The claim has been made that segmentation is little more than stereotyping and is of limited value to the marketer. This claim is not valid. Segmentation and stereotyping are fundamentally different. Segmentation, when conducted in conformance with accepted concepts and techniques, can be a valuable component of a marketing programme.
An exploration of literature on selected topics in market segmentation and stereotyping will furnish the conceptual foundation for analysing the similarities and differences between the two terms.
Skinner (1994, 184) defines market segmentation as the process of dividing a total market into groups of consumers who have relatively similar product needs and a market segment as a group of individuals, groups, or organizations that share one or more characteristics. Similar definitions have been proposed in Oxford University’s A Dictionary of Business (1996), which adds that each segment must be a homogeneous group that is reachable by a specific marketing approach; by Michman (1991) and Greco and Michman (1995), who add that a market segment is identified as a group of consumers with relatively similar characteristics to each other, characteristics that differ from those possessed by any other group of consumers; and by Proctor (2000), who separates markets into consumer markets and industrial markets. These definitions are based on the existence of a heterogeneous market that consists of smaller homogenous markets (Michman 1991). Different market segments may have dissimilar needs, may need variations of the same product, may pay dissimilar prices, may make their purchases in different places, and may receive communications from different media sources (Proctor 2000). The Manila Bulletin (2004) suggests defining the market segment as finely as possible to better meet consumer needs.
As early as 1911, the need to segment markets was recognised. Elmo Calkins, in The Business of Advertising, recognised the need for market segmentation in his suggestion that periodicals target specific audiences (Haugtvedt 2004). Even during the heyday of mass marketing, Wendell Smith extolled the benefits of recognising heterogeneous demand and segmenting markets, coining the term segmentation in his 1956 Journal of Marketing article (Michman 1991; Swenson 1990; Lazer 1971). In a 1964 article in the Harvard Business Review, Daniel Yankelovich proposed that segmentation should not be restricted to demographics alone and suggested that consumer behaviour should also be considered (Michman 1991). Today, with mass markets having been separated into smaller, tightly-focused segments (Levine et al. 2000), market segmentation has become a sophisticated science (Shrum 2004).
Marketers use one or more segmentation variables - individual, group, or organisational characteristics - to divide a market into segments. For consumer markets, Skinner (1994) identifies four classifications, each containing segmentation variables: demographics (e.g. age, sex, income, ethnicity); geographic (e.g. climate, terrain population density); psychographic (e.g. personality, lifestyle); and product-related (e.g. usage, application, benefits). Proctor (2000) and Oxford’s A Dictionary of Business (1996)include a geodemographic segment, which merges geographic and demographic categories. Morton (1998) identifies the classifications as demographics, psychographics, and sociographics. The sociographics category, according to Morton, includes variables such as organisational memberships and other sociological factors. Swenson (1990) adds household size, education, buying behaviour, self-concept, emotional needs, activities, and interests. Finally, Michman (1991) adds social class to the list of segmentation variables.
The use of multiple segmentation variables is preferred over the use of a single variable (Skinner 1994). Lazer (1986, cited in Coupland and Nussbaum 2004) suggests that a market segment has many dimensions. Proctor (2000) urges marketers to use more than one segmentation variable to help in focusing on a tighter target market to increase marketing efficiency and effectiveness. For instance, a study of the elderly market by Bone (1991, cited in Coupland and Nussbaum 2004) revealed that, in addition to age, the factors of discretionary income, health, level of activity, discretionary time, and response to others were critical segmentation variables. Bhat (1996, cited in Haugtvedt et al. 2004) contends that the use of a descriptor as a basis for segmentation can be considered to be stereotyping because it assumes that everyone who fits that single descriptor acts similarly or the same along other dimensions of behaviour.
Michman (1994; 1983) cites the benefits of market segmentation as an improved ability to meet consumer needs, more precise targeting of potential consumers, and more focused communication to the consumer segment. He also cites the limitations as high costs associated with segmentation activity and growing diversity in markets which he attributes to dynamically changing lifestyles. Swenson (1990) attributes the latter phenomenon to society’s celebration of ethnic and social diversity which has replaced the melting pot philosophy underlying mass marketing. Choudhury and Cui (2003) caution marketers to avoid using segmentation to effectively deny access to consumers based on certain characteristics such as ethnicity, age, or gender.
Robbins (1998, 99) defines stereotyping as judging someone on the basis of one’s perception of the group to which that person belongs. Oxford’s A Dictionary of Business (1996, 477) describes stereotyping as making assumptions about individuals or groups based on information (which may or may not be valid) obtained before the individual or group has been encountered, adding that the assumption is made that all of the people in a certain group possess the same (or similar) characteristics in all aspects of their values, attitudes, and behaviours. Mcgarty and colleagues (2002) cite three principles of stereotyping: (1) it provides explanations; (2) it serves as an energy-saving device; and (3) it involves shared beliefs. Jussim and colleagues (1995) write that the beliefs which underlie stereotyping may be either positive or negative and either accurate or inaccurate. Gibson and colleagues (1997, 99) define a stereotype as an overgeneralized, oversimplified, and self-perpetuating belief about people’s personal characteristics.
Stereotyping serves an essential human function in that it helps to simplify an otherwise complex world (Robbins 1998) for the perceiver (Bodenhausen et al. 1994ab; Macrae 1994, cited in Hilton and Von Hippel 1996). Dávila (2001) stresses that the categorising, ordering, and simplifying at the centre of stereotyping are necessary to interaction and communication because they restrict the range of interpretations and facilitate resulting evaluations. In stereotyping, a person codes others, including their behaviour, into a few, simple cognitive classifications to simplify what the person needs to know (Cohen 1981; Wyer and Srull 1981; Cantor and Mischel 1979, cited in Moore and Thorson 1996).
Stereotyping creates a problem when one individual inaccurately stereotypes another (Gibson et al. 1997; Judd and Park 1993, cited in Robbins 1998). Stereotyping, by reducing human complexity to a small number of conventions, promotes social hierarchies (Hall 1997; Dyer 1993, cited in Dávila 2001). Shrum (2004) suggests that stereotyping reduces exposure to other characteristics of an individual that do not fit within the description of the stereotype. Levine and colleagues (2000) write that stereotypes, whilst having some basis in reality, are lousy tools with which to frame critical judgements. A stereotype is a set of beliefs that is incorrectly learned, overgeneralized, factually incorrect, or rigid (Ashmore and Del Boca 1981, 16, cited in Olson and Zanna 1994).
With a conceptual foundation firmly established, market segmentation and stereotyping may be compared and contrasted to identify similarities and differences. Market segmentation, specifically consumer segmentation, and stereotyping are both methods for classifying people who share similar characteristics. In segmentation and stereotyping certain assumptions are made about individuals before the individuals are encountered. This is the point where the similarity between the two terms ends.
Stereotyping, which involves the use of a few, simple cognitive classifications, assumes that everyone in a particular group classified by a specific characteristic shares the same or similar other characteristics; market segmentation considers individuals to be multidimensional in nature, possessing a wide variety of other characteristics. For instance, in stereotyping an elderly person, one might consider that all people over 60 years of age are sickly, poor, and inactive whereas market segmentation would recognise that some of these elderly individuals are very healthy, others are quite affluent, and yet others enjoy athletics. The large number of segmentation variables would indicate that one stereotyped group might translate into many potential market segments. The advice of the several experts cited suggested that multiple segmentation variables should be used in segmenting a market. Bhat’s statement that use of a (single) descriptor as a basis for segmentation can be considered to be stereotyping points to an essential difference between the two terms.
The purpose of stereotyping is energy savings whilst the purpose of market segmentation was shown to be an improved ability to meet consumer needs, more precise targeting of potential consumers, and more focused consumer communications. Whereas stereotypes are lousy tools with which to frame critical judgements, according to Levine, market segments are widely used in making critical business decisions, the value having been established almost a century ago. Contrasted to saving energy, which is the purpose of stereotyping, segmentation is quite costly in terms of effort and monetary expense. Stereotyping was described as overgeneralised and oversimplified. Conversely, segmentation was referred to as being sophisticated science. Stereotyping restricts diversity and exposure to differences by making broad classifications; properly conducted market segmentation (including avoiding the use of segmentation to effectively exclude consumers from access to goods and services based on factors such as ethnicity, age, or gender through the application of the chosen marketing mix) attempts to tackle the challenge posed by growing diversity and exposure to differences among consumers.
Clearly, market segmentation and stereotyping are fundamentally different. When used appropriately, each serves a valuable purpose - stereotyping in simplifying a complex world and saving energy and segmentation in offering an approach for dealing efficiently and effectively with complex markets. Segmentation, when conducted in conformance with accepted concepts and techniques can be a valuable component of a marketing programme.
The claim that segmentation is little more than stereotyping and is of limited value to the marketer has been refuted.
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