Segmentation and Target Market Paper Essay
Segmentation and Target Market Paper
Upon opening a business, a company must decide where to place the business and how to market the company. This is not an easy task if several businesses of the same industry are located in the same neighborhood. Before the company can open, a new business must choose what market they want to reach and the best way to reach them. The company must also determine the psychographic and behavioral characteristics of each market the company is trying to reach. The following is information on how Walmart Corporation chooses their geographic, demographic, psychographic, and behavioral segments when the company places a new store in a specific neighborhood.
The first Walmart store was established in Rogers, Arkansas, in 1962 by founder Sam Walton (Walmart Corporation, 2014). Walton moved his family to the area of Bentonville, Arkansas to take advantage of small town living and opened his Five and Dime store in the town square. With the success of that store he decided to open the first Walmart to offer lower prices and greater services to his valued customers (Walmart Corporation, 2014). By 1970, the company had gone public where Walton used the proceeds to expand the business.
Over time the company grew enough that Walton decided to venture into uncharted territory by opening Walmart Supercenters, Sam’s Club Warehouses and the company’s first international stores in Mexico. The company now has “11,000 retail units under 71 banners in 27 countries and e-commerce in 10 countries. We employ 2.2 million associates around the world — 1.3 million in the U.S. alone” (Walmart Corporation, p.1, 2014). The company has been very successful but still must keep in mind where a store is placed, what market to target, and how the company will promote the new store.
Walmart is not immune from determining where to place one of their stores. The company must take into consideration where the store and placed and who the target market will be. According to Kotler and Keller “geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods” (2014, p. 214). Walmart strives to get as close to their customers as possible. Therefore, Walmart currently has four store formats that are used based on the geographical segmentation on where the company wants to place a store. These stores are Walmart Supercenters and Walmart Discount Stores where the company targets large and small neighborhoods, Walmart Neighborhood Stores that are placed in neighborhoods where a pharmacy is needed, and Walmart Express designed for urban and rural areas where a larger store does not exist (Walmart Corporation, 2014).
Demographic segmentation is the process of dividing a market into segments based on “age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class” (Kotler & Keller, p. 216, 2012). For Walmart, this means targeting lower income and working class families to market their company. According to Brian, “Walmart is using its wealth of sales and inventory data to segment based on demographics, allowing it to market to specific age, ethnicity and income brackets” (2006. p. 1). What this means is that the company will market more electronics in a predominantly African American neighborhood, fresher produce for a Latino base, gourmet and organic foods for higher income individuals, and more pet supplies to shopper 45 years and older. This gives the company the best opportunities to market to the demographic segments while keeping all age groups in consideration for new product lines.
Psychographic segmentation is the process of placing consumers in different categories based on personality traits, lifestyle, or values (Kotler & Keller, 2012). Walmart uses psychographic segmentation to market certain products to the company’s three core consumer groups. Walmart’s core consumer groups are brand aspirationals, price-sensitive affluents, and value-price shoppers (Ryan, 2007). Under these groups, brand aspirationals are individuals with low income who like brand name products such as KitchenAid or Black & Decker. Price-sensitive affluents are individuals with higher incomes who love deals and get a brand name for lower prices. Value-priced shoppers are those of lower income and do not have extra funds to spend, so they are looking for the lowest price possible (Ryan, 2007).
Behavioral segmentation is the process of placing consumers in different categories on the basis of knowledge of, attitude toward, use of, or response to a product (Kotler & Keller, 2012). To successfully market a specific product Walmart will want to keep in mind the three core groups that have been created. According to Ryan, all product decisions the company makes will be based on the three core groups (2007). Feedback from these groups will help the company determine what products that sell best and those products the company can eliminate because they do not sell.
The success of Walmart is paramount, but the company was not without customer loyalty issues. According to Kotler and Keller, a brand position is the “act of designing a company’s offering and image to occupy a distinctive place in the minds of the target market” (2012, p. 276). The company’s original positioning statement for the longest time was “Always Low Prices; Always” (Walmart Corporation, 2014). However, in 2008 the company decided to change their positioning statement to help kick-start new growth. The company revitalized many of their stores and changed their positioning statement to simply “Save Money, Live Better” (Lippincott, 2014).
This created a firestorm of growth as the company started targeting individual of all income levels and raised their customer base by 7% for individuals with higher income levels (Lippincott, 2014). An alternative position statement for the company could be: “For individuals all ages and income levels, Walmart offers name brand products at lower prices that will satisfy your needs, wants, and desires to help you save money and live better lives”.
In conclusion, market segmentation is important when a company decides what market to target. Geographic segmentation plays an important role as the company must decide where to place the business. Will the business be in a neighborhood closer to the target market or further away. The role of demographic segmentation gives the company an idea of the age groups, gender, income levels, and social groups they want to target. Psychographic segmentation helps the company determine lifestyles and behavioral segmentation help the company determine attitudes towards the company’s product. Walmart uses all of these options before opening a store in any location. This has given the company the advantage of reaching the right target markets with great success.
Brian (2006, June 14). Wal-Mart to Customize Stores via Demographics. Retrieved on September 29, 2014 from http://futurewire.blogspot.com. Kotler, P., & Keller, K. L., (2012). Marketing Management (14th Ed). Pearson Education Inc.
Prentice Hall, Upper Saddle River, New Jersey.
Lippincott (2014). Walmart, Save Money. Live Better. Retrieved on September 28, 2014 from
Ryan, T., (2007, March 7). Wal-Mart Classifies Customers for Growth. Retrieved on September 28, 2014 from http://www.retailwire.com. Walmart Corporation (2014). Walmart History, Our Story. Retrieved on September 28, 2014