Market Segmentation - Definition, Types and Examples

Market segmentation is the process of dividing markets of potential customers based on different characteristics. It is being used by marketing professionals since late 1990’s. It is effective tool to reach target customers. Market segmentation makes it easier for marketers to personalize their campaigns and focus on what’s necessary. By splitting up larger population, the marketers can easily and accurately identify trends and opportunities. When dividing markets, the researchers generally seek for common characteristics of consumers such needs, interests and lifestyle.  Market segmentation helps to reduce costs, retain and target more customers.

Types of Market Segmentation

If marketing professionals split up a market based on key features and make a marketing plan based on that information, there will be a high chance of success than if they create a generic campaign and implement it across all segments.  So, before you promote a product, you have to plan so that you can reach the target audience. For this you need to understand the four different types of market segmentation which are explained below.   Each type of market segmentation determines the strategy a firm follows to promote, distribute and position its product in the market.

Demographic Segmentation

Under demographic segmentation the group of consumers is divided on the basis of variables such as age, gender, income, occupation, educational background, language, marital status, religion, nationality and so on. Demographic segmentation helps an organization to target its consumers more accurately.  For example, daily, we see some brands are targeted only to woman while others only to men. Some brands are targeted only to married while others only to unmarried. Similarly, some products are marketed for lower income class while others are meant for higher income class. This type of segmentation is quite common across the industry. Because it is easy and effective method of segmentation. The information about consumers can easily be collected from social media plate forms and many other sources.

Behavioral Segmentation

Behavioral segmentation splits up population on the basis of their knowledge, usage, behavior, loyalty, occasions and purchase pattern. For instance, suppose there is two persons. One person wants to look beautiful, he would buy a beauty cream and the other person who wants just freshness, he would buy a fragrant soap.  Another example of Blackberry mobile phone which was launched for business group whereas Samsung was launched for users who like android and free applications. Apple was launched for those who want to secure their data and be a part of unique.  Based on occasion, the purchasing patterns of people are completely different as compared to purchasing patterns in normal days. People buy more products in the occasion of festivals. So, behavioral segmentation is the best starting point for marketers. Because if marketers know the purchasing behavior of consumers, they can develop a more targeted approach. 

Geographic Segmentation

This is the most common type of market segmentation. Here the group of people is divided on the basis of their geography. The needs of people living in one location may be different from those living in another location. For example, in cold countries a company might be marketing heaters whereas in hot countries the same company might be marketing air conditions. Geographic segmentation may be in the form of urban versus rural, cold areas versus warm areas, north versus south, seacoasts versus interior, national market versus foreign and so on.    Geographic segmentation is useful for both small and large businesses. The large businesses may target their audience in foreign market while the small businesses may target their audience in local markets.   Understanding geographic regions of potential customers may help determine where to advertise, sell and expand your business.

Psycho-graphic Segmentation

Psycho-graphic segmentation is based on lifestyle of people. At this stage qualitative research (interview) is conducted to know activities, interests and opinions of people.  When you collect data from your potential customers about their activities, interests and opinions, then you can develop products and services that are tailored to their needs. But it should also be considered that there is impacts of social class on the purchase ability of people and as well as their likes and dislikes. Mostly people buy things that suit their class. A person from upper class will buy stylish and costly products. He may buy BMW, but a person from lower class cannot afford it even he is of the same age group and he also likes BMW.