Once all of the bases for segmentation have been considered, the marketing
organisation must then decide which descriptors they will use to segment the
market and describe their market segments. Demographic descriptors such as
age, gender and income are easy to measure but they can be
misleading. Psychographic descriptors may be more useful, in particular for
lifestyle products.
A multi-descriptor approach to segmentation allows the firm to arrive at a richer,
more comprehensive description of the target market. However, the high cost and
time of segmenting the market means that firms should avoid over-segmentation
of the market. Over segmentation may lead to segments that are too small to be
profitable, or segments that really do not differ significantly in their needs from
other similar segments.
Some products, including lifestyle products, such as clothing and music lend
themselves to extensive segmentation. Conversely, standardised products, such as
electricity, gas, water, salt, flour, and sugar may require less
segmentation. However, these days it is difficult to identify many 'mass-marketed'
products. For example many years ago, you could have used milk as an example
of a product that was mass-marketed. Going back some decades you could buy
just one type of milk. But now, you can get full cream milk, skim milk, light milk,
high calcium milk, flavoured milk, lactose free milk etc.
Example - Segmenting the market for ready to drink alcoholic beverages
(RTDs)
Lets suppose that we are the manufacturer of ready to drink (RTD) alcoholic
beverages. To determine our key target markets, we first need to segment the
market for RTDs. Information on the RTD market can be obtained by doing
searches on the Internet and looking through industry journals. We need to
know about the overall RTD market to help us determine what segmentation
descriptors may be relevant for this product category. Here is a brief market
overview:
The RTD market has experienced growth in the last few years with a
global annual growth rate of 5.1% in 2014 (Just Drinks 2016). The RTD
market has come under increased pressure from rival categories such as
beer, cider, wine and spirits. However, RTDs have become one of the most
innovative and adaptive categories in the alcohol world according to the
IWSR report (Just Drinks 2016).
14% of Australians consume RTD (Roy Morgan 2010)
20% of RTD consumers are under 30 years of age, 9% are over 30 years
of age (Roy Morgan 2015)
The industry has seen a change of focus to premium products and higher
alcohol content (Drinkstrade 2016).
The industry has been criticized in the past for appealing to underage
drinkers. The ‘alcopops’ tax sparked a steady decline in RTD consumption
per capita, as the price of the industry’s products was made significantly
more expensive. Some consumers have gradually substituted for other
similar products, such as cider. Meanwhile, increasing healthconsciousness has encouraged many consumers to stop drinking
altogether (IbisWorld 2016; Roy Morgan 2012)
Selecting relevant descriptors
The following segmentation descriptors are relevant to RTDs. It is essential to
provide justification for the descriptors selected, and where possible to provide a
source to support your opinion.
Base Descriptor Justification
Geographic Region
Consumers in regional/rural areas of Australia
consume more alcohol than city people (Roy Morgan
2012) and also more RTD than city people (16.7%/
10.9%).
Demographic Age
People’s tastes change as they get older (
Armstrong & Kotler 2015). The largest proportion of
users fall into the 18 – 24 age group who enjoy the
taste, convenience and the image of RTDs
(Drinkstrade 2016). RTDs may be viewed as ‘lollywater’ or a sweet non-alcoholic tasting drink that
appeals more to this younger age group. The fun
image of RTDs appeals to this younger
segment. Older consumers may prefer a less sweet,
more alcoholic tasting drinks with more subdued
colours and packaging.
Sex
More females prefer vodka and white spirit RTD’s
whereas males prefer bourbon & whiskey RTD’s
(Drinkstrade 2016)
Family lifecycle
The family life cycle stage of a consumer may impact
on the types of drinks they consume, the frequency
of purchase, and where they purchase them. Single
younger consumers purchase the majority of their
drinks at a higher price in a nightclub or pub setting.
They are moderate to heavy social/weekend
drinkers. Conversely, married couples with children
are more likely to purchase alcohol from a bottle
shop at lower price for use at smaller gatherings of
friends and would be less frequent users (assumed).
Income
The quality, packaging and brand of alcohol used in
RTDs affects the final price to the consumer. People
with higher disposable incomes can afford and may
want the image attached to premium
products. Conversely, people on lower disposable
incomes may prefer cheaper alternatives. The higher
the income, the greater the alcohol consumption
(Salvation Army, Alcohol Awareness Survey, Aug.
2003).
Psychographic Value and life
style segment
The value and life style segment that consumers fall
into can help determine successful positioning of the
product and ensure promotional appeals are
targeted and encoded to the mindset of the segment
(Roy Morgan 2016). A younger segment may relateto images of large parties and nightclubs, while an
older segment might be more influenced by
advertising that depicts smaller social gatherings
with closer friends.
Personality
Personality influences the decision to consume a
certain type of product and brand choice (Armstrong
& Kotler 2016). Product features and promotional
appeals are tailored to reflect the personalities of the
target consumer. Brightly coloured drinks reflect a
more flamboyant personality and would be more
appealing to females than males. Stylish bottles and
labels reflect a more worldly, sophisticated
personality as opposed to tin cans and would be
more appealing to older drinkers (assumed).
Behavioural Benefits sought
The benefits sought from each market segment can
be used to develop effective promotional
campaigns. Some consumers may be more
influenced by image of the brand & being socially
accepted while others could be motivated to
purchase by price, taste or relaxation (Salvation
Army Alcohol Awareness Survey, Aug 2003).
Usage rate
Determining the usage rate for different market
segments can help to identify key user groups that
may be targeted. Binge drinkers (having more than
3 times the acceptable level in one session) are more
likely to be Males (54%) than females (19%) in 20 -
24 yrs (Salvation Army Alcohol Awareness Survey,
Aug 2003).
Loyalty status
The RTD market has a low loyalty rate with only
25% of drinkers being single brand users
(www.roymorgan.com.au - Feb 2003 update). RTD
consumers customarily shop across a wide variety of
product sectors, which makes brand or category
loyalty "a rare but prized asset" (Just drinks 2015) .A
segment that is more likely to brand switch can be
more easily convinced to trial a new product, but
harder to retain in the long run.
Where
purchased
The purchasing behaviour of consumers is
important to determine where products should be
made available for purchase. 49% of people
consume alcohol in restaurants/cafes, 46% in
pubs/clubs, 53% at a friends house, 45% at private
parties and 74% in own home
(www.assda.anu.edu.au).
Note: %’s add up to more than 100% as multiple
answers were allowed.
The majority of this information to justify the variable chosen has been readily
accessed via the Internet, however where information is not available
assumptions have been made (and clearly identified). Of course, if you wereemployed in the industry, you would have a budget to purchase reports from
previous research or to collect primary data.
Example - Segmenting the market for RTDs - three target market profiles
[##please note for your assignment you need to describe 1 target market only]
By applying the descriptors we have determined are relevant to this product
(RTDs) in the previous section, we can identify a number of market segments. A
description (profile) of what I consider to be three key market segments has
been provided below. You will note that the three segments presented here are
identical on many key descriptors, but to be a distinct segment they must differ
on at least one key descriptor. However, the descriptors that segments do not
differ on are still relevant to the product category. Further, these descriptors
provide a basis for a rich and full description of the market segments to be
targeted.
Variable
Segment 1
Young female
socialites
Segment 2
Young male
professionals
Segment 3
Married females
with younger
children
Region Eastern seaboard
Eastern seaboard Eastern sea-board
Age 18 - 25 20 - 29 30 - 40
Sex Female Male Female
Family
lifecycle Single Single Married with children under high school age
Income
$10,000 -
$35,000 ( high
disposable
income)
$40,000 -
$65,000
(Moderate to
high disposable
income)
$55,000+ (household
income) (Low to
moderate disposable
income)
VALS Look at me
VALS segment
Young Optimist
VALS segment
Conventional Family
Life or Something
Better VALS segment
Personality
She enjoys
work or study
but loves to
Competitive,
outgoing and
ambitious, he is
Social, likes smaller
gatherings of friends.
Aware of trends butparty and
socialise. While
she is up to
date with the
latest trends,
she also knows
her own mind.
one of the lads.
Image means a
lot. His motto is
to work hard &
play harder.
doesn't always follow
them. Family and the
reasonable budget
they have is
important, but so is a
little fun!
Benefits
sought
Image, variety
/ new
experiences,
taste,
convenience
(Just-drinks
2015)
Image,
convenience
Convenience, a little
luxury, taste, various
sizes/ formats
(including cans and
pouches)
(Just-drinks 2015)
Usage Rate
Moderate to
high mainly
weekend
drinker
Moderate during
the week and
weekends
Light social drinker
Loyalty
status
Very little,
happy to try
new things
Medium, likes to
stick to the
brands that are
known
Very loyal, once they
like a drink they stay
with it for a long
while.
Where
consumed
Night clubs /
pubs / social
gatherings
Outdoor social
events, home,
BBQ's
Home, smaller
gatherings of friends,
BBQ's occasional
night out.
*
IMPORTANT: You should access ABS data via the USQ Library Electronic
Databases and the library electronic database as U.S.Q is a subscriber to AusStats
and therefore students can download many publications for free.
Effective market segments
Once market segments have been profiled and analysed, the firm is now ready to
select its target markets.
REMEMBER For this assignment you need to describe just 1 target market only.
Image References:
*All unattributed images have been sourced from Microsoft ClipArt
1 – Orbitburco12, A Man in a Contemporary Business Suit, CC BY-SA 4.0
2 - Pixabay, Mother-Baby-Happy-Family-Child, CC0 Public Domain