Segmentation:   The Key to Effective Marketing
By Daniel Jay Morrison

Introduction
To be commercially successful, the marketer must sell as much profitably as possible to maximize return on investment.   Whether you are selling soap, hotel rooms, shirts, cemetery plots, or financial services, you need to estimate the market, set a goal, and invest in marketing and sales efforts.  The key to the process is estimating the consumption potential of the market, since it determines the scope of the business, the available budgets, and the likely profit.   To determine market potential, it is critical for a seller to find out who really wants their offering.  Finding out “who” is the focus of this chapter. 

For the Senior Market, it is especially challenging to determine the correct target.  The composition of this sector is constantly changing as the older members pass on and the Boomers arrive at the rate of one every 7 seconds.  The Senior sector is also one of the most diversified population groups as the homogenizing of popular tastes and experience really didn’t impact until the relatively recent universality of television and computers.  The marketer eyeing the Senior segment must therefore be especially tuned into the probability of multiple “layers” of segment definition.   The marketer must also be aware that the definition/description of today’s Senior target will be changing rapidly, and staying abreast of change will be critical to continued success.

The identification of the “who“ will buy your product or service leads us to market segmentation.  What is it?  “Segmenting” is breaking down the whole along defined lines of demarcation.  In marketing, the term refers to a splitting of the available total population along demographic or psychographic lines for purposes of targeting.  Since virtually no product or service can be declared universally desired (or needed) in the same manner, marketers must be specific in the focus of their marketing effort to achieve their expectations for volume and profit.  As will be evident later in this chapter, the Senior Market can be divided using many different factors.  The actual population segment offering potential for your offering will be a combination of several of these factors.  We will address the factors separately solely for clarity of definition.

Segmentation & The Positioning Statement
To increase the probability of success, sellers must have an accurate definition of their offering and who would want it.  (Ford knew an inexpensive, dependable, “available only in black” car would meet the demand of a defined  large market sector.  The same could be said for Thomas J. Lipton’s tea bag, Job’s Apple computer, and the initial development of mutual funds for sector growth with much improved stability.)  It is therefore important, before reviewing the Senior market, to review how segmentation fits into the business plan. 

In Economics 101, the student learns that business is the process of exchange of one party’s property for another’s with a net gain.  Modern business asks the buyer to give up part of his/her personal wealth for the seller’s offering.   In this context:

My definition of marketing is that companies do not sell their goods/services, but rather that consumers buy them.  Marketing then is the allocation of corporate resources to influence that consumer buying decision. 

… Obviously to do so, the marketer must know the exact profile of the potential buyer.

From an operational standpoint, every product or service being offered to potential buyers must have a clearly defined Positioning Statement to assure optimal definition of the offering, clear identification of the target, and pinpointed application of resources.   Based on a defined Positioning Statement, the company can establish, modify, balance, and extend their lines on an organized foundation.   Each of the four cornerstones of the Positioning Statement (Product, Category, Target, and Unique Selling Proposition) require careful consideration and then integration with the remaining three corner posts to assure fit.

For whom is the Positioning Statement prepared?  At the highest level, it serves as the pivotal communication to a company’s management/ownership of the business in which they are engaged, the basis for the allocation of capital resources, and the expectations for future direction and growth.  On an operational level, from product manager to CEO, it defines the parameters of the business and establishes a “measuring stick” for all executional elements used for the presentation of the line to prospective consumers.

I contend that anyone who makes decisions regarding the offering to consumers must be personally sensitive to the consumer profile.  By “offering”, I include design of the marketing mix (brand identity, product, pricing, package, yield, financial service, flavors, options) and/or the communications of the marketing mix to the prospective consumer (selection of media, development of creative message, publicity, mailings, package design and copy, display material).   By “sensitive”, I mean the marketer involved in decisions impacting on the consumer should have current and in-depth knowledge of the consumer in terms of demographic description, as well as feelings, motivations, enthusiasms, wants, and fears.

To appreciate the importance of this premise, think of a young copywriter preparing an ad for inclusion in AARP’s magazine.  Obviously that young person does not remember Pearl Harbor and does not feel stiff joints on waking in the morning.  Therefore, unless that individual has personally studied his intended target, it is very unlikely that the writing will be fully impactful on the reader, who is from four to six decades older than the writer.

Is Segmentation The Same As Consumer Profile?
They are the same in that both terms address the same goal.  Segmentation begins with the market as a whole and works “down” to the identification of the portion of the whole which represents the current or potential market.  (More than one segment may buy the same product or service, but they are differentiated based on demographic or psychographic needs or wants.)  Consumer Profile works from known information of the current users and applies the information to the selection of appropriate marketing tools.  In both cases, the marketer’s objective is to have a clearly defined group(-s) of people from whom market demand can be expected or generated.

Example:   Men, aged 60-70, who are overweight, under exercised, have personally experienced one or more heart ailment events, have a family history of heart disease, are currently taking one or more prescription medicines for high blood pressure on a daily basis, and are frightened of dying from their heart condition.

Example:  Women, aged 65-75, healthy and fully mobile, single/ divorced/widows, with a personal annual income of more than $75,000, who travel by bus to Atlantic City to gamble specifically with slots, who view themselves as active, involved, social, and fun loving

In both cases, marketers knowing about their target will be in position to design (or present) products/services that appeal to the needs/wants of the consumer.  They can also more effectively select media that is appropriate in reach and content, develop copy that will feature the appropriate message, and have the planning basis for business development, volume growth, and equity expansion.

Segmentation Of The Senior Market
The Senior Market is often defined by work status (people who are retired), by age (over 50, over 55, over 60), or by living arrangements (“senior” housing).  This chapter includes a broad listing of possible methods for segmenting the Senior Market.  The list is not to be viewed as comprised of stand-alone differentiating elements.  In fact, several of the segmentation elements would be present in any given target market and it is critical to the marketer to know what the elements are and how they intersect when defining a potential consumer.

Through this exploration, it will become apparent that age is only one of many factors which may be used to define the Senior segment.  Selection of the appropriate segmentation factor(-s) depends on the seller’s product or service.    

Segmentation By Age

For the Senior Market, age is an obvious critical defining factor.  Witness the change in market status of a person who attains the age to qualify for AARP, Medicare, or retirement options.

Individual life experiences, and the resultant memories, can also have dramatic impact on purchasing attitudes.  Evidence of this lies among many of the survivors of The Great Depression (or immigrant generations) for whom financial independence became a paramount concern and any spending was intensely controlled. 

Since product and service selection by Seniors traces back to the individual life experience and memories, the marketer seeking “to reach out and touch” needs to know which memories are relevant to the target, and then employ those memories as connecting vehicles for product and service messages.  Sometimes the connection can be direct (such as in the marketing of memorabilia), other times it can be more subtle (such as the use of World War II or Viet Nam era music), and sometimes it can be indirect in the tonality of the presentation (such as use of a more gentle tone reminiscent of an earlier time).

While age can define a segment, the marketer has to be careful not to focus singularly on that dimension.  Age should only be a starting point.  If we simplistically view the Senior Market as people aged 50-, or 55-, or 60-years old and older, we run into the need to sub-segment further since this age group has music tastes that range from The Stones to Rudy Valee, automobile tastes that range from SUV’s to Model T’s, current transportation ownership (and usage) that ranges from Harley’s to adult tricycles, and movie experiences that range from Harrison Ford to Fred Astaire.

Apart from age, can all these people be considered as from the same segment?  What else should we use to define further the Senior Market?  Note the words “define further” since this suggests that the segment profile becomes a composite of differing elements.  All of the following sub-segments may not apply to your specific product or service.  However, the marketer should not be cavalier in dismissing any of these elements until each is carefully reviewed for relevance.  I would also encourage marketers to then search for additional elements that are critical to their specific offering but not listed here, such as category experience or use of directly competitive products.

Let’s address the remaining “Big Two” segmentation issues for Seniors:  Wealth and Health.   When age is combined with both wealth and health, the marketer can form a reasonable macro profile of the potential market.

Segmentation By Wealth
To what extent is the individual’s wealth a factor for your sales?    If your item is low cost per unit or essential to the target’s well being, wealth may be a lesser factor.  If, however, the unit price is relatively high and the item or service is not a necessity, knowing the consumer’s financial situation is critical to sales. 

Wealth can be viewed along several dimensions, such as: wealth in assets, wealth in disposable income, and wealth in terms of knowledge, sophistication, and need for estate planning/banking/tax/investment advice.

The above elements of wealth describe facts of financial holdings.  There is another important aspect of wealth that overlaps into attitude, preferred lifestyle, and may (or may not be) relate to age.  This added element, empowerment, adds a wholly new perspective to the design and presentation of goods and services.  By inclusion of this factor, the marketer will be in the best position to communicate optimally to those for whom empowerment is a defining characteristic.

Opposed to empowerment based on wealth is disempowerment based on real or potential lack of wealth.  A major source of fear among Seniors at all ages is that of financial solvency.  (Remember, one definition of “Senior” is retirement from work, e.g., the cessation of regular earned income.)  Failure in proper planning by many among the population now reaching Senior status has raised awareness of the risk of financial insolvency to levels not seen since prior to the introduction of Social Security. 

Compounding these fears, present political campaigns and national financial budgetary arguments have raised awareness of the possibility of Social Security not even being there when needed.  Awareness of this concern may prove most valuable to marketers in terms of positioning and copy execution.   Where available, real promises of cost savings, financial stability, and reduced financial risk will likely prove most appealing to Seniors of this sub-segment.

Segmentation By Health

Physical Health:  As the human body ages, it goes through a range of physiological changes which can have direct impact on the appeal of your product or service.  Physical changes can include reduced hearing, vision (shapes, letters, colors), touch, coordination, physical reaction time, smell, taste, stamina, and strength to open packages.   The downside (and upside!) of these changes can define the limits of a product/service appeal or open an entirely new market if designed and positioned correctly.

Another aspect of physical health is the ability of Seniors to move from one place to another. Some Seniors are actively skiing; some Seniors are bed- or chair-bound.  (Age may or may not be an important factor overlaying the individual’s health and activity level.)  Clearly, across this spectrum, the need to define and tap the relevant profile is paramount to assure communication in an effective, and not offensive, manner.

Mental Health:  With aging, mental health can also change.  Beyond the obvious potential for loss of short-term memory (“Senior Moment”) and Alzheimer-type debilitation, the Senior is also at risk of experiencing depression. This state often results from hearing loss or other sources of isolation, loss of long-time spouse, retirement, physical relocation, sudden onset of disease, or financial concerns. 

A subject related to mental health is the individual’s social health.  Targeting should include a review of the desired profile in terms of their social involvement in their home, in the retirement community, and in the community at large.  Each level of involvement (or non-involvement) has dramatic implications on the individual’s mental outlook and receptivity of that target to your message and offering. 

The marketer should consider that one segmentation element might override another.  An example of this would be where the individual has chronic illness, but has a positive attitude that permits otherwise unexpected activity (and purchase).  This could include attendance at concerts, purchase of sneakers that offset foot and ankle problems, and utilization of travel services for the handicapped.

Lastly, the marketer needs to know what is needed in terms of self-perception of the target regarding attractiveness, sexiness, curiosity, pride, self-esteem, and other emotional mind frames.  Direct application of this sub-category definition would be in the Product Positioning, Product Mix, Marketing Strategies, Packaging Strategies, and Advertising Creative Strategy Work Sheets.

As stated in American Demographics (September 1996, and even more true today):  “The consumer behavior of older Americans has more to do with their outlook on life than their age.”   The rapidly evolving perception of Seniors, moving them from front porch rockers to exercise machines and Disneyland, reflects a more energetic, healthier, and more active capability and self-perception.  (Unfortunately, a portion of today’s Senior population has not benefited by the improved conditions.  If the marketer’s products or services are targeted on this disadvantaged segment, further refinement would be needed.)  By being aware of the positive attitude shift for Seniors, the marketer can tap into opportunity while avoiding the high potential of pitfalls due to miscasting and mis-portrayal of the older generations.  As I indicated above, a person recently entering “Senior” ranks may find the gentle, deliberate, slow paced representation of Seniors as for a wholly different species … and they would be correct, even though both segments are members of AARP.

Segmentation By Location
Where are these Seniors located?  Obviously, targeting and subsequent spending of marketing funds should include awareness of the geographic location of the Seniors.  This is, by the way, a rapidly evolving picture in that traditional retirement/senior locations are changing.   Either traditional retirement locations have or are becoming too expensive, they are located too far away from children, they are too hot and have big water bugs, they don’t look like the North due to cacti and red stones, or they simply do not meet an emerging desire to stay in the familiar places where friends, bagel stores, doctors, and a long-patronized laundry are located. 

Additional location sub-sets have emerged in the last decades as the Seniors are using their disposable income for multiple home ownership and travel.  (Remember, the newer Seniors are the self-indulgent Boomers for whom the world is viewed as theirs to redefine.)  Their options are taking on more importance as the definition of Senior homes has evolved.   Included in the location question could be “Snow Birds” (the people who winter in the south and summer in the north), “Half-Backs” (people who emulate the Snow Birds but don’t return fully to the northern climates), and “Dislocatees” to non-traditional Senior retirement venues (people who have permanently moved, left behind all their resources, and need to start anew with everything from doctors to restaurants and retail banking).  Additional options have opened to today’s younger, richer, and healthier Seniors.  Many opt for ownership of multiple houses (to follow the sun, snow, or socially elite) and others keep a single home but travel extendedly and extensively,

It is worth noting in this section that “location” can also mean the physical home in which Seniors live.  Clearly the home format has tremendous impact on the lifestyle, purchasing patterns, and receptivity to products and services.  Significant needs and perceptual values are placed on goods and services specific to the Senior’s home, whether in their original free standing home, co-op, condo, in a senior retirement home, assisted living, nursing home, or in their children’s homes.  Awareness of this dimension can lead to product mix options (different portion sizes, multiple or smaller packs, safety packs), communication (illustration on packaging/POP/advertising), and new products (based on security issues, special lighting, in-home safety products). 

Segmentation by Education
Education has long been considered a major determinant in income and resultant spending patterns.  The Senior Market, when defined as people 50 or more years, is the most divergent group in American history along lines of formal education.  We must remember that during World War II, reflected by Seniors aged 70-plus, a high school education was considered sufficient by many.  As a college education supplanted the high school diploma as the standard, and was in increasing cases supplanted itself by postgraduate study in business and the professions, the formal education of Seniors now ranges from less than 12^th grade to Masters and Doctorate degrees.  This range from the elderly members of the Senior spectrum to the newly senior Boomers has tremendous impact on the strategies and terminology used in product design and communication.

Segmentation Across A Range of Important Additional Segmentation Elements
I suggest these following varied elements be viewed in light of which applies as the critical target differentiation for your product or service.   Further definition can then be specific to your needs.

Gender:  Clearly gender may have major impact on how a product or service is perceived.  At the retirement home, my Uncle Bennie said he had the two most important factors for social success:  “I’m a man and I breathe!”  With women vastly outnumbering men in later years, the importance of each gender must be considered in media, creative, promotions, and product/service definition, design, and positioning

Family Status:  The importance of family structure is a major factor in the wants and needs of Seniors.  Is the individual married, divorced, or a widow/widower?  Does the individual have grown children, no children, or near-by children?  Does the individual have grandchildren and are those grandchildren near or distant?  (According to Roper:  One in three Americans is a grandparent.  These Seniors are an enormous market for childrens’ products, which used to be perceived as purchased only by the younger parent generation.)

Ethnic Definition:  Does the race of the target matter to your sales?  Has the dramatic growth in minority populations impacted on your sales and/or prospects?  How about religion, nation of birth, degree of Americanization of values and lifestyle, and language spoken at home?

Computer Savvy:  How much is the computer and web access a benefit (or necessity) for your approach to the Senior Market?   Does the rapidly growing profile of seniors who do surf the web represent a viable target for you?  Who are they?  How does their profile, beyond simply being on the web, meet the profile of your users?

Fears:  Frequently, as an individual ages, a sense of insecurity begins to grow.  While part of this may be attributable to the fear of pain in dying or theological concerns of what follows life, much of it can be traced to very legitimate concerns about real life current issues.  Seniors are, in fact, more vulnerable to physical injury.  This may result in simply falling down due to poor footing, slowed reactions, or weakened coordination.  A person of advanced age usually experiences a broken hip as a permanent sentence to a wheelchair and an early death.

Physical injury may also result from assault.  Seniors are aware that they are perceived as “easy prey.”  Victimization by criminals appears to be an issue of increasing concern as Seniors age.  This phenomenon can present an extraordinary opportunity to marketers if properly addressed.  Seniors also fear isolation in case of emergency need for support services.  Several products and services already address this opportunity.  Growth in this sector can be further increased by careful definition of the target and their specific feelings. 

Segmentation By Buyer Versus User
While it is critical to know who buys your offering, it is similarly critical to know who uses the offering and holds influence over the buying decision.  A simple example of this situation is the middle-aged offspring who pays for the senior housing, but where the Senior himself/herself can veto the decision.  Similarly, someone other than the Senior may be making the super market visits, but the Senior will be making out the list based on medical need, package design, readable instructions, or level of flavor.

When a two-tier buying structure exists, the marketer must identify and employ the needs and wants of both influencing parties.  When a generation may separate the two levels, the issue becomes more complex and special attention must be taken to assure that both parties meet their individual needs and comfort level regarding the purchase decision.

The Importance Of Segmentation for Established Businesses, Expansion Goals, And Launching New Ventures
Established businesses provide the clearest example of the marketer’s need to identify the target segment of their current consumer/customer.  A consumer has already chosen to spend his or her resources for your offering.   By knowing who they are and why they are choosing your product/service, you are better able to maintain your sales volume.  By not knowing, you are at risk of demand declines due to changes in the target needs, competitive entries, or category upheavals.

To expand sales volume, segmentation knowledge provides two bases of pursuit.  First, it allows the seller to expand the marketing mix of products (both the offering itself through line extensions, and the applied use of the product, as evidenced by Arm & Hammer’s classic case of a new use as a refrigerator deodorant).  Second, by knowing exactly who is buying, the marketer can also determine who is not buying and develop a rank order of opportunity for potential new markets.  The expanded segmentation may come from new geography, share growth in current markets among competitive users, or new profiles in established markets by specialized marketing efforts (such as advertising in Spanish).

To launch a new venture, one apart from current offerings but hopefully related to company equities in brand, market expertise, or other corporate strengths, it is especially critical that the marketer determines the highest- potential target segment.  This focus establishes a “beachhead” to initiate volume sales and a revenue stream.  Once established, the marketer can then add new users and new markets for expanded profitability through spread fixed costs.

The Best Approach?
Which segmentation approach do I prefer?  I prefer the full list!  Obviously, they are not all appropriate to all products or services, but the concept is, and it remains with marketers to determine which of the many factors are critical to the buying decision of their offering.

By returning to the definition of Marketing and The Positioning Statement, we can see that a true understanding of the buyer profile is pivotal to sustained profitable success.  The more one can refine a targeted segment, through multiple views along demographic and psychographic dimensions, the more effective each marketing dollar spent will be.

As with marketing any product or service to an identified market segment, the designers and approvers of the offerings and its communications must know the target segment.  They should also write down the definitions and formally share agreement so all company assets can be singularly focused.  If done, the needs, wants, and outreach will be on target and effective.  If not, the message or offering will fall on (sometimes literally) deaf ears.

How To Assure Accurate Segmentation for Positioning, Design, and Communication?
Research the hell out of your market segment.  Research your offering and your means for communications.  Research the target, competition, the market.  Research the comparative benefit of your product versus competition,... and versus the consumer not spending anything!  Continued feedback will assure that your marketing is on target and that you and your team have up-to-date sensitivity to the market segments you seek to attract. 

Research should be both qualitative and quantitative.  It is necessary to have personal sensitivity to the target as well as to have broader perspective of the target within the market.  A key caveat to research investment is that the expenditure should be proportionate to the risk of the decisions based on the results.  Accordingly, unless the company is planning to pave over Kansas for a new manufacturing plant, quantitative (verifying, statistically projectable) research should only be applied when major investments and risks are to be incurred.  Periodic quantitative investment may be appropriate, but it is critical that plans for the research result in information that will lead to “next step” business decisions.  In this fashion, the company can best assure that the research investment will lead to new volume rather than just create “great knowledge”.

As a line item in the marketing budget, research is one of the most cost effective and efficient spending options.  Done correctly, the amount spent on research can significantly improve the impact of major marketing funds.  Almost always, the positive effect of actionable knowledge far outweighs the research investment.

Conclusion
Segmentation, defined as a tight specification of a selected target audience, is one of the four fundamental “legs” of the Positioning Statement.   It is therefore critical that the appropriate consumer segment is identified, reached, and spoken to with a message that is important to them. 

 A closing note:  Segmentation is not static.  Clearly, you must have a defined target at the beginning of your marketing program, but that target may change.  You must, therefore, keep the question of “Who Is My Target” front-of-mind throughout all marketing activities, and assure that your company offerings stays relevant to the selected segment.

© DJM & Associates, Inc.™