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Segmentation is a cornerstone of sound marketing will (and should) receive preferentlal treatment. lmplementing
and brand building. Segmentation is the forming segmentt1tion by profit requires detailed data on revenue and costs
of groups (of consumers) based on some criteria or éll the customer level-data not available in many instances.
characteristics. The usefulness of segmentation ties directly to
With segmentation by behavior, groups are formed based on sorne
how these groups are formed. Formed appropriately, segments
uniquc behavioral characteristic relevant to the business. A retailer
can be a powerful organizing principie for brand development.
like Home Depot mlght group customers into several ·behavior
Used lnappropriately, segmentation can weaken your
segments such ílS "do-it-yoursclf renovator" (someone who takes
understanding of the market you compete in. The rnosl cornmon
on majar renovíltion projecls) or "weekend fix-il guy" (someone who
mistake is to segment based on demographics (age, income,
rnakes mínor home repélírs on lhe weekend) . Thcse segments are
education , marital status, and so on) . Brand managers will forrned by behavior, nol demographics.
say things like "our segment is young, upscale men" or "we've
divided the market into three categories-low income, moderate Segmentation by benefit is lhe thírd recommemlecl segmentr1tion
income, and high income." Both cases illustrate segmentation by í.1pproach. People vary with respccl lo what is the primary driving
úemographics. The first example is a bit more sophisticated, but foclor t.hat influences their choice of brand. Consicler automobíles.
it is segmentation by demographics nonetheless. Sorne people mosl heavily value Silfely. For some ..reliabilily is
mosl importan!. í-or ot:hers, performance is lhe prirnmy moliv.1lor.
Segmentation by demo,grilphi~ fai ls to provicle deup insighl Consider jea ns. In choosing a brand, sorne people are more fornsecl
into the underlying dy11amics that are affecling brand choices. lf on pres! ige. Some people valu c..comfort. For ol hers. low pric.c is the
segmenting by demographics is not that 11c;eful. how sh01 ild yoII prlmmy conshforntion. Eac.h ol these cxt1111ples illuslrntes r1 lwnefit
think alJout segmental.ion? Thcre are thri;e: pr1rticularly good w,1ys lo segment.
segment the markel- by profil, by behavior, rnicl by flcnefit.
Only r1fler you llave fornwd segmcnts do demor,r,1phics come
Segmentalion by prol'il recog11iz0s tlrnl differenl people have into play. Peoplt' in lhe ··safely" segment for cars mir,ht tend to be
different (finuncial) valtte lo íl business. A person can be valuílb!e fernale, 2S ··'r', yt~ars old, married, with íl householc.l sizc of 1 -·6.
beCiluse they buy lots of your producl or servicc. For example, tt The "weekend fix-il guy" segnwnl rnight be ch¡1r;iclerizcd ilS mr1le,
wom;:in buying paper lowels for a fíl mily of five likely buys ,1lol 3~:i ..-'.~O yems old, suburban, wilh ,1
of paper towels. A person míghl be va luuble because he or silc .
11ouse110 lle 111con1e $2c:>· · 7r:oc)o
... .>, . -,-·111_, 1· 1, • ;-1,·c· 1·!11t'1 '
is relalively insensitíve Lo price ancl doesn'l de111and or expect But nolicc lhal demographics me
discounts. A persoI1 might bf j) .l i ¡j u 1!.1ilV :_:,·uu c!
not used lo lonn the ser,ments, bul
valu ab le because his or her rüther lo e/escribe the segments \1i/;l \/ ''. l (1 · ;<: f ;lnt ' l li
loyally will generate reveI 1ue over after lhey lwve been formecl . l
1 1t_, 111<1 r ei k v
i1
rnany years. Segmentali on, lhen.
Segrnenlalion provicles Vuluc In l!!( 1i.1i . l1y lx· l1 ,wi11 1·
forms groups or people based
011 profitabilily. You ca n create as
lwo ways--it irnproves both the c.1, 1ti 1Jv
lici1di1..
effectiveness and the efíiciency of
many groups as is useful for your
your marketing efforts. By vcry clemly identifylng your tmget group,
business. For example, sorne banks
you can gain deep insight into the motivations of that gro~p-what
use inlernal color codes "red,"
advertising üppeals will work, what types of promolfons w1ll be
"yellow," and "green" to reflect the
compelling, and whr1t product ar service features will be most
profit importance of customers.
L-!1 l ¡•••l;J r·::,c
• • l.~ .•. ' • attractive. You improve the effectiveness of your marketing programs.
A high-profit "green" customer

70 71
 Segmentation improves efficiency by focusing your marketin g
spendíng on the group of people who are most !ikely to be receptive
to your brand message. Every brand has sorne limited budget
for marketing and brand building. That budget might be as small
as $3,000 oras large as $300 míllion-but there is sorne limit.
Segmentation enhances efficíency by peeling away irrelevant (to your
brand) people. Segmentation ensures that your limited resources
aren't diluted-but directed in a way that yields maximum impact.
Demographics clearly are an important element of targeting.
But starling the segmentation process with demographics fails to
embrace more fundamental factors that are clriving brand choice.
People don't buy Volvos because they are "women, 25 to 45 years
old." They buy Volvos beca use safetyj s the primary criterion in
selecting a brand of car. People don't order Heineken beer because
they are "urban, professional males." They arder Heineken because
they are at happy hour with their work colleagues and want to make a
good impression.
In developing a targeting slrategy for your brand, first identify
market segments-eíther by profit, by behavior, or by benefil.
Determine which segmenl is best far your brand to focus on. Which
segment best aligns wílh your brand's image? Which segmenl is
not well served by a compelitor? After deciding lhe
segmenl for your brand, describe the segmenl using
demographics. Use demograµhics for describing segments,
not for forming them.

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