Market segmentation is a marketing strategy that involves dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics. The overall aim of segmentation is to identify high yield segments, which are those segments that are likely to be the most profitable or have growth potential, so that these can be selected for special attention and become target markets. Researchers typically look for common characteristics such as shared needs, common interests, similar lifestyles, or even similar demographic profiles when dividing or segmenting markets.
Market segmentation can be done in several ways, such as geographically, demographically, or behaviorally. For example, business-to-business (B2B) sellers might segment the market into different types of businesses or countries, while business-to-consumer (B2C) sellers might segment the market into demographic segments, such as lifestyle, behavior, or income.
Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market. With risk minimized and clarity about the marketing and delivery of a product heightened, a company can then focus its resources on efforts that are most likely to be successful. Companies who properly segment their market enjoy significant advantages, such as stronger marketing, more effective and efficient advertising and sales, and a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.
There are four main types of market segmentation: demographic, geographic, psychographic, and behavioral. Demographic segmentation divides the market based on characteristics such as age, gender, income, and education level. Geographic segmentation divides the market based on location, such as country, region, or city. Psychographic segmentation divides the market based on personality traits, values, attitudes, interests, and lifestyles. Behavioral segmentation divides the market based on consumer behavior, such as usage rate, brand loyalty, and benefits sought.
In summary, market segmentation is a marketing strategy that involves dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics. It helps companies minimize risk, focus their resources on efforts that are most likely to be successful, and enjoy significant advantages. There are four main types of market segmentation: demographic, geographic, psychographic, and behavioral.
