What Is Market Segmentation? (Types, How To Choose and Tips)

When you’re looking to improve the effectiveness of your marketing, segmentation should always be one of your first ports of call. Learn about the 4 most common types of market segmentation, plus some other ones that you may have missed.

Market segmentation is an increasingly important part of a strong marketing strategy and can make all the difference for companies in competitive market landscapes, such as e-commerce.

When up against a range of online competitors, effective communication is the best way to differentiate your business. Market segmentation offers an opportunity to pinpoint exactly what messaging will drive your customers to make a purchase.

The 4 basic types of market segmentation are: 1. Demographic 2. Psychographic 3. Geographic 4. Behavioral

Demographic, psychographic, behavioral and geographic segmentation are considered the four main types of market segmentation, but there are also many other strategies you can use, including numerous variations on the four main types.

4 Main Types of Market Segmentation & Their Benefits

What are the benefits of market segmentation?

There are many benefits to market segmentation including:

What is market segmentation?

Market segmentation is when you divide your target audience into different groups based on several factors. When you implement market segmentation in your workplace, youre creating these subgroups that are based on things like a customers location, age, beliefs, motivations, actions and more. The goal of market segmentation is to understand your target audience better so youre able to develop strategies to connect with them. Youll also be able to optimize your marketing efforts or connect to your target audience by building products and services that meet their needs.

Types of market segmentation

Here are the four types of market segmentation with examples:

Demographic segmentation

Demographic segmentation is one of the most common types that marketers use to section a group of people. You can use any demographic feature to segment, including age, ethnicity, gender, education, nationality, family status or income. Demographic segmentation is popular because its easy to identify, especially if you use various market research methods.

For example, if youre a business-to-consumer (B2C) company that sells adult skateboards, you may choose a target audience that comprises millennials between the ages of 21 and 33.

For a company thats mostly business to business (B2B), demographic segmentation may include the other companys industry or company size. For example, a B2B company that is selling project management software for enterprise-level businesses may target marketing executives or the CEO of large companies.

Behavioral segmentation

Behavioral segmentation concentrates on how the audience acts, including their purchasing and spending habits and how they interact with your brand and others. To effectively use behavioral segmentation, you must be aware of some actions your customer takes.

For example, the B2C skateboarding company may focus on customers who follow and regularly interact with a popular skateboarding brand on social media. The B2B company may target potential clients who have visited their company blog and signed up for a free e-book on effectively managing projects in the workplace.

Geographic segmentation

Geographic segmentation is another easy one to identify. Using this type of segmentation, you can categorize customers based on factors such as country, zip code, their distance from a specific location, neighborhoods, city and even the climate they experience.

To use geographic segmentation, the B2C skateboard business may focus on potential customers who live in easily navigable cities. The B2B software company may concentrate their efforts on reaching customers that work in areas with a heavy marketing or information technology focus because those are the industries most likely to have projects to monitor.

Psychographic segmentation

Psychographic segmentation involves labeling audience members according to their personality and other characteristics, including values, lifestyle, motivations, interests and beliefs. Psychographic segmentation isnt as common because it takes longer to identify audience members for a segment. The characteristics you may be looking for are frequently subjective rather than data-focused.

For example, the same B2C skateboard company may focus on customers who care about the environment and would appreciate a more sustainable way of commuting. The B2B company may concentrate on reaching marketing managers who are motivated by reaching increased productivity goals.

How to choose a market segmentation type

Follow these steps to choose the type of market segmentation that works best for your needs:

1. Understand your current customers

Its important to first understand your existing customers before performing additional market analysis or segmentation because then you can identify any areas where you may be missing opportunities to connect with potential customers. In this step, analyze your current audience so you can identify any pattern they follow. You can use this information to figure out how youll go through market segmentation and research with other groups.

To understand your current customers:

2. Develop buyer personas

A buyer persona is a fictional person whos based on your ideal customer. Youll give this person a name, occupation and the characteristics you believe your ideal customer possesses. Buyer personas are helpful so you can envision who exactly youre trying to reach with your efforts, making it easier to select the market segments that fit your needs.

3. Create a list of potential target markets

Evaluate your buyer personas and identify any trends you notice. See which characteristics are more common among your personas and identify which segments you may be missing. Then, write out a list of the potential target markets that youd like to create based on your ideal customer.

4. Research your selected segments

Before implementing your selected market segments into your marketing efforts or product creation, perform some research to make sure theyre the best choices. You can research your competition, perform some market analysis and contact your target audience based on your segmentation selections to test your theory. Some other ways to perform research on your selected segments include:

The research you do in this step can help you determine if youve selected the best market segment and if you need to narrow it any further.

5. Test your strategy

This final step involves using a subgroup of your segment to test your assumptions about your market and ideal customers. To do this, you may create a beta environment for a select group of potential customers, create a small crowdfunding website or perform A/B testing between two groups.

Tips for market segmentation

Follow these tips to create an effective market segmentation:

FAQ

What are the 5 marketing segments?

There are many ways to segment markets to find the right target audience. Five ways to segment markets include demographic, psychographic, behavioral, geographic, and firmographic segmentation.

What are the 7 market segments?

Market Segmentation: 7 Bases for Market Segmentation | Marketing Management
  • Geographic Segmentation: …
  • Demographic Segmentation: …
  • Psychographic Segmentation: …
  • Behavioristic Segmentation: …
  • Volume Segmentation: …
  • Product-space Segmentation: …
  • Benefit Segmentation:

What are the 8 market segments?

Read this article to learn about the eight important bases for segmentation of market, i.e., (1) Geographic Segmentation, (2) Demographic Segment, (3) Economic Segmentation, (4) Psychological/Psychographic Segmentation, (5) Sociocultural Segmentation, (6) Use Related Segmentation, (7) Benefits Segmentation, and (8) …

What are the 3 segmentation consumer markets?

There are three broad groups of consumer segmentation criteria: Behavioral, Psychographic and Profile variables.

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