In the last example, we created market segments based on differences in product-related possessed by customers.  In contrast, this next example focuses on segmenting the market based on product "usage rates." In other words, the health club market will be segmented based on how much or how often consumers use health club facilities. 

Product Usage Rates As A Segmentation Base

Although this particular segmentation scheme is not that valuable in helping us understand health club market segments, it can be a valuable segmentation base for many other types of consumer goods. Virtually every product-market can be segmented by usage rates or consumption rates into heavy and light consumption segments.  The heaviest consumption segment is generally called the heavy-half. Even low involvement products, such as soaps and detergents, toilet tissues, and soft drinks can be segmented in this manner. 

Exhibit 1 provides some representative examples.  Roughly 94% of all consumers use soaps and detergents. Of this 94%, the heavy half (20 to 30% of consumers in this market) account for 75% of sales for the entire product category. Similar statistics hold true for toilet tissue. 95% of consumers use toilet tissue, yet the heavy half consumes 71% of the total product produced.  Similarly, 41% of consumers drink beer, and 87% of beer consumption is accounted for by the heavy half. Similar patterns exist for other product categories. The consumption rate patterns illustrated above follow a rule of thumb that has come to be known as the 80-20 principal.  As applied to market segmentation, this principle says that roughly 20% of consumers for a given product account for about 80% of the sales for that product.

Many marketing managers find it desirable to target the 20% of consumers that constitute the heavy half for their product because this segment's high consumption rate translates into greater sales and profit potential. This may be a mistaken assumption. The mistake may be that, if we perceive there to be profit potential in the heavy user segment, our competition probably does as well. The end result may that too many firms may targeting the same market segment. As a result, profits may be very limited.  Managers who fall into this trap are said to be committing the majority fallacy. A better strategy may be to target a lighter consumption market segment, particularly if there are no other competitors going after that segment. The over all profit potential in lighter consumption segments may be substantially higher as a result.

Creating the Usage Rate Segments

The health club survey questionnaire contained an item that asked subjects to indicate how often they exercised at their health club. Subjects could indicate whether they exercised less than once per week, one to two times per week, two to three times a week, three to four times per week, or five or more times per week. As illustrated in Exhibit 2, we arbitrarily classified everyone who works out two or fewer times per week as "light exercisers," people who exercise three to four times per week were classified as moderate exercisers, and folks who work out five or more times per week were labeled as heavy exercisers.  Thus, we used this question on an 'a priori' basis to create three 'usage rate' market segments:  light exercisers, moderate exercisers, and heavy exercisers.

Note that we did not have to use 'cluster analysis' this time to create our segments.  This is because we decided how the market would be segmented in the current example based on how they answered the single question: 'how often do you exercise?'  In contrast, in the last example, there were 23 items that reflected consumer needs making it virtually impossible for us to 'a priori' decide how the market should be segmented.  As a result, the cluster analysis program was an essential ingredient in the segment creation process in our last example!

Profiling the Usage Rate Segments

The next step is to profile consumers in each of the resulting usage rate market segments. This is done in exactly the same manner as before by creating a series of tables or 'cross tabulations.' in which items assessing respondents' needs, demographics, lifestyle traits, and attitudes were tabulated against membership in each of the three usage rate segments.  The purpose of these tables is to tell us how subjects, on average, differ from one usage rate segment to the next.  

Let’s look at some of the basic demographic and attitudinal differences between the three usage rate segments. Exhibit 3 presents a table showing differences in males and females in the light, moderate, and heavy exerciser categories. The results indicate that, on average, females tend to work out less often than do males.

There also are differences between usage rate segments in terms of marital status. Look at the row of percentages in Exhibit 4. Beginning with the 'divorced' category,  the bulk of divorcees are in the light exercise segment.   In contrast, the bulk of the never married, 46%, are in the heavy exercise segment. The currently married category is fairly equally split between the light, moderate, and the heavy segments.

A similar directional relationship holds with respect to educational attainment and one's propensity to work out (Exhibit 5). Heavy exercisers tend to possess higher levels of educational attainment.

Exhibit 6 presents a cross tabulation between segments and subjects' preferences for various types of equipment -- i.e. their 'needs.'  All I have done is put the average importance weights expressed by subjects in each market segment (as taken from the survey data)  in respective columns of the table. For example, the first row tabulates subjects' average preferences for free weights in each of the three segments.   Heavy exercisers are most interested in free weights, while light exercisers express the least interest. Importance ratings for the remaining facilities on the table differ very little between segments. 

There are distinct differences in attitudes about health, fitness, self, and nutrition between the usage rate segments, as shown in Exhibit 7. For example, subjects in the heavy usage segment are inclined not to talk much to others during their workout.  In contrast, subjects in the light exerciser segment enjoy talking while exercising.  The second question in the Thumbnail reflects the extent to which exercising is an important part of the individual’s life. Heavy exercisers, on average, strongly agree with this statement while light exercisers are somewhat more ambivalent. Similar patterns hold with respect to many of the additional attitudinal questions from the survey.

Just as we created a summary table for our previous example of benefit segmentation, we also must create a summary table showing how the heavy-, moderate- and light-exercise segments differ on roughly the same key purchase-related characteristics. A table similar to the one contained in Exhibit 8 is constructed to communicate these key differences and becomes a primary tool employed by marketing managers for constructing marketing programs.

Page last modified: February 06, 2002