Marketing segmentation is an important part of the marketing process. In order to be effective, firms must know who they want to target and what their customer needs and wants are. The UK car industry has a very large market and in order to serve it efficiently, it needs to segment its market and select a target market. Several methods may be used to segment the market but this essay will focus on evaluating the psychographic segmentation method as a basis for effective marketing in the UK car industry.
This essay will first define several terms, and then it will explain the benefits and the limitations of psychographic segmentation. It will then show how psychographics are used in the UK car industry and identify if other segmentation techniques are used, with or without psychographics, in this same industry.
Market segmentation is an essential part of the marketing process. It allows firms to allocate their market into groups that have the same similarities, which are relevant for decision making in the marketing strategy (Jobber, 2001). Then firms can target their market to serve it effectively, they can differentiate the market, define the opportunities and threats and tailor the marketing mix.
To be useful, segments selected should be measurable, substantial, accessible, differentiable and actionable (Jobber, 2001). The market can be segmented in different ways; the three most popular techniques used are: behavioural segmentation which analyse benefit sought, purchase occasion, purchase behaviour, usage and perception and beliefs; the second is psychographic segmentation which analyse the lifestyle and the personality of consumers and the third is profile segmentation which base its researches on demographic, socio-economic and geographic variables (Jobber, 2001).
Researches show that there is no exact definition for psychographics but Emanuel H Demby (1989 p 26). said that “psychographics allow us to view a population as individual with feelings and tendencies addressed in compatible groups (segments) to make more efficient use both of mass media and those that targeted to particular potions of the population”. The basis of psychographic research is that the more a firm know and understand about their customers the more effectively they can communicate to them (Heath, Piirto, 1995).
Psychographic Segmentation Research
Psychographic research can identify similar values, attitude, and lifestyle or personality groups, but the two main variables used in psychographic segmentation are the lifestyle and the personality of the customer: Personality is an individual’s pattern of character that influences behavioural responses such as self-confidence, dominance, sociability. This variable is important to be understood because people tend to see themselves in a way and purchase products to satisfy their self-concept so people see them in the way they want.
Lifestyle is a person’s pattern of living as expressed in this or her interests, opinions and activities. It is considered to be a rich descriptor of people buying patterns. Often, people buy brands because those brands relate to their way of living (Morgan, Doran, 2002-2003). For example, a successful businessman in his late thirties will buy a BMW because the image the brand shows in its advertisement is power, success and high standard of living. Psychographics are necessary to firms because they can investigate into specific product category and brand decisions by consumers and can be used to paint the big picture of consumer lifestyle (Heath, Piirto, 1995).
Psychographics has proven to be a very useful tool for organisations in their marketing research. It identifies target markets that could not be isolated using only demographic variables. According to Wells (1974), psychographics is designed to measure the consumer’s predisposition to buy a product, the influences that stimulate buying behaviour, and the relationship between the consumer’s perception of the product benefits and his/her lifestyle, interests and opinions (Heath, Piirto, 1995).
Often researchers have turned to psychographics because of the limitation encountered in demographics. An advantage of psychographics is that it describes segments in terms directly relevant to advertisement campaign and market planning decisions of organisations (Heath, Piirto, 1995). It has also appealed marketers for its power to combine the richness of “motivational research” with the statistical sophistication of computer analyses and, provide corporate strategists with rich descriptive details for developing marketing strategy; (Lesser, Hughes, 1986) it has the ability to give marketers a big image of the consumer’s lifestyle.
There is also the appealing advantage that psychographic segments, which are developed for markets in one geographic location, are generalizable to market in other geographic locations (Heath, Piirto, 1995). Psychographics are essential for discovering both the explicit and the hidden psychosocial motives that so often spell the difference between acceptance or rejection of the brand.
But psychographics has limitations, researchers have found reliability problems: first there are no standardized methods to evaluate the stability of results of psychographic techniques and incertitude in this area weakens predictive power. Therefore, it will throw doubts in whether the segment and market targeted are reliable or not.
The main problem is that psychographics attempt to measure intangible and diffuse concepts, values and attitudes are not easy to measure as every single person has a different personality and consequently have different opinions and interests. It has also been pointed out by (Fenwick et al., 1983) that there is little cross-study evidence on reliability so findings cannot be compared and improved.
The car industry in the United Kingdom is very large but is resumed by two monopolies: the first one is a monopoly in favour of Ford, which owns most of the leading brands. The second is another monopoly which is described as a “complex monopoly situation arising from the selective and exclusive distribution system used by most car suppliers in the United Kingdom.” by the United Kingdom Parliament (1998)
The UK has the biggest used car market in Europe: of the 26 million cars on the British road only 2 million have been bought new in the past twelve months (United Kingdom Parliament (1998). Since the market is so large, and that there is a word limitation, this essay will only concentrate on two different brands both owned by ford but with different legal entities and different target market.
Jaguar creates cars for customers that are seeking distinctive saloons and sports cars which deliver “stimulating performance and captivating style”. They have built an image for their cars which correspond to what their potential buyers want to identify themselves as. The company is seeking to reflect the individuality of its consumers. Its image is one of luxury, sport and freedom to inspire people. Jaguar uses psychographics since a big part of the customer’s purchase decision process is based on values, self-concept and attitudes. Jaguar need to know its customers, their personality and their self-concept to create a car up to their expectation and reflect the lifestyle they have.
Volvo is another brand of car that has a very different target market. Volvo uses psychographics to segment their market. They create cars aiming mainly at “modern families”. They analyse what are the attitude and values of families towards cars, what are the lifestyle of today’s families: research showed that families were going away for holidays and needed big cars that are able to be reliable and provide comfort for the whole family.
It has been found that today, families go to the beach but also to the mountain. So, Volvo created cars that allowed families to purchase car to suit their lifestyle. They also had to analyse the personality and the self-concept of those families. A family that wants freedom, that is adventurous. And this is reflected in Volvo’s advertising campaign. So, when people watch those advertisements, they can rely to it and identify themselves with the image they are giving out.
Other methods of segmentation are used in the UK car industry such as demographics or geographic. But often those methods, particularly in the car industry, need to be supplemented with other data, even if some researchers such as Ziff (1971) affirmed that “as demographic is based on the ground that demographic groups are relatively homogenous, it does not need psychographics to distinct customer’s behaviour” (Heath, Piirto, 1995, p 16).
Demographics can turn up objective facts such as tell that the target customer owns a car but it will not be able to tell why the person bought the car; this “why” is told by psychographics. In order to be successful, the car industry must know its consumers: their age, their sex, their marital status, their income, their purchase behaviour such as if they are brand loyal or if they are innovators. Jaguar keep record of every single client and follow them for up to four years to know everything about their satisfaction, their complaint, so they are able to measure the number of clients that are brand loyal.
Both Volvo and Jaguar saw a new target market in women and develop design to satisfy their wants. In order to serve this new and growing market, identified through demographics, those firms will need to use psychographics because women have different attitudes, values, personalities and lifestyle than men. They will also need to know what their expectations are and what issues they think are most important when they buy a car. For example, women may be more focused on safety and design while men may be more careful about their image and the performance of the car.
Therefore, psychographics can be a useful tool for the car industry in segmenting their market. This technique helps them understand their customers better and deliver more appropriate products and services. But as psychographics have proven not to be reliable on different situations, it would be more effective if used with other segmentation techniques such as demographics or behavioural segmentation. It will allow marketers to have more data in order to select the most appropriate market for their product and avoid making errors in their decision process.
References
Lesser, A.J., Hughes, M.A., (January 1986) The generalizability of psychographic market segments across geographic locations, Journal of Marketing [online], Vol.50 pp18-27.
Jobber, D., (1995) Principles and practice of marketing, 3rd Ed McGraw Hill Book company, England.
Heath, Piirto, R., (Nov./Dec.1995) Psychographics, Marketing tools [online], Vol.2, issue 8, pp 12-25.
Fenwick, I., Schellinck, D.A., Kendall, K.W., (1983) Assessing the reliability of psychographic analysis, Journal of marketing science, Vol.2, No.1.
The United Kingdom Parliament, (1998) The structure of the UK car market, Committee on Trade and Industry, Second report.
Morgan, S.J., (2003) Lecture 3: Segmentation, targeting and positioning, Lecture Notes, [online], Birkbeck university of London.
Ziff, R., (1971) Psychographics for market segmentation, Journal of advertising Research, Vol. 11, No. 2. Available from: EBSCO host.
Morgan, C.M., Levy, D.J., (2002-2003) Psychographic segmentation, Communication World.
Demby, E.H., (1989) Psychographic revisited: the birth of a technique, Marketing research, Vol.6, No.2, pp 26-29.
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Thank you for evaluating the psychographic segmentation method as an effective marketing base in the British car industry and it will certainly be useful for further research
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