• Geographic Segmentation

• Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographical geographic segmentation units, such as nations, states, regions, counties, eities or neighbourhoods. A

Dividing a market irito company may decide to operate in one or a few geographical areas, or to operate

different geographical in all areas but pay attention to geographical differences in needs and wants.

units such as Tuitions, International lifestyles are emerging, but there are eounterforees chat continue to

states, regions, counties, shape markets. Cross­cultural research has defined five 'mentality fields' for cars

cities or neighbourhoods. in Europe. M These show how much language demarcates common cultures and

ways of life:

1. The north (Scandinavia).

2. The north­west (the United Kingdom, Iceland and parts of Norway, Belgium and Holland),

3. The centre (German mentality field extending to Switzerland and parts of eastern Europe).

4. The west (the French­speaking area, including parts of Switzerland and Belgium).

5. The souCh (the Mediterranean, covering Spanish, Portuguese, Icalian and Clreek languages).

Intermarket separation: teens show swprising similarity no matter where in the world they live. For instance, ffii.s young woman could live almost anywhere.

Thus, many companies turget teenagers with

world/wide marketing campaigns.

386 Chapter 9 Market Segmentation and Targeting

Table 9.1

Market segmentation variables for consumer markets

VARIABLE

TYPICAL HKBAKUOWNS

Geographic Region

In the USA these are Pacific, Mountain, West North Central. West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England. Each country has its own variation on this.

County size

A, B, C, D.

City size Under 5,000; 5,000­20,000; 20,000­50,000; 50,000­100,000; 100,000­250,000; 250,000­500,000; 500,000­1,000,000; 1,000,000­4,000,000; 4,000,000 and over.

Density

Urban, suburban, rural.

Climate

Northern, Southern.

Demographic Age

Under 6, 6­11, 12­19, 20­34, 35­49, 50­64, 65+. Gender

Male, female.

Family size

Family life cycle Young, single; young, married, no children; young, married, youngest child under 6; young, married, youngest child 6 or over; older, married with children; older, married, no children under IS; older, single; other.

Income Under $10,000; $10,000­15,000; $ 5,000­20,000; $20,000­30,000; $30,000­50,000; $50,000­75,000; $75,000 and over.

Occupation Professional and technical; managers, officials and proprietors; clerical, sales; craftsmen, foremen; operatives; farmers; retired; students; homemakers; unemployed.

Education Grade school or less; some high school; high school graduate; some college; college graduate.

Religion

Catholic, Protestant, Jewish, other.

Race

White, Black, Asian, Hispanic, other.

Nationality American, British, French, German, Scandinavian, Italian, Latin American, Middle Eastern, Japanese, other.

Psychographic Social class

Lower lowers, upper lowers, working class, middle class, upper middles, lower uppers, upper uppers.

Lifestyle

Achievers, believers, strivers.

Personality Comprilsive, gregarious, authoritarian, ambitious. Behavioural

Purchase occasion

Regular occasion, special occasion.

Benefits sought

Quality, service, economy.

User status Non­user, ex­user, potential user, first­time user, regular user. Usage rate

Light user, medium user, heavy user.

Loyalty status

None, medium, strong, absolute.

Readiness state Unaware, aware, informed, interested, desirous, intending to buy. Attitude towards product

Enthusiastic, positive, indifferent, negative, hostile.

Market Segmentation • 387

Self­expression is important to car buyers in all the geographical regions, but the similarity ends there. The western group seek quality and practicality, the .south want value for money, while the north­western group see their car in very personal terms, The differences influence the cars they buy and how they are equipped. Although

all developed nations worry about the environment, they do so in different ways. In Italy, France and the UK, motorists do not see their car as a source of pollution, while in Germany, demand for environmentally friendly cars is growing fast.

Pargasa, the large Swiss investment group, concentrates on francophone Europe. It has ten eore holdings including French Paribas, Swiss Orior and Belgium's Petrofina, but these and other holdings are all concentrated in France and the French­speaking parts of Belgium and Switzerland. According to Aimery Langois­Meurinne, the group's chief executive, it would like to extend its core holdings to much more than ten.

Geographically it is pulling in its wings from the United Kingdom and the United States, but it wants to expand closer to home. 'We are trying to understand Germany and German­speaking Switzerland,' he says, 'but we are starting from a low base.' 9

Climatic differences lead to different lifestyles and eating habits. In countries with warm climates, social life takes place outdoors and furniture is less import­ ant than in Nordic countries. Not noticing the different sizes of kitchens has

caused many marketing mistakes. Philips started making profits in the Japanese market only after it made small coffee­makers to fit the cramped conditions there.

In Spain, ("oca­Cola withdrew its two­litre bottle after finding it did not fit local refrigerators, 10

Many companies today have regional marketing programmes within national boundaries ­ localizing their products, advertising, promotion and sales efforts to fit the needs of individual regions, cities and even neighbourhoods. Others are

seeking to cultivate yet untapped territory. For example, IKEA expanded globally using its large blue­and­yellow stores and dedicated out­of­town sites. IKEA was part of a marked 1980s trend towards out­of­town shopping. Its stores attracted customers from great distances, so that countries were served by a handful of stores. IKEA changed its strategy when acquiring the Habitat furniture chain from Storehouse in the early 1990s. The small stores gave it access to passing trade and new customer segments who are less willing to travel. The Habitat chain also

serves small towns. In making this significant shift, IKEA is also following the European trend towards town­centre malls. Having seen American urban decay,

demographic European politicians are resisting out­of­town developments. 11 segmentation

Dividing the marksc into groups based on

* Demographic Segmentation

demographic variables such as age, sex, family

Demographic segmentation consists of dividing the market into groups based on size, family life cycle, variables such as age, gender, family size, family life eycle, income, occupation,

income, occupation, education, religion, race and nationality. Demographic factors are the most

education, religion, race popular bases for segmenting customer groups. One reason is that consumer

and nationality. needs, wants and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other

life­cycle segmentation types of variable. Even when market segments are first defined using other bases ­

Offering products or such as personality or behaviour ­ their demographics need knowing to assess the

marketing approaches size of the target market and to reach it efficiently.

that recognize the consumer's changing

needs at different stages AGE. Consumer needs and wants change with age. Some companies use age of their life. and life­cycle segmentation, offering different products or using different marketing

388 Chapter 9 Market Scgmencaciori and Targeting

approaches for different age and life­cycle groups. For example, Life Stage vit­ amins come in four versions, each designed for the special needs of specific age segments: chewable Children's Formula for children from 4 to 12 years old; Teen's Formula for teenagers; and two adult versions {Men's Formula and Women's Formula). Johnson & Johnson developed Affinity Shampoo to help women over

40 overcome age­related hair changes. McDonald's targets children, teens, adults and senior citizens with different ads and media. Its ads to teens feature dance­ beat music, adventure ;md fast­paced cutting from scene to scene: ads to senior citizens are softer and more sentimental.

LEGO's range shows the limits of age­based segmentation. For babies there are Duplo rattles (0 to 3 months), then there are round­edged

activity toys made of two or three pieces (3 to 18 months). All these have the familiar LEGO lugs so that they will fit on to LEGO products. Next come Duplo construction kits or toys (2 to 5 years). Duplo bricks look like LFGO bricks, but are twice the size so that young children can manipulate but not swallow them. Duplo kits start simple, but there are

more complex ones ­ like train sets or 700 sets ­ that are suitable for children with increasing sophistication. By the age of 3, children have developed the manipulative skills that allow them to progress to LEGO Basic. This is targeted at 3 to 12­year­olds. The progression is made easy by the small LEGO bricks fitting to Duplo ones.

Age­based segmentation works until children are 5 years old when fewer and fewer girls buy LEGO and boys' interests diversify. In comes LEGO Pirates (<M2 years), Space Police (6­12), Railways (6­12), Technic (7­12), Model Team (9­12) and so on. To counter girls' decline in interest, LEGO launched Fabuland, a heavily merchandised product backed by Ladybird books and videos. It failed, leaving Legoland with an incongruous Fabuland monorail and play area. Pastel­coloured Fantia is another attempt to attract girls.

LEGO's product for the new millennium is Mindstorm, intelligent LEGO bricks. The result of a ten­year, DKrlOO million project with Massachusetts Institute of Technology, the bricks are programmed via an

infrared transmitter connected to a Pentium­powered PC. According to LEGO's Tormod Askildsen: 'It can be used to make all kinds of devices', such as an intruder alarm set up to empty ping pong balls on an

unsuspecting parent visiting a child's room. LEGO has great faith in Mindstorm's ability to enliven stagnant toy sales and woo children away

from the virtual world of computer games. It also claims that the intelligent bricks appeals to girls as much as boys. 12

LlFE­CYCLE STAGE. Life­cycle stage is important in recreation markets. In the holiday market, for instance, Club 18­30 aims at young singles seeking the

four Ss: sun, sand, sea and sex. This boisterous segment does not mix well with the families that the Club Mediterranean caters for. Children's activities and all­

day child care are an important part of the latter's provision. Saga Holidays eaters for older people. Its prices are kept low by travelling off­peak. Saga also provides insurance for older people and aims to set up and run radio stations for them.

Given the ageing population in Europe and other developed economies, Saga looks set to grow. 13

In the United Kingdom housing market, Barratts was the first to identify two life­cycle stage segments. It provided Solo apartments as starter homes for young people. These had full furnishing and household equipment included in the basic

Market Segmentation • 389

price. These extras would not have appealed to Ba mitts' other target market, older people with'empty nests' trading down to a small, single­floor home.

GENDER. Gender segmentation is usual in clothing, hairdressing, cosmetics gender segmentation and magazines. Recently, marketers have noticed other opportunities for gender

Dividing a market into segmentation. For example, both men and women use most deodorant brands.

different groups based Procter & Gamble, however, developed Secret as the brand specially formulated

on sex. for a woman's chemistry, and then packaged and advertised the product to re­

inforce the female image, Tn contrast, Gillette's association with shaving makes its deodorant male oriented.

The car industry has also begun to use gender segmentation extensively. Women are a growing part of the car market. 'Selling to women should be no different than selling to men,' notes one analyst. 'But there are subtleties that

make a difference.' 14 Women have different frames, less upper­body strength and greater safety concerns. To address these issues, car makers are redesigning their cars with bonnets and boots that are easier to open, seats that are easier to adjust and seat belts that fit women better. They have also increased their emphasis on safety, highlighting features such as air bags and remote door locks. In their advertising, some manufacturers target women directly. Indeed, much TV adver­ tising of small cars is now aimed at women, pioneered by Volkswagen: an angry. Smartly dressed woman leaves a town house — she throws away a ring, discards a

fur coat but, after hesitating, keeps the keys to the Volkswagen Golf. Volkswagen now devotes 30 per cent of its television advertising budget to advertisements for

women. Large advertising spreads are designed especially for women consumers in such magazines as Cosmopolitan and Vogue. Other companies avoid direct appeals, fearing that it will offend women. It sometimes comes across as conde­

scending. Some companies, such as Toyota and GM, try to include a realistic balance of men and women in their ads without specific reference to gender.

Sometimes the medium changes, but the message does not. Alongside the tra­ ditionally feminine ads for fragrances and fashion in one issue of Vogue are product ads for the RM\V BSOCsi, Audi S2, Toyota MR2, etc., showing no people. Rover's ad for its Metro Manhattan differentiates: 'For the woman who has every­ thing'. Ford's ad for its Maverick 4 x 4 is interesting: it shows two pictures with a man driving and a woman by his side.

income segmentation INCOME, Income segmentation is often used for products and services such as

Dividing a market into •tars, boats, clothing, cosmetics and travel. Many companies target affluent

different income groups. consumers with luxury goods and convenience services. The brands behind the

390 • Chapter 9 Market Segmentation and Targeting

Caffrey's Irish Ale attracts discerning young males.

Phoiography: Jonathan Glynn­Srnith.

French LVMII group's initials betray its focus on affluent consumers: Louis Vuitton luggage, Moot & Chandon champagne and Hennessy eognae. The groups links with the LIK's Guinness, which owns Johnnie Walker Red and Black Labels as well as Guinness, mean it has an. interest in five out of Europe's top ten brands. Not surprisingly, LVMH is growing fast and appears recession­proof. The company's brands are growing and it is seeking other luxury brands. Besides its haute couture activities, LVMH owns Parfums Christian Dior, has taken control of Guerain, the French fragrance house, and is stalking Van Clef & Aprels, the Paris­ based jeweller."

However, not all companies grow by retaining their focus on the top­income segment. Foreign and long­haul travel was once for the wealthy, but the travel market is now a mass industry. P & O aims to do the same with cruises. Once the preserve of the rich and retired, P & O Cruises are entering the mass market. With

the help of its German­built Orianu, it intends to bring prices down. For example, in 1995 a 12­day Mediterranean cruise on P & O's Canberra for two adults and two children cost £2,877, cheaper by £640 than the 1994 price. The mass­market tour operator Airtours is also entering the cruise market and aiming even further down market. It will sail tbe Mediterranean and the Canary Islands with a ship

bought from Closter Cruise of Norway. P & O's marketing director welcomes Airtours' market entry: 'What Airtours are good at is talking to a slightly younger, more down­market group of customers. They will put cruising in people's minds.' Airtours' managing director pledged to 'revolutionize the market ... You've seen nothing yet. This is a different end of the market to where cruising has been before."''

Established retailers, following the wheel of retailing and developing more sophisticated stores with added values, have allowed new entrants to succeed by targeting less affluent market segments. In the United Kingdom grocer;' market, Kwili Save did this with a lean organization, economically located stores and a no­ frills operation that kept prices to the minimum. The more up­market positioning of other United Kingdom grocers has also allowed Germany's cost­cutting Aldi into the market.

Market Segmentation • 391

f*e< idcinograpliics Geode mo graphics is an increasingly used segmentation method. Originally devel­ The study of the oped by the CACI Market Analysis Group as ACORN (A Classification Of relationship between

Geodem ograp hies

geographical location Residential Neighbourhoods), it uses 40 variables from population census data to

and demographics. group residential areas. Marketing Highlight 9,2 shows ACORN in use.