Market segmentation is an integral part of a company's marketing strategy. It is the process of breaking down a larger target market into smaller, more homogeneous groups of customers that you can more efficiently market to. Both consumer-oriented and business-oriented companies should segment customers using one of several common approaches.
Demographic market segmentation is one of the most common approaches to segmenting markets. With this strategy, a company simply divides the larger market into groups based on several defined traits. Age, race, gender, marital status, occupation, education and income are among the commonly considered demographics segmentation traits. As a simple example of usage, a company that sells feminine hygiene products will include "female" in its description of its primary market segment.
Geographic segmentation is used by companies that sell products or service specific to a certain community, state, region, country or group of countries. Local businesses usually get no benefit in paying for national or international advertising. Companies that operate nationally can often save by delivering the same marketing messages to a national audience through one television, radio, magazine or newspaper ad. Global businesses typically decide whether to maintain a universal message or tailor messages to each country's marketplace.
Psychographics or lifestyle segmentation has become increasingly common as companies look to identify consumers based on interests and activities in lieu of demographics. As an example of this strategy's benefits, consider the lifestyle of an outdoor adventurer. Camping enthusiasts, for instance, typically have few consistent demographic traits. Campers are a diverse group. Thus, marketers would likely target a segment of outdoor hobbyists or campers for new camping equipment through outdoor programs or magazines.
Behavioral segmentation is based on user behaviors, including patterns of use, price sensitivity, brand loyalty and benefits sought. A company may have customers with a similar demographic makeup but distinct behavioral tendencies. Some may use the product daily, while others use it weekly or monthly. Higher-income earners may have more interest in higher-quality models versus low-cost models. This may prompt the provider to target higher-end products and services to one group and more value-oriented offerings to lower-income or budget-conscious customers.
Segmenting for business customers often has overlap but commonly includes geographic, customer type and behavior-based strategies. Geographic business segmentation is similar to that with consumer segmenting. Customer type segmenting may include business size or the nature of the business. Banks, for instance, often have different products for small versus large businesses. Behavioral segmenting is based on repeat or loyal customers versus one-time users.
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