Companies spend a lot of time and money on marketing strategies that get their brand and goods in front of the right people. Segmenting the market divides customers into groups based on different points of view. Learning more about market segmenting can help improve your business’s marketing plan.
In this article, we discuss the five types of market segmentation, Strategies for identifying potential customers, and the benefits of Market Segmentation.
What is Market Segmentation?
Market segmentation, sometimes called marketing segmentation, is a way to find specific groups of customers and figure out how to best present goods to these groups to get the most sales.
Market segmentation helps brands effectively focus on specific customer groups. It divides a target market into easier-to-reach groups of people similar in demographics, needs, priorities, hobbies, and other psychological and behavioral factors. Brands use market segmentation to help them target audiences when they make, sell, and market products.
5 Types of Market Segmentation with Examples
There are four main ways to divide a market into segments. One type can generally be divided into two groups: individuals and organizations.
Here are five common types of market segmentation, along with examples of each:
Demographic Segmentation
Statistics about people are used to divide people into demographic groups. It’s an easy and familiar way for businesses with a business-to-consumer (B2C) strategy to divide their customers into groups they can talk to directly. This method of marketing works because most people make expected buying choices based on their demographics.
Demographic data might be the best approach for a small business just starting to sell itself. It’s easy to find demographic information in public records. The most popular characteristics used to divide people into groups are Gender, Income Level, Age, and Nationality.
Example
According to its market segmentation approach, young men with disposable income may be the primary buyers of a new video game console.
Geographic Segmentation
Some marketers think of regional segmentation as a demographic segmentation, but it can also be seen as a separate type. Geographical factors are used for this simple segmentation.
It can be a specific geographic boundary, like a ZIP code, or a regional zone, like a climate. Geography and climate can affect customers’ interests and preferences, so knowing these things can help you market better and grow your business. Some main factors of geographic segmentation include Country, City, Zip Code, and Climate.
Example
In Cherapunji, India, a clothing store might have more rain gear on show than in the Southwest.
Psychographic Segmentation
Psychographic segmentation is a more advanced way to divide customers into groups based on values that affect their minds. Determining the factors for this type of segmentation can be more challenging because they are subjective and need research.
To get psychographic data, you can look at existing market research or ask your customers specific questions about their interests through focus groups, interviews, or surveys. Common psychographic segmentation factors include Interests, Opinions, Aspirations, Values, etc.
Example
A business that sells fitness clothes might go after people who like to play or watch different sports.
Behavioural Segmentation
Behavioral segmentation sorts people into groups in a market based on how they act and make decisions. This more advanced form of segmentation tries to figure out how a customer spends their money so that you can make a more targeted marketing plan. If you want to target people based on what they buy, behavior may be an excellent way to divide them into groups. Behavioral splitting factors include Occasion, Purchase criteria, Usage rate, Brand Interactions, etc.
Example
People in older groups are more likely to buy national beer brands, while millennials tend to buy more craft beer.
Firmographic Segmentation
A younger way to divide the market is through firmographic segmentation, a variation using demographic data. This information is mainly about the traits of a business, not a person or a family.
It is a business-to-business (B2B) approach that changes marketing messages based on the type of company they are aimed at. Some of the most common causes in firmographic segmentation are Industry, Location, Revenue, etc.
Example
A company that makes business software offers a more flexible and extensive suite to a global company, while smaller businesses provide a more spartan, fixed-fee product.
Market Segmentation Strategies
There are many ways everyone agrees on how to split the market. When deciding on market segmentation, companies often ask themselves the following questions to help them determine which market groups to focus on.
Describe your ideal customer.
Do people want and need your services and goods? How big or small is the market? How does your brand relate to those of your competitors in the current market?
Segment your market
Pick five ways to divide your market: by demographics, firmographics, psychographics, geography, or behavior. Even though most brands use more than one, you don’t have to stick to just one. Try out each one to see which one works best for you.
Know your market
To do this, you must do some preliminary study, like polls, surveys, focus groups, etc. You should ask questions about the groups you picked and use quantitative (checkable boxes) and qualitative (open-ended for free text answers) questions.
Divide your customers into groups.
Look at the answers to your survey to determine which customer groups are most likely to be interested in your brand.
Try out your business plan.
After you have figured out what the answers mean:
- Test your ideas by making marketing, ad campaigns, and other things specifically aimed at your target market.
- Use conversion tracking to see how well it works.
- Test again and again. If take-up is low, review your segments or study methods again and make the necessary changes.
Read more: Segmentation, Targeting, and Positioning Strategies
Benefit of Market Segmentation
Marketing segmentation requires time and money. However, a good plan can help a business make more money and stay healthy in the long run.
The top 10 benefits of market segmentation are listed below.
Higher chances of brand loyalty
Through marketing segmentation, customers have many chances to build a long-lasting relationship with a business. Customers may like marketing tactics that are more direct and personal and that promote community, belonging, and acceptance. By dividing the market into groups, businesses can better find the right customer who fits their products and profiles.
More likely to succeed
Market segmentation is the process of studying your market. To be more specific, it helps to split a large market into smaller modules. This reveals to marketers the market’s and consumers’ potential, lowering the risk of losing money. Consequently, the business has a better chance of succeeding.
Improved Brand Recognition
Marketing segmentation lets management think about how they want certain people to recognize them. Once the niche market has been found, management has to choose what word to send. This message is meant for a particular group of people, making it more likely that a company’s branding and marketing have been carefully thought out. This can also improve the way customers engage with the business roundaboutly.
It brings in more money.
Market segmentation is a handy business tool because it helps companies target specific groups of people, which in turn helps them find better business chances in those groups. So, marketers can plan their campaigns based on the needs and wants of the chosen market group, which helps the business make more money. With this method, companies can focus on a small part of the market instead of the whole market, which allows them to make more money.
More differences in the market
Market segmentation helps companies send the exact word they want to the market and their competitors. This idea can also help with product differentiation by highlighting what makes a company different. A precise impression made by management is more likely to be remembered and unique than a general marketing plan.
It makes businesses more competitive.
Once the business team and marketing know what they want to focus on and who they want to sell to, they need to consider how competitive they are. When a business knows exactly who its target market is, the competition gets more challenging. This makes the marketing team develop new ways to promote their brand and set themselves apart from rivals. Different deals and prices will help the marketing team get more customers, and getting to know your customers better will make them more loyal to your brand.
Better utilization of resources
Marketing segmentation helps business owners focus on specific users or groups of people based on their demographics. Instead of trying to sell products to everyone, marketing segmentation lets you take a more targeted and accurate approach that generally costs less than a broad-reach approach.
Market campaigns that work
Businesses that know their customers and what they want can tailor their digital marketing campaigns and ensure their strategies align with what the market wants, directly affecting their performance. Focusing on essential platforms like TikTok will help your business even more. You can also increase the number of people who see your videos on TikTok.
A happier customer base
Based on market segmentation, a company can focus its marketing efforts on a specific group of customers. This helps the company serve its customers better, which is what every business wants to make the customers happy.
Learn More About Your Customers
Market segmentation helps you learn about the market’s needs and the people who might buy from you. This lowers the chance that your marketing strategy will fail or lose money. Studying the market before starting a campaign significantly raises its chances of success. Marketers can better plan and organize their marketing efforts by dividing the market into segments. Market research allows marketers to plan and strategize their campaigns based on the general needs of possible customers.