Market Segmentation In The Wine Industry Marketing Essay

Market segmentation is the company needs of the market diversity and differences of consumer behavior, all current and potential customers in the whole market, classified as a number of similar characteristics of the customer groups, in order to determine their target market. It helps wine companies understand consumer requirements and then satisfy them. The basis of consumer market segments and business market segments will be discussed in this essay. There are four important standards have to be considered: geographic, demographic, psychographic and behavioral segmentation. In the wine industry, marketing segmentation has great significance for wine producers and marketers. For instance, based on age segmentation or income segmentation, after understand consumers, wine producers can get the result of their objectives or marketing strategic. When establishing a new wine company, the first consideration is the market target. Wine producers must decide what segments they want. So there are three aspects had to think when wine marketers evaluating market segments: size of the segment and growth rate of the segment, segment structural attractiveness, and company objectives and resources. Finally, marketing segmentation has benefits and drawbacks in wine industry.

What is market segmentation?

Market is composed by the customers and sellers, and different customers may have different needs, characteristics, behavior or buying attitudes. Each customer is a separate entity, they have unique wants. Therefore, sellers may divide a market into different groups of individual markets. Every consumer group is a market segment, each segment are the tendency of buyers with similar wants or needs (2002). They divide the market into distinct groups who have distinct needs, wants, behavior or who might want different products and services. This action is known as marketing segmentation. It is a concept in economics and marketing. Marketing segmentation is marketers through market research, based on the wants and desires of customers, differences of their buying behavior and purchasing habits, divide a whole market into a number of individual groups in the market classification process. Segmentation allows the wine company to better satisfy the needs of its customers. Company only through the market segmentation, select the most favorable market area in order to achieve economic profits. If more detailed to segmented market, it can be two parts, consumer market segmentation and business market segmentation.

Consumer market segmentation

The consumer market dominated in the market structure. Its development, directly or indirectly affect the industrial development of the market and the overall socio-economic development. The main factors affecting the consumer market is consumer demand. Consumer demand for the quantity and composition of population impact, but also by the quality of goods and variety of colors, but the most important factor is people’s purchasing power (2002). It directly related to people’s income level. Consumer markets can be segmented in four main consumer characteristics: geographic, demographic, psychographic and behavioral segmentation (2010).

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Geographic segmentation, it divides the market into several geographic parts based on national, regional, urban, rural, climate or topography. The wine company may choice one or a few geographic areas to pay attention on consumer needs and wants. For example, many multinational companies prefer to build their parent company in the heart of the city. Companies’ want the best locations, such as Myer or David Jones on Randall Mall, which located in the centre of Adelaide. Marketers choose a best location is so important for the company’s future.

Demographic segmentation, it divides the market into groups such as age, gender, occupation, income, family size, family type, family life cycle, nationality, ethnicity, religion, social class. These factors are the most popular areas for a company to segment customers. Consumer demands always change with age. So many companies use age segmentation to position their product. Such as KFC targets to young people and children. Clothes Company offer different style clothes to the different generations. Income segmentation is often used by many companies as cars, clothing, luxury furniture and jewelry. Income changes will directly affect consumers’ desire and expenditure patterns. High-income consumers will buy more expensive products than low-income consumers.

Psychographic segmentation, it is according to consumer lifestyle, personality, buying motives and other variables, divided into different groups. More and more enterprises, such as clothing, cosmetics, furniture, entertainment, paid attention to people’s lifestyle segmentation. Lifestyle is that people consumption, entertainment, specific habits and patterns, different lifestyles will have different needs preferences. For example, British clothing company put some women classified as “simple-type women”, “fashion-type women” in two types. Namely, the designers will design different styles, color and material of the garment.

If the market divided by behavioral segmentation, it is according with the consumer purchase or using time of a commodity, purchase volume, purchase frequency, brand loyalty and other variables. Purchasing many commodities have time limit. For instance, Airlines, travel agency during summer vacation to advertise and implement concessionary fares to attract people travel by plane; businesses doing great quantity advertising about air-conditioning in the hot summer effectively increase sales. Purchase frequency segmentation, such as pencil, primary scholars often buy, senior scholars in normal and the workers or peasants not always buy.

Business market segmentation

Industrial market is a business strategic and tactical decision-making, especially in the marketing. Many markets can be segmented into five types: non-users, ex-users, potential users, first-time users and regular uses of products and services (2002). The objective for business market segmentation is to identify the most significant differences among current and potential consumers that will influence their purchase decisions or buying behavior (2002). This will allow the marketers to classify products’ prices, programs, or solutions for maximum competitive profit. Industrial market can be segmented geographically and behaviorally which same with consumer market. In industrial market, patterns of consumption behavior can be a basis for segmentation, such as buying statues, usage rate and loyalty status (2010).

What are the bases for market segmentation in the wine industry?

In the wine industry, wine products are divided into such as pre-dinner wine, table wines with different foods have different wine, high sweetness, high alcohol content, high acidity content and cellaring different years or there are some special wine products for women to drink. There are so many types of wine because wine company must satisfy different consumer groups. Because wine marketers must understand consumer wants and needs. The main factors will influencing the wine consumers’ purchasing decisions are knowledge of the wines and previous drinking experience, such as wine region, brand, label and the price. Market segments are very useful in wine industry, such as geographic, demographic, psychographic and behavioral segmentation.

Geographic segments in wine industry, a major wine company has measured wine consumption rates around the world and in some major national markets, wine consumption decreasing in Europe, but increasing in Asia (Gastin & Schwing 2004). More and more Asian purchase wines, because they become western in recent years. Many researches clearly shows that most wine consumers live near bigger cities, such as in the United States where the largest wine markets are Chicago, Los Angeles, Seattle and San Francisco (Gastin & Schwing 2004). Therefore, wine producers more likely to sell their products at these markets which is easy to meet their effective global strategic.

Some wine companies try to use demographic segmentation to achieve their objective. Income segmentation is the most frequently used by wine industry. High-income consumers have more buying power than low-income consumers. As we all know, most of the wine is sale to the high-income consumers, such as French wine. But there are exceptions. For example, Yellow Tail is produced in Australia, but the real sales in the United States. Yellow Tail is the best sales of all foreign wine products in the U.S. market. It has been reported that: “Yellow Tail is perhaps the only one Australian wine brand which sold one million cases of wine in the United States, sales of foreign wine brands in the first.” And Yellow Tail has also enjoyed the success in the Britain. Why Yellow Tail wines can capture the U.S. market? Because most of the wine producers are cared about the years of wine, factory nation or a moving story behind wines. While Yellow Tail has broken the traditional wine marketing model, they want the products closer to customers, close to real life marketing model. The price of Yellow Tail is suit for not only the high-income consumers to buy but also low-income consumers. Moreover, Yellow Tail has many different types wine to drink with different food (n.d.). Such as Cabernet Sauvignon, it best enjoy with roast beef and mushroom sauce (n.d.). Chardonnay, it best enjoy with seafood and spaghetti. Rosé, it best enjoy with cheese or sweetmeats (n.d.). Especially, these wines have added many different fruit flavor which are different from previous wine. Wine marketers attempted to satisfy every consumer’s needs and wants.

Age segmentation, in the wine marketing adults can be segmented into young-aged adults (21-40) and old-aged adults (more than 41). Young-aged adults have higher frequency of drinking wine at the party or fete friends. They always purchase low-middle level wines. Most times they prefer beer or cocktail to wines. When they select wine products, they focus on packaging and brand. Old-aged adults have higher the frequency of drinking of wine than young-aged. Even having dinner at home, they are willing to drink wine. Most of them like high alcohol content wine. These old-aged adults have higher spending power and more opportunities for higher consumption. Hence, wine producers will depend the age to make the production in different packaging and labels, aroma and flavor.

Psychographic segmentation in the wine industry, based on the following five wine consumer lifestyles: (1) relaxed lifestyle (2) dining ambience (3) fun and entertainment (4) social aspiration (5) travel lifestyle (Thach & Olsen, 2005). Each buyer type has different attitudes towards wine and different preferences. In this segmentation, wine industry focus on when and why customers buy wines. For instance, in France, consumer who like to listening to classical music, going to the theater and wearing a suits and evening dress were more likely to own a bottle of Bordeaux Grand Cru ~Dubois & Laurent. In Asia, many consumers pursue prestige and brand which means to purchasing high-priced wines (Thach & Olsen, 2005). Understanding this segmentation in the wine industry is the key to targeting wine marketing objective.

Behavioral segmentation in wine markets, according to user status, market can be segmented into five parts: (1) regular drinkers, who consume wine daily, 2% of US population (2) often drinkers, who consume wine at least two or three times per month, 10% of US population (3) potential drinkers, who consume wine at least two or three times per quarter, 14% of US population (4) ex-drinkers, who used to drink wine, but drink other alcohol now, 31% of US population (5) non- drinkers, who never drink wine, 43% of US population. Through this data, more wine producers will try to promote potential drinkers’ buying power, such as advertising or buy one get another one free.

What are the implications for wine producers?

Marketing segmentation has great implicated on wine producers. There are some positive sides for wine company to segmented markets into several parts. First at all, market segmentation help wine company, especially smaller companies, find the best market opportunities and developing marketing strategies. Secondly, wine producers can use minimize operating costs to gain maximize operating efficiency. Wine companies can change their strategic following the consumer needs, timely and correctly adjust the product structure, make its products more marketable. On the other way, the marketing segmentation also has drawbacks, such as brand credit will go down and profits will become decline in long-term. For example, a wine company starts to use a segment which is adding fruit in their wines. This is the first breakthrough in wine market. This caused more and more potential consumers and regular consumers buy it. They thought this company’s strength is stronger than other brands. But after many years, more other wine producers use this segment, consumers will know that the main difference is the products through advertising or other means to impose on consumers, not products truly function as propaganda. So the brand credit decrease.

Outline the process of evaluating market segments.

Target market is through market segmentation, firms are prepared to appropriate products and services to meet their needs for one or several sub-markets. Wine company has to evaluate the market segments and choice some segments to meet their objective. There are three factors should be considered when evaluating market segments: size of the segment and growth rate of the segment, segment structural attractiveness, and company objectives and resources (2010). A smart target marketing selection will help companies and attract more wine consumers. Firms produce wine is limited, but consumer demand is unlimited, therefore, they can only be based on market segmentation, select some consumer groups as the target market. Firstly, they must select the right size of segments and growth rate of the segment. These depend on size of customer purchases or the size of industry organization. General can be divided into large groups, medium groups and small groups’ customers. Every company wants to target segments with large sales and maximum profits. Nevertheless, not all the companies can do the best. Smaller companies may find difficult to compete with larger companies, because they lack of marketing strategic or technology. So the smaller size segments may be more suitable for smaller firms. Secondly, companies need to make decisions that have the segments attractive for customer or not. Wine producers must understand their current and potential competitors. If competitors too strong to compete, segments will become less attractive (2010). Wine producers also need to think substitute commodities, because marketers may find difficult to set a higher price of wines. Finally, after a wine company has right segment size and an attractiveness segment, it will also be considered the company’s objectives and resources. The best segment must meet a company’s long-run objectives, not only short-run. And then, resources can be a main point to be decided. Wine marketers need to consider that do they have enough skills or technology to succeed in that segment (2010).

Conclusion

In conclusion, the content of the above words show that marketing segmentation is the development of key wine marketing strategy. Market is divided into distinct groups who have different wants or behaviors. In wine industry, it helps wine producers to understand the customer’s consumption patterns and product preferences. Wine company will change marketing strategic with the latest consumers’ demand. They choose more profitable segments and then attract more potential customers buy wines and get the maximum profits. However, there are positive and negative sides for market segmentation. Such as profits will become decline in long-term if wine marketers often change their segments.