Multilevel segmentation


A market can be segmented, using several bases in succession. It is not as though the segmentation bases discussed are mutually exclusive and a market can be segmented only with one particular base, on either or basis. Since customer characteristics are spread over several variables, any market can be segmented through several bases. Different bases can be used in combination in segmenting a given market. They just have to be relevant for the concerned market. Actually, the different bases can be used in succession in a suitable order, and the market can be segmented at multi-levels.

For example, a market can be segmented using the demographic base in the first instance, followed by the psychographic base and the buyer behavior benefit base. The market can be segmented using volume as the base in the first instance, followed by the demographic or psychographic or buyer behavior benefit base. Assuming that the firm first carries out volumes segmentation of its market, it can know who the heavy users of its product are, but it cannot know the purpose for which they buy the product. The firm can then pick up the heavy users and carry out multi-level segmentation, and continue its probe more deeply

Since each of these bases has several sub-bases, the numbers of levels in which a market can be segmented are indeed numerous. Actually, the aim should always be to go as deep as possible in segmenting the market so that segments that are most attractive and most suited can be chosen. One has to just ensure that the bases and sub-bases selected are relevant to the context.

Tasks Involved in Segmentation

Ø Assessing the differences between one customer group and the other in terms of their needs and their likely responses to the product and other marketing mix elements.

Ø Finding out by what descriptive characteristics can consumers of a particular disposition be tagged on to a specified segment.

Ø Disaggregating the consumers into suitable segments base on (i) and (ii) above.

Ø Analyzing whether it is possible to formulate separate marketing program or marketing mix for different segments.

Ø Finding out which segments will be particularly happy with the offerings of the firm and can, therefore, be considered as the natural targets of the firm.

Ø Estimating the likely levels of purchase by each of the segments.

Ø Selecting those segments which offer higher potential and which will also be amenable to the offerings of the firm.

Multi-level segmentation enables better selection of target market and better choice of marketing mix: Multi-level segmentation enables the marketer to choose his target market better. It also helps him to make the winning marketing strategy and strike the right product offer and the right marketing mix. With the information generated from multilevel segmentation, he can obtain a deeper understanding of the consumers in each segment, their needs, buying motives and buying behaviors. He can understand in what way each of the different segments want the product to be, he can then tailor his product, marketing offer and promotional appeal, to fit the individual appeal, to fit the individual segment; he can select the price, distribution methods/channels, media vehicles, advertising massages and sales appeals, which will be appropriate.

A case of GM:
GM has identified about 40 different ‘customer needs’ and correspondingly, 40 different market segments in which it would be present with its vehicles. For example, it has targeted the Pontiac at active, sports-oriented young couples, the Chevrolet at price-conscious young families, the Oldsmobile at affluent families, and the Buick at older and more conservative couples.

Market segmentation is resorted to for achieving certain practical purposes. For example, it has to be useful in developing and implementing effective and practical marketing programs. Whatever be the bases used for segmentation, the task as such is an exacting one. Mere identification of difference between one customer group and another does not complete market segmentation. It is just the starting point. Many other tasks are involved. These are shown in above points.