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 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.com:
* 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.
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.