Market segmentation is used by various companies to tailor their products and services to the target demographic or consumers who are thought to be most interested in these products and services. One of the research methodologies developed to segment people into different groups is called Values and Lifestyles (VALS).
VALS segmentation model segments all US citizens into 8 distinct types, or “personas”: innovators, thinkers, believers, achievers, strivers, experiencers, makers, and survivors (US Framework and VALS™ Types, n.d.). Different groups are segmented according to motivations and financial resources in order to predict their behavior as consumers. The outcome of a VALS test is a certain persona assigned to the individual based on their responses interpreted by the VALS algorithm. In my case, the test results were not completely accurate. It part I believe it is due to the fact that the test is not a real representation of reality as it ignores context. In other words, the data obtained by the questionnaire is inconclusive and only some predictions, such as purchasing power, can be made. In the case of Costco Wholesale, a retail company chosen for the project, our target demographic is correlated with the general demographic of Costco. This fact is largely explained by the Costco business model, with the company’s stores open only to members and their guests. Costco customers are financially established since the average annual household income of its members is estimated at $156000 (Robins, 2015, par. 5). Costco members plan before their actions and are not influenced by what is popular since they enroll in a membership program. These two facts put Costco’s target market into the following VALS categories: thinkers and achievers. In the case of Costco, psychographic segmentation is important, because products sold at Costco should be aimed at consumers who visit these stores.
Another segmentation model is Claritas’ PRIZM, which provides much detailed segmentation with 66 different profiles or personas (Segment details, n.d.). Different groups are segmented according to demographics and behaviors (Segment details, n.d.). The most common segments for ZIP Code 97006 Beaverton, OR are young digerati (wealthy younger family mix), money and brains (wealthy older family mix), American dreams upper mid younger family mix), urban achievers (lower mid younger family mix), and new beginnings (low-income family mix). The majority of households are comprised of 1 to 3 people, and about half of the people living in Beaverton have children. It is difficult for me to judge whether the data is actually representative of the real Beaverton population. PRIZM segmentation does appear to be more accurate than VALS due to a much larger pool of personas, which means the segmentation is much more detailed. In addition, the fact that the data is based on income, education, occupation, and home value, makes the segmentation scientifically valid. I would say that the data seems to be interpreted correctly for my hometown.
The most difficult challenge faced by marketers today is finding the right demographic which will help create and advertise products and services specifically tailored for them. Market segmentation is the solution to this problem. The rapid development of technology allows for better data acquisition and processing, and it is quite logical to use this data to improve decision-making. The biggest takeaway for me relative to my group marketing plan is that it is important to consider market segmentation to help us tailor our marketing messages and create a better marketing strategy.
References
Robins, J. (2015). Costco’s Surprisingly Large-Circulation Magazine. Web.
Segment Details. (n.d.). Web.
US Framework and VALS™ Types. (n.d.). Web.