usage rate, their brand familiarity and consumers whose buying patterns are determined by some occasions.  Segmenting by usage rate enables marketers to focus their efforts on heavy users because they will account for a sizeable portion of all product sales.  For example, most airlines will focus on passengers who fly more frequently, because they are a lucrative market and their needs are different than those who fly only once a year.

 

The occasions for which products are bought for, will also determine the demand thereof.  Turkeys for Christmas and Easter confectionery are examples of premium priced products that target the consumer who is less price sensitive during these occasions.

 

If a brand loyal segment is targeted, marketers will often change their promotion strategy to remind consumers of the advantages of a long-term relationship rather than providing information about the product that the consumer is already aware of.

 

Geographic segmentation

With geographic segmentation, factors such as the region of the country or the world, the market size, market density or the climate will be taken into account.  It has been observed by retailers that use computerized checkout stations with scanners, that consumer demand for products such as ice cream, increases dramatically during summer months.  Other products that might enjoy greater demand during certain seasons are: snow blowers, water ski’s, air conditioners, sunscreen, allergy medication, and hot chocolate, to name a few.

 

Demographic segmentation

Demographic information such as age, gender, income and ethnic background are a very popular basis to segment markets.  Purely because this information are easy to access and are often related to the way consumers behave. An example of age segmentation is children between the ages of 4 to 12 who has a great influence on a family’s consumption habits – think breakfast cereal or clothing ranges of famous characters (Ben Ten).

 

Gender segmentation is also very commonly used to focus on a specific gender’s interest and hobbies.  Cosmetics, clothing, magazines and footwear are among the products that use marketing strategies based on gender.

 

Psychographic segmentation

Psychographic segmentation has even more detail than demographic segmentation, and will focus on factors such as motives, lifestyles and experiences.  Promotions of baby products will target a group of people who are motivated to care for their loved ones, where makers of luxury products such as Rolex watches will aim their marketing efforts at consumers who are motivated by status.  Many cigarette marketers, including Camel and Peter Stuyvesant, use a lifestyle segmentation approach to reach fun-loving, young individuals.

 

Benefit segmentation

This is the process of grouping consumers according to the benefits they want from the product.  An example of this is Kulula airlines who offers online check-in for consumers who values convenience and do not want to stand in a queue.