Research Paper Example: Customer Segmentation in Sears Canada

The past decade has seen the retail domain in Canada take up an imperative role and position in the Canadian market. Along these lines, the retail sector has significantly impacted the Canadian economy and inexorably influenced the consumers and their utilization activities and trends. In 2011, the retail sector accounted for approximately $450billion which was close over 10% of the country's workforce (Strauss, 2011). Most remarkably, the industry recovered from the globally catastrophic recession in 2009 to record a 17% increase towards 2010. During this period when the recession was at its worst, the Canadian retail sector still accounted for 6% of the GDP (Strauss, 2011). The recession was then followed by a rather steady increase in retail sales. Be that as it may, the past decade has also seen the sector being characterized by heightened competition in light of the prevalent growth of department stores. As the retail market evolves, it becomes imperative for retail outlets to progress as well else they risk becoming extinct. As a result, these retailers are escalating above their conventional marketing strategies with the end goal of offering better products and services in a spectrum of changing consumer trends and market segmentation. Thus, this research endeavor focuses on Sears Canada, a department store chain that is striving to attain a competitive advantage through heightened investment in innovation and new marketing strategies.

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The company's history emanates Sears from the 1950s when Simpsons-Sears, a Canadian catalog order, and retail organization, was joined fused of understanding between Simpsons of Toronto and Sears, Roebuck and Co of Chicago. Consequently, in 1971, the group altered its logo to display just the name Sears with a specific end goal to counteract customer disarray amongst Simpsons and Simpsons-Sears. Hudson's Bay bought off Simpsons in 1978 and Roebuck and Co obtained the 17 million shares from Simpsons-Sears claimed by the Hudson's Bay in 1983. It was not until 1994, however, that Sears introduced its dealer outlets locally. These dealer stores offered a wide array of products with the flagship being appliance and electronics. Today, the company is a full-line retailer of general stock and home-related administrations in Canada. In early 2010, the organization recorded 122 full-line retail establishments, 280 specialty stores, 22 Floor Covering Centers, 1,853 catalog stock pick-up areas, and 108 travel workplaces. Subsequently, the company's business operations are founded on two business groups; merchandise and real estate. The merchandise gathering includes but not limited to goods and services sales while the latter encompass income from Sears joint ventures. Be that as it may, the company faces an array of challenges such as the threat of new entrants into the market, increased competition, falling market share in the retail sector, and decreasing sales from direct channels. Consequently, the company is necessitated to reinvent itself to compete efficiently and remain relevant. Thus, it is also imperative to adopt a more differentiated marketing approach. In so doing, the company will be able to align its marketing mix with the underlying consumer demands. Along these lines, there are various key customer segments that the firm ought to identify and focus its strategies upon.

Demographic Customer Segmentation

Succinctly, demographic customer segmentation alludes to the characterization of a large mass market into smaller sections on the premise of but not limited to age groups, gender, occupation, levels of education, and ethnic foundation. Marketers dissect demographic attributes and what rises is an actual market profile grasping those characteristics deemed to be significant in a marketing strategy. According to Clinkard (2013), international immigration has led to the increase in Canada's population to approximately 35, 000,000 which expand the retail market. With the growth in immigration, the population consists of gatherings of people from diverse ethnic groups hence the need for segmentation along demographic constructs. Furthermore, gender constitutes a significant demographic aspect that Sears ought to consider when developing an objective marketing profile. With an ever-increasing number of women in the Canadian workforce and the changing parts of men and women in Canadian families, the marketing introduction is turning out to be progressively unisex in nature. Prudent marketing mix strategies would, therefore, necessitate the comprehension and integration of gender trends. For instance, 30% of women earn more than their male counterparts (Tuckwell, 2013). Also, Canada's ethnic differences exhibit new customer target segmentation opportunities for Sears Canada. Statistics Canada depict that minorities represent one in five nationals (Strauss, 2011). Also, these minorities are projected to represent 70 percent of the development in consumer spending given their tendency to live in vast urban areas.

Psychographic Customer Segmentation

This type of segmentation incorporates the division of the market along the lines of consumer interests, values, opinions, and lifestyles (Tuckwell, 2013). Thus, psychographic customer segmentation is multi-faceted. Subsequently, Sears Canada ought to consider various factors that drive consumers to make purchase decisions. In so doing, the company will be in a better position to determine which customers buy and why they make these investment decisions. Comprehension, identification, and incorporation of this client segment would then help the organization to target particular groups of customers as opposed to the current mass marketing mix. Psychographic factors such as consumer needs and motivation, insight, and personalities work together to determine lifestyle. Along these lines, the company would be able to structure its marketing strategies, products, and services with the primary objective of aligning to the underlying target market. In so doing, the company will offer goods and services in line with personalities and lifestyles of particular customer segments.

Behavioral Customer Segmentation

Behavioral customer segmentation stems from the constructs of pragmatic consumer behavior towards products and services. Key behavioral factors include but are not limited to underlying benefits, brand allegiance, willingness to purchase, user status, and the rate of consumption. According to Craft (2004), consumers will pay a premium for an item that addresses their issues more particularly than does a competing item. Accordingly, marketers who segment the general market and adjust their products to the requirements of at least one smaller section remain to enjoy profitable gains. Thus, by identifying various consumer behaviors, an organization can group the market in different segments and structure its products and services to suit each segment. It also becomes easier to differentiate marketing mix strategies.

Discussion

The potential profits and gains offered by customer segmentation must be measured against the costs which when coupled up with the research surveying required to segment a market may incorporate expanded development and marketing costs. The backdrop above also depicts that markets and the consumers are not homogeneous (Smith, 1956). Smith further recommended that segmentation, the division of a market into gatherings of customers who share certain qualities or affinities towards a product or a service, may be a compelling route for an association to oversee diverse conditions in a market. Along these lines, there are three key three potential core customer segments for the retail department store brand Sears Canada. Whereas the three possible groups are all plausible, the demographic segment is the most effective. The company should, therefore, base its primary focus and align its marketing mix operations to this section in light of the immense benefits depicted above.

References

Clinkard, J. (2013). Population growth continues to tilt Canada to the west. Daily Commercial News and Construction Record, 86(8), 1.

Craft, S. (2004). The international consumer market segmentation managerial decision-making process. SAM Advanced Marketing Journal, 69(3), 4046.

Lynn, M. (2011). Segmenting and Targeting Your Market: Strategies and Limitations. The Scholarly Commons, 1-14.

Smith, W. (1956). Product differentiation and market segmentation as alternative marketing strategies. Journal of Marketing, 3-8.

Strauss, M. (2011, August 21). Canadian shoppers balk at higher prices. Retrieved from The Globe and Mail: http://www.theglobeandmail.com/report-on-business/j-crews-canadian-shoppers-balk-at-higher-prices/article2136570/

Tuckwell, K. J. (2013). Think marketing. Don Mills, Ont: Pearson Canada.