Mass marketing and market segmentation
position are two marketing choices that retailer can make. Wal-Mart Stores, Inc., the world's largest
retailer, has been working on a new strategy to make its U.S.
stores more relevant to the position for specific demographic groups. Each
Wal-Mart store would arrange its merchandise to fit one of six demographic groups:
African-Americans, the affluent, empty-nesters, Hispanics, suburbanites, and
rural residents.
Wal-Mart Stores’ strategy involves arrangement
of resources in key geographical areas that are likely to yield maximum returns
for investment. Before sound strategies
can be developed, comprehensive research must be conducted. The research
should include consumers’ need and buyer
behavior. Wal-Mart needs research instruments to
assess the segmentation positions. The accuracy and reliability of survey instruments should be under control, the
associated segments must be defined, and the specific characteristics of each
segment need to be evaluated. Marketing
professionals usually use segmentation strategies such as demographics,
psychographics (VALS survey), and geographic data to identify specific
characteristics unique to each market segment. Then, the organization can
target its specific activities in hopes of affecting buyer behavior.
Demographic segmentation
identifies those characteristics that are identifiable and measurable in the population. These characteristics
include age, gender, marital status, income, occupation and education, which
can provide the basis for this particular segmentation. A great deal of this
type of information can be obtained from government reports. Psychographic research investigates the
needs, motivations, personality, perceptions, level of involvement, learning,
and attitudes. Through geographic segmentation, the market is divided by
location. The idea is that people who live in the same area share similar needs
and wants. But other factors may also affect the way people think. Surveys are probably
the most commonly used methods of gathering
information for segmentation research. Questionnaire development is the
most crucial part of the survey design process. Survey questions must match research objectives. Survey
questions vary according to what type of information to collect from the
respondents. Open-ended and closed-ended are two types questions used in a survey. An open-end question allows participants to respond
in any way they choose. Close–end questions include multiple-choice, likert-scale, categorical,
numerical, and ordinal[,but limited in the amount of
time and of in-depth
questions that can be accomplished. Survey through mail or internet is cost
effective but it is difficult to get meaningfully opinions and the return rate
could be very low. Observation with technology can generate cost effective and
reliable data. At cash registers, the purchasing habits of consumers can be
automatically monitored and summarized with the Bar Code Scanners. Wal-Mart
also stores the Bar code scanned information for a long time, which can be
easily retrieved to be used for segmentation study. But data from the canner
can not provide personal in-depth information. A good
research strategy should have multiple
ways to obtain data.
After
data is collected, Mal-Wart can start to analyze
it. Cluster
analysis is one of the tools that can be used to resolve classification
problems, which is to sort cases into groups, or clusters, so that the degree
of association is strong between members of the same cluster and weak between
members of different clusters. However, many variables can affect segmentation
research results, each segment in different location should have its own
research conducted for strategy development. .
Accuracy
and reliability
Accuracy
and reliability are essential for the planning and implementation of marketing
strategy. Data from observation with technology such
as bar code scanners at cash registers may be more accurate and with higher
reliability than that of subjective interviews. The use of a sample
relative to an entire population is often necessary for practical reasons. Though some instruments have fewer errors than the others, error still exists and
must be under control. Measurement error comes primarily from
error in the source data, and secondarily from the estimating procedures that
utilize the source data. Error also arises because much of the source data do
not fully meet the requirements. Test-retest, and
internal consistency methods, equivalent form can be used to check the
reliability.
Market segmentation
and specific characteristics "Segmentation,
targeting, and positioning are marketing tools used by a company to gain competitive
advantage in the market" (Carnegie Mellon University, 2003). Market segmenting is dividing the market
into groups of individual markets with similar wants or needs. The process of
segmentation is to identify groups of similar customers and potential
customers, to prioritize the groups to address, to understand their behavior,
and to respond with appropriate marketing strategies that satisfy different
preferences of segment. “This is
precisely why some marketing experts have described segmentation as a strategy
of dividing the markets for conquering them.” (Rudra, 2007)
Wal-Mart had indentified six demographic groups including
African-Americans, the affluent, empty-nesters, Hispanics, suburbanites, and
rural residents. Segmentation is all about tailoring and customizing product
assortment, shelf placement, pricing, services, trade promotions, even store
layout and design to appeal to and satisfy the needs, demands, and expectations
of consumers in a store's trading area (Copper, 1997).
African-Americans
The African-American
population is a fast-growing, relatively untapped wealth, which presents
numerous opportunities. African-American buying power
is expected to reach $1 trillion by 2010. Approximately 64 percent of African
Americans versus 51 percent of Caucasians spend more on products they perceive
as “the best.” However, about 40% of African-American couples live in older
homes and those couples usually have high school education, lots of children, work entry-level
service jobs, and live in apartment-filled neighborhoods.
The affluence: About 5 million
millionaires and 267 billionaires live in the United
States. Affluent consumers find price highly important because
most people get rich by carefully handling their money, and while most will pay
extra for convenience and to get what they want, eight out of 10 enjoy their
purchases more if they get a bargain (RoperASW, 2008). Many affluent consumers are early
adopters of luxury products from flat-panel TVs and home theaters to digital
cameras and professional kitchen appliances. They like to travel and redecorate.
Affluent consumers find word-of-mouth and referrals from friends and colleagues
extremely important when making buying decisions. Affluent adults are also
heavy magazine readers. (MRI 2002 data)
Empty Nesters
Empty Nesters are relatively wealthy and
more inclined to spend their money on self-rewarding behavior. They develop new
purchasing habits and new consumer packaged goods (CPG) needs as they adjust to
their new freedom. Age defines Empty Nesters' spending patterns. Early Empty
Nesters (aged between 50 and 64) have high disposable incomes and spend
lavishly on rewarding themselves. Late Empty Nesters (aged 65 years and over)
have more limited budgets, leading to a greater emphasis on value in their CPG
purchases, with high spending reserved for special occasions.
Hispanics
Hispanic people are more family-oriented. They are the fastest growing
ethnic segment. The US Consumer Expenditure
Survey cites that Hispanics cook dinner at home 5.6 times per week. Hispanics spend
more for at-home groceries than any other population group. The frequent
grocery purchases include meats, poultry, fresh produce, eggs and milk. Those Hispanics
who have immigrated to the U.S. from countries
with economic challenge usually operate on a cash basis. So when others are
squeezed by reductions in credit, interest-rate increases and dropping prices,
many Hispanics have cash available. But differences do exist in language,
culture and traditions among Hispanics from different countries.
Suburbanites
Suburbanites have the nation's second-wealthiest lifestyle. Suburbanites
are characterized
by married couples with children, college degrees, and a significant percentage
of Asian Americans, business executives, managers and professionals. They like to decorate their homes with
multiple computers, large screen TV sets, and an impressive collection of
wines. Suburbanites enjoy cultural activities from reading
books to attending theater. Suburbanites tend to be kid-obsessed, with
heavy purchases of computers, action figures, dolls, board games, bicycles, and
camping equipment.
Rural residents
Rural Residents like to play baseball, basketball and volleyball, besides going
fishing, hunting, and horseback riding. To entertain their sprawling families,
they buy virtually every piece of sporting equipment on the market. Rural Residents like to stay home and watch TV at night along with cooking,
sewing, camping and boating. Rural residents tend to living in
older, modest-sized homes.
Conclusion
Wal-Mart Stores, Inc., the world's largest retailer, has been
working on a new strategy to make its U.S.
stores more relevant to the position for specific demographic groups. Wal-Mart
can use segmentation strategies such as demographics, psychographics (VALS
survey), and geographic data to identify specific characteristics unique to
each market segment. Survey is probably
the most commonly used method of gathering information for segmentation
research. Questionnaire development is the most crucial part of survey design
process. Open-ended and Closed-ended are
two types questions used in a survey. Observation with technology can generate
cost effective and reliable data. But data from the canner can not provide
personal in-depth information. A good research should have multiple ways to
obtain data.
Accuracy and reliability are essential for the
planning and implementation of marketing strategy. Though some instrument has less error than the others, error still exists and must be under control. Test-retest, equivalent
form, and internal consistency methods can be used to check the reliability.
Improved
segmentation can lead to significantly improved marketing
effectiveness. Wal-Mart had indentified six demographic groups including African-Americans, the
affluent, empty-nesters, Hispanics, suburbanites, and rural residents. The
specific characteristics unique to each market segment have been identified.
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