Market Segmentation

Separating customers into market groups provides the basis for successful strategy development in marketing a restaurant. Market segmentation is the process of dividing a total market into groups of people with similar needs, wants, values, and purchasing behaviors. A market is not a place, but rather a group of people, as individuals or organizations. The group needs products and possesses the ability, willingness, and authority to purchase them. A market segmentation is a mixture of individuals, groups, or organizations that share one or more characteristics, which causes them to have similar product needs.

In a homogenous market, a marketing mix is easier to design than one in a heterogeneous group with dissimilar needs. Choosing the correct variable for segmenting market is important in developing a successful strategy. Variables are often broken down into 4 categories for the segmentation process: geographic, demographic, psychographic, and behavioristic.

Variable: Geographic

          Region:

o   Pacific, Mountain, West North Central, West South Central, East North Central, East

          City/metro population:

o   Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000; 100,000-250,000; 250,000-500,000; 500,000-1,000,000; 1,000,000-400,000; 4,000,000 or over

          Density

o   Urban, suburban, rural

          Family life cycle

o   Northern, southern

Variable: Demographic

          Age:

o   Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+

          Gender:

o   Male, female

          Family size:

o   1-2, 3-4, 5+

          Family life cycle:

o   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 18; older, single; other

          Income:

o   Under $10,000; $10,000-$15,000; $15,000-$20,000; $20,000-$30,000; $30,000-$50,000; $50,000-$100,000, $100,000 and over

          Occupation:

o   Professional and technician; managers, officials, and proprietors; clerical, sales; craftspeople, foreman; operatives; farmers; retired; students; housewives; unemployed

          Education:

o   Grade school or less; some high school; high school graduate; some college; college, graduate

          Religion:

o   Catholic, Protestant, Jewish, Muslim, Hindu, other

          Race:

o   White, Black, Asian, Hispanic

          Nationality:

o   American, British, French, German, Italian, Japanese

Variable: Psychographic

          Social class:

o   Lower lowers; upper lowers; working class, middle class, upper middles, lower uppers, upper uppers

          Lifestyle:

o   Straights, swingers, longhairs

          Personality:

o   Compulsive, gregarious, authoritarian, ambitious

Variable: Behavioristic

          Occasions:

o   Regular occasion, special occasion

          Benefits:

o   Quality, service, economy, speed

          User status:

o   Nonuser, ex-user, potential user, regular user

          Usage rate:

o   Light user, medium user, heavy user

          Loyalty status:

o   None, medium, strong, absolute

          Readiness stage:

o   Unaware, aware, informed, interested, eager, intending to buy

          Attitude toward product:

o   Enthusiastic, positive, indifferent, negative, hostile

Geographic variables include climate, terrain, natural resources, population density, and subculture values that influence customers’ product needs. Demographic variables consist of population characteristics that might influence product selection like age, gender, race, ethnicity, income, education, occupation, family size, family life cycle, religion, social class, and price sensitivity. Psychographic variables include many factors that can be used for segmenting the market, but the most common are motives and lifestyle. Lifestyle segmentation categorizes people according to what is important to them and their mode of living. A classification system for segmenting customers in terms of lifestyle factors is the VALS: Values and Life-Styles research program. The VALS model is broken down into 3 parts:

          Ideals:

o   Consumers make choices based on their knowledge and principles.

          Achievement:

o   Consumers make choices based on what they perceive will show their success to their peers.

          Self-expression:

o   Consumers make choices based on a desire for social or physical activity, variety, or risk.

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