Market segmentation and demand assessment

Fig. 1 – Principles of Segmentation

There are several principles: geographic, demographic, psychological, and behavioral. 

Geographic principle of segmentation: people who live in the same country, region, in a large or small city, population density, climatic conditions. All these factors can influence the nature of demand.

Demographic principle: depending on age, gender, family size and life cycle, income, nationality, religion, etc.

The two principles we discussed above have one significant advantage; they can be easily measured and calculated using government statistics.

It is much more challenging to find data on “psychological” segmentation in the public domain. This is all about lifestyle, individuality, and social class.

The fourth parameter is behavioral segmentation. Depending on how people buy, that is, for what reasons, how loyal they are, how they feel about the brand, whether they are users, have never tried it, etc.

All these factors are also sources of segmentation parameters. Because there are cases in business where it is necessary to specifically offer products to those who have never used the product. For this, it is essential to find out why they do not use our product and offer them something they will definitely like. All parameters can be used in combination with each other. 

Also, continuing the topic of segmentation, it is important to emphasize that there is a difference between the consumer and the buyer. Of course, very often, it can be the same person. But the consumer is not always the one who buys.

Fig. 2 – Example of a Purchase

In the picture, we see a mother and daughter. Let’s say the daughter wanted ice cream, so the mother bought it for her. Thus, we understand that for some products, such as dolls or soft toys, the daughter is the consumer, while the mother is the buyer, as she has the resources to make the purchase.

These differences also need to be considered, as each participant in this situation or any other has their own interests. Therefore, different tools of influence and communication are used for them. 

Consumer Profile

It is best to create it by comparing with the characteristics and values of celebrities they know. For example, we start with those in their 20s, continuing to 45 and older. There are millennials who are looking for something new, experimenting, doing interesting things. And there are those who enjoy relaxing in company, attending parties, or just gathering with friends at home or outdoors. They are quite sociable, having a very large and diverse circle of people. There are those who stick to one specific brand; they are specific, authentic. But this is just one way of segmentation. 

Similarly, there is another quite interesting way; if we already know who we want to target, that is, we have already chosen a consumer group, let’s determine what they do throughout the day? For example. First, they have breakfast, then go to the gym, after that to work, in the evening a meeting with friends, and so on. All of this influences their final choice.

And another example of segmentation, again based on consumer behavior. 

Fig. 3 – Behavioral segmentation: dividing segments by priorities

There are consumers who often use our product, some who rarely do, who may purely switch from one product to another, and there are those who fundamentally do not consume the products of the chosen brand. Based on these parameters, classification can also be made. Because we understand that those who often use our products require one strategy, those who do not often require another strategy, and accordingly, those who do not use our products at all require a third.

In summary, it can be said that the consumer is the center of the business, and our task is to offer the consumer exactly what they want. Not forgetting that we need to constantly maintain communication with them.

Impact of Trends

Current popular trends can be divided into 4 groups: “technological,” “health as a religion,” “closer to oneself,” and “always young.”

1. An example of a “technological” trend is the shift of restaurants and cafes, influenced by the pandemic, to online menus, abandoning printed versions.

2. Another trend, “health as a religion”: the transition to and maintenance of a healthy lifestyle. That is, people have started to think more about their health, reduced sugar consumption, started counting calories, and are exercising more.

3. Another trend “closer to oneself” implies how important national traditions and characteristics have become for people.

4. And another interesting trend “always young” is when adults do not behave like youth, yet have the same needs. And this also needs to be taken into account.

Example

So, let’s consider a small example: a company that produces beverages plans to launch a new product.

We start, of course, with market assessment to better understand what category we represent, who the competitors are, what the structure and characteristics of the competitors are, and who the consumers are, what the consumption occasions are, etc. That is, we gather as much information as possible.

Then we look at what segments exist and evaluate them, trying to answer the questions

– How many beverages do they consume throughout the day?

– What occasions do they buy and consume? And for each occasion, what beverages do they consider for consumption?

– What specific beverages do they consume? 

– Where do they buy?

– And others.

After answering these questions, we move on to the strategy of product placement, to put it simply. That is, we determine where the products will be sold, in which specific points of sale, where they are placed, how they are placed, possibly next to complementary products, etc. 

Of course, there are both opportunities and threats associated with segmentation.  

Table 1 – Opportunities and Threats in Segmentation

However, in any case, consumer segmentation is important for the proper functioning of the business.

To dive deeper into the topic, you have the opportunity to familiarize yourself with the report in video format with answers to questions.