What segmentation method divides buyers according to their attitudes knowledge uses or responses to a product?

Your Company Size is Irrelevant to Segmentation

Regardless of your company size, defining and targeting specific markets provides focus and strategic direction. This is the purpose of market segmentation.

Market segmentation is the process of dividing a market into a distinct group of buyers that require different products or marketing mixes. Segmentation enables businesses to identify and cluster different groups of customers in a market in order to target specific products and services for each group or segment.  Market and customer segmentation matters when you want to tailor your offer (product, channel, price, and communication) more precisely to different groups based on their needs and use segmentation to understand the economic value and economic potential of each group. When resources are limited, segmentation help you decide where to focus and make your investments by identifying segments with the greatest potential economic value.

Anytime you suspect there are significant measurable differences in your market, you should consider dividing the market into smaller segments as a way to reveal niches, make your marketing and improve the efficiency of your marketing. Sometimes, especially for smaller companies, the differences between segments is subtle. But it is these subtle differences that can make a big difference. There’s enough research and experience out there to support the belief that targeting helps a company be more effective than just try to cast a wide net. Often smaller companies lack the resources and expertise to create segments. The most common approaches to segmentation are:

• Demographic bases (age, family size, life cycle, occupation)
• Geographical bases (states, regions, countries)
• Behavioral bases (product knowledge, usage, attitudes, responses)
• Psychographic bases (lifestyle, values, personality)

An Exploration into Four Market and Customer Segmentation Options

Segmentation is basic Marketing and relevant to every company.

Research and market analysis are vital steps in the process of market and customer segmentation starts.  The information you derive from these is what enables you to identify segments.  Once you have the data, what approach should you take to your segmentation? Select one of these four customer and market segmentation methods: A-priori, usage, attitudinal, and needs-based. Cost, your ability to implement the segmentation, and the value of segmentation to your business will affect the type of segmentation method you use.  Let’s examine each option:

1. A-Priori segmentation

A-priori (pre-existing) segments are the most basic way of creating market or customer segments. In A-priori segmentation, the market is split according to pre-existing demographic criteria such as age, sex or social economic status. More sophisticated versions include lifestage (which combines information about age, presence of children and working status) and geodemographics such as Experian’s Mosaic or CACI’s Acorn classification systems where households are allocated to specific clusters on the basis of typical household make up and housing type.

The benefit of a priori segmentation is that they are easy to define because it is the simplest segmentation approach to apply and use. A database can be flagged or sorted on the pre-existing data and that data can be used to drive sales and marketing campaigns.

2. Usage segmentation

The benefit of usage segmentation is that segments are based on a groupís value to the business. Usage segmentation can help establish underlying driving forces from other demographic variables. There are two ways of carrying out a usage segmentation, firstly customers are split according to their weight of use or by time and place.

In the former, market and customer segments might be created along a continuum of heavy to light users in the latter customers would be grouped by when or where they buy.  By applying decile analysis you can split the users into 10 evenly numbered groups or use Pareto analysis to separate the top 20% from the bottom 80%. This segmentation can be carried out directly on customer databases.

3. Attitudinal segmentation

When market research is used for usage studies, it is also often accompanied by attitudinal research – what do customers think or believe about the category in question. This is commonly achieved through banks of agree-disagree scales or ratings out of 5,7 or 10. The aim of this approach is to understand commonalities in opinion and what makes one group of users different from another. This approach can then be used to target groups by what they think and how they feel, rather than just who they are. This is particularly valuable in determining branding strategies and keeping a brand in tune with customers.

To understand how attitudes affect purchase, statistical techniques such as “cluster analysis,” are used where people with similar attitudes are combined together. For instance grouping those for whom the environment is important separately from those who think price is more important. Attitudinal clusters do not fit easily into database or conventional targeting. Companies can reach different attitudinal groups by offering a range of products and a range of communication, but clearly the lack of a clear definition means cross-over between the targeting of segments.

There are some inherent problems associated with attitudinal segmentation. It can be expensive and very difficult to replicate. Cluster analysis cannot be carried out into the field so scoring systems or surrogate measures need to be developed which can skew data. And because attitudes can change over time, the segments will evolve and devolve.

4. Needs based segmentation

Needs based segmentation is a method designed to determine fundamental drivers for the buying decision. Needs based segments are typically the most actionable forms of segments as you know what drivers and performance the product or service has to satisfy. These are normally more stable than attitudinal groups as they should directly reflect and predict existing market share.

Most needs-based market segmentation uses Conjoint Analysis to split a category into different levels of functional performance. By understanding what elements are key drivers for individuals, specific needs and requirements can be identified from the trade-offs that each person makes. Using cluster analysis, this information can be drawn together to find different segments with similar preferences and needs from the product category in question.

Once you have selected your segments, you should develop a separate marketing plan for each. Regardless of you size, every company can take the following four steps to gain knowledge and information on how to segment their markets:

1. Leverage secondary data. Trade associations, trade publications, trade conferences, and basic research publications often provide a wealth of information and insight into a segment.
2. Monitor your competition. Watching key competitors can often provide useful information about the market. Competitors are just like you, they are following the money. Larger competitors may have been able to conduct the research you couldn’t and you can use their efforts for guidance.
3. Create a trade buying council. Key buyers exist within your trade and they may be willing to share research and other information about the market.
4. Conduct informal qualitative research within the potential segments. Invite a few individuals from the selected segments to a dinner or breakfast as a way to learn more about the needs, wants, buying criteria, and supplier preferences

Put Your Segmentation Model to Work

Opportunity and accessibility are two essential criteria  for building any segmentation model.  A key aspect of opportunity is whether the segment is large enough to provide a solid customer base. Second is accessibility. Make sure you evaluate your segments based on whether you can gain access to the target.

Need help with segmentation? Check out our Market Segmentation Workshop.

What segmentation divides buyers into segments based on their knowledge attitudes uses or responses to a product?

What are the 4 methods of segmentation?

Which divides buyers into segments based on their knowledge?

What are the 4 types of segmentation with examples?

What is psychographic segmentation method?

What is segmentation based on consumer attitudes?