What is market segmentation? Why does it play a major role in marketing? How does it help to market to customers? What are the different types of market segmentation? All your questions are answered in one place in this article.
Have you ever wondered why Vans shoes are not available at the local shoe outlets, or why low-cost feature phones are not sold at flagship showrooms?
That is market segmentation. In simple words, to divide the audience into subsets based on what they prefer, need, and want. Generally, a potential customer won’t ask for a feature phone at a flagship showroom.
What Is Market Segmentation?
When a company chooses to segment its market, it carries out thorough research to determine who are its target customers. It will divide the target audience into different groups based on characteristics like age, gender, income, personality traits, or behavior.
The list is long. It can be anything. Do they have dogs or use mouthwash or not and many more.
In general, the segmentation is done based on demographics, needs, priorities, common interests, and at most, behavioral criteria.
So, Why Market Segmentation Is Done?
In simple words, it helps in effectively selling a product or service. Market segmentation helps to reach out to the right customers with the right kind of products or services at the right time. If you know what your customers want, you just need to be there and that’s it. People will buy what they need.
All you need to make sure of is that you are either better than your competitors or cheaper than them. A mix of the two would highly work for a brand.
Generally, companies segment markets to optimize products and advertising. This helps them to target different kinds of customers with relative marketing.
Market segmentation basically helps an organization understand its target market. The company can divide its target audience into multiple groups. This helps you to market your products or services effectively and be available in the right places at the right time.
What Are The Types Of Market Segmentation?
There are many bases on which segmentation is done. Organizations generally target customers based on a number of factors. These factors are different in nature and hence classify market segmentation into types.
These are the most commonly used forms of market segmentation.
1. Demographic Segmentation
In demographic segmentation, the market is segmented in terms of demographics. It is the most general form of segmentation. Here factors like age, education, income, family size, race, gender, occupation, nationality, and such elements are used to segment a market.
Demographic segmentation is a very simple and most commonly used form of segmentation.
Demographic factors take into account what we use, how we use it, and how much we are willing to pay for such relevant products or services.
2. Geographical Segmentation
When an organization uses a subset of demographics like location or area, it is known as geographical segmentation. Such segmentation helps companies to create multiple target customer groups with specific boundaries. Geographical segmentation helps to target customers in particular geography with specific preferences and interests.
Needs differ with geographies. So a better understanding of regions helps companies to target specific customer groups. It’s done mostly to choose what to advertise and market in such areas.
3. Behavioral Segmentation
Markets are diverse. So pointing out a potential customer group based on geography or income often turn out to be unsuccessful. For certain products and services, organizations carry out behavioral segmentation. It divides the market based on behavior. Basically, the company classifies the market depending on the decision-making patterns of customers.
Mainly carried out for mid-range products, behavioral segmentation is done based on factors like purchase, consumption, lifestyle, and usage.
Behavioral segmentation helps companies to divide market and target customer groups based on purchasing behavior, allowing marketers to target such buyers easily.
4. Psychographic Segmentation
Coming to our last type of market segmentation, psychographic segmentation is generally done for niche or upper-range products. Behavioral segmentation uses different psychological aspects to divide the market.
It uses the behavioral pattern to classify the markets based on personality traits, values, opinions, and interests.
How does Market Segmentation Help A Business?
It’s really important to understand what the consumer needs before you target a market. Market research helps you to understand what customers like, what they want, and whether are they happy with the current service or product. Market segmentation offers you to take advantage of the gap currently prevailing in the market.
Segmentation helps you to target different groups of customers and develop marketing strategies based on segments.
As a business, you can create customized marketing campaigns based on different markets. It also plays an effective role in the communications of both advertisement and advanced customer targeting. Market segmentation allows you to stay cost-effective and lower acquisition costs.
As a matter of fact, market segmentation empowers a business to use the right opportunities in a market by enabling how you create product offerings effectively based on different factors.
Editorial Staff at NextWhatBusiness is a team of Business Consultants having years of experience in small and medium scale businesses.