Market Segmentation is the practice of dividing a market or audience into distinct groups based on shared characteristics such as demographics, behavior, needs, or interests.
This helps get a clearer picture of your audience and how to address them effectively.1
Visual Representation
Purpose
The primary purpose of market segmentation is to divide a broad market into smaller, more manageable consumer groups with similar needs, characteristics, or behaviors.
This approach helps businesses tailor their products, marketing efforts, and services more precisely.
This approach can make customers happier and more loyal and lead to more people buying what the company sells.2
How It Works
Here’s a simple way how market segmentation works:
- Find Differences: Look at what makes people different, like their age, what they like, or where they live.
- Gather Info: Collect information by asking questions or looking at what people buy to understand their preferences.
- Create Groups: Use this information to make groups. Each group has people with similar interests or needs.
- Pick the Best Groups: Decide which groups are the most important for what you’re selling.
- Plan for Each Group: Make special plans for selling to each group, using messages or products that fit their preferences.3
A Few Types of Segmentation
- Demographic: Categorizing based on age, gender, income, etc.
- Geographic: Segmentation by location, such as country or city.
- Psychographic: Dividing the market on lifestyle, values, or interests.
- Behavioral: Based on consumer behavior like purchasing habits or brand interactions.4
Usage
Market segmentation is used in many different areas to help businesses understand and reach their customers more effectively.
Here are a few examples:
- Product Development: Companies use market segmentation to design products that specifically meet the needs of different customer groups.
- Advertising Campaigns: Businesses create different ads targeting various segments, ensuring the message resonates with each group’s unique preferences or needs.
- Sales Strategies: Sales teams can tailor their approaches based on the specific characteristics of each market segment, improving their chances of making a sale.
- Customer Service: By understanding the different segments, companies can offer personalized customer service that meets each group’s expectations.
- Pricing Strategies: Market segmentation helps in setting prices that are attractive to different customer groups, based on their buying power and willingness to pay.
- Email Marketing: Emails can be customized for different segments, increasing the relevance and effectiveness of the communication.5
Example
Imagine a fitness center divides its customers into groups like young professionals, families, and retirees.
It then creates special offers, messages, and programs for each group.
Young professionals get offers for high-energy classes and flexible memberships.
Families receive promotions for kid-friendly spaces and discounts.
Retirees are given options for gentler exercises and social gatherings.
By focusing on what each group needs, the fitness center boosts its memberships and makes its customers happier.
Related Terms
References:
1. Wikimedia Foundation. (2023, November 23). Market segmentation. Wikipedia. https://en.wikipedia.org/wiki/Market_segmentation
2. DIGITAL MARKETING. (2020). (n.p.): PHI Learning Pvt. Ltd.. https://www.google.com/books/edition/DIGITAL_MARKETING/33QDEAAAQBAJ
3. What is market segmentation? how it works, careers, and more. Coursera. (n.d.). https://www.coursera.org/articles/market-segmentation
4. Tynan, A. C., & Drayton, J. (1987). Market segmentation. Journal of marketing management, 2(3), 301-335. https://www.tandfonline.com/doi/abs/10.1080/0267257X.1987.9964020
5. Market segmentation: Types, examples, and strategies. Semrush Blog. (n.d.). https://www.semrush.com/blog/market-segmentation-strategy/
