Market Segmentation

• Markets consists of buyers and buyers differ in one

or more ways.

• They may differ in their wants, resources,

locations, buying attitudes and buying practices.

• Through market segmentation, companies divide

large, heterogeneous markets into smaller segments
that can be reached more efficiently and effectively
with products and services that match their
unique needs.
• At its core, market segmentation is the practice
of dividing the target market into approachable groups.
Market segmentation creates subsets of a market based
on demographics, needs, priorities, common interests,
and other psychographic or behavioral criteria used to
better understand the target audience.

• By understanding your market segments, companies can

leverage this targeting in product, sales, and marketing
strategies. Market segments can power the product
developmental cycles by informing how you create
product offerings for different segments like men vs.
women or high income vs. low income.
 Benefits of Market Segmentation
• Stronger marketing messages: Brands no longer have to be generic and
vague – they can speak directly to a specific group of people in ways they
can relate to, because they understand their characteristics, wants, and
needs.

• Targeted digital advertising: Market segmentation helps the brands to

understand and define their audience’s characteristics, so they can direct
the marketing efforts to specific ages, locations, buying habits, interests
etc.
• Developing effective marketing strategies: Knowing the target audience
gives brands a head start about what methods, tactics and solutions they
will be most responsive to.
• Better response rates and lower acquisition costs: These will result from
creating the marketing communications both in ad messaging and
advanced targeting on digital platforms like Facebook and Google using
identified segmentation.
• Attracting the right customers: Market segmentation helps brands to
create targeted, clear and direct messaging that attracts the people they
want to buy from them.
• Increasing brand loyalty: when customers feel understood, uniquely well
served and trusting, they are more likely to stock with the brand.
• Differentiating your brand from the competition: More specific, personal
messaging makes your brand stand out.
• Identifying niche markets: segmentation can uncover not only
underserved markets, but also new ways of serving existing markets –
opportunities which can be used to grow the brand.
• Driving growth: You can encourage customers to buy from you again, or
trade up from a lower-priced product or service.
• Enhanced profits: Different customers have different disposable incomes;
prices can be set according to how much they are willing to spend.
Knowing this can ensure you don’t over (or under) sell yourself.
• Product development: You’ll be able to design with the needs of your
customers top of mind, and develop different products that cater to your
different customer base areas.
How to start with segmentation
There are five primary steps to segmentation:

• Define your market: Is there a need for your products

and services? Is the market large or small? Where does
your brand sit in the current marketplace?

• Segment your market: Decide which of the five criteria

(demographic/firmographic, psychographic, geographic
or behavior) you want to use to segment your market.
You don’t need to stick to just one – in fact, most
brands use a combination – so experiment with each
one and find what works best.
• Understand your market: You do this by conducting
preliminary research surveys, focus groups, polls, etc. Ask
questions that relate to the segments you have chosen, and
use a combination of quantitative (tickable/selectable boxes)
and qualitative (open-ended for open text responses)
questions.

• Create your customer segments: Analyze the responses from

your research to highlight which customer segments are most
relevant to your brand.

• Test your marketing strategy: Once you have interpreted

your responses, test your findings on your target market,
using conversion tracking to see how effective it is. And keep
testing. If uptake is disappointing, relook at your segments or
your research methods.
There is no single way to segment a market. A
marketer has to try different segmentation variables,
alone and in combination, to find the best way to
view the market structure. The chart shows the major
variables that might be used in segmenting consumer
markets
–Geographic segmentation
divides a target market by
location so marketers can
better serve customers in a
particular area. This type of
market segmentation is based
on the geographic units
themselves (countries, states,
cities, etc.), but also on various
geographic factors, such as
climate, cultural
preferences, populations, &
more.
 Geographic segmentation
Geographic segmentation divides
a target market by location so
marketers can better serve
customers in a particular area.
This type of market
segmentation is based on the
geographic units themselves
(countries, states, cities, etc.), but
also on various geographic
factors, such as climate, cultural
preferences, populations, & more.
–Demographic
segmentation is market
segmentation according to
age, race, religion, gender,
family size, ethnicity,
income, and education.
Demographics can be
segmented into several
markets to help an
organization target its
consumers more accurately.
With this type of
segmentation, an organization
can categorize the needs of
consumers.
• Psychographic segmentation is when
you break your customer groups
down into units as it pertains to their
beliefs, values, and reasons for being.
• People have different interests,
attitudes, and traits. It is how
marketers learn to position their
products so that compatible
customers can “discover” them. It’s
how brands find the right
customer match based on customer
attitudes and lifestyles.
–Behavioral segmentation is
the process of sorting and
grouping customers based on
behaviors they exhibit. These
behaviors include the types of
products and content they
consume, and the pace of
their interactions with an app,
website, or business.