Cluster customers with similar characteristics
Before you begin this lesson you should have a good understanding of what market segments and customer classifications are. You should also know what and how identifying the characteristics, motivations and behaviours of your target customers can help you with your segmentation exercises. If you are in doubt please refer back to our lesson on Defining Market Segments.
Now we are going to dive a little deeper into segmentation and explore the four most common bases used for segmentation and how you can cluster your target customers with similar characteristics to make it easier you to understand what, where and when to target. The four bases are:
- Geographical bases (region, urban/non-urban environment…)
- Demographic bases (age, gender, life cycle phase…)
- Psychographic bases (lifestyle, values, personality…)
- Behaviour bases (seeking profits, degree of use, degree of loyalty…)
Clustering is a process of creating groups of customer types that have similar characteristics as you start to layer in psychographic and behavioural aspects to the more factual geographical and demographical bases, for example:
- Irish men
- 29-45
- Environmentally aware
- Enjoy walking and listening to live music
Let’s take a closer look at those segmentation bases…
Geographic Segmentation
Geographic Segmentation aims to divide the market into different geographical units like neighbourhoods, cities, counties, countries or world regions like Europe or South East Asia, etc. This segmentation base seeks to identify factors that can be considered important for developing appropriate marketing strategies for each area and often include language, climate, and lifestyles. This base is most commonly used by multi-national and global businesses, Starbucks for example.
Demographic Segmentation
Demographic Segmentation aims to divide the market into groups based on demographic variables like age, gender, family size and life cycle. Let’s take two examples; age and gender:
- Age: Consumer needs and wants change with age. The marketing mix may therefore need to be adapted depending on which age segment or segments are being targeted.
- Gender: Dividing a market into different groups based on sex, has long been common for many products including cosmetics, clothing and magazines.
Psychographic Segmentation
Psychographic Segmentation aims to divide the market into groups based on social class, lifestyle and personality characteristics. This segmentation base is based on the assumption that the types of products and brands an individual purchases will reflect that persons characteristics and patterns of living. Facebook does a great job with lifestyles, attitudes and interests… and will present ads to you based on what you like, share, etc.
Behavioural Segmentation
Behavioural Segmentation aims to divide the market into groups based on their knowledge, attitudes, uses and responses to the product. Examples are:
- Occasions groups according to the occasions when they purchase, use or think of buying a product
- Benefits Sought groups according to the benefits sought from the product
- Buyer Readiness Stage groups according to readiness to purchase the product (Awareness –Education – Repertoire – Consideration – Purchase)**
- Amazon do a great job with this… they will present more purchasing options based on what you do (behavioural) rather than what you say you’ll do (psychographic)
By combining the Geographical and Demographic bases with Psychographic and Behaviour bases you are effectively creating clusters of customers that will give you a more more specific view of who is in your market!
Exercise
At this point, take the list you created earlier and organise them into segment bases…. Reminder:
- Geographical bases (region, urban/non-urban environment…)
- Demographic bases (age, gender, life cycle phase…)
- Psychographic bases (lifestyle, values, personality…)
- Behaviour bases (seeking profits, degree of use, degree of loyalty…)
What’s next
Later we will talk about how you might confirm that any segments you have identified are real, distinctive, viable and their buying power is measurable.
** See our Digital Marketing Metrics & Analytics course for more on the Sales Funnel and Customer Experience