Page 237 - Marketing Management

214 PART 3 CONNECTING WITH CUSTOMERS

Bases for Segmenting

Consumer Markets

Market segmentation divides a market into well-defined slices. A market segment consists of a
group of customers who share a similar set of needs and wants. The marketer’s task is to identify
the appropriate number and nature of market segments and decide which one(s) to target.
We use two broad groups of variables to segment consumer markets. Some researchers try to
define segments by looking at descriptive characteristics: geographic, demographic, and psycho-
graphic. Then they examine whether these customer segments exhibit different needs or product
responses. For example, they might examine the differing attitudes of “professionals,”“blue collars,”
and other groups toward, say,“safety” as a product benefit.
Other researchers try to define segments by looking at behavioral considerations, such as con-
sumer responses to benefits, usage occasions, or brands. The researcher then sees whether different
characteristics are associated with each consumer-response segment. For example, do people who
want “quality” rather than “low price” in an automobile differ in their geographic, demographic,
and psychographic makeup?
Regardless of which type of segmentation scheme we use, the key is adjusting the marketing
program to recognize customer differences. The major segmentation variables—geographic,
demographic, psychographic, and behavioral segmentation—are summarized in Table 8.1.

Geographic Segmentation

Geographic segmentation divides the market into geographical units such as nations, states,
regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can
operate in all but pay attention to local variations. In that way it can tailor marketing programs to
the needs and wants of local customer groups in trading areas, neighborhoods, even individual
stores. In a growing trend called grassroots marketing, such activities concentrate on getting as close
and personally relevant to individual customers as possible.
Much of Nike’s initial success comes from engaging target consumers through grassroots mar-
keting efforts such as sponsorship of local school teams, expert-conducted clinics, and provision of
shoes, clothing, and equipment. Citibank provides different mixes of banking services in its
branches depending on neighborhood demographics. Curves, an exercise chain aimed at middle-
aged women, places paper bags where consumers can place a form asking for more information
about Curves in local businesses such as ice cream shops, pizza parlors, and other places where guilt
can strike the weight-conscious shopper. Retail firms such as Starbucks, Costco, Trader Joe’s, and
REI have all found great success emphasizing local marketing initiatives, but other types of firms
have also jumped into action. 2

Bed Bath & Beyond Bed Bath & Beyond Home furnishing retailer Bed Bath & Beyond’s ability
to cater to local tastes has fueled its phenomenal growth. The firm’s managers pick 70 percent
of their own merchandise, and this fierce local focus has helped the chain evolve from bed linens
to the “beyond” part—products from picture frames and pot holders to imported olive oil and
designer doormats. In Manhattan stores, for instance, managers are beginning to stock wall
paint.You won’t find paint in suburban stores, where customers can go to Home Depot or Lowe’s. One man-
ager says several customers have been surprised to find out the store is part of a national chain and not a
mom-and-pop operation. For Bed Bath & Beyond, that’s the ultimate compliment. 3

More and more, regional marketing means marketing right down to a specific zip code. 4
Many companies use mapping software to pinpoint the geographic locations of their cus-
tomers, learning, say, that most customers are within a 10-mile radius of the store and are fur-
ther concentrated within certain zip+4 areas. By mapping the densest areas, the retailer can
rely on customer cloning, assuming the best prospects live where most of the customers already
come from.