Market Segmentation for Sephora

Answer

Market Segmentation for Sephora

Tung (2013) reports that Sephora classifies its customers into four main segments, namely; geographic, psychographic, demographics and behavioral segments.

Geographical segmentation focuses on maximizing the reach and influence of the brand in the market. This contributes to market development and market penetration. Currently, Sephora targets its beauty and cosmetics products to women in 33 countries around the globe (Sephora 2019a). It reaches out to them through 2,300 stores. It operates 430 stores in the Americas where they are strategically located on high streets and busy locations. This helps attract a lot of foot traffic from tourists, travelers, locals and shoppers. Sephora’s Dior Addict Stellar Shine Lipstick perfectly captures the intention of the firm in using this strategy to position itself (Sephora 2019b). As a result, it has influenced consumer behavior in the different geographical regions to use it as a brand of choice. Sephora can be noted as being good at using geographical segmentation to influence consumer behavior.

Demographic factors considered for segmenting Sephora’s customers include age, gender, family size, occupation, income, religion, nationality and race. The brand targets mostly women but with a few focuses on men interested in fashion and beauty. The age grouping for the target customers range from 20 to 50 years (Sephora 2019a). The customers are mostly families and individuals with high disposable income. Large family sizes are admirable because of the high rate of consumption. In the recent past, the products have gained more appeal among pre-teen and teenage girls. The products target different races, religion and nationality. Sephora’s Dior lipstick is an admirable product that satisfies the needs of diverse customers regardless of their race, nationality, religion and occupation. However, it discriminates against low income earners. This segmentation is good since it has helped achieve the high brand value and equity desirable for a luxury brand.

Sephora’s psychographic segment considers environment conscious people who value organic and environment friendly products ranging from accessories, brushes, tools and makeups. This is why the stores have adopted an eco-friendly strategy in their design, architecture, interior decor and appearance (Tung, 2013). This market segment further incorporates features such as lifestyle and activities of the buyers. The consumers of Sephora have active lifestyles and they value meeting people and attending social events. The Dior lipstick fails to perfectly meet this segmentation needs because the product is not organic however, it still meets most of the lifestyles of its customers.

Behavioral segmentation of Sephora’s customers considers usage rate and their pattern of decision making. The brand focuses on attracting tech savvy customers through its digital platforms. This strategy is in line with customers who value electronic commerce thus their behaviors are shaped by online trends. On the other hand, the older customers prefer making frequent visits to the stores. Sephora targets customers who make frequent. This is the reason why Sephora accompanies its products and services with a loyalty program that monitors customers behavior (Samuely 2019). By doing this, it manages strong relationships with the customers thus enticing them to make repeat purchases of their products. The Dior Lipstick has been designed and packaged in a small silvery package that symbolizes luxury. This implies that it size and color perfectly resonates the demands of customers in this segment.

Economic Analysis

This industry is resistant to economic recessions and this is an advantage for Sephora. Beauty products are now a necessity in Canada. This means that the industry continues to attract higher profits and returns on investments regardless of the economic conditions. The beauty economy is a  lucrative industry that has contributed towards a stronger economy. This is seconded by the fact that Canada has a strong economy ranked as the tenth largest in world. Its membership and association with the Organization for Economic Co-operation and Development (OECD) as well as G-20, commonwealth of Nations and World trade Organization has expanded its international influence in terms of trade in cosmetics and beauty products (David 2019). In addition, Canada is a developed economy with a mixed economy. This means that its economic system allows for public and privately-owned businesses. Such an economic system is flexible and fosters competitive growth in the cosmetics and beauty industry.

Canada and Market Size

The Canadian beauty economy is ranked as the fourth largest after tourism, cars and real estate. It is associated with the desire for high living standards among Canadians especially the women and teenage girls. There are 3,700 cosmetic firms in Canada ranging from small to medium and big sized firms. They produce 20,000 different brands of cosmetic products used around 1.54 million beauty parlors (Frue 2018). The Canadian cosmetics and beauty industry is expected to grow and reach a value of $15.8 billion by 2021. The current market value of the industry is currently at $7,604m and it is expected to register an annual growth rate of 1.4% annually until 2023. Per person revenue to be generated in fiscal 2019 is estimated at $203.97.