Marketing: Understanding segmentation variables

To understand what segmentation variables in marketing are, it helps to first know what market segmentation is. Market segmentation is the analysis of population demographics in marketing research so they can be categorized in specific ways. These specific ways of categorization in market segmentation are why segmentation variables are needed and used. Moreover, market segmentation variables define both how a demographic will be segmented and categorized. Market segments can also be divided into sub-categories or branched-categories in which additional variables are added to sub-sets of the market segment for more elaborate identification.


What segmentation variables are

Segmentation variables help marketers and/or market researchers refine target marketing and market segmentation to pre-determined goals and/or inquiries regarding the market segment. These variables can include and/or exclude a wide range of data depending on what the market researcher wants to find out. Some commonly used market segmentation variables include age, gender, and zip code. Segmentation variables span a range of functions, intents and descriptions and include the following types as also illustrated at Netmba:

• Geographic variables ex-zip code, area code, city

• Consumer behavior ex-spending habits, favorite products

• Interest information ex-attitudes, beliefs, lifestyle

• Population information ex-gender, age, income, occupation

Illustrating further, in times when basic demographic is not enough to segment a market additional variables are needed to further focus the categorization of potential and existing client profiles. In such cases the marketer may want to know about product preferences, income level, occupation, and other more detailed aspects of market segmentation. For example, if a marketer knows clients for ABC store generally come from 3 surrounding zip codes a geographic market segmentation is defined. However, other than this no additional information is available about the market. Questions such as why they shop at ABC store, when they shop there, and what they shop for may also be useful to the market researcher.

How segmentation variables are used

Market segmentation variables are used to answer specific questions and provide more detailed information about existing and potential clients in the context of business applications. To use the variables correctly proper statistical methods, and data collection techniques should be used so as to not disproportionately gather information, incorrectly collect that information, or haphazardly analyze and utilize it. 

Good segmentation variables address the budget, product, brand equity, revenue goals and other important aspects of business operations. If the wrong variables are used in the wrong way during market segmentation, the questions answered may not be appropriate for the company's objectives. Market segmentation variables are thus used in the following ways:

• Assist in determining market information

• Help companies identify who to market to

• Provide criteria to more specifically categorize existing market(s)

• Are used in statistical analysis and/or additional market research

• Allow companies to fine tune their marketing budgets and expenditures

To illustrate further, consider the ABC company once again. ABC company wants to find out three things, 1) who buys its products, 2) why these people buy their products and 3) what products they buy. In order to do this ABC company first defines its goals i.e. to answer these 3 questions, then creates a way to do this, ie. data gathering. Following this the data collected is analyzed using tools like histograms, regression analysis, and further qualitative and/or quantitative research. When the information is compiled and analyzed, a more detailed overview and understanding of the company's market should be clear.

Summary

This article has discussed market segmentation variables in terms of what they are and how they are used in the context of business decision-making. Moreover, market segmentation variables are data that reflect unique and specific aspects of a company's existing and/or potential market. These variables are gathered using information acquisition techniques, Following this, the information is processed through analysis designed to answer and address a businesses key objectives and concerns. Once the information is analyzed and presented, the company may then have an increased probability of making more sound financial, operational marketing and advertising decisions.

Sources:

1. http://www.businessplans.org/Segment.html
2. http://www.netmba.com/marketing/market/segmentation/

How niche marketing can benefit your business

Niche marketing is a form of business marketing that focuses promotion of product(s) or service(s) on a specific target market. Since it 'targets' a specific portion of a population demographic niche marketing is an arguably more effective way of generating revenue than mass marketing. This is so as the products or services may be more likely to be purchased by the target market because in a sense the products or services are customized for them.

Niche marketing using Earth friendly branding

Source: 'Ecogirls'; C.C. By-S.A. 3.0

The reason niche marketing is used is because it is a cost effective form of advertising. Rather than spending endless amounts of money to drag a marketing dragnet across a sea of people it is considered beneficial to identify that group or those groups of people who are most likely to use a certain type of product or service. After this group is identified a niche marketing campaign can begin.

Defining niche marketing

To illustrate what niche marketing is think of a specific type of product like writing services. People who like to read a lot are probably more likely to enjoy writing than those who prefer talking a lot. Markets can be divided further through complementary products. For example, if someone is already subscribing to a writing magazine, they then become a more likely candidate for a writing website than someone who doesn't subscribe to the magazine. At least that's how some marketing logic works. This group of people subscribing to the writing magazine then become a potential niche demographic for additional writing services, and marketing of those services is then considered 'targeted'.

Benefits of niche marketing

The benefits of niche marketing including a more researched study of who is likely to purchase a product in addition to potential advertising savings and increased sales per advertising dollar. So long as the research costs don't outweigh the decrease in advertising dollars the decision to establish a niche market is well founded. Acquiring a niche market involves more than just finding magazine subscription lists however.

A niche market is also found through other means such as website visits, personality type, income demographic, religion, socio-economic status and culture. There are many ways to identify who is going to buy what and this is assisted by the use of statistical tools such as cluster plots, and mean regression analysis. When various groups of people demonstrably fall in to certain groups, this is illustrated through statistical charting and graphing. This research is then used in obtaining marketing financing from finance executives. Additionally, when the results of primary research such as surveys and focus groups leads to probable success of a nice marketing campaign such financing is further justified.

• Potentially increased sales per dollar of advertising
• Higher corporate profit
• Better researched consumer profile
• Product or service viability and usefulness defined in terms of consumer
• Increase marketing efficiency

Summary

Niche marketing is thus a form of marketing that matches a certain brand with a person or group of people. While this is ideally intended to lower advertising costs and increases profit from revenue and the sales per advertising dollar ratio. This beneficial affect of niche marketing may not always happen as the 'market' is composed of human variables and is thus an inherently adverse enterprise. Nevertheless, in addition to enhanced demographic identification which stabilizes market forecasting are ideas like brand equity that are used in collaboration with the targeted marketing. This brand equity can also improve the perceived value of the product or service to a client and theoretically increases the likely-hood of product or service patronage.

Source: http://www.businessdictionary.com/definition/niche-marketing.html