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Consumer Segmentation Variables

Disciplines > Marketing > Understanding Markets > Consumer Segmentation Variables

Demographic | Economic | Lifestyle | Usage | See also

The way markets are segmented will change what products and services you create and particularly the way you market them. Here are some of the variables used, although many more are still available.

Demographic

A basic way of segmenting customers is by a standard set of variables that are called 'demographics'.

Age

People of different age groups have different needs and desires. Children, teens, young adults, older adults, retirees, all may be assumed to have particularly characteristics.

Professional age groups have been divided into complete 'generations', including:

• Baby Boomers: Born 1945-1965
• Generation X: Born 1965-1980
• Generation Y: Born 1980-1995
• Generation Z: Born 1995-2010

An example of the differences that age creates is in the exposure to computers. Generation Y, for example, are now in the workforce and have used the computers and internet from very early in their lives.

Gender

Men and women are different not just in appearance but also in what products they use and what messages appeal to them. Gender and gender variables are hence important.

Nationality

The country where you were born can be a useful indicator of culture and the associated attitudes.

Nationality also indicates language and perhaps country where the customer lives. Marketing to people in other countries and who speak other languages can be very complex and require support from local agencies.

Ethnicity

Ethnicity is similar to nationality in the broad cultural effect. Ethnic groups indicate broad evolutionary history, with people who have bred together for thousands of years. Ethnic groups are often defined by geographic variables. They also have a strong religious correlation when the religion tends to ensure people marry only others from the same religion.

Religion

A key attribute of religions is that they can require a significant degree of control over their adherents lives. Beliefs and values are also shaped by the religion and may be significant for products that clash or support these rules.

Social class

People may be classified by the social groups to which they belong. This tends to be significantly driven by income and is also affected by religion, ethnicity and other differences.

Typical social classes include the NRS social grading system which classified people as A, B, C1, C2, D or E. The occupation indicated is fairly traditional and based on manufacturing industry (these days there is much greater variety).

Location

Where a person lives can say a lot about them. General geographic region may be important and related to nationality. Within towns and cities, the street where a person lives can also say a great deal and may be a useful indicator of their income.

ACORN (A Classification of Residential Neighborhoods) is a UK system that identifies residents as one of the following (plus further sub-categories):

• Wealthy Achievers
• Urban Prosperity
• Comfortably Off
• Moderate Means
• Hard Pressed

Marital status

Whether a person is married or not used to be a simple test. These days, when many are divorced, how recently and how often a person is divorced can be useful. Also, when people are living together, whether married or not, the stability of their relationship will affect their buying patterns.

Education

The level to which a person is educated and the subjects of their education indicates their knowledge level and may well affect their choices of products and the marketing approach that will work best. This includes the language and images to use as well as the overall message.

Occupation

A person's occupation also says a lot about them and may well give an indicator about their income and education levels if these are not otherwise available.

Economic

What people will pay for products depends not only on what they earn but their attitudes and how they approach money overall.

Income

Dividing people by their income is a straightforward and common segmentation. This is often done using salary bands which can then be used to estimate their likely spending patterns. Hence if a person has a lower salary, then they are more likely to regularly spend money on staples with occasional treats.

Income can also be considered at the household level where salaries are pooled for the common good.

Saving

Sometimes the savings that people have is important, especially if you are a savings company or are selling higher-cost products that people may need to dip into savings to buy.

Patterns and quantities of saving may also be important if you are assessing the financial security of the person. Some people will never save while others spend as little as possible and save all they can.

The manner of saving can vary. Some people will invest in higher risk portfolios as they seek to get maximum returns while others are more cautious. This can indicate risk patterns that stray over into other areas, for example in the desire to own fast cars.

Borrowing

The amount people borrow and the style of borrowing can be important if you are selling goods such as cars or houses where people are likely to need a loan of some kind. Even lower cost items such as televisions may be bought on financial schemes.

People vary greatly in their approach to borrowing. At the extremes, some will happily take as much as they can get, while others will avoid borrowing wherever possible.

Spending patterns

The way people spend can vary. Some, for example, will buy things as they need them while others will buy when they can afford them. Some spend only on themselves while others buy a lot for such as their children.

Lifestyle

The way people live their lives can vary greatly.

Economical

Some people have a general focus on economy, whether or not they have money (but of course especially if they have less). Others will spend freely (again, whether or not they have money).

Recreational

The way people relax can be significant, for example whether they play games, enjoy sports, watch movies and so on.

Social

Some people live quiet family lives or alone while others like to get out and have a good time with friends. The style of how they enjoy themselves can vary greatly, from country walking to clubbing.

Ecological

For some customers the impact on the environment is important, even in the product packaging used. For others, the environment is less of an issue.

Usage

Usage variables are those that classify how the customer uses the product. These variables are closer to the product than other variables

Frequency

A customer who uses the product infrequently will wear it out over a much longer time than one who uses it regularly. The infrequent user may need to be reminded how to use the product, while the frequent user may want quick answers to problems experienced.

Benefit

The way the customer uses the product and the benefit they gain from it may be quite different.

Criticality

For some customers the product must work perfectly or else serious problems will occur. Others may find this less important. For example a computer for home use is usually less critical than for business use.

See also

Understanding Customers