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Segment Your Market: Who’s Out There?

SegmentationsegmentationThe process of dividing a larger market into smaller pieces based on one or more meaningful and measurable shared characteristics. is the process of dividing a larger market into smaller pieces based on one or more meaningful and measurable shared characteristics. It’s crucial to slice up the pie so you can focus your resources on customers whose needs you have the best chance of satisfying. These are the benefits of a segmentation approach.

Segmenting the population gives you a concrete vision of your potential customer. For example, targeting upper-income unmarried men with a college education gives you a more specific vision of the intended audience than does simply advertising to “people.”

Figure 6.3. 

Revlon, Maybelline, and Cover Girl use segmentation strategies in order to target their predominant consumers: women.


Segmenting the population provides focus and specificity on those people most likely to buy your product. It’s better to find the five million people who are 80 percent likely to buy than it is to find the eighty million people who have a 5 percent chance of buying.

Segmenting the population lets you estimate the number of people in a given category (such as “Affluent Retirees”), which gives you an idea of your potential market size. Knowing how many potential customers you’ll have influences your sales estimates, your total marketing budget, and the advertising media you use. For example, if you’ll be targeting Hispanic consumers in Phoenix, your total market size will be 1.36 million people.[161]

DemographicsdemographicsMeasurable aspects of a population. are measurable aspects of a population. Each key variable is usually defined in terms of a small number of categories or ranges. For example, age data might record the number of thirty- to forty-year-olds in aggregate, rather than separately tallying each age group of people who are thirty, thirty-one, thirty-two, thirty-three, and so on.

These are widely used demographic measures:

  • Gender of the individual or head-of-household (e.g., Female)

  • Age (e.g., 18–24)

  • Life stage (e.g., empty-nest parents who have more time for each other now that their kids are in college)

  • Household income (e.g., $30,000–$40,000 per year)

  • Education (e.g., college graduate)

  • Occupation (e.g., banker)

  • Race/ethnicity (e.g., African American)

  • Religion (e.g., Buddhist)

  • Socio-economic status or SES (e.g., DINKs—“double income, no kids”)

SS+K Spotlight

While demographics can be an effective way to begin to understand your potential consumers, msnbc.com and SS+K knew that they would need to dig deeper to identify the specific audience for their branding campaign. While some product categories can move forward with demographic information only, services such as news, entertainment, and sports media need more information to fine-tune their targets. For example, the Bravo network, which has successfully created numerous high-style reality shows that revolve around upscale pursuits like gourmet cooking, fashion modeling, or home design, recently developed for advertisers a one-off (that is, one-time publication) magazine it called Bravo Affluencer. Each of the two people on the cover represented a distinct psychographic segment that is key to Bravo’s targeting strategy: an attractive man and woman, both in their late twenties, shopping bags and PDAs in hand, passports visible in pockets, dressed casually but stylishly. These two models are reminiscent of the popular stars of the sitcom Will and Grace—and that’s no accident. Bravo executives actually use the phrase “Will and Grace” to describe two of their key viewer segments: urban gay men and single female professionals. Many of the network’s most popular shows such as Project Runway and Top Chef attract these viewers in large numbers.[162] As we learned in Chapter 5, Know Your Audience: SS+K Learns All About msnbc.com, Inside and Out, SS+K and msnbc.com had done significant segmenting and research to identify their target audience, the News Explorer.

GeographygeographyDefines key aspects of climate, culture, and customer density. plays three roles in the target marketing process:

Most geographic segmentation schemes use definitions the government created for census, postal, and economic forecasting purposes.

  • Zip code. Zip codeszip codesAs defined by the U.S. Postal Service, zip codes identify each of roughly forty-three thousand neighborhoods. Other countries, too, have analogous postal code systems. Zip codes are often the basis for direct mail advertising, as defined by the U.S. Postal Service, identify each of roughly forty-three thousand neighborhoods. Other countries, too, have analogous postal code systems. Zip codes are often the basis for direct mail advertising. Car dealers use zip code information as a proxy for income, making different offers, such as lease-to-own or cash incentives, to entice potential buyers in different neighborhoods.

  • MSA. Metropolitan Statistical Areas (MSAs)Metropolitan Statistical Areas (MSAs)The U.S. Office of Management and Budget (OMB) defines 363 MSAs in the United States. MSAs are defined using census data at a county level (or a group of economically linked contiguous counties) with at least one urbanized area of fifty thousand or more population. are important for local advertising channels (e.g., newspaper, radio, outdoor, local broadcast TV, and cable). The U.S. Office of Management and Budget (OMB) defines 363 MSAs in the United States. MSAs are defined using census data at a county level (or a group of economically linked contiguous counties) with at least one urbanized area of fifty thousand or more population. One MSA, called the “New York-Northern New Jersey-Long Island, NY-NJ-PA” MSA is the most populous MSA in America and contains approximately nineteen million people.

  • Civil boundary regions.

    • City. Of U.S. cities, nine have a population over one million, and 254 have a population over one hundred thousand.

    • County. There are 3,066 counties in the United States.[165]

    • State. Identifying customers by state can be important because laws may vary from state to state, especially for industries such as financial services (like insurance), tobacco, and alcohol. These regulations can affect advertising strategies. For example, California law heavily restricts distribution of coupons for cigarettes.

  • Census regions and divisions. Four broad regions (West, Midwest, Northeast, and South) further divided into nine divisions.

  • DMA codes. Designated Market Areas (DMAs)Designated Market Areas (DMAs)Markets in the United States that are within range of a particular broadcast television station. A DMA consists of all counties whose largest viewing share is given to stations of that same market area. are markets in the United States that are within range of a particular broadcast television station. The term was originally defined by Nielsen Media Research to identify TV stations whose broadcast signals reach a specific area and attract the most viewers. A DMA consists of all counties whose largest viewing share is given to stations of that same market area. Nielsen gathers data to verify DMAs four times a year; there are currently 210 nonoverlapping DMAs in the United States.

  • Sales or distribution regions. Many companies create their own geographic subdivisions, which vary by company. For example, a product might be sold through a specialty retailer that only operates in the Northwest.

  • Climatic. Some products are specific to or more prevalent in areas with a specific client. For example, Minnesotans buy more snowshoes than do Texans.

Figure 6.4. 

Snowboard manufacturers like Burton, K2, and Lamar focus their distribution strategy on climates where winter sports are prevalent.


While demographics are useful, advertisers often need to slice and dice even further. Traditional demographic segments (such as gender, age, and income) provide only a rough estimate of the attitudes and desires of different groups, so marketers often give consumer groups labels that capture something about their lifestyles and motivations as well.

Imagine an advertiser that defines a segment as recent moms. This label implies that all women who have recently given birth are fairly similar and that they all will respond the same way to an advertising message—how accurate is that assumption? Bloomingdale’s Quotation, a store-within-a-store, instead calls its target market “yummy mummies.” These are women age thirty-five to forty-five who have gained weight after their babies but don’t want to look matronly. They are affluent, suburban, and casual yet fashionable. Bloomie’s research department provided further insight into the target customer: she thinks classic sportswear like Jones New York is too formal but contemporary sportswear like Juicy Couture is too young. The mom wants clothes that look pretty and feminine and have flair but offer a generous, not-too-tight fit.[169]

PsychographicspsychographicsDimensions that segment consumers in terms of personality, values, attitudes, and opinions. While demographics can divide people along specific (often quantitative) dimensions, psychographics captures the reasoning and emotion behind people’s decisions. refers to dimensions that segment consumers in terms of personality, values, attitudes, and opinions. While demographics can divide people along specific (often quantitative) dimensions, psychographics captures the reasoning and emotion behind people’s decisions. This information also enables advertisers to capture the themes, priorities, and “inside meanings” that a specific taste culture identifies with. For example, Svedka Vodka targets urban party people who are out drinking until three o’clock in the morning three nights a week. This target market is irreverent, and Svedka’s ads speak their language. The ads feature futuristic imagery and lines like “Svedka says ‘thank you’ for making the gay man’s fashion gene available over the counter in 2033.”[170]

PRIZM NE classifies psychographic segments based on where they live.

Figure 6.5. God’s Country

God’s Country

Affluent people who live in wealthy exurban (beyond suburban) areas make up this segment. They like their space and their conveniences. They are typically Baby Boomers who balance their lives between high-powered jobs and laid-back leisure.

They are mostly college-educated Whites between the ages of 35 and 54 with a median household income of $84,851. They are most likely to travel for business, take a golf vacation, read Skiing magazine, and drive a Toyota Land Cruiser.

Figure 6.6. Gray Power

Gray Power

Older, middle-class seniors who live comfortably in the suburbs characterize this segment. These retired homeowners are opting to stay in their homes rather than move to a retirement community. The mostly White, college-educated suburbanites have a median household income of $51,367. They are most likely to shop at Lord and Taylor, belong to a veterans’ club, watch the U.S. Senior Open on TV, and drive a Buick LaCrosse.

Figure 6.7. Kids and Cul-de-Sacs

Kids and Cul-de-Sacs

This segment includes upper-middle-class suburban couples, with children, who enjoy focusing on their families. They live in a large home in a subdivision. Their white-collar profession and young age (25–44) provides them the means to have it all.

The segment includes a growing number of Hispanic and Asian Americans. The median household income is $70,490. They are most likely to shop at The Disney Store, eat at Chuck-E-Cheese, watch Nickelodeon TV, and drive a Nissan Armada SUV.

Figure 6.8. Boomtown Singles

Boomtown Singles

Young, working singles living active lifestyles in sprawling apartment complexes in fast-growing satellite cities compose this segment. They are under 35, ethnically diverse, and hip, and they want it all. Nightlife, restaurants, and convenience products and services are important to them. Their median household income is $38,910. Since they don’t have children, they are very active. They are most likely to go snowboarding, watch Fuse network, read The Source magazine, and drive a Nissan Sentra.

Sometimes marketing and advertising firms create psychographic segmentation systems with cute names or acronyms for the segments, such as DINKs (double income, no kids), who are good targets for yuppie products like expensive roadsters and exotic vacations, or even DINKWADs (double income, no kids, with a dog), who are like DINKS but would add in lots of treats for a pampered pooch. msnbc.com, for example, termed its new target audience the News Explorer.

These are some well-known psychographic segmentation tools that advertisers use to divide up their markets:

  • VALS2™VALS2™ (Values and Lifestyle System)VALS2™ divides U.S. adults into eight groups according to what drives them psychologically as well as by their economic resources. The system arranges groups vertically by their resources (including such factors as income, education, energy levels, and eagerness to buy), and horizontally by self-orientation. (Values and Lifestyle System): According to its parent, SRI International, “VALS reflects a real-world pattern that explains the relationship between personality traits and consumer behavior. VALS uses psychology to analyze the dynamics underlying consumer preferences and choices.”[171] VALS2™ divides U.S. adults into eight groups according to what drives them psychologically as well as by their economic resources.

    The system arranges groups vertically by their resources (including such factors as income, education, energy levels, and eagerness to buy) and horizontally by self-orientation. Three self-orientations make up the horizontal dimension.

    1. Consumers with a principle orientation make purchase decisions guided by a strong internal belief system.

    2. People with a status orientation base their decisions on what they think their peers think.

    3. Action, or self-oriented individuals, buy products to have an impact on the world around them.

    Actualizers, the top VALS2™ group, are successful consumers with many resources. This group is concerned with social issues and is open to change. The next three groups also have sufficient resources but differ in their outlooks on life:[172]

    1. Fulfilleds are satisfied, reflective, and comfortable. They tend to be practical and value functionality.

    2. Achievers are career-oriented and prefer predictability to risk or self-discovery.

    3. Experiencers are impulsive and young, and they enjoy offbeat or risky experiences.

    The next four groups have fewer resources:

    1. Believers have strong principles and favor proven brands.

    2. Strivers are similar to achievers but have fewer resources. They are very concerned about the approval of others.

    3. Makers are action-oriented and tend to focus their energies on self-sufficiency. They will often be found working on their cars, canning their own vegetables, or building their own houses.

    4. Strugglers are at the bottom of the economic ladder. They are most concerned with meeting the needs of the moment and have limited ability to acquire anything beyond the basic goods needed for survival.

    VALS2™ helped Isuzu market its Rodeo sport-utility vehicle by targeting Experiencers who believe it’s fun to break rules. The company and its advertising agency promoted the car as a vehicle that lets a driver break the rules by going off road. One ad showed a kid jumping in mud puddles after his mother went to great lengths to keep him clean.[173]

  • Trend analyst Faith Popcorn’s firm BrainReserve refers to segments based on life stages like MOBYs (mommy older, baby younger), DOBYs (the daddies); former yuppies divided into PUPPIEs (poor urban professionals) and WOOFs (well-off older folks); latchkey kids, sandwichers (adults caught between caring for their children and their older parents); and SKIPPIEs (school kids with income and purchasing power). The company also groups consumers based on special interests, like global kids (kids with strong feelings about the environment plus strong influence over family purchase choice); and new health age adults (consumers who consider their health and the health of the planet to be top priorities).

  • Mediamark Research (MRI) divides the wealthiest 10 percent of U.S. households (“the upper deck”) by lifestyles: the good life, well-feathered nests, no strings attached, nanny’s in charge, and two careers.

Behavioral segmentationbehavioral segmentationSlices the market in terms of participation or nonparticipation in an activity. slices the market in terms of participation or nonparticipation in an activity. Sometimes this involves identifying the different ways consumers use products in a category. Mattel introduced a new brand it calls Barbie Girls to attract the increasing number of girls who spend a lot of time online in virtual worlds instead of playing with real dolls in the physical world. It features a free Web site, BarbieGirls.com, that will allow children to create their own virtual characters, design their own room, and try on clothes at a cyber mall. It’s following up with Barbie-inspired handheld MP3 music devices.[174]

Segmenting by behavior often singles out heavy users of a product, because even though these consumers may be relatively small in number, they often are key to sales in a category. Indeed, there is a lot of truth to the so-called 80/20 rule80/20 ruleThis is a rough rule of thumb that says 20 percent of customers buy 80 percent of a product.: this is a rough rule of thumb that says 20 percent of customers buy 80 percent of a product. Sure enough, for example, Kraft Foods began a $30 million campaign to remind its core users not to “skip the zip” after its research showed that indeed 20 percent of U.S. households account for 80 percent of the usage of Miracle Whip—“heavy” users (pun intended) consume seventeen pounds of Miracle Whip per year![175]

Information sources that can pinpoint heavy users in a brand or product category include:

  • Industry group reports (for example, the National Golf Foundation tracks the number of golfers in the United States and the extent of their participation in the game).

  • Surveys of consumer behavior (for example, the number of people who eat fast food more than three times per week).

  • Product sales (install base): Owners of particular products can be an affinity group. For example, a company can choose to target owners of Apple iPods either with accessories or with a brand image that resonates with that population.

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Video Spotlight

SS+K

Michelle Rowley explains how behavioral segmentation of the audience led to understanding the difference between a CNN.com user and an msnbc.com lover.

Many clients sell products used by businesses rather than (or in addition to) end users. B2B advertisers also segment their markets, but the dimensions they use are different. In addition to data the government collects about businesses, trade organizations often offer data about their members. In addition, services like Hoovers Online provide detailed breakdowns about many companies. Relevant dimensions include these:[176]

  • Company size. This comprises such things as revenues or headcount.

  • Industry. Marketers often use the North American Industry Classification System (NAICS)North American Industry Classification System (NAICS)A numerical coding of industries the United States, Canada, and Mexico developed. The NAICS reports the number of firms, the total dollar amount of sales, the number of employees, and the growth rate for industries, all broken down by geographic region., a numerical coding of industries the United States, Canada, and Mexico developed. The NAICS reports the number of firms, the total dollar amount of sales, the number of employees, and the growth rate for industries, all broken down by geographic region.

  • Geography. This comprises such things as location of headquarters, sites, or geographic focus of distribution.

  • Buying cycle. Companies often have a deliberative process for buying with known intentions to buy within a certain number of months.

  • Buyer role. Advertising often targets specific people within an organization (e.g., those who influence, specify, and make buying decisions).

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Video Spotlight

Michelle Rowley: Primary Research Informs User Differences

Listen as Michelle describes the process of working with Energy Infuser and what the triads uncovered.

If an agency relies on simple demographics to define its target market, the risks of oversimplification and naïve projections are considerable. The job of an account planner like SS+K’s Michelle Rowley is to dig deeper; to see, understand, and report significant differences among potential target markets on the basis of characteristics that aren’t immediately apparent to just anyone with access to a marketing database.

The profile provided Michelle with a basic understanding of the msnbc.com user. In addition to some telling demographics, Michelle had a good sense of how users describe their technological acumen and online news-gathering behavior and preferences.

After analyzing a veritable mountain of proprietary research already collected by the client, Michelle and her colleagues identified a trio of expectations consumers brought to their online news and information experiences. First, the online news audience assumed “the cost of entry” for credible sources was an ability to provide breaking news in a timely fashion; research indicated that consumers considered this a generic attribute and not a point of differentiation for any news provider. The second and third expectations were also considered essential parity characteristics (i.e., elements that any competitor would need): a well-organized site that provides ease of access and a multi-faceted presentation of text, photos, and video. Users said the most important attribute for news and online information providers was to provide trusted coverage.

Beyond that, there were still some significant gaps in the research that Michelle and company had to fill before they were prepared to commit fully to a target audience and position the brand in the marketplace. SS+K wanted to better understand the factors involved in making a choice for news and information:

  • What role does news and information play in the lives of online consumers?

  • What were the emotional drivers in choosing a source?

  • Who was likely to influence others’ choice of a news site, and how was this influence exercised?

Once these more global issues were better understood, SS+K could more effectively address how to position msnbc.com relative to its competition.

Understanding consumers’ behaviors, as well as their motivations and gratifications for using particular sites, was a key focus of the next research phase. The ultimate goal was to find a voice, a tone, a way of presenting the brand that was relevant and clearly differentiated in the minds of the consumers as unique to msnbc.com. Michelle and her colleagues organized focus groups and interviews for further exploration of the opposing goals and perspectives suggested by the initial research. Among these were the following:

  • Attraction versus retention

    • What is the relationship between what attracts you to a site and what keeps you interested once you’re there?

    • Why are users accessing broadcast-related media online?

    • How can msnbc.com differentiate itself from MSN? What is the value of the association beyond driving traffic?

    • What type of content will motivate your current consumers to spend more time on the site?

    • Are light msnbc.com users clicking through on other sites?

  • Credibility versus liability

    • What value do the NBC news brands bring to an online news site?

    • What is credible about the NBC brands?

    • How strong are the associations with NBC news personalities?

  • Informed versus overwhelmed

    • What is the balance between knowledge as power and news as noise?

    • Do online news users want “all the news that’s fit to print” or “enough information so I don’t look stupid”?

    • Do your users want to know it all or just know enough?

  • Entertained versus unfulfilled

    • What causes the negative reaction to the site among non-users? Are non-users reacting to the actual product or its reputation?

    • What is the appropriate balance between hard news and entertainment content?

    • How does the style of storytelling affect a user’s perception of the content on the site?

SS+K needed answers to questions like these before the agency could identify the profile of the person most likely to be attracted to msnbc.com as a news source. That’s where the targeting process comes in, so we’ll turn to that next.



[161] Kevin Downey, “Phoenix: Ad Budgets Soar in Newly Ensconced 8th-Largest Latino Market, But Immigration Remains a Concern,” Marketing y Medios, October 22, 2007, http://www.marketingymedios.com/marketingymedios/market_profile/article_display.jsp?vnu_content_id=1003661213 (accessed November 5, 2008).

[162] Susan Dominus, “The Affluencer,” New York Times Magazine, October 30, 2008, http://www.nytimes.com/2008/11/02/magazine/02zalaznick-t.html? partner=rssnyt&emc=rsscc (accessed November 5, 2008).

[163] Emily Burg, “Do You Want To Be My Amigo? MySpace Launches En Espanol,” Marketing Daily, April 26, 2007, http://www.mediapost.com (accessed November 5, 2008).

[164] “For car marketers, local cable ads are spot-on,” Automotive News, May 28, 2007, 26F.

[168] Michael Barbaro, “Meteorologists Shape Fashion Trends,” New York Times Online, December 2, 2007, http://www.nytimes.com/2007/12/02/business/02weather.html (accessed July 11, 2008).

[169] Elizabeth Woyle. “What Do 35-Year-Old Women Want?” BusinessWeek, April 2, 2007, 66.

[170] Dan Heath and Chip Heath. “Polarize Me,” Fast Company, April 2007, 59.

[171] For more information, see http://www.sric-bi.com/VALS/.

[172] Martha Farnsworth Riche, “VALS 2,” American Demographics, July 1989, 25. Additional information provided by William D. Guns, Director, Business Intelligence Center, SRI Consulting Inc., personal communication, May 1997.

[173] For other examples of applications see “Representative VALS™ Projects,” SRI Consulting Business Intelligence, http://www.sric-bi.com/VALS/projects.shtml#positioning (accessed February 29, 2008).

[174] “Mattel Aims at Preteens with Barbie Web Brand: Toymaker Turns to Tech as Sales Slump for Iconic Fashion Doll,” Associated Press, April 26, 2007, http://www.msnbc.com (accessed April 26, 2007).

[175] Judann Pollack, “Kraft’s Miracle Whip Targets Core Consumers with ’97 Ads,” Advertising Age, February 3, 1997, 12.

[176] For more information, see http://www.hoovers.com.

[177] Elias Terman, “Name Dropping,” American Printer, January 1, 2007, v124.

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