1. Geographic segmentation

Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, provinces, cities or even neighborhoods. A company may decide to operate in one or few geographical areas, or to operate in all areas but pay attention to geographical differences in need and wants.

Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods. For example Citibank offers different mixes of branch banking services depending on neighborhood demo­graphics. And Baskin-Robbins practices what it calls "three-mile marketing," emphasizing local events and promotions close to its local store locations. On a global scale, video game companies create different versions of their games depending on the world region in which the game is sold. For example, Capcom sells its Resident Evil series as Biohazard in most other countries, such as Japan and France, where it is played in local languages.

Other companies are seeking to cultivate as-yet-untapped geographic territory. For example, many large companies are fleeing the fiercely competitive major cities and suburbs to set up shop in small towns and in rural and semi-urban India. These stores, geared toward small markets and vacation areas that can't support a full-size store, are designed to offer a more intimate neighborhood store setting. In contrast, other retailers are developing new store concepts that will give them access to higher-density urban areas. For example, Wal-Mart has been complementing its supercenters by opening small, super­market-style Market side grocery stores in markets where full-size stores are impractical. Market side stores are a third the size of Wal-Mart's other small-store format, Neighborhood Market supermarket and a 10th the size of one of its supercenters.

2. Demographic segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for seg­menting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables. Even when marketers first define seg­ments using other bases, such as benefits sought or behavior, the must know segment demographic characteristics in order to asses; the size of the target market and to reach it efficiently.

A) Age and Life-Cycle Stage

Consumer needs and wants change with age. Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups. For example Leo Toys offers different toys for kids in different age groups. It acknowledges the fact that a toy that amuses a 4-year-old may fail to attract a 12-year-old.

Similarly, whereas HP targets adult buyers with its "The Computer is Personal Again" campaign, along with Sunday circular ads featuring price and value, it has developed a special "Society for Parental Mind Control" campaign targeting teenagers. Research shows that although parents are the predominant buyers of computers, teens are key recommenders. "It's such an old story, but kids are the arbiters of cool," says one analyst. So HP wants to raise its teen cool quotient. The teen-targeted campaign uses mostly online and viral media. For example, teens can click on to the "Society far Parental Mind Control" site to pick up "fun, new ways to get a sweet computer out of your parents."

Considering the special needs of the consumers in higher age groups, many companies design special products for them. For example, HDFC Standard Life Insurance has launched pension plans for retired people so that they do not have to depend on any -one for their financial needs. Marketers must, however, be careful to guard against stereotypes when using age and life-cycle segmenta­tion. Although some 80-year-olds fit the doddering stereotypes, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families.

Thus, age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power. Companies marketing to mature consumers usually employ positive images and appeals. For example, take the cruise industry, which heavily targets people of all age groups at all life stages. One Carnival Cruise Lines ad for its Fun Ships features an older per­son and child riding waterslides, stating "Fun has no age limit."

B) Gender

Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. For example, Barbie—a chain of retail stores in India—offers clothing only for girls. More recently, many mostly women's cos­metics makers have begun marketing men's lines. Nivea markets Nivea for Men, "an advanced line of enriching skincare and soothing aftershave products specially designed for the active, healthy men's lifestyle," and offers a four-step guide to perfect men's care. Similarly, L'Oreal offers Hydra Energetic—a mois­turizer, for men to soften the signs of fatigue and stress.

A neglected gender segment can offer new opportunities in markets ranging from motorcycles to guitars. For example, 10 years ago, two-wheelers were mainly targeted at men and were looked at as a means of transportation. Today, marketers like Bajaj and Hero Honda are targeting brands like Kristal DTS-i and Pleasure at young women. These two-wheelers are not bulky and powerful but light and "fun" to ride for young and fash­ionable women.

C) Income

The marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel have long used income segmentation. Many companies target affluent consumers with luxury goods and convenience services. For example, for a price, luxury hotels pro­vide amenities to attract specific groups of affluent travelers, such as fami­lies, expectant moms, and even pet owners:

At the Four Seasons Hotel Chicago, guests can buy the Kids in the City package for $520 a night and, among other things, enjoy a visit in their room from the Ice Cream Man, who arrives with all the fixings to make any concoction they desire. At one spa in Scottsdale, Arizona, expectant parents can pur­chase the "Bundle of Joy" Babymoon package, which includes a 24-hour Cravings-Chef service, a couples massage, and breakfast in bed. The Benjamin Hotel in New York City pro­vides dog beds in a variety of styles and doggie bathrobes, as well as canine room service and DVDs for dogs. And if that isn't decadent of enough, how about dropping $100,000 for an extravagant weekend in Vegas? At The Ritz-Carlton, Lake Las Vegas in Henderson, Nevada, the Love at Lake Las Vegas weekend package includes two nights in the 2,400 square foot presidential suite, helicopter and gondola rides, a champagne-tasting party on a yacht complete with rose petals strewn about and a string trio, use of a luxury car throughout the stay, in-room couples spa treatment, a $5,000 casino line of credit, a $50,000 shopping spree at Neiman Marcus, 14 dozen roses, and a butler-drawn Cristal champagne bath.

However, not all companies that use income segmentation target the affluent. For example, many retailer’s such as Big Bazaar, with its "Isse sasta aur kahan?" (it doesn't get cheaper than this) tagline, suc­cessfully target low- and middle-income groups. With their low-income strategies, Big Bazaar stores are now the fastest-growing retailers in India.

3. Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeups.

The products people buy reflect their per­sonalities and lifestyles. As a result, marketers often segment their markets by consumer personalities and lifestyles and base their marketing strategies on rel­evant appeals. Earlier, we saw how Dilmah targets the sophisticated, trendy, and upscale youth with its t-bars. An opposite yet successful example comes from Pakistan. Tapal uses the stereotypical rustic, extrovert, and macho culture of Punjab to sell its "Tezdum" brand of tea. The word "Tezdum" roughly translate into "strong taste/flavor" and connotes a "strong/tough guy." The brand is targeted toward middle- and lower-income Pakistani consumers who prefer their tea "extra" strong. Tezdum ads use symbols and action sequences from the iconic Punjabi movie "Maula Jat" to depict the users of Tezdum as rustic, tough men and not timid urban dwellers who cannot handle strong tea. The famous Punjabi movie villain, Mustafa Qureshi, endorses the strength of the blend and that of the users. The macho image is further reinforced by taglines like "Tagra Josh, Tagra Rang, Tagra Maza" (strong passion, strong color, strong taste) and "Lage Tha Kar Ke" (hits with a bang). The brand has developed a significant following in its target group.

4. Behavioral Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments.

A) Occasion

Buyers can be grouped according to occasions when they get idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation can help firms build up product usage. For example, most consumers drink orange juice in the morning but orange growers have promoted drinking orange juice as a cool, healthful refresher at other times of the day. In contrast, Coca-Cola's "Good Morning" campaign attempts to increase Diet Coke consumption by promoting the soft drink as an early morning pick-me-up. In the Indian subcontinent, however, considering the nature and lifestyle of the local families, Coca-cola promotes its brands as a family drink on occasions like Diwali, Christmas, and family outings.

Some occasions like Valentine's Day were originally promoted partly to increase the sale of candy, flowers, cards, and other gifts. And many marketers prepare special offers and ads for holiday occasions. For example, a greeting card manufacturer may create different greeting cards with messages appropriate for occasions such as Valentine's day, Christmas, Diwali, New Year, and birthdays. In India, greeting cards are sold for every occasion, be it Raksha Bandhan, Holi, or Diwali. Cards with messages for special occasions, like a card for a father’s birthday with a special message inside, are always in demand.

B) Benefits Sought

A powerful form of segmentation is to group buyers according to the different benefits that they seek from the product. Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

A company manufacturing athletic wear segments its market according to benefits that different consumers seek from their active wear. For example, "Fit and Polish" consumers seek a balance between function and style—they exercise for results but want good doing it. "Serious Sports Competitors" exercise heavily in and love their active wear—they seek performance and function. By contrast, "Value-Seeking Moms" have low sports interest and low active wear involvement—they buy for the family and seek durability and value. Thus, each segment seeks a different mix of benefits. The company must target the benefit segment or segments that it can serve best and most profitably, using appeals that match each segment's benefit preferences.

c) User Status

Markets can be segmented into nonusers, ex-users, potential users, first time users, and regular users of a product. Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users.

Included in the potential user group are consumers facing life-stage changes— such as new parents or newlyweds or even parents of soon-to-be wed young peo­ple—who can be turned into users. For example, Master "Molty Foam" manufacturers in Pakistan actively target parents of soon-to-be-wed daughters. Wedding is an occasion in the Indian subcontinent where the parents of the bride invest heavily in gifts for their daughter to facilitate the establishment of a new home for the young couple. Home furniture is typically one of the key items gifted to the new couple. Master reminds parents that their long-lasting foam mattress and pillows will be the ideal gift for a long and happy life for their daughter. Through the use of jingles like "Meri Nannhi Pari ... Naey Ghar Ko Chali" (my little fairy moves on to a new home /life), Master attracts young couples-to-be and their parents through its highly emotional message while reinforcing the need for a good-quality, durable product for the new house. These campaigns have been very successful in attracting new users to its flagship brand.

D) Usage Rate

Markets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. For example, Burger King targets what it calls "Super Fans," young (age 18 to 34), Whopper-wolfing males who make up 18 percent of the chain's customers but account for almost half of all customer vis­its. They eat at Burger King an average of 16 times a month. Burger King targets these Super Fans openly with ads that exalt monster burgers containing meat, cheese, and more meat and cheese that can turn "innies into outies."

E) Loyalty Status

A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Colgate), stores (Big Bazaar /Shoppers' Stop), and companies (Toyota). Buyers can be divided into groups according to their degree of loyalty. Some consumers are completely loyal—they buy one brand all the time. For example, Apple has an almost cultlike following of loyal users.

There are Mac users—folks who happen to own a Mac and use it for e-mailing, blogging, browsing, buying, and social networking. Then there are the Apple diehards—the Mac fanatics who buy Apple products and accessories that maximize their Mac lives. Some of these zealots buy two iPhones—one for themselves and the other just to take apart, to see what it looks like on the inside, and maybe, just to marvel at Apple's ingenious ability to cram so much into a tight little elegant package. These Mac fanat­ics (also called MacHeads or Macolytes) see Apple founder and CEO Steve Jobs as the Walt Disney of technology. Say the word "Apple" in front of Mac fans and they'll go into rhapsodies about the superiority of the brand. Put two MacHeads together and you'll never shut them up. "The Mac [comes] not just as a machine in a box, it [comes] with a whole commu­nity," notes one observer. Such fanatically loyal users helped keep Apple afloat during the lean years, and they are now at the forefront of Apple's burgeoning iPod and iTunes empire.

Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. Still other buy­ers show no loyalty to any brand. They either want something different each time they buy or they buy whatever's on sale.

A company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers. For example, studying Mac fanatics, Apple can better pinpoint its target market, develop marketing appeals. By studying its less-loyal buyers, the company can detect which brands are most competitive with its own. By looking at customers who are shifting away from its brand, the comp can learn about its marketing weaknesses.

F) Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, better defined target groups. Thus, a bank may not only identify a group of wealthy retired adults but also, within that group distinguish several segments based on their current income, assets, savings and risk preferences, housing, and lifestyles.

Several business information services—such as Claritas, Experian Acxiom, and Maplnfo—provide multivariable segmentation systems that merge geographic, demographic, lifestyle, and behavioral data to help companies segment their markets down to pin codes, neighborhoods and even households. One of the leading segmentation systems is the PRIZM NE (New Evolution) system by Claritas. PRIZM NE classifies American household based on a host of demographic factors—such as age, educational level, income, occupation, family composition, ethnicity and housing—and behavioral and lifestyle factors—such as purchase free-time activities, and media preferences.

PRIZM NE classifies U.S. households into 66 demographically and behaviorally distinct segments, organized into 14 different social groups. PRIZM NE segments carry such exotic names as "Kids & Cul-de-Sacs "Gray Power," "Blue Blood Estates," "Mayberry-ville," "Shotguns & Pickups," "Old Glories," "Multi-Culti Mosaic," "Big City Blues,' and "Bright Lites L'il City." The colorful names help to bring the clusters to life.

PRIZM NE and other such systems can help marketers to segment people and locations into marketable groups of like-minded consumers. Each cluster has its own pattern of likes, dislikes, lifestyles, and purchase behaviors. Such segmentation provides a powerful tool for marketers of all kinds. It can help companies to identify and better understand key customer segments, target them more efficiently and tailor market offerings and messages to their specific needs.