Philip Kotler, Kevin Keller, and Ander Chernev Chapter 6 PDF

CHAPTER 6 Identifying Market Segments and Target Customers When canned...

CHAPTER 6 Identifying Market Segments and Target Customers When canned soup consumption dropped along with its share of the market, Campbell set out to study the habits of Millennial consumers face- to-face, which resulted in a new line of ready- to-eat, more exotically flavored soups promoted entirely online. Source: Radu Bercan/ Alamy Stock Photo C ompanies cannot connect with all customers in large, broad, or diverse markets. They need to identify the market segments they can serve effectively. Identifying these market segments requires a keen understanding of consumer behavior and careful strategic thinking about what makes each segment unique and different. Identifying and uniquely satisfying the right market segments are key to marketing success. Campbell is one of many companies trying to come to grips with the younger Millennial consumer. >>> Campbell Soup Company’s iconic red-and-white soup cans represent one of the most famous U.S. brands and were even the subject of an Andy Warhol portrait. Several years ago, though, the century-and-a-half-old company suffered a double whammy: Overall consumption of canned soup declined 13 percent, and Campbell’s market share dropped from 67 percent to 53 percent due to the popularity of fresh and premium soups. To stop the sales slide, Campbell set out to better under- stand the 18-to-34-year-olds who make up 25 percent of the U.S. population and will profoundly affect the company’s future. Adopting an anthropological research approach, Campbell sent execu- tives to study Millennial consumers face to face in “hipster market hubs” such as London; Austin, 144 M06_KOTL4813_16_GE_C06.indd 144 15/09/2021 14:33  PART 3 | DEVELOPING A VIABLE MARKET STRATEGY TX; Portland, OR; and Washington, DC. The executives engaged in “live-alongs,” where they shopped and ate at home with young consumers, and “eat-alongs” where they dined with them in restau- rants. The key insight? Millennials loved spices and ate more exotic food than their parents. They just couldn’t cook it at home! Campbell’s solution was a new line—Campbell’s Go! Soup ready-to- eat meals in six flavor varieties, such as Moroccan Style Chicken with Chickpeas, Spicy Chorizo and Pulled Chicken with Black Beans, and Coconut Curry and Chicken with Shiitake Mushrooms. Sold in pouches rather than cans to convey freshness and at a price ($3) more than three times the basic red-and-white soups, the product line was promoted entirely online, including on music and humor sites, gaming platforms, and social media. Campbell also sells Swanson broths and stocks; V8 veg- etable juices; Pace salsa, sauces, and dips; and Prego pasta sauce. Yet soups account for half its revenue, so marketing success for the new line was crucial.1 To compete more effectively, many companies are now embracing target marketing. Instead of scat- tering their marketing efforts, they’re focusing on those consumers they have the greatest chance of satisfying. Effective targeting requires that marketers: 1. Identify distinct groups of buyers who differ in their needs and wants (segmentation). 2. Select one or more market segments to enter (targeting). 3. For each target segment, establish, communicate, and deliver the right benefit(s) for the com- pany’s market offering (developing a value proposition and positioning). This chapter will focus on the first two steps: how to segment the market and identify target customers. Chapter 10 discusses the third step: how to develop a value proposition and positioning to build viable market offerings that grow over time and withstand competitive attacks. Identifying Target Customers There are many techniques for identifying target customers.2 Once the firm has identified its market opportunities, it must decide how many and which ones to target. Marketers are increasingly combin- ing several variables in an effort to identify smaller, better-defined target groups in order to develop an offering that can fulfill these customers’ needs better than the competition. Thus, a bank may not only identify a group of wealthy retired adults but also, within that group, distinguish several seg- ments depending on current income, assets, savings, and risk preferences. This has led some market researchers to advocate a needs-based targeting approach. Targeting is the process of identifying customers for whom the company will optimize its offer- ing. Simply put, targeting reflects the company’s choice of which customers it will prioritize and which customers it will ignore when designing, communicating, and delivering its offering. The logic of iden- tifying target customers and the strategic and tactical aspects of this process are discussed in more detail in the following sections. Learning Objectives After studying this chapter you should be able to: 6.1 Explain the essence of targeting. 6.4 Explain how to develop strategies to target multiple market segments. 6.2 Define the key principles of strategic targeting. 6.5 Describe how to segment consumer markets. 6.3 Describe how to effectively communicate and deliver offerings to target customers. 6.6 Describe how to segment business markets. 145 M06_KOTL4813_16_GE_C06.indd 145 15/09/2021 14:33  146 PART 3 | DEVELOPING A VIABLE MARKET STRATEGY THE LOGIC OF TARGETING In mass marketing, the firm ignores segment differences and goes after the whole market with one offer. It designs a marketing program for a product with a superior image that can be sold to the broad- est number of buyers via mass distribution and mass communications. Undifferentiated marketing is appropriate when all consumers have roughly the same preferences and the market shows no natural segments. Henry Ford epitomized this strategy when he offered the Model-T Ford in one color, black. The argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. The narrow product line keeps down the costs of research and development, production, inventory, transportation, marketing research, advertising, and product management. The undifferentiated communication program also reduces costs. However, many critics point to the increased splintering of the market and the prolifera- tion of marketing channels and communication, which make it difficult and increasingly expensive to reach a mass audience. When different groups of consumers have different needs and wants, marketers can define mul- tiple segments. The company can often better design, price, disclose, and deliver the product or service and also fine-tune the marketing program and activities to better counter competitors’ marketing. In targeted marketing, the firm sells different products to all the different segments of the market. Cosmetics firm Estée Lauder markets brands that appeal to women (and men) of different tastes: The flagship brand, the original Estée Lauder, appeals to older consumers; Clinique and M∙A∙C cater to young women; Aveda to aromatherapy enthusiasts; and Origins to eco-conscious consumers who want cosmetics made from natural ingredients.3 The ultimate level of targeting is the one-to-one approach in which each market segment comprises a single customer.4 As companies have grown proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories have been designed more flexibly, they have increased their ability to individualize market offerings, messages, and media. Consumers can buy customized jeans, cowboy boots, and bicycles that cost thousands of dollars. Peter Wagner started Wagner Custom Skis in Telluride, Colorado, in 2006. His company now makes about 1,000 snowboards and pairs of skis a year, with prices that start at $1,750. Each ski or snowboard is unique and precisely fitted to the preferences and riding style of its owner. Strategies such as using NASA-like materials and making adjustments of thousands of an inch send a strong performance message, matched by the attractive aesthetic of the skis.5 One-to-one marketing is not for every company. It works best for firms that normally collect a great deal of individual customer information and carry a lot of products that can be cross-sold, need periodic replacement or upgrading, and offer high value. For others, the required investment in infor- mation collection, hardware, and software may exceed the payout. The cost of goods is raised beyond what the customer is willing to pay. Mass customization is the ability of a company to meet each customer’s requirements—to pre- pare on a mass basis individually designed products, services, programs, and communications.6 MINI Cooper’s online “configurator” enables prospective buyers to virtually select and try out many options for a new MINI. Coke’s Freestyle vending machine allows users to choose from more than 100 Coke brands or custom flavors, and even to create their own. Services are also a natural setting for customized marketing. Airlines, hotels, and rental car agen- cies are attempting to offer more individualized experiences. Even political candidates are embracing customized marketing. On Facebook, politicians can find an individual’s preferences by observing the groups or causes he or she joins. Then, using Facebook’s ad platform, the campaign team can test hundreds of ad messages designed to reflect the theme of these other interests. Hikers may get an environmentally themed message; members of particular religious groups may get a Christian-themed message. STRATEGIC AND TACTICAL TARGETING Targeting can be strategic or tactical based on the criteria a company uses to zero in on target custom- ers. Strategic targeting focuses on customers whose needs the company can fulfill by ensuring that its offerings are customized to their needs. Tactical targeting identifies the ways in which the company can reach these strategically important customers. Strategic and tactical targeting are not mutually exclusive; they are two integrally related components of the process of identifying target customers. M06_KOTL4813_16_GE_C06.indd 146 15/09/2021 14:33  CHAPTER 6 | Identifying Market Segments and Target Customers 147 Hallmark’s worldwide line of greeting cards—which range from the sentimental, humorous, and musical to online and interactive greetings—are aimed at specific market segments that include new mothers, parents, grandparents, and customers of different ethnic backgrounds, as Source: store_signs/Alamy Stock Photo well those who want to benefit charities such as UNICEF. card business. In addition to popular sub-branded card lines, such as the humorous Shoebox Greetings, Hallmark has introduced lines targeting specific market segments. Fresh Ink targets 18- to 39-year-old women. The Simple Motherhood line targets moms, with designs featuring fresh photography and simple, relatable sentiments. Hallmark’s four ethnic lines— Eight Bamboo, Golden Thread, Uplifted and Love Ya Mucho—target Chinese, Indian, African American and Latino consumers, respectively. Specific greeting cards also benefit charities such as (PRODUCT) RED™, UNICEF, and the Susan G. Komen Race for the Cure. Hallmark has also embraced technology. Musical greeting cards incorporate sound clips from popular movies, TV shows, and songs. Hallmark recently introduced its Magic Prints line of interactive products, with “magic mitt” technology that lets kids leave an imprint of their hand on an insert in a card or other keepsake for parents or grandparents. Online, Hallmark offers e-cards as well as personalized printed greeting cards that it mails for consumers. For business needs, Hallmark Business Expressions offers personalized corporate holiday cards and greeting cards for all occasions and events.14 When targeting multiple customer segments, some companies make the mistake of not aligning the attributes of their offerings with the distinct value sought by target customers in each segment. This often occurs when companies create offerings based on their product development capability and production capacity, instead of devising offerings designed to satisfy explicit customer needs. Such an approach is problematic, because unless the company is clear on how its individual offerings will address the needs of each segment targeted, the offerings may end up competing for the same customer segment(s) while the needs of other segments are ignored. In addition, target customers might be confused and find it difficult to distinguish among multiple offerings that lack the ability to deliver the specific value they seek. Thus, it is essential to the success of the company’s multi-segment targeting strategy to tailor the attributes of the company’s offerings to the needs of each customer segment targeted. Segmenting Consumer Markets Market segmentation divides a market into well-defined slices. A market segment consists of a group of consumers who share a similar set of needs and/or profile characteristics. Common types of segmentation include demographic, geographic, behavioral, and psychographic. We discuss these types of segmentation in the following sections. M06_KOTL4813_16_GE_C06.indd 154 15/09/2021 14:33  CHAPTER 6 | Identifying Market Segments and Target Customers 155 DEMOGRAPHIC SEGMENTATION One reason variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class are so popular with marketers is that these vari- ables are often associated with consumer needs and wants. Another is that they’re easy to measure. Even when we describe the target market in non-demographic terms (say, by personality type), we may need to link back to demographic characteristics in order to estimate the size of the market and the media we should use to reach it efficiently. Here’s how marketers have used certain demographic variables to segment markets. Age. Marketers often group customers based on their age into different generations. For example, one of the commonly used demographic factors is that of generation, such as the Silent Generation (1925–1945); Baby Boomers (1946–1964); Generation X (1965–1981); Generation Y, also referred to as Millennials (1982–2000); and Generation Z (2001–present). Each generation is profoundly influenced by the times in which it grows up—the music, movies, politics, and defining events of that period. Members share the same major cultural, political, and economic experiences and often have similar outlooks and values. Marketers may choose to advertise to a cohort by using the icons and images prominent in its experiences. They can also try to develop products and services that uniquely meet the particular interests or needs of a generational target. For example, nutrition supplement companies develop different products based on consumers’ age. Centrum—a brand of multivitamins produced by Pfizer—markets two different types of vitamins: Centrum Adults that targets adult men and women and Centrum Silver Adults that is designed for adults 50+. Centrum Silver Adults contains multivitamins that are age adjusted with a broad spectrum of micronutrients that help support the health of older adults. Other age-specific products include diapers, baby foods, college loans, and retirement communities. Stage in the Life Cycle. People in the same part of the life cycle may still differ in their life stage. Life stage reflects a person’s major concern, such as going through a divorce, entering a sec- ond marriage, taking care of an older parent, deciding to cohabit with another person, and buying a new home. These life stages present opportunities for marketers who can help people cope with the accompanying decisions. For example, the wedding industry attracts marketers of a vast range of products and services. It’s no surprise that the average U.S. couple spends close to $40,000 on their wedding.15 Marketers know marriage often means that two sets of shopping habits and brand preferences must be blended into one. Procter & Gamble, Clorox, and Colgate-Palmolive include their products in “Newlywed Kits,” distributed to couples applying for a marriage license. Marketers pay a premium for newlywed name lists to assist their direct marketing because of the high expected return on their promotional efforts. But not everyone goes through that life stage at a certain time—or at all, for that matter. More than a quarter of all U.S. households now consist of only one person—a record high. It’s not surprising that this $1.9 trillion market is attracting interest from marketers: Lowe’s has run an ad featuring a single woman renovating her bathroom; De Beers sells a “right-hand ring” for unmarried women; and at the recently opened, ultra-hip Middle of Manhattan 63-floor tower, two-thirds of the occupants live alone in one-bedroom and studio rental apartments.16 Singles Day Singles Day is a popular Chinese holiday on which young people celebrate their pride in being single. The holiday was named Singles Day because its date, November 11 (11/11), consists of four “ones.” The holiday has become the largest offline and online shopping day in the world, with the Chinese e-commerce giants Alibaba and JD.com generating around $115 billion in sales for the duration of the sales event running from November 1 to midnight on November 12. Alibaba and other retailers and manufacturers have embraced the holiday as a means to reach single young adults and have launched a barrage of targeted promotions to persuade them to shop. Taobao, the world’s biggest e-commerce website (owned by Alibaba), even added a feature to its app to show how users’ spending that day ranked against that of other people in their area.17 Gender. Men and women have different attitudes and behave differently, based partly on genetic makeup and partly on socialization.18 Research shows that women have traditionally tended to be more communal minded and men more self-expressive and goal directed; women have tended to take in more of the data in their immediate environment, and men have tended to focus on the part of the environment that helps them achieve a goal. M06_KOTL4813_16_GE_C06.indd 155 15/09/2021 14:33  156 PART 3 | DEVELOPING A VIABLE MARKET STRATEGY Gender differences are shrinking in some other areas as men and women expand their roles. One Yahoo survey found that more than half of men identified themselves as the primary grocery shoppers in their households. Procter & Gamble now designs some ads with men in mind, such as ads for Gain and Tide laundry detergents, Febreze air freshener, and Swiffer sweepers. On the flip side, according to some studies, women in the United States and the United Kingdom make 75 percent of decisions about buying new homes and purchase 60 percent of new cars.19 Nevertheless, gender differentiation has long been applied in clothing, hairstyling, and cosmetics categories. Avon, for one, has built a $6 billion-plus business by selling beauty products to women. Gillette has found similar success with its Venus razor. More recently, however, a number of companies have begun to question the value of gender differentiation and eliminate gender traits from their products in response to consumers’ skepticism about the benefit of gender- Source: Roman Tiraspolsky/Alamy Stock Photo differentiated products. For example, Bic introduced Made For YOU, a line of genderless razors and grooming products, joining compa- nies like Non Gender Specific, Aēsop, and MALIN+GOETZ that offer gender-neutral skin care products.20 Venus Razor Gillette’s Venus razor has become the most successful women’s shaving line ever—holding more than 50 percent of the global women’s shaving market—as a result of insightful consumer research and extensive market testing of product design, packaging, and advertising. The razor was a marked departure from earlier designs, which had essentially >> Extensive consumer been colored or repackaged versions of men’s razors. Venus research and market was designed specifically to meet women’s needs. Extensive research identified unique shaving testing of a razor crafted needs for women, including a shaving surface that is nine times greater than the male face, as well to meet the unique shav- as shaving in a wet environment and across the curves of the female body. The resulting design ing needs of women included an oval shaped cartridge to better fit into tight areas like underarms and the bikini area resulted in Gillette’s Venus razor garnering and additional lubrication for better glide. Furthermore, after discovering that women change their more than 50 percent of grip on a razor about 30 times during each shaving session, Gillette designed the Venus razor with the global female shav- a wide, sculpted, rubberized handle offering superior grip and control. It also commissioned Harris ing market. Interactive (now Harris Insights & Analytics) to conduct an online study among more than 6,500 women in 13 countries that found seven of 10 wanted so-called goddess skin, defined as smooth (68 percent), healthy (66 percent), and soft (61 percent), leading to the introduction of the new Gillette Venus & Olay razor.21 Income. Income segmentation is a long-standing practice in such categories as automobiles, clothing, cosmetics, financial services, and travel. However, income does not always predict the best customers for a given product. Despite the high price of early color television sets, blue-collar workers were among the first to purchase them; it was cheaper for them to buy a television than go to movies and restaurants. Many marketers are deliberately going after lower-income groups, in some cases discovering fewer competitive pressures or greater consumer loyalty. Procter & Gamble launched two discount-priced brand extensions in 2005—Bounty Basic and Charmin Basic—which have met with some success. Other marketers are finding success with premium-priced products. When Whirlpool launched its pricey Duet washer line, sales were double their forecasts in a weak economy, thanks primarily to middle-class shoppers who traded up. Increasingly, companies are finding their markets are hourglass-shaped, as middle-market U.S. consumers migrate toward both discount and premium products. Companies that miss out on this new market risk being “trapped in the middle” and seeing their market share steadily decline. After recog- nizing that its channel strategy emphasized retailers like Sears selling primarily to the middle class, Levi-Strauss introduced premium lines such as Levi’s Made & Crafted to upscale retailers Bloomingda- les and Saks Fifth Avenue, and the less-expensive Signature by Levi Strauss & Co. line to mass market retailers Walmart and Target. M06_KOTL4813_16_GE_C06.indd 156 15/09/2021 14:33  CHAPTER 6 | Identifying Market Segments and Target Customers 157 Race and Culture. Multicultural marketing reflects awareness that different ethnic and cultural segments have sufficiently different needs and wants to require targeted marketing activities and that a mass market approach is not refined enough for the diversity of the marketplace. Consider that McDon- ald’s generates a significant share of its U.S. revenues with ethnic minorities. A recent survey showed that 25 percent of African American respondents, 24 percent of respondents of Hispanic origin, and 20 percent of Asian American respondents stated that McDonald’s is the fast-food restaurant they eat at most often. The company’s highly successful “I’m Lovin’ It” campaign was rooted in hip-hop culture but has had an appeal that transcended race and ethnicity.22 The Hispanic American, African American, and Asian American markets and their numerous submarkets are growing at two to three times the rate of non-multicultural populations, and their buy- ing power is expanding. Multicultural consumers also vary in whether they are first, second, or a later generation and whether they are immigrants or were born and raised in the United States. Accordingly, marketers need to factor the norms, language nuances, buying habits, and business practices of multi- cultural markets into the initial formulation of their marketing strategy rather than adding these as an afterthought. All this diversity also has implications for marketing research; it takes careful sampling to adequately profile target markets. Multicultural marketing can require different marketing messages, media, channels, and so on. Specialized media exist to reach virtually any cultural segment or minority group, although some companies have struggled to provide financial and management support for fully realized programs. Fortunately, as countries become more culturally diverse, many marketing campaigns targeting a spe- cific cultural group can spill over and positively influence others. To launch its new Explorer model, Ford developed a TV ad featuring comedian Kevin Hart that initially targeted the African American market, but it also became one of the key ads for the general market launch.23 GEOGRAPHIC SEGMENTATION Geographic segmentation divides the market into geographic units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can operate in all areas while heeding local variations. In that way, it can tailor marketing programs to the needs and wants of local customer groups in trading areas and neighborhoods, and it can even cater to the needs of individual customers. Going online to reach customers in a particular geographic location can open a host of local opportunities, as Yelp has found out. Yelp Founded in 2004, Yelp.com wants to “connect people with great local businesses” by targeting consumers who seek or want to share reviews of local businesses. Almost two-thirds of the website’s millions of vetted online reviews are for restaurants and retailers. Yelp was launched in San Francisco, where monthly parties with preferred users evolved into a formal program, Yelp Elite, now used to launch the service in new cities. The company’s mobile app allows it to bypass the internet and connect with consumers directly; more than half of searches on the site now come from its mobile platform. Yelp generates revenue by selling designated Yelp Ads to local merchants via hundreds of salespeople. The local advertising business is massive, with digital ads overtaking traditional ads in local markets. Local businesses also benefit from Yelp: Several research studies have demonstrated the potential revenue payback from having reviews of their businesses on the site.24 Regional differences matter. Consider the following facts: People in Salt Lake City (and Utah) eat the most Jell-O; Long Beach, CA, residents eat the most ice cream; and New York City dwellers buy the most country music CDs.25 Regional marketing increasingly means marketing right down to a specific zip code. Many companies use mapping software to pinpoint the geographic locations of their customers, learning, say, that most customers are within a 10-mile radius of the store and are further concentrated within certain zip+4 areas. Some approaches combine geographic data with demographic data to yield even richer descrip- tions of consumers and neighborhoods. Market research and data analytics company Claritas has developed a geoclustering approach called PRIZM Perimeter that defines households with 68 demo- graphically and behaviorally distinct segments reflecting consumers’ likes, dislikes, lifestyles, and purchase behaviors. The 68 segments are defined according to socioeconomic rank, including charac- teristics such as income, education, occupation, home value, urbanization, age, socioeconomic rank, and presence of children at home.26 The inhabitants in a segment are presumed to lead similar lives, drive similar cars, have similar jobs, and read similar magazines. M06_KOTL4813_16_GE_C06.indd 157 15/09/2021 14:33  158 PART 3 | DEVELOPING A VIABLE MARKET STRATEGY >> Local advertising allows Yelp.com or the Yelp app to share millions of reviews from customers who want to relate their experiences with local businesses with those who are looking for specific services and products such as restaurants and retailers. Source: bigtunaonline/Alamy Stock Photo Geoclustering helps capture the increasing diversity of the U.S. population. Geoclustering seg- mentations such as PRIZM have been used to answer a variety of questions: Which neighborhoods or zip codes contain our most valuable customers? How deeply have we already penetrated these seg- ments? Which distribution channels and promotional media work best in reaching our target clusters in each area? By mapping the densest areas, the retailer can rely on customer cloning, assuming the best prospects live where most of the customers already come from. BEHAVIORAL SEGMENTATION In behavioral segmentation, marketers divide buyers into groups on the basis of their actions. Many marketers believe variables related to users or their usage—user status, usage rate, buyer-readiness stage, loyalty status, and occasions—are good starting points for constructing market segments. User status. Based on their prior experience with the company’s offering, consumers can be clas- sified into nonusers, potential users, first-time users, regular users, and ex-users. Understanding customers’ experience with the company is important because different types of experience tend to require different marketing strategies. Included in the potential-user group are consumers who will become users in connection with some life stage or event; for example, mothers-to-be are potential users who will turn into heavy users. The key to attracting potential users, or possibly even nonusers, is understanding the reasons why they are not using. Do they have deeply held attitudes, beliefs, or behaviors? Or do they just lack knowledge of the product or brand benefits? Usage rate. We can segment markets into light, medium, and heavy product users. Heavy users often are a small slice but account for a high percentage of total consumption. Heavy beer drinkers account for 87 percent of beer consumption—almost seven times as much as light drinkers. Many marketers would rather attract one heavy user than several light users. A potential problem, how- ever, is that heavy users often are either extremely loyal to one brand or never loyal to any brand and always looking for the lowest price. They may also have less capacity to expand their purchasing and consumption. Light users, on the other hand, may be more responsive to new marketing appeals.27 Buyer-readiness stage. Some people are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. To help char- acterize how many people are at different stages and how well they have converted people from one stage to another, marketers break the market into buyer-readiness stages. The proportions of consumers at different stages have a significant effect on the design of a marketing program. Suppose a health agency wants to encourage women to have an annual Pap test to detect cervi- cal cancer. At the beginning, most women may be unaware of the Pap test. The marketing effort should launch awareness-building advertising using a simple message. Later, the advertising M06_KOTL4813_16_GE_C06.indd 158 15/09/2021 14:33  CHAPTER 6 | Identifying Market Segments and Target Customers 159 should dramatize the benefits of the Pap test and the risks of not getting it. A special offer of a free health examination might motivate women to actually sign up for the test. Loyalty status. Based on brand loyalty status, consumers can be divided into four main seg- ments: hard-core loyal consumers who buy only one brand all the time, split-loyal consumers who are loyal to two or three brands, shifting-loyalty consumers who move from one brand to another, and switchers who show no loyalty to any brand. Accordingly, a company might focus its efforts on (1) retaining loyal customers and increasing their usage rate and (2) increasing the company’s share of purchases among the segments who are less loyal. Occasions. Consumers buy a company’s products and services for different reasons. We can distinguish buyers according to the occasions when they develop a need, purchase a product, or use an offering. For example, air travel is triggered by occasions related to business, vacation, or family. Flowers can be purchased as a gift or for decorating one’s own home. Wine can be used for drinking or for cooking. Understanding usage occasions is important because different occasions are associated with different needs, and the value that a product or service can create for customers is likely to vary across occasions. PSYCHOGRAPHIC SEGMENTATION In psychographic segmentation, buyers are divided into groups on the basis of psychological traits, lifestyle, or values. Psychographic segmentation is important because demographic, geographic, and behavioral characteristics of consumers do not always accurately reflect their underlying needs. For example, people within the same demographic group can exhibit very different psychographic pro- files: Some older consumers may be psychologically young, as Honda’s experience shows. Honda Element To target 21-year-olds with its boxy Element, which company officials described as a “dorm room on wheels,” Honda ran ads depicting sexy college kids partying near the car at a beach. So many Baby Boomers were attracted to the ads, however, that the average age of Element buyers turned out to be 42! With Baby Boomers seeking to stay young, Honda decided the lines between age groups were getting blurred. After sales fizzled, Honda decided to discontinue sales of the Element. When it was ready to launch a new subcompact called the Fit, the firm deliberately targeted Gen Y buyers as well as their empty-nest parents.28 One of the oldest marketing classification systems based on psychographic measurements is the VALS framework. VALS is based on people’s psychological traits and classifies U.S. adults into eight primary groups in terms of their responses to a questionnaire featuring four demographic and 35 ­attitudinal questions.29 The main dimensions of the VALS segmentation framework are consumer