2.3 Market Segmentation and Clustering in the U.S.

Market segmentation is a business strategy that involves dividing prospects (potential customers) into subsets or segments that have common needs, wants, desires, values, and priorities. Market segmentation enables organizations (organizations ranging from for-profit to not-for-profit) to target different categories of prospects who perceive the full value of certain products and services differently from one another.

Targeting or target marketing is a detailed process a company follows to decide which potential customer segments the organization will focus on. Marketing segmentation always comes before targeting so an organization can be more selective marketing their products. It is assumed that by aggregating prospects into segments that have common characteristics and requirements, they will respond similarly to a marketing and selling action.

Business location analysis directly relates to other geospatial sciences and studies:

• Demographics and Geodemographics
• Consumer behavior (Psychographics)
• Census data and segmentation
• Other geospatial information, e.g., physical geography, human geography, transportation networks, internet access, or infrastructure

Designing an effective Market Segmentation relates to business requirements and situation—a challenge or opportunity—which the business faces. How does the problem relate to market, location, consumers, customers, products, business operations, or supply chain distribution?

Horan (2022, pp.76-79) shares examples of customer segmentation used in business marketing. Third party data companies compile every imaginable measure, ranking, and segmentation across global markets to meet the needs of competitive businesses.

• Business to Consumer (B2C) - demographic, geographic, psychographic, and behavioral
• Business to Business (B2B) - firmographic

There are many methods to measure and delineate customer segments. We approach several of these in the following lessons - you may find value in conducting additional research depending on your needs in geospatial analysis, gaining a deeper understanding of marketing objectives, or developing market reports.

Customers have different needs and, for market segmentation to be practical, market segments should be evaluated against defined criteria or requirements. Early in my pharmaceutical sales career, a VP of Sales encouraged us to monitor our sales daily and understand the metrics used by the company to evaluate its performance. The VP added, "If something you're doing isn't measurable, it's a hobby." In the NetMBA reading, several criteria for segmenting customers, markets, or products include the following characteristics:

1. Identifiable
2. Accessible
3. Substantial
4. Unique Needs
5. Durable

Elements of the segmentation may include business reporting, transforming consumers to customers, expanding current customer product choices, and reevaluating business goals. Analysts often need more data sources for marketing segmentation. Consider ideas on creating customized consumer experiences through omni-channel marketing:

• Asking questions: intelligent, pertinent, relevant
• Enrich data into useable, valuable georeferenced information
• Segmentation
• Data – location data
• Areas of interest – areas of influence
• Demographics
• Geography – relative or applicable regions of geographic relevance
• Consumer-driven commerce
• Digital economy

In Section 2.1, we described applications of location data for enriching, analyzing, and visualizing georeferenced data. That’s important for an organization’s business development, marketing, and management departments. Current combinations of marketing and business principles establish market targeting as traditional, multi-channel, digital channel or omni-channel; improving a business strategic audience decision making and customer experiences.

Many economic sectors are grappling with the explosion of data from multiple sources and formats. We will examine the value of location data & location intelligence which geospatial analysis provides business decision makers, e.g., through Smartphone penetration, location infrastructure (cell towers, beacons, RFID, GPS), and the Internet of Things (IoT). Throughout the lessons, consider methods of enriching, analyzing, and visualizing location data.

The Claritas segmentation data is sourced from third-party national online surveys collecting population, financial, insurance, technology, and energy track data. Varied audiences or customers seek different data for understanding consumer preferences, market and geographic trends, and relationships in data to demographics. Claritas produces PRIZM Premier, P$YCLE Premier, ConneXions products for commercial customers.

• PRIZM Premier provides insights on demographics, household lifestyle and media preferences, shopping behaviors, and technology usage in 68 segments, 11 LifeStage Groups, and 14 Social Groups.
• P$YCLE Premier is built for financial marketing services connecting data on financial needs and behaviors of US households.
• ConneXions is designed for the technology and telecommunications industry to relate technology behaviors of connected consumers and adoption rates of new technology.

Activity: Explore Claritas PRIZM "My Best Segments."

This lesson is an introduction to market and demographic segmentation. Our activity applies geodemographic segmentation to social and economic variables. You may or may not be familiar with Nielson Claritas segment information tool from previous courses. Claritas Zip code look-up tool lets you view your neighborhood's household segments by zip code. Segmentation data includes quick facts such as: population, median age, median income, and consumer spending in addition to the information shown nationally by segments within the segmentation system.

1. For this activity, we will access the ZIP code look-up page and begin an overview of Claritas' segmentation. Please scroll to the bottom of the MyBestSegments [5] page where there is a grey box.

2. Under the header "Tools", select "Segment Details" for information on segments or "ZIP Code Look-up."

(Note: you may have to launch the Segment Details and ZIP Code Look-up webpages using the links found inside the grey box shown in Figure 2.6 below. At times, a Stripmenu will appear for navigation, so you will not have to use the links at the bottom of the page. It depends upon how you are redirected to MyBestSegments when you first launch the webpage. Additionally, if the site does not launch, try using a different browser.)

3. You can practice by following the steps below:

a. Go to MyBestSegments Zip Code Look-up.

b. In Figure 2.7 below, the State College ZIP Code 16801 has been used for a sample Look-up (State College actually covers 4 ZIP Codes: 16801, 16803, 16804 & 16805).

c. Now try a 5-digit ZIP code of a place with which you are familiar.

You will notice that there are some help links and tutorials in the top portion of the zip code look up page that may be beneficial for new users.

ZIP Code Data

4. The right side of the page (the portion that includes the map and the graphs below the map) contains information specific to the ZIP Code that was entered in the search field (see Figure 2.8). Below the map are four different graphs that display the data for the ZIP Code. These graphs can be manually scrolled from left to right by clicking on one of the four dots at the bottom of that section, or allowed to be scrolled through using the play-pause feature.

National Data Segments within the PRIZM Segmentation System

5. The left side of the page contains segmentation system tabs: PRIZM Premier, P$ycle, and ConneXions. These tabs contain nationally based data that can be used in comparison to the local data (see Figure 2.9). Notice how the PRIZM tab data segments demographic collections which are the "most common" data segments for that particular zip code.

• PRIZM Premier
• P$sycle
• ConneXions

Select one of the PRIZM segment collections to view additional information. This will open a new web page with additional information. Keep in mind that the information contained in the tabs (PRIZM, P$ycle, and ConneXions) is national. You will notice a brief explanation of the segmentation with some clarification. Although there are a number of tabs, the free version of the zip code look-up site only displays data on the "snapshot" tab.

Your PRIZM Segment - Your Household

6. Review the segment page (Boomtown Singles, Country Squires, Traditional Times, Suburban Sprawl, etc.) within the PRIZM segmentation tab to find what segment best represents you or your household (see sample in Figure 2.10). Ask yourself the questions:

• What are the similarities and parallels between the data and how it relates to you or your neighborhood?
• What are the characteristics of the segment (that you chose) that relate to you?

Social and Lifestage Groups:

7. Open the social group link for the segment that you have chosen. The link is located about a third of the way down on the segment page. This social group is an aggregation of multiple segments that have a common element. Consider what it is that these groups have in common to involve this segment. These groups are a coarser representation, grouping by factors that they have in common with the segment. Think about what is distinguishing the social and lifestage groups for your presentation.

• As we aggregate segments into a social or lifestage grouping, what patterns are we noticing that are in common?
• It is also important to consider your Weiss readings and your work thus far the answer to the question, "What is different about Social and Lifestage groups? Do you see patterns, similarities, differences?"

This was a quick introduction to PRIZM. There will be additional exercises where you will be required to gather information from Claritas and PRIZM so be sure to practice with it and explore all of the features to become a little more familiar with it.