It is important to understand what is often termed the ‘classificatory’ information and ‘back- ground’ characteristics of your customer. Customers have two types of characteristics that can be measured. They have objective characteristics, which relate to:
o Demographics o Socio-economics o Consumer life cycle o ACORN
o Media usage.
They also have subjective characteristics, which relate to the ‘psychographics’. Psychographics look closely at various personality traits and inventories and very importantly, particularly in the 21st century, lifestyles.
Geographic segmentation
Geographic segmentation is a popular form of segmentation; for example, geographic regions of television areas are used as a form of geographic segmentation. Geographic segmentation means that the market can be broken down into areas for marketing purposes – into towns, cities, regions, countries and so on. This is particularly relevant with the tourism industry, where particular regions will be promoted as holiday and leisure destinations.
Geographic segmentation is particularly important on a global basis, as there are so many different cultures, characteristics and lifestyle requirements that need to be met. Many organi- zations will try, where possible, to standardize their product offerings globally, while others may try to tailor global requirements. It will very much depend upon the marketing place and the competitive elements that exist within it.
Demographic segmentation
One common area of demographics is social class. This is often a contentious issue. Let us look at some of the areas developed by the JICNAR social grade definitions when looking at segmentation (see Table 3.2).
As a marketer you should be able to recognize different market segments for any major product, for example motor vehicles. There are a number of different cars available to suit the many and varied needs of customers and their lifestyles.
Table 3.2 JICNAR classification Social
grades
Social status Characteristics of occupation
A Upper middle class High managerial/professional
B Middle class Intermediate managerial/administrative professional C1 Lower middle class Supervisory/clerical/junior/managerial/administrative/
professional C2 Skilled working class Skilled manual labour
D Working class Semi-skilled and unskilled manual labour
E Lowest level of
subsistence
Widows, casual workers, state pensioners
Geo-demographic segmentation
Geo-demographic factors are a combination of demographic and geographic variables which suggest that certain groups of people tend to move in circles appropriate to class and occupa- tion, while others may move together relating to lifestyles and geographic factors. There are two particular methods in this area that should be considered, ACORN and MOSAIC.
ACORN
ACORN (A Classification of Residential Neighbourhoods – Table 3.3) is a classification system which identifies people by geo-demographics. The current ACORN system divides the UK into 17 groups, which comprise of a total of 54 different types of areas, which share common socioeconomic characteristics. The basis of this type of segmentation is recognizing that different residential areas have very different profiles of people within them and therefore the products they may need may vary from area to area. In many instances products may not even be targeted at specific groups as it is not deemed to be appropriate.
Table 3.3 ACORN consumer targeting classification
Category A Thriving 19.8% 1 – Wealthy achievers – suburban areas 2 – Affluent greys, rural communities 3 – Prosperous pensioners
Category B Expanding 11.5% 4 – Affluent executives
5 – Well-off workers, family areas
Category C Rising 7.6% 6 – Affluent urbanites, town and city areas 7 – Prosperous professionals, metropolitan areas 8 – Better-off executives, inner city areas
Category D Settling 22.3% 9 – Comfortable middle-aged, mature home-owning areas 10 – Skilled workers – home-owning
Category E Aspiring 13.7% 11 – New home-owners, mature communities
12 – White-collar workers, better-off multi-ethnic areas Category F Striving 22.6% 13 – Older people, less prosperous areas
14 – Council estate residents – better off homes 15 – Council estate residents, high unemployment 16 – Council estate residents, greatest hardship 17 – People in multi-ethnic low-income areas
Unclassified 2.4%
Source: Adapted from Dibb, Simkin, Pride and Ferrell (2001)
From the seven overall categories, ACORN can then go on to identify issues relating to behaviour, personality, motives and lifestyle. These are what we termed the ‘psychographics’. The ‘objective’ characteristics of ACORN versus the ‘subjective’ characteristics of personality, motives and lifestyle serve to move the organization much closer to understanding the basis of customer needs, wants and expectations.
MOSAIC
MOSAIC is a classification system which analyses information from a variety of sources. It analyses geo-demographic data including the census (which provides housing, socioeconomic, household and age information), postcode address records (to provide housing and special types of address information, for example non-residential addresses), the electoral role (to provide composition of households and population movement information) and the CCN files/ Lord Chancellor’s office (to provide information on credit searches and bad-debt risks). MOSAIC provides three types of information as follows:
o Unit postcodes – A six or seven digit code
o Census enumeration districts – Based upon census data, containing about 180
addresses in each district
o Pseudo-enumeration districts – Areas created by MOSAIC using a combination of unit
postcodes within an individual enumeration district.
Lifestyle segmentation
Lifestyle segmentation is a very complex area and is based upon the characteristics of psychographics. These are more subjective and less easy to measure than the typical traits of demographics.
The key areas of interest for a marketer would typically be:
o Social activities – leisure activities, sport, eating out, holidays, shopping habits o Interests – music, reading, science, history, food, fashion, Internet
o Opinions – social and ethical issues, business, politics, culture, education, religion.
Clearly these characteristics will then be linked with demographics, to start establishing a clear customer profile, on which to base segmentation.
Behaviour segmentation
Behavioural segmentation relates to dividing customers, or indeed organizations, into groups based upon their purchase behaviour, frequency of purchase, attitudes towards the products/ services, benefits sought and consumption patterns.
There are a variety of different ways that a market can be segmented. The process of market segmentation involves the following steps:
o Analyse and describe the market segments o Validate segment choice by testing
o Choose an appropriate strategy for segmentation o Develop the product or market positioning.
Dividing the market into smaller segments can often present a wide range of new and exciting opportunities for organizations, enabling them to meet more directly a wider range of customer needs, but also enabling them to remain competitive in the marketplace. Segmentation can also allow organizations to respond faster to the changing needs of the customers and also the macro-factors of the external marketing environment.
Market segmentation is therefore essential for successful implementation of marketing strat- egy. It can help achieve:
o Lengthening of the PLC o Increased sales and profits
o Capture of some of the competitors’ share of the market
o Survival of a small firm operating in a competitive market consisting of large firms o Effective resource allocation
o Strategic marketing planning.