Examples of a priori methods,
where the type and number of segments are determined in advance, include the
following:
- Segments where customers are segregated according to observable
or pre-existing characteristics such as demographics, geodemographics,
psychographics, socialgraphics or personas. Demographic segmentation bases
include gender, age, income, race, occupation, marital status, household size,
life stage, etc.
- Usage segments that classify customers based on heavy/medium
/light use in terms of either quantity or frequency of buying.
- Segments based on behavioural loyalty —
solus (100% loyal), core and non-core.
- Segments based on customers’ attitudinal loyalty.
Exhibit 3.2 Skew analysis depicting demographic profile of
shoppers at four different supermarket banners.
A priori segments are easy to define,
and easy to reach through advertising in targeted media. Exhibit 3.2, which
depicts the demographic profile of some retail banners, reveals that the chain
Inulas is targeting high income homes and white-collar workers, whereas ZerMart
is targeting middle/low income homes and blue collar workers.
Segmentation based on usage and behavioural
loyalty is useful in directing marketing efforts to segments on the basis of
value to the business. Customer transaction databases in business markets can
be used for usage segmentation. In consumer markets usage segments may be
crafted from retailers’ loyalty panel data, or from consumer panels, or even
from data obtained from usage and attitude studies.
Exhibit 3.3 Usage segmentation of the Tea and Coffee category.
Exhibit 3.3 provides an example of usage based
segmentation for the “hot beverage” market comprising tea and coffee. The heavy
and light hot beverage segments tend to consume more tea, whereas the medium
segment comprises mainly coffee drinkers. A manufacturer that dominates the tea
category in this market may consider targeting light consumers to induce them
to consume more “hot beverage”. Targeting the medium segment would be more
challenging because converting coffee drinkers to drink tea is unlikely to be
an easy task.
Data from customer satisfaction or brand equity
studies Customer Satisfaction and Customer Value,
and Chapter Brand Equity) may be used for crafting segments based on
the customers’ loyalty. Another approach to segmentation, the loyalty matrix
(described in the Brand Equity chapter), combines behavioural loyalty
and brand equity. These approaches are useful in tailoring marketing efforts
and strategies to cater to the distinct requirements of each loyalty segment.
A limitation with a priori methods is that
they do not directly reflect the needs of the customers. For some brands and
categories, pre-existing characteristics might not yield useful segments.
An important consideration is the feasibility of
targeting and tracking consumer segments. For instance, in hot beverage, how
does a tea manufacturer engage with light consumers? If light consumers have
distinctly different media consumption habits or if they patronize different
retail outlets, it becomes feasible to target them. What is likely is that they
purchase smaller pack sizes. The tea company may consider directing marketing
efforts to motivate small pack consumers to consume more tea.