overall strategy and goals of segmentation, which must be consistent with and derived from the firm’s mission and objec-tives as well as its strengths, weaknesses, opportunities, and threats. The next step is defining or describing segments as a means of identifying common needs and wants within a segment, as well as of distinguishing between different segments. There are six basic methods used to segment consumer markets:nGeographic segmentation is segmentation by location, such as by region, state, or country. This is one of the earliest segmentation methods ever used.nDemographic segmentation is the most commonly used segmentation method. It uses variables such as age, gen-der, income, family life cycle stage, and household size.nPsychographic segmentation divides a population into groups according to factors such as self-values, self-con-cept, and lifestyle. Various companies specialize in helping firms segment their markets according to psy-chographic segmentation, most commonly by conducting a large-scale survey. One of the most broadly employed psychographic survey tools is the Value and Lifestyle Survey (VALS), which describes consumer segments in terms of eight categories.nBenefit segmentation is based on the relationships that homogeneous groups have with a particular product. Segmentation is done on the basis of the different bene-fits consumers seek as they examine similar products or services.nBehavioral segmentation divides customers into groups on the basis of how they use the product or service. Some common behavioral measures include occasion segmentation (which focuses on when customers pur-chase the product or service) and loyalty segmentation (which refers to customers who believe that the firm can meet their relevant needs better than any competitor).
Lesson 347Firms often employ a combination of segmentation methods to identify and target customers. Geodemographic segmen-tation is a good example of such a combination: It merges geographic, demographic, and lifestyle information associated with a specific segment to provide a more focused description than any of the characteristics considered separately.Once the market is segmented, the firm must then decide which of those segments is attractive enough to target. Mar-keters generally use five criteria to evaluate a segment’s attractiveness. The segment must be readily identifiable, substantial enough to merit investment of time and other resources, reachable through communication and distribu-tion, responsive to the products offered, and profitable both at present and in the future.After analyzing the attractiveness of various segments, a firm chooses which segment or segments to target, often using a SWOT analysis to assess the opportunities and threats within a particular segment and the company’s own strengths and weaknesses in terms of its core competencies.
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