Market Segmentation Process

In order for Campbell Soup to carry out its market segmentation strategy, it had to undertake research to make operational the market segmentation process the goal of which is to identify groups of consumers who are relatively homogeneous with respect to their responses to marketing inputs. To accomplish this goal requires (1) the selection of the most appropriate descriptors to use to identify market segments (Campbell relies heavily on geography, age of housewife and her occupational status, and presence of children); (2) the determination of differences between segments – especially those concerned with product benefits (Campbell has brought out more than 400 new products between 1981–1985 designed to appeal to different target groups); (3) an evaluation of relative long term attractiveness of alternative segments (how much more potential does the Northeast have versus the Southeast for Campbell’s Home- Style gravy?)

This article is organized around these three steps in the market segmentation process. The discussion is designed to show the contribution that marketing research can make to the selection and execution of a market segmentation strategy as well as how much such research is accomplished.

Descriptors and the Identification of market Segments:

Segmentation requires the use of a dependent variable as well as independent variables. The former derives from the organization’s need to segment the market (what it hopes to accomplish) and is referred to as the basis for segmentation. Since the overall objective of segmentation is concerned with elasticities to marketing inputs, it is understandable why the dependent variable would vary according to management’s needs. Thus, for example, new product decisions are typically concerned with benefits sought, innovativeness and purchase predispositions, while advertising decisions involve the use of such variables as media usage, psychographics and benefits sought.

The independent variables seek to explain the elasticity in the base or dependent variable and are called descriptors. As we shall see in the next section, there is a large number of such variables, and there is often considerable question about the extent to which the basis for segmentation and the segment descriptions are related; that is the extent to which descriptions explain variations in the dependent variable (e.g., to what extent age explains the consumptions of pizza). Examples of descriptor variables include of behavioral variables. The same variables can be used as the basis for segmentation or as descriptors.

If the researcher is interested in obtaining a profile of the marketplace and its buying behavior relative to a given product, then such descriptors as demographics, socioeconomic characteristics, and psychographics are likely to be used to explain difference in product usage. Decisions pertaining to the various marketing mix elements require the use of more situation-specific descriptors, including, for example, benefits wanted in the product, attitudes towards the product category and individual brands, and media usage. These kinds of descriptors, on average, are better indicators of the elasticities associated with specific marketing inputs than the more general descriptors.

The descriptors used to identify segments typically vary between consumer and industrial markets, although some are common to both. In any event, the number of segmentation descriptors available is enormous.

There are three major approaches research designs to identifying and measuring differences between market segments. The first and oldest is the a priori design, which starts by selecting the basis for segmentation using such variables as demographics and then proceeds to collect data such as product usage or ownership media habits and attitudes. The results show how the segments vary with respect to such variables as purchasing behavior overall size and worth and media exposure.