The notion of market segmentation is, according to many textbooks, one of the fundamental principles of marketing and the idea is almost as ancient as marketing theory itself.
It is well known and understood that in today's competitive marketplace, locating and effectively targeting unique market groupings is a reality and a necessity.
It is said to form the basis for an organisation's competitive market advantage by not only allowing it to understand its various customers and the differing products and services they desire, but also allowing great insight into competitor behaviour and likely strategy.
Given that segmentation is such a vital strategic tool that offers solutions in an ever-changing, dynamic environment, it is imperative that marketers and leaders of organisations continuously innovate about ways to slice and dice their individual markets.
Traditionally, most market practitioners have followed conventional methods to segment their markets. The most widely used models are based on Kotler's seven-step segmentation process, which encourages a needs-based market segmentation approach.
According to the same set of traditional market segmentation models, there are three ways to segment a market: demographic (such as by age, sex or religious affiliation); behavioural (such as how the target market buys or uses the product, where they buy and how often); and psychographic (by lifestyle and personality).
But in a market that is continuously evolving and whose dynamics have become multifaceted, is this enough? Unfortunately not.
While these methods form an important basis for the process, they tend to be too rigid and narrow for today's complex and diverse markets.
Segmentation, in the main, is still based on one-dimensional descriptive generalisation and efforts tend to fail because of the use of a single set of variables to define the market. So what else can marketers use to view their targeted consumers? Generational theory.
Generational segmentation is the process of dividing up the market across the various generations in our time.
It is argued that the way we buy, conduct relationships and think are, by and large, defined by the period in which we were born. The experiences during the years in which we grew up have shaped our attitudes, values and expectations.
By understanding the different generations (GIs, silents, boomers, Xers and millenial), one can gain greater insight into how different people behave and their likely reactions to life and events irrespective of income levels or other demographics. For instance, given the fact that the world today is run by boomers (those born between the 1940s and the 1960s), it might be worthwhile for us to understand what make those people tick.
From a marketing point of view, targeting a generational group, as opposed to simply a demographic or lifestyle segment, allows marketers to tap into the unique values and shared life experiences that can create rich opportunities for the development of appropriate messaging, distinct strategies and differentiated product positioning that add to competitive advantage.
Generational theory-based segmentation is by no means designed to replace traditional methods, but rather to enhance them by adding a filter for the information.
It is a tool that allows for the addition of a creative process for gaining better consumer insights and giving organisations the competitive edge.
- Ingrid Veysie is the head of BBDO Consulting South Africa