Segments are then offered arrays of products and services according to their identifiable needs. Firms targeting identifiable segments can, theoretically, provide consumers with more precise satisfaction of their varying wants.
In the business-to-consumer market, several variables can be used to define groups of consumers, including demographics, psychographics, geography, behavioural aspects and profitability. These provide a basis upon which to create segment profiles that can be targeted with customised value propositions (i.e. a marketing mix).
Why generational segments are important
The key point, is that generational segments are too generalised to be the sole means by which a firm segments a market. The reason is that they were never meant to offer firms a simple one-size-fits-all option. Marketing theory taught from high school business studies and beyond does not espouse that generational cohorts and market segmentation are interchangeable concepts. Rather, the generations (demographic segmentation) can be seen as one possible first step in segmenting consumer markets.
Not everyone within a generation acts, thinks and spends in the same way. That the media perhaps indivertibly propagates the idea that generations are all the same, belies the fact that clever marketers use generational labels - but know their limitations.
Why some generalisation is necessary
It is not that generational segments are the end-game in the segmentation process; rather, they are a logical first step. First, we generalise about a cohort, and then prepare for variety with a group.
If marketers were unable to generalise about a population, they would need to customise products based on the whims of individual consumers. For all but the most generic products that have mass appeal, ‘slicing' the generational segments is not only common practice, it is common sense. Efficient and sustainable manufacturing demands some generalisation and uniformity.
Being customer- or market-oriented does not mean you build everything individual consumers demand. Rather, you generalise by segmenting consumers into groups with identifiable (general) tastes or characteristics. Beginning, say, with baby boomers as a demographic macro-segment, you are then able to focus on, and target, various sub-sets within this group.
Segmenting the baby boomer market, for example, begins with what they largely have in common (i.e. age and life stage), and is followed by ‘slicing' into income, occupation, lifestyle and location characteristics.
Regarding generational segmentation, either you concede that a firm must generalise by supplying a limited range of products based on its manufacturing constraints, or you must treat an entire population as separate, unique individuals.
Customer relationship management (CRM) technology, despite its promise of utopian personalised customer relationships between buyers and sellers, has not yet reached the point where individuals are ‘wired in' and their every whim catered for. Generalisation is a priori concept - it is self-evident. We all accept that if we choose to buy a particular brand of car, we must choose from a limited palette of colours.
It is reasonable to assume that the car manufacturer must generalise about our colour tastes - they have no choice but to group us. A modern society groups people every day and in every way: from the provision of a bus targeting a geographic group, to a school class targeting a group of learners based on their age or subject choice. We are all individuals, but we are all constantly moving in and out of groupings, whether they be called cohorts, segments or target markets.
Figure 1 - Generational segments as a first stage in segmenting consumer mass markets
Do you begin with generational segments?
Effective marketing strategies are not based on the popularist view that markets are segmented solely by generations. Rather, demographic data is usually the foundation upon which more complex pictures of target markets are developed.
While there is no single way you should segment consumer markets, doing so based on demographics (incorporating the generational segments) is perhaps the most common starting point. The main reason is that demographics, unlike psychographics (i.e. values, attitudes, personalities and lifestyles), are easy to measure. As we have demonstrated (see Figure 1), the numbers don't lie - the generations are a demographic reality, and are the most self-evident divisions in our society. But in a marketing sense, this is only part of the story.
In order to attract customers, each competing firm must develop a distinctive competitive position. This can only be achieved by identifying (and thus grouping) consumers who have unfulfilled needs.
Market segmentation is both a creative and an individual process - if it was not, all firms using the same segmentation strategy would be unable to differentiate their products. Generational segments might be an endless fascinating sociological topic, but they should not be a firm's default segmentation strategy.
By way of illustration, take the market for urban transportation. First, consider an urban population and its subsequent generational divisions. Then, as we have done here, focus on one segment, such as Generation X.
Through our research we have identified and labelled the following four segments that exist within the urban, suburban Generation X population (Figure 2). Yes, that's right, there is variety within Generation X - they are not all the same!
Figure 2 - Generation X urban-suburban segments
Creative Class: This segment is largely made up of tertiary-educated, higher income, semi-professional/professional people. They are mainly singles and couples living in the inner-city urban centres in the major capital cities. They often own their residence but may rent for lifestyle and investment purposes, and choose to live in the city/urban environment for café/cultural/lifestyle reasons.
Thrifty City: These are high-school educated, lower income, unskilled/semi-skilled people, and include singles, couples and some with children. They reside in lower cost rental or supported accommodation, and live in the cities' medium/high-density housing areas for affordability reasons.
Suburban Style: This segment is higher educated, higher income, semi-professional, professional business-owning/entreprenurial Generation Xers. They are mainly couples and families living in suburbs in the major capital cities, live in 'aspirational housing' homes, and have chosen it for the lifestyle provisions: schools, children's needs and so on.
Generation Tradition: These secondary-educated, lower unskilled or semi-skilled people, in couples and families, who live in the outer and mortgage belt suburbs surrounding major capital cities. They live in these suburbs for affordability and for the family benefits; for example, housing with a backyard.
Note: Generation X were examined in this case study because they, more than the younger generations, can be observed to be living outside the parental home. Their geographic location and migration patterns can be readily observed in the Australian Bureau of Statistics, housing and mortgage consumption data.
Each of these segments can be further segmented - say, by their behaviour in relation to transportation preferences. As is highlighted in the following model (Figure 3), we have suggested that the Generation X Suburban Stylers might exhibit a propensity to favour mid-sized four-wheel drive vehicles.
This segment can then be assigned a more detailed profile, relative to a specific value proposition. The target market based on this segmentation strategy could be defined as:
Full-nest, female, Generation X Suburban Stylers seeking an attractive, versatile yet smooth riding mid-sized 4x4.
Figure 3 - Generational segmentation model
