What is market segmentation
What is Market Segmentation, Objectives, and Types of Segmentation
Market segmentation, as its name suggests, is the division of the market into parts (or segments) that are definable, accessible, profitable, and actionable due to their growth potential.
It is done because companies cannot target an entire market, but rather specific segments of the population. This is mainly for cost reasons. Can you imagine how much it might cost to reach every corner of the planet with your product? Instead, it’s much more profitable to reach small groups of people.
Market segments are determined through different strategies of framing the target audience based on their personal, socioeconomic, commercial characteristics, etc. Therefore, having a buyer persona profile (customer archetype) can favor the segmentation for each product or service.
Effective market segmentation is essential if you want to attract the right audience.
Objective of Market Segmentation
For everyone working in marketing, it’s a well-known fact that no customer is identical to another.
They can differ based on their nature, habits, behavior, age, professions, likes, dislikes, and general preferences. Therefore, the main objective of market segmentation is to find the differences among consumers, so that at the same time homogeneous groups of buyers can be determined.
Philip Kotler defines the objectives of market segmentation in the following words:
The purpose of market segmentation is to determine the differences between buyers, so as to generate consequences, marketing among them.
Objectives of Market Segmentation
- Group customers based on their common characteristics such as nature, behavior, income, age, education, profession, religion.
- Identify the priority needs of the target market.
- Identify areas where customers can be created and market areas that can be expanded.
- Determine the goal of the marketing strategy and the organization’s objectives.
Elements of the Market Segmentation Process
- Definable: While segmentation implies “a group of people”, they must have similar characteristics.
- Profitable: The questions that fit into this classification regarding the population are whether it is large enough to be profitable and to direct campaigns appropriately. If the number of people can potentially increase, so too can the sales and profits of the product.
- Stable or enduring over time: It should have characteristics that are not variable in the short or medium term.
- Accessible: To define a marketing strategy with a mix of tools and/or techniques that can reach the largest number of segmented people with the resources available to the company.
- Homogeneous and responds similarly to marketing strategies: It is necessary to understand the characteristics needed to address that segment with reasonable and optimizable effort, cost, and time.
Market segmentation can be carried out in multiple ways that are not exclusive to each other. As long as there is an adequate study of the market, the essential characteristics of the market segment can be defined.
Types of Market Segmentation
Geographic segmentation is perhaps the simplest to perform, taking into account the location and geographic needs of the people grouped in this classification. This can determine the focus of marketing strategies for specific places according to the company’s resources.
Marketing specialists often segment markets based on geography. They group industries that concentrate in geographical areas.
Just as some companies are located near natural resources, sometimes it is necessary to be near customers and pioneers of some industries to conveniently provide them with supplies.
Geographic segmentation should be considered when the dependence on some services, quality of transport, distribution structure, and capabilities to expand operations are important.
Examples of Geographic Segmentation
- Region: by continent, country, state, or even neighborhood
- Size of the metropolitan area: Segmentation based on population size
- Population density
This is the market segmentation that divides larger markets into smaller groups based on demographic variables such as: income, age and life cycles, gender, education profession, family, generation, or social class. Demography is the most common way to segment the mass consumer market since the metrics and marketing objectives associated with demographic variables are relatively easy to measure.
Companies usually know the general characteristics of their market, but in this case, it is important to specify which are the most relevant for the product.
This is the type of segmentation that Facebook and Instagram allow when you are doing advertising. Here is a tutorial on how to make effective advertising on Instagram and Facebook.
Examples of Socio-Demographic Segmentation
- Family size
- Family life cycle stage
- Education level
- Social class
This market segmentation base is widely used by marketing specialists. Important aspects of psychographic segmentation include lifestyle, social class, cultural values, consumer personality, individual lifestyle, social class, and culture.
It is a segmentation based on all those qualitative characteristics of people such as their behaviors, tastes, opinions, attitudes, and desires.
Examples of Psychographic Segmentation
In social media, you can segment by interests when you are advertising online, for example
This type of market segmentation, although it seems similar to the previous one, is actually mostly used based on the user’s behavior in the conversion funnel. For example, those who did not want to register their data but did interact with other content on the page, or people who backed out at the last minute from making a purchase on the website, etc.
It is the type of segmentation used in digital marketing when you are doing remarketing and show specific ads to users depending on what pages they have viewed on your site or how they have interacted with social media.
Examples of Behavioral Segmentation
- Benefits sought
- Usage rate or percentage
- Brand loyalty
- User status. For example, active or inactive user.
- Readiness to purchase
- Usage occasions
Another way to segment behavior on the Internet is by using the correct keywords in your messages and Google Ads.
Some authors define market segmentation types differently.
Market segmentation is of great importance for the design of digital marketing strategies, as it favors the direction of advertising guidelines to a specific audience and the optimization of the sales process to achieve the established commercial goals.
Finally, this process allows both marketing specialists and salespeople to personalize their services or products based on the customers’ capacity, location, and individual characteristics.
If you are looking for an agency to help segment your market and understand your consumer, contact Dazzet, a marketing agency.
Juan Esteban Yepes