The theory of market segmentation was put forward by American marketing expert Wendell Smith in the 1950s, which was called another revolution in marketing after the "consumer-centered concept". Market segmentation refers to the enterprise according to the enterprise's own conditions and marketing intentions to consumers according to different criteria into a smaller, with some similar characteristics of the sub-market practice.
Enterprises carry out market segmentation because in the modern market conditions, consumer demand is diversified, and the number of people, widely distributed, any enterprise is not possible to satisfy the various requirements of all consumers in the market with their own limited resources. Through market segmentation, to provide their own advantageous products or services to specific consumer groups in the market has been the most basic premise of modern marketing. Consumers are numerous and have different needs, but companies can differentiate according to certain criteria to determine their target groups. The main basis for market segmentation are: geographic criteria, demographic criteria, psychological criteria and behavioral criteria, according to these criteria for market segmentation are geographic segmentation, demographic segmentation, psychological segmentation and behavioral segmentation.
(1) Geographic Segmentation
Geographic segmentation is to divide the market into different geographic units, geographic criteria can be selected from countries, provinces, regions, counties, cities or residential areas. Geographic segmentation is a segmentation standard often used by companies. On the one hand, because consumers in different regions have different habits, lifestyles, religious beliefs, customs and other preferences, and thus demand is different. For example, European and Asian consumers due to the different skin texture, living conditions, the demand for skin care products, cosmetics, there are great differences, therefore, when Yuxi in China to play "especially developed for the Oriental women's cosmetics," the slogan, get the Chinese women's favor. On the other hand, modern enterprises, especially large-scale multinational enterprises, in the transnational or transnational or cross-regional marketing, geographical differences on the success or failure of marketing is more critical. As the saying goes, "When a tangerine is born in Huainan, it is a tangerine; when a tangerine is born in the north, it is a hedgehog". At the same time, small-scale manufacturers in order to centralize resources to capture the market, but also often a small area and then subdivided.
Reynolds (R-J-Reynolds), such as the United States, will be divided into three characteristics of Chicago's cigarette mini-market:
A North Shore area market. Most of the residents here are well educated and concerned about their health, so the company markets brands of cigarettes that are low in tar.
B The Southeast market. This region is home to blue-collar workers who are low-income and conservative, so the company marketed its low-priced Winston cigarettes here.
C The southern market. This was a black neighborhood, so the company made extensive use of the black press and bulletin boards to promote Sharon cigarettes, which had a high menthol content.
(2) Demographic Segmentation
Demographic segmentation is the process of dividing the market into groups based on the consumers' age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality.
Demographic segmentation is the most widely used type of segmentation in market segmentation because the structure of consumer needs and preferences, the utilization of product brands and population are closely related, and because demographic factors are easier to quantify than other factors.
Age, gender, and income are the most commonly used indicators for demographic segmentation. The size of the consumer's demand purchase changes with age. There is a clear difference between the youth market and the middle-aged and old-aged market. Young people spend money generously and pursue fashion and trendy excitement; while the requirements of the middle-aged and old-aged people are relatively conservative and steady, and they are more in pursuit of practicality, efficacy, and good value for money. Therefore, enterprises in the provision of products or services, the development of marketing strategies relative to these two markets should be different considerations.
Gender segmentation is widely used in clothing, cosmetics, cigarettes and magazines. The demand characteristics of the male market and the female market are very different, for example, women's cigarettes and men's cigarettes have very different appeal points. Marlboro men's cigarettes emphasize the male robustness, dashing as the Western cowboys, while Kool women's cigarettes highlight the mysterious elegance of women.
Based on income, the market can be divided into high-income layer, white-collar, working class, low-income group, etc. or the amount of division of the class. High-income and white-collar classes are more concerned about the quality of goods, brands, services and product value-added factors, while low-income people are more concerned about the price and practicality. For example, car companies, real estate companies for different income groups to provide different products and services.
Of course, many companies tend to use a combination of two or more factors in their demographic segmentation, rather than just one.
(3) Psychological Segmentation
Psychological segmentation is the segmentation of the market according to the social class, lifestyle and personality traits of consumers, and people in the same geographic market segment may display very different psychological characteristics. For example, a U.S. pharmaceutical company will be divided into four types of consumers: realists, believers in authority, skeptics, and sentimentalists. Behavioral segmentation is the segmentation of the market based on consumers' knowledge of the brand, its system, its use and its reaction. The main segmentation factors in this area are as follows:
Timing: that is, the time when the customer comes up with the need to buy the brand or use the brand, such as marriage, promotion, programs and so on.
Purchase frequency: whether it is a frequent or occasional purchase.
Purchase benefits: cheap, convenient and practical, trendy and fashionable, show off, etc..
User status: ever used, never used, first time user, potential user.
Brand knowledge: don't know, heard of, interested in, hope to buy, ready to buy, etc..
Attitude: enthusiasm, certainty, indifference, denial, hostility. Enterprises choose certain detailed criteria based on the characteristics of the products or services they offer, and conduct surveys and analyses according to these criteria, and ultimately to describe and summarize the market segments of interest. Sometimes, when the segmentation market cannot be generalized by using the above four segmentation criteria separately, it is necessary to consider the combined use of the above four criteria, and the more detailed the information, the more conducive to the selection of the target market. The final generalized market segments should at least meet the following requirements:
The segmented market must be specific, clear, not plausible or general, otherwise it loses its meaning.
The segmented market must be a potential market, and the possibility of entry, so that the enterprise is meaningful, if the market potential is very small, or the cost of entry is too high, there is no need to consider such a market. The decision makers will use the "brainstorming method" to estimate the needs of potential customers in terms of geography, demographics, psychographics, and purchasing behavior.
Analyze the different needs of potential customers, and initially form a number of segments with similar consumer needs.
Remove the ****similarities between the preliminary sub-markets and use the differences between them as the basis for market segmentation.
The sub-markets are provisionally named.
Further recognizing the characteristics of the sub-markets for the purpose of segmentation or consolidation.
Measure the size of each market segment and estimate the likely level of profitability.
The seven-step segmentation method summarizes the general procedure of market segmentation, which should be applied flexibly according to the real conditions when enterprises operate in practice.