Customers

segmentation involves dividing the market and that's all of the actual and potential 0:04 consumers out there. So it involves dividing that market up into smaller 0:10 segments or smaller groups based on their commonalities. 0:15 So if there are all these people around we can divide them up into different groups 0:21 of people and that's what we're referring to when we talk about segmentation. 0:26 Now why do we segment the market? It's pretty straight forward. Different types of people, different groups 0:32 of customers. They want different things. They want different products and services. 0:37 They wanna buy them in different ways. Sometimes people wanna shop online versus 0:43 in person. So different types of customers wanna go shopping and want to experience different 0:48 products and services. Now what is the best way to segment. There's no best 0:53 way. There's no right way to segment all of the time. But often segmenting 0:58 in by multiple variables can be useful approach. Now when I talk 1:04 about segmentation variables the key categories of variables 1:09 are demographic, psychographic and behavioral variables. 1:15 So these are our three main categories of variables that we 1:20 use to divide up the market. And again there's no single best way to segment 1:25 the market. It really depends on your company, your product and your service. But 1:30 often times we see that we segment the market using a combination 1:36 of demographic, psychographic and or behavioral variables. 1:41 So I'll talk a little bit more about demographic segmentation right now and this involves dividing 1:47 up the market based on the demographic variables. Those are the basic descriptive 1:52 variables about who people are and how the population is composed. 1:57 For example dividing people up by age is a means 2:04 of demographic segmentation. You can divide people into a group of millennials 2:09 versus a group of generation x and a group of baby boomers 2:14 and a group of older adults and that's demographic segmentation. Specifically 2:20 dividing the market up by age groups. We can divide the market up by gender, 2:26 by family size, by life cycle- that means the stage 2:32 of life that people are in- Right, so right now all of you are in 2:37 the stage of your life where you are a student. After this usually you'll be a new 2:42 professional and then maybe a lot of people will get married and a lot of people will 2:47 have babies and lots of other things right. So we often see the people follow 2:52 a life cycle, high school, college, jobs, family- 2:57 and depending on what stage or cycle of your life you're in you'll have different consumption needs. 3:03 We can divide the market up based on income with different groups of people in different 3:09 income brackets. We can divide the market up based on different occupations, groups 3:14 of doctors, teachers, lawyers, nurses and so on and so forth. 3:20 We can divide people based on their level of education. We can divide people 3:26 based on their ethnic and cultural background and we can divide people 3:32 up based on geography. Where they live? Something as 3:36 wide as what country they live in or something as specific as what neighborhood 3:41 they live in a very specific city. All of these are ways to 3:47 segment the market based on demographic factors, 3:52 Next up we have psychographic segmentation. That's our second main bucket or 3:57 main category of variables that we can use to divide up the market. 4:03 And psychographic segmentation divides the market up based on psychological 4:08 factors or personal characteristics. So for example, 4:13 lifestyle. This is a personal quality right? You might have a really adventurous 4:18 outdoorsy lifestyle right. And that's one lifestyle right. And so you can divide 4:24 people up based on different lifestyles that they're in. Or based on different personality 4:29 factors. Maybe you can divide people up into really extroverted people and really introverted 4:35 people and so on and so forth. We can divide people up based on their 4:40 mental state, based on what they're interested in, based on their attitudes 4:45 towards companies or products or the country in 4:52 general and we can divide people up based on their opinions. All 4:56 of these are going to be ways that we can divide people up based on psychographic factors. 5:01 Now we have behavioral segmentation. And this involves dividing the market 5:08 up based on how a consumer uses the product. What a consumer knows 5:13 of a product or how consumers respond to products. Basically 5:19 behavioral segmentation is about dividing consumers up based on how they behave 5:24 with respect to a product or service. Now to get into a little bit more detail 5:30 about this we can think about occasions. There are certain occasions 5:35 where you might consume a certain product or service and you don't consume it on other 5:40 occasions, right. Halloween costumes at Halloween, for example. Now 5:46 occasions can be a once in a lifetime occasion like you have consumption needs for 5:51 a once in a lifetime wedding or it can be a once a year occasion 5:56 like Halloween or a birthday. Or it can be a daily occasion. Many 6:01 of you have coffee and cereal upon the occasion of waking up. 6:06 We can divide people into different groups based on the occasions during which they might 6:12 use a product or service. We can also divide people up based on the benefits 6:18 that they seek when they buy something. For example think about toothpaste. 6:23 You can buy toothpaste with the benefit of whitening toothpaste. 6:29 Makes your teeth whiter. That's a benefit that some customers seek when they buy toothpaste. 6:34 Others seek the benefit of cavity protection. Others seek the benefit 6:39 of breath freshening. There are all sorts of different benefits that people seek 6:44 out when they buy something and we can divide people up into groups based on the benefits 6:51 they seek. User status refers to whether someone is a 6:55 current user of a product or service a future user of a product or service 7:00 or maybe an ex user of a product or service right. So do they currently use something, 7:06 are they potentially going to use it in the future. Or did they use it previously and they don't 7:11 any more. That would be dividing the market up based on user status. 7:16 User rate refers to how much of something somebody uses. Are they a heavy 7:22 user of something, light user of something, or a medium user. If 7:27 you go to Starbucks three or four times a day, you might be a heavy user of Starbucks. 7:32 If you go to Starbucks maybe once a year you're probably more of a light user 7:37 of Starbucks and that's dividing the market up based on user rates. Finally 7:42 we have loyalty status you can divide people off based on how loyal they are 7:47 to your company or your brand. And all of these are ways to divide up 7:53 the market based on their behaviors with respect to market offerings. 7:58 Alright so just to summarize what we've talked about. When we divide up the market, 8:04 that's segmentation and that's complete dividing everybody out there in different groups. 8:09 The main ways that we divide them up are based on demographic, psychographic, 8:14 and behavioral variables, which I've talked about in this video.