Page 5: The base for segmentation
Segmentation involves dividing up a whole market so that products and services can then be developed for each part of the market. Some companies divide up a market geographically, while others divide markets according to demographic details such as age, gender or occupation. The criteria used to divide the market is known as the segmentation base.
United Airlines uses a form of psychographic segmentation to divide up the market for its services. This involves identifying the social class, lifestyles, opinions, interests, behaviour and attitudes of customers. Modern communication systems play a major part in this information-gathering exercise. With the help of questionnaires, United Airlines classifies its customers by their motivations. For example, some customers choose United Airlines because of price, while others choose the airline because of schedules, frequent flyer programmes or other forms of service.
For United Airlines, successful segmentation enables targeting to take place. Targeting provides the focus for the activities of the business.
It enables promotions and services to be aimed only at those who are most likely to respond positively to them. Passengers are communicated with through email which is becoming a focus for closely-targeted marketing.
The United Airlines business model can be compared to the classic 80:20 rule in Pareto's Analysis. Based on experience of the airline industry, the model assumes that, for airlines offering a high level of service, 80of profit comes from 20of customers. The profit-generating customers are the ones who are prepared to pay a premium price for a premium service. They are the ones that the airline most needs to attract.