Market Segmentation is a marketing term that refers to aggregating prospective buyers into segments or groups with common needs and who respond similarly to a marketing action. Let’s learn more about what is market segmentation and its role in marketing.
What is Market Segmentation?
Market segmentation is a marketing strategy that involves dividing a market into distinct and homogeneous groups of consumers who share similar needs, characteristics, or behaviors.
The purpose of segmentation is to tailor marketing efforts to better meet the specific requirements of each segment, maximizing the effectiveness of marketing campaigns and product/service offerings.
By recognizing and understanding the diversity within a market, businesses can customize their approaches and resources to target specific customer groups more efficiently.
Meaning of Market Segmentation
- Segmentation means dividing your target audience into specific markets based on traits.
- Effective segmenting supports marketing efforts and helps you understand your audience’s values.
Definition of Market Segmentation
Market Segmentation can be defined as the process of dividing a broad target market into smaller, more specifically defined groups.
Market Segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments each of which tends to be homogeneous in all significant aspects. – William J. Stanton
Market Segmentation is the sub-dividing of a market into a homogeneous subset of consumers where any subset may conceivably be selected as a market target to be reached with a distinct market mix. – Philip Kotler
Objectives of Market Segmentation
The objectives of market segmentation revolve around understanding and addressing the diverse needs of different customer groups more effectively.
By breaking down a larger and more heterogeneous market into smaller, more manageable segments, businesses can tailor their marketing strategies to specific audiences.
The primary objectives of market segmentation include:
- Identifying Target Audiences
- Understanding Customer Needs
- Tailoring Marketing Messages
- Optimizing Resource Allocation
- Enhancing Product Development
- Improving Customer Satisfaction
- Increasing Competitiveness
- Adapting Pricing Strategies
- Facilitating Communication Channels
- Facilitating Distribution Strategies
- Measuring and Evaluating Performance
Importance of Market Segmentation
Market segmentation is crucial for businesses and marketers as it provides a structured approach to understanding and addressing the diverse needs of different customer groups.
The importance of market segmentation can be highlighted in various aspects of marketing and business strategy:
- Better Understanding of Customers
- Customized Marketing Strategies
- Resource Optimization
- Product Development and Innovation
- Enhanced Customer Satisfaction
- Competitive Advantage
- Effective Communication
- Adaptation of Pricing Strategies
- Strategic Decision-Making
- Market Expansion Opportunities
- Risk Mitigation
Types of Market Segmentation
Here are four common types of market segmentation:
- Demographic Segmentation
- Geographic Segmentation
- Psychographic Segmentation
- Behavioral Segmentation
Dividing the market based on demographic factors such as age, gender, income, education, marital status, and family size.
It Helps businesses tailor their products, services, and marketing messages to specific demographic groups.
For example, a company might target a product specifically to young, urban professionals or families with children.
Demographic Segmentation includes:
- City Size
Segments the market based on geographic criteria such as location, region, climate, population density, and urban/rural areas.
Recognizes that consumer needs and preferences can vary based on where they are located. Businesses can adapt their strategies to match the characteristics of different geographic regions.
Geographic Segmentation includes:
- Marital Status
- Family Size
- Family Life-cycle
Classifying consumers based on lifestyle, personality, values, attitudes, interests, and behaviors.
Aims to understand the psychological and emotional factors influencing purchasing decisions. Companies can create marketing messages that resonate with specific psychographic profiles, targeting consumers with similar lifestyles or values.
Psychographic Segmentation includes:
- Social class
Groups consumers based on their behaviors, usage patterns, brand loyalty, and decision-making processes.
Helps in tailoring marketing strategies to match specific consumer behaviors.
For example, companies might target frequent buyers differently from occasional buyers or focus on consumers who have shown loyalty to their brand.
These four types of market segmentation provide businesses with frameworks to better understand and connect with their target audiences. It allows for more targeted and effective marketing strategies, as well as the development of products and services that are more aligned with the needs and preferences of specific customer segments.
Behavioral Segmentation includes:
- Benefits such as
- Users Status
- Potential User
- First Time User
- Regular User
- Ex USer
- Buyer Readiness Stage
- Intended to buy
- User Rate
- Loyalty Status
- Hardcore loyal
- Softcore loyal