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Oct. 2005, Volume 4, No.10 (Serial No.

28) Chinese Business Review, ISSN 1537-1506, US A

The Analysis of Bases of Market Segmentation

Wei Lu∗ Tianjin University/Communication University of China

Abstract: This paper analyses the characters of different bases of market segmentation and classes the bases
into four kinds: observable general bases, observable product-specific bases, unobservable general bases and
unobservable product-specific bases. The result can be used in the future research of market segmentation.
Key words: market segmentation the method of segmentation the bases of segmentation

Markets made up of individual with diverse product needs are called heterogeneous markets. In such market,
a marketer should use the market segmentation approach. Market segmentation involves viewing heterogeneous
markets as a number of smaller homogeneous markets, in response to different preferences and is attributable to
the desire of consumers for more precise satisfaction of their varying wants. Segments are directly derived from
the heterogeneity of customer wants. Consumer markets include individuals, groups or organizations that purchase
specific kinds of products for the purpose of using them to produce other products, resell to facilitate the
organization’s operations. Five criteria- identifiability, substantiality, stability, responsiveness and actionability-
have been frequently put forward to determine the effectiveness and profitability of marketing strategies [1].
A segmentation base is defined as a set of variables or characteristics use to assign potential customers to
homogeneous groups. A segmentation base is a dimension for segmenting a market, and in most cases, several
bases will be considered simultaneously to provide the best possible customer profile. The goal of market
segmentation is to identify market segments comprised of people or business with similar characteristics and
therefore similar needs. Both physical and behavioral bases can be used to explore and exploit market niches.
The bases can be classed into four kinds: observable general bases, observable product-specific bases,
unobservable general bases and unobservable product-specific bases. The above bases are used in common in
market segmentation.

1. Geographic
These bases are observable general bases. When marketing managers divide the whole market into segments
based on location, they are using geographic segmentation. Many types of location can be used –regions, countries,
states, counties, cities or towns, and even neighborhoods- depending on the goods or services being marketed.

2. Demographic Segmentation
These bases are also observable general bases. Dividing the total market into segments on the basis of such
demographic variables as age, gender, income, occupation, education, race, nationality and social class is called
demographic segmentation. This is the most popular method by which marketers identify market segments.
Demographic segmentation is widely used for two reasons. First, consumer ’s wants and needs are often closely
associated with their demographic characteristics. Second, demographic variables are easy to measure and are
readily available to marketers. For example, the ford Motor Company redesigned the Mustang in 1994 to appeal
more to women, who represent a $65 billion annual market.


Wei Lu, Ph.D. candidate of School of Management, Tianjin University, lecturer of Media Management School of Communication
University of China; Main research fields: Management Science and Engineering (Marketing, Corporate Strategy and ERP).

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The Analysis of Bases of Market Segmentation

3. Socioeconomic
These bases are unobservable general bases. Socioeconomic variables deal with social class and economics
measures of a population. Socioeconomic factors include educational levels, occupation and household income.
Various home ownership measures (such as, ownership. Vs. rental –single family, townhouse or apartment) often
are explored to better understanding consumer market. The demographic and socioeconomic factors are commonly
brought together and called “demographic ” by researchers. Through the use of demographics, markets can be
assessed by both the number of potential customers and their income levels to know the level of purchasing power.

4. Psychographics
These bases are observable product-specific bases. The segmentation variables base on consumer’s
personality, characteristic and life-style. Psychographics classify consumers by their attitudes, feelings and
personality. Psychographics analysis recognizes that individuals who have similar interest, enjoy similar activities,
and have similar outlook on life should be grouped together for marketing purposes. Used in conjunction with
demographics, however, this approach can be a powerful tool in painting a realistic profile of designated market
segments. In a retail study, psychographics is one of three major segmenting bases used to generate unique
customer profiles distinguishing department store shoppers from those who prefer discount stores.

5. Product Usage
This base is an observable product-specific base. This base analyzes consumption of goods or services and
classifies users into different market segments. A typical classification for a market might be heavy users, average
users, light users, non-users. The frequency with which consumers buy or use a product or service is its usage rate.
When marketers choose usage rate as a segmentation variable, they first divide the market into three categories-
heavy users, light users and non-users [2].

6. Benefits
This base is an unobservable product-specific base. Benefits segmentation subdivides a market according to
differences in the benefits that consumers are seeking when they buy goods or services. This is one of the most
accurate means for pinpointing what consumers are seeking, which is one of the more difficult segmentation bases
to measure. The marketer must determine what wants and needs he prospects as the individuals will buy products
from the company that can best provide these benefits.
There are some other unobservable product-specific bases, such as brand loyalty, readiness stage, perception
and preferences, situation/occasions, media exposure, and marketing mixed elements. Segmentation provides
other important approaches to define and understand markets.
However, that virtually all of the evidence on the effectiveness of alternative bases is derived from
applications to consumer markets, and that is a certain segmentation basis which may be preferred depending on
the specific requirements of the study at hand. In general, the most effective bases are found in the class of
product-specific unobservable bases. Moreover, in modern market segmentation studies, a variety of bases may be
combined, and each is according to its own strength.

References:
1. Michel Wedel, Wagner A. Kamakura. M arket Segmentation Conceptual and Methodological Foundations (Second Edition),
Kluwer Academic Publishers, 2000
2. William D. Neal, John Wurst. Advances in Market Segmentation, Marketing Research, 2001(13)

(Edited by Syna, Dragon and Yanyu)

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