Loyalty Segmentation

Loyalty segmentation can also be successfully applied to retail store customers. Efforts to establish stronger bonds with buyers known as relationship marketing, has great potential. By using database programs to identify and reach customers with relevant rewards, companies can cement the buyer seller relationship. For example, one large food products manufacturer distributes a publication to buyer households, attempting to make certain that household continues to buy the company’s products and cross selling other products of the company consistent with the household’s needs.

Marketers of new national brands are often advised to target toward those segments that exhibit considerable brand switching. However, one research study of the introduction of a new national brand (Puff’s facial tissue) indicated that marketing efforts could also be successfully targeted toward households that were loyal to existing national brands and toward purchasers of private label brands.

Situation Segmentation:

Marketers often become complacent after identifying their market by demographics and psychographics (who buys) and may not further understand how the product is used and enjoyed, whether the consumer is at work, play or home. Actually, a manufacturer’s or retailer’s product line can be seen as range of items appealing to the needs of diverse person situation market segments. This segmentation approach divides the market by groups of consumers within usage situations. For example, Holiday Inns, Inc., has established categories on the basis of situational needs of travelers. The various Holiday Inn brands might be chosen by travelers in different situations, as follows:

Holiday Inn (mid-scale): On a business trip to Chicago, you need to be chosen to the airport and have to meet clients for dinner.

Crown Plaza (upscale): On a business trip to Chicago, you need to be downtown.

Hampton Inn (budget): You and the family are visiting Grandma for Thanksgiving

Embassy Suite (all suites): You are traveling to Memphis on business and plan to stay for one week.

Residence Inns (residence hotel): You are relocating to San Francisco on a temporary business assignment of a few weeks or months.

Thus, consumers often select products on the basis of which usage situations they expect to encounter.

Benefit Segmentation:

The approaches to market segmentation discussed so far are all helpful to the marketer. However, they suffer from an underlying disadvantage –- all are based on an ex post facto analysis of the kinds of people who make up specific segments of a market. That is, emphasis is on describing the characteristics of different segments rather than on learning what causes these segments to develop. However, proponents of benefit segmentation claim that the benefits that people are seeking are the basic reason for purchase and therefore the proper basis for market segmentation.

Marketers have learned for example, that knowing people’s interest in alternative benefits is helpful in predicting the attention paid to advertising copy developed round those benefits. In one study, air travelers who indicated being more interested in fun while flying than in travel planning help were more attentive to advertising focused on the fun benefit, while those interested in travel planning were more attentive to advertising featuring that theme. This relationship held true even though both segments were exposed to both themes. Thus people are more likely to attend to commercials and buy brands that center on benefits of interest to them.

The technique of Benefit:

The technique of benefits segmentation typically involves a three step process:

1) Exploratory research to develop a complete listing of benefits of possible value in segmenting the relevant market.
2) Development of sensitive and reliable scales to measure major attitude dimensions
3) Quantitative measurement of the market, usually involving a national sample, resulting in clustering of respondents by their attitudes. Individual clusters (or segments) are described in terms of their behavior, lifestyles, demographics and other relevant characteristics. Segments therefore are discriminated by their attitudes and differences in their behavior are analyzed through cross tabulations.

Although the concept appears simple, its implementation is very complex, often requiring computers and sophisticated multivariate attitude measurement techniques. The statistical methods employed relate the responses of each consumer to those of every other respondent and then develop clusters (typically three to seven segments) of consumers with similar ratings patterns. Each of these segments represents a potentially profitable and different opportunity for marketing effort.