Wendell Smith: Market Segmentation

In 1956, Wendell Smith published a paper proposing market segmentation as alternative marketing strategy (Smith 1956) and is often credited with popularising the now common place marketing fundamental. Market segmentation is the division of the market into smaller segments of consumers with similar defining characteristics and needs. (Kotler et al, 2013). Marketers will use one or a combination of the main segmentation variables: demographic, geographic, behavioural and psychographic. Psychographic segmentation divides a large heterogeneous market into smaller homogenous markets based on personality traits, values, lifestyle or social class (Kotler et al., 2013). This method allows companies to tailor their product and marketing mix to the group most likely to buy them (Yankelovich and Meer, 2006). Often in combination with demographic variables, companies can use psychographics to position their brand to have appeal to the wants, needs and values of their target market

In the early 1960s, age and income were no longer aligning with the tastes and lifestyles. This shift meant that demographic segmentation wasn’t as effective as it had been prior. (Yankelovich and Meer, 2006) There was a need for another means of segmentation. The term ‘psychographic’, a portmanteau of ‘demographic’ and ‘psychology’, was coined by Emanuel Demby in 1974. Demby wished to apply the principles of social science to demographics in order to improve understanding of customer behaviour, therefore enabling more effective marketing strategies. (Vyncke, 2002) This new method of segmentation allowed for the varying psychological profiles found within a demographic. (Lin, 2002) Personal value systems or characteristic classifications such as VALS, LOV and RVS...

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...sive wines is a symbol of wealth and status, indicating a desire to live a luxurious style, placing them in the ‘aspirational’ segment of wine drinkers. The Asia-Pacific region also accounts for a third of the global beer volume and is the world’s largest region for spirit consumption.

Whilst this and other emerging markets offer great opportunities for expansion, psychographic segmentation does face several challenges in regards to international markets. Cultural views in regards to alcohol vary all over the world. Some of these views may be influenced by religious mandates, such as those found in Islam or views may be influenced by governmental factors, including legal drinking age or liquor laws and regulations. This means there can’t be a universal method of psychographic profiles and limits research conducted in the area to the country it was conducted in.