Bases for market segmentation— ultimate consumers and business users

A company can segment its market in many different ways. And the bases for segmentation vary from one product to another. At the top of the list, how­ever, is the division of the entire potential market into two broad categories: ultimate consumers and business users.

The sole criterion for placement in one or the other of these categories is the customer's reason for buying. Ultimate consumers buy goods or services for their own personal or household use. They are satisfying strictly nonbusiness wants, and they constitute what is called the "consumer market».

Pic. Business users constitute a major market segment that is quite different from the consumer market.

Business users are business, industrial, or institutional organizations that buy goods or services to use in their own businesses or to make other prod­ucts. A manufacturer that buys chemicals with which to make fertilizer is a business user of these chemicals. Farmers who buy the fertilizer to use in commercial farming are business users of the fertilizer. (If homeowners buy fertilizer to use on their yards, they are ultimate consumers because they buy it for personal, nonbusiness use.) Supermarkets, art museums, and paper manufacturers that buy the service of a certified public accountant (CPA) are business users of this service. Business users constitute the "business market"—the topic of Chapter 6.

The segmentation of all markets into two groups—consumer and busi­ness—is extremely significant from a marketing point of view because the two markets buy differently. Consequently the composition of a seller's mar­keting mix—products, distribution, pricing, and promotion—will depend on whether it is directed toward the consumer market or the business market.

BASES FOR CONSUMER MARKET SEGMENTATION

Dividing the total market into consumer and business segments is a worth­while start toward useful segmentation, but it still leaves too broad and heter­ogeneous a grouping for most products. We need to identify some of the bases commonly used to segment these two markets further.

As shown in Table 4-1, the consumer market may be segmented on the basis of the following characteristics:

• Geographic.

• Demographic.

• Psychographic.

• Behavior toward product (product-related bases).

Marketing executives should be especially aware of trends in each subcate­gory of these segments.

In using these bases to segment markets, we should bear in mind two points. First, buying behavior is rarely traceable to only one segmentation factor. Useful segmentation is developed by including variables from several bases.

The market for a product rarely consists of all people living in Pacific Coast states or all people over 65. Instead, the segment is more likely to be described with a few of these variables. Thus a market segment for a financial service might be families living on the Pacific Coast, having young children, and earning above a certain income. As another example, one cloth­ing manufacturer's target market might be affluent young women (income, age, sex).

The other point to observe is the interrelationships among these factors, especially among the demographic factors. For instance, age and life-cycle stage typically are related. Income depends to some degree on age, life-cycle stage, education, and occupation.