What is Market Segmentation?

BusinessManagementSales & Marketing

Market Segmentation − Definition

Market segmentation is a business practice that brands use to segregate their target market into smaller and more manageable groups based on common grounds to optimize their marketing, advertising, and sales efforts. Simply put, customers of each market segment have similar characteristics that businesses can leverage to advance their efforts.

Market segmentation can help businesses to target the people who can become satisfied customers of the business or enthusiastic consumers of the product or service. To segment a market, it must be split up into groups that have similar characteristics. Splitting up an audience in this way allows for more precisely targeted marketing and personalized content.

Primarily, there are four major types of Market Segmentations, namely −

  • Demographic Segmentation

  • Behavioural Segmentation

  • Geographic Segmentation

  • Psychographic Segmentation

Let us see each one in detail.

Demographic Segmentation

Demographic segmentation refers to splitting up audiences based on observable, people-based differences. These qualities include things like age, sex, marital status, family size, occupation, education level, income, race, nationality, and religion. Segmenting a market according to demographics is the most basic form of segmentation. Combining demographic segmentation with other types can help narrow down the market even more.

One benefit of this kind of segmentation is that the information is relatively easily accessible and cheaper to obtain. Some products are targeted explicitly towards a specific demographic.

For example, a company might make two types of sports shoes − one for men and one for women. There are numerous ways to gather demographic data. One way is to ask your customers directly. The other way to obtain demographic data indirectly from customers by looking at social media and other online profiles where they may provide information about themselves.

Behavioral Segmentation

Markets can also be segmented based on consumers’ behaviours, especially regarding one particular product. Dividing the consumers based on behaviours they display allows a business to create messaging that caters to those behaviours.

Some types of behaviours to look at include the following −

Online shopping habits

A business might consider a users’ online shopping habits across all sites, as this may correlate with the likelihood of them purchasing on their website.

Actions taken on a website

Companies can track actions users take on online properties to better understand how they interact with them. They might identify how long someone stays on the website, whether they read articles all the way to the end, the types of content they click on and more.

Benefits sought

This refers to the need a customer is trying to meet by purchasing a product.

Usage rate

Categorizing users based on usage rate. The messaging will be different depending on whether someone is a heavy user, medium user, light user, or non-user of a product.

Loyalty

After using a product for some time, customers often develop brand loyalty. Companies can categorize customers based on how loyal they are to the brand and tailor their messaging accordingly.

Geographic Segmentation

Splitting up the market based on their location is a basic but efficient segmentation strategy. A customer’s location can help a business better understand the needs and then disseminate location-specific ads.

  • The most basic process is identifying users based on their locations such as their country, state, county and pin code.

  • You can also identify consumers based on the characteristics of the area they live in, such as its climate, the population density and whether it is urban, suburban or rural.

  • Dividing a market according to location is critical and requires tailoring the messaging according to regional differences in language, interests, norms, and other attributes. People who live in different countries may also have different interests.

For example, football is very popular in Europe, while cricket is more popular in India. If a company is into marketing sports equipment or\npublishing sports articles, it must take these different preferences into account.

Psychographic Segmentation

Psychographic segmentation is similar to demographic segmentation, but it deals with characteristics that are more mental and emotional. These attributes may not be as easy to observe as demographics, but they can give a business valuable insight into the audience’s motives, preferences, and needs.

Other Segmentation Methods

Value segmentation

A market based on the “transactional worth” of their customers − how much they’re likely to spend on their products.

Firmographic segmentation

This is done mostly in Business-to-business (B2B) segment. Companies may use firmographic segmentation to divide up the businesses in a market.

Generational segmentation

Businesses may segment consumers by their generation and group them into categories such as Millennials, Baby Boomers, etc.

Life stage segmentation

Market segmented into groups based on where they are in their lives. Going to college, getting married and having children are examples of key life events to consider.

Seasonal segmentation

Segmentation on the basis of how people buy different products at different times of the year.

Benefits of Market Segmentation

Companies that correctly segment their markets get significant advantages. They are as follows −

Determining market opportunities

By doing so, businesses can study the details of what is being offered in the market as well as the offerings made by the competition. Detailed study will help find out the current satisfaction level of the customers.

Adjustments in marketing appeals

The sellers can make the best adjustments with the context of their product and market standards. Based on the target audience, businesses can make certain sales promotions and advertisements to attract the target audience.

Developing marketing programs

It facilitates the companies to develop certain market standards with marketing programmes and budget which is based on the clear idea of the response of specific market standards.

Designing a product

Market segmentation often helps in designing products which match with the market standards to attract the target audience.

Media selection

Market segmentation also helps in intelligently selecting the right advertising media and planning the spending budget accordingly.

Marketing efforts

This also helps with timely promotional efforts based on seasons. For example, consumer goods are much more advertised during festive days as the demand rises.

Wise and Efficient Use of Resources

Market segmentation identifies the potential marketing areas with a potential market study. Thus, it helps to use corporate resources and money during a more streamlined and efficient manner.

Ultimate customer satisfaction

Market segmentation allows the corporate to shape its marketing endeavours during a particular market fragment, and helps the\norganizations serve the buyers better by expanding consumer loyalty, which is the definitive objective of any business.

Cost-Effective

Productive promoting exploration and market division help to spare loads of huge loads of valuable time, cash and assets contributed inside the showcasing effort.

Knowing your customer

The market division helps with investigating the market needs and potential clients which lessens the hazard of hardship or inadequate promoting endeavours. As the advancing exploration is done until now before the mission, the probabilities of being powerful are indisputably more because the division of the market makes the promoters endeavour to their homework for displaying. Division likewise helps with embracing reasonable appropriation systems.

Conclusion

Companies or market employ segmentation tactics to boost revenue, develop better goods, and communicate more effectively with prospects and consumers.

raja
Updated on 22-Jun-2022 11:24:26

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