Market segmentation refers to the practice of dividing a consumer market into smaller subgroups that share certain characteristics. It is an application of market research which seeks to break down the market into segments to better understand the needs and wants of each subgroup. A business can then customize products or branding in a manner that attracts the different segments. The purpose of market segmentation is to optimize advertising, marketing, and sales. Being familiar with its target audience allows a business to develop marketing strategies that appeal to the audience. There are various types of segmentation, including geographic, demographic, psychographic, and behavioral segmentation, and the choice of market segmentation depends on the goals of a business.
One type of market segmentation is geographic segmentation, which groups people depending on where they live. This method uses physical location of consumers as the basis for division. A market can be grouped by nation, state, county, city, or state (Keller & Kotler, 2016). For instance, a clothing manufacturer may produce different clothing for different market segments based on location and with consideration of the prevailing weather conditions. The seller could market heavy cloths in colder regions and light cloth in regions with sunny weather. Geographic segmentation is helpful for a market where consumer needs vary by region.
A market can also be subdivided based demographic characteristics, such as age, income level, gender, religion, education level, nationality, marital status, and family size. An example is a food vendor who sells Halal meat products in a market that is identified as Muslim majority. Selling Halal products shows that the vendor understands the religion practiced by the market segment. Demographic segmentation is relatively simple to implement because it uses easily identifiable characteristics.
Another type of segmentation is psychographic segmentation, where the market is subdivided based on consumer qualities that drive buying decisions. Consumers in a segment share psychological characteristics, such as personality, values, beliefs, and opinions (Keller & Kotler, 2016). Psychographic segmentation may also consider a consumer’s interests and lifestyle. An example of this type of segmentation is a business marketing a certain type of car as a luxury vehicle to appeal to consumer segments that value prestige. Another example is a restaurant that sells products that are strictly organically grown, thereby targeting eco-conscious consumers. Psychographic segmentation is useful because it considers consumer qualities that actually influence purchasing.
Lastly, behavioral segmentation divides a market based on purchasing behaviors. This type of segmentation considers a customer’s knowledge, attitude, and use of product (Keller & Kotler, 2016). Consumers exhibit different behaviors that are associated with their buying decisions. For instance, purchases can be driven by an occasion such as holidays or specific events. During graduation season, a party planner may offer their services at discounted price. Similarly, a business may opt to run a promotion to reward loyal consumers to encourage continued purchases. Generally, behavioral segmentation focuses on the buying behaviors of consumers.
In summary, market segmentation is done to get a better understanding of the target market and how to appeal to various consumer groups. Viewing the market as different consumer groups with distinct characteristics allows a business to tailor its products or promotional methods to the identified consumer needs. It is important to note that although there are different types of market segmentation, they often overlap in real life. It is common practice for a business to utilize a mix of two or more methods of segmentation to achieve the best results.
Keller, K. L., & Kotler, P. (2016). Marketing management (15th ed.). Pearson Education.