Market Segmentation: Definition, Example, Types, Benefits

The benefit of geographic segmentation is that the data is relatively easy to collect through online data sources. Marketers can also hone their messaging to the target audience of a specific location or combine it with other segmentation variables, like demographics, to build a complete profile of their target market. To identify what customers want, marketers have learned to divide people into market segments based on their demographics, behaviors, location, purchasing habits, and other factors that influence their buying patterns.

  1. Segmentation based on brand interactions groups customers depending on how they engage with your brand.
  2. You can create products to appeal to needs your main market segment may have and develop different products tailored to different parts of your customer base.
  3. If you engage in influencer marketing, customer segmentation can also help you to partner with the right kind of influencers whose content resonates with the customer segment you are targeting.

Even if you’re selling a product with broad appeal, customer segmentation can help you tailor your messaging to different groups to better engage with them. You might split your audience up by age and push individuals ads that show people who are close to their age. The most basic is identifying users based on their locations such as their country, state, county and zip 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’s urban, suburban or rural. Identifying characteristics can require you to get more specific since one county could have rural, suburban and urban areas.

Behavioral segmentation: The how

For effective segmentation, a marketer has to use different segmentation variables alone and in combination. A market segment means a homogeneous group consisting of buyers who seek the same offering. You can then leverage these insights to better serve your customers, leading to more profits and more growth for your business. Different customers have different needs, which means that trying to appeal to a large market with the same product, or the same kind of marketing will not work.

On the other hand, highlighting their key problem and matching it with a specific solution simplifies the decision-making process, and increases the likelihood of a sale. The beauty of market segmentation is that it’s infinitely repeatable; you can easily customize campaigns and break them further into more specific groups. Strategies include targeting a group by location, by demographics—such as age or gender—by social class or lifestyle, or behaviorally—such as by use or response. Market segmentation is a marketing strategy in which select groups of consumers are identified so that certain products or product lines can be presented to them in a way that appeals to their interests. There has been extensive research using market segmentation strategies to promote overcoming COVID-19 vaccination hesitancy and other health initiatives.

Technographic Segmentation

Enter your site URL, and the report shows you where your website visitors are located across the world. If many Colgate buyers also buy Crest, Colgate can attempt to improve its positioning against Crest, possibly by using direct-comparison advertising. Or it can decide to operate in all areas but pay attention to geographical differences in needs and wants. Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.

Firmographic segmentation

Market segmentation can help with customer needs research (also known as habits and practices research) to deliver information about customer needs, preferences, and product or service usage. This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up. Companies like American Express, Mercedes Benz, and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers.

By making use of market segmentation, your company should benefit from being able to use its resources more efficiently and from making more informed marketing decisions. The process of market segmentation involves dividing the market into groups of customers with similar traits, known as ideal customer profiles (ICPs). Marketers use demographic, psychographic, geographic, and behavioral factors to do market research and create a more result-oriented marketing strategy.

It markets a skincare line for teenagers focusing on acne treatment and prevention, while offering an anti-aging skincare range for customers aged 40 and above. Additionally, they have a men’s grooming line tailored specifically for male skin care needs. Market segmentation is the strategic 4 types of market segmentation division of a broader market or customer base into distinct subgroups based on shared characteristics, preferences, or demographic factors. The goal of segmentation is to tailor marketing strategies to resonate with the varied subgroups that exist within your larger target audience.

The question is, which is the right approach for your business, and how do you know which is best? When intelligently combined, these segmentation methods make for effective, insightful segments with high ROI and strong predictive power. Of all the possible ways you can segment your market, there are four that have stood the test of time. These individuals need to be of extremely high-value, since there are so few of them. Not only is this expensive, but it misses out on all the benefits of segmenting your market. Segmenting your market isn’t the only way to go, but there’s no getting around the need to understand your customers at a deep level.

Market segmentation is a great way to kick-start a market opportunity analysis. When you combine your knowledge of market segments with that of the competitive landscape, you can identify under-served markets just aching for a solution to their unmet needs. Often, the one-to-one marketing strategy will see businesses naming their key individuals and targeting them specifically through their marketing strategy.

Market segmentation realizes that not all customers have the same interests, purchasing power, or consumer needs. Instead of catering to all prospective clients broadly, market segmentation is important because it strives to make a company’s marketing endeavors more strategic and refined. By developing specific plans for specific products with target audiences in mind, a company can increase its chances of generating sales and being more efficient with resources. On digital ad services, you can target audiences by their age, location, purchasing habits, interests, and more. When you use market segmentation to define your audience, you know these detailed characteristics and can use them to create more effective, targeted digital ad campaigns.

So, if your marketing efforts are falling short, it may be time to revisit and refine your market segmentation approach. Often the most difficult market segmentation approach, psychographic segmentation strives to classify consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to achieve, as these traits (1) may change easily and (2) may not have readily available objective data. However, this approach may yield strongest market segment results as it groups individuals based on intrinsic motivators as opposed to external data points. The deep insights you glean from a strong market segmentation process will help you set an omnichannel strategy that better addresses your customers’ needs.

Evaluate Potential Segments

For more on demographics, head to our complete guide on audience demographics, and learn how to transform demographic data into razor sharp insights with our article on demographic audience analysis. To better understand the vital role of personalized and targeted marketing in more detail, read our complete guide on Segmentation, Targeting, Positioning (STP Marketing). When working with a CRM, make sure that it has the right tools to track and analyze customer data. Book a free demo with us today and start segmenting your customer base in the easiest way possible. Market segmentation is the process of dividing your market into different categories or segments. Market segmentation allows a company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).

One way to group markets is by dividing them based on factors like location, age, gender, and buying habits. Marketers are responsible for identifying emerging customer problems, defining new marketing messages, and testing new product concepts. To identify new opportunities, marketers need to frequently test their target audiences for new insights and verify if customers still enjoy existing products.

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