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  • Writer's pictureAnpar Research

Benefit Of Market Segmentation: 11 Advantages And 4 Types

Updated: Feb 23

An illustration of the benefit of market segmentation with a focus on a target group from the total audience

You may want to get to know your audience better and target certain customers towards specific product or service offerings then this is where you will see the benefit of market segmentation.

Market segmentation is the practice of dividing the prospective audience into separate groups based on their common needs, wants, behaviour, values and traits such as age, gender or location, which will allow you to determine the purchasing habits of each of these groups.

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11 top benefits of market segmentation

1. Allows businesses to be selective

Businesses can be selective and go after parts of the market that will be profitable for them. This is probably the most important aspect of segmentation in deciding who you want to do business with.

2. Shaping market opportunities

In doing market segmentation will allow you to identify market opportunities by comparing competitor offerings to the needs of each of the segment groups that you are looking into.

3. Tailoring a brand's offering

By finding out what each of the segment’s needs are and what are they likely to buy to fulfil these requirements, you can tailor your product and service offerings to particular segments.

4. Competitive advantage

Businesses may have a competitive advantage over others in serving certain parts of the market. This could be a specialism rather than supplying to a mass market or maybe a pricing and time advantage that comes with it.

5. Innovation

Where there are gaps in the market where segments needs are not met, this will help drive innovation in plugging these gaps to fulfil these needs.

6. Marketing cut through

Marketing is more likely to stand out with advertising messages that resonate with potential customers through the relevant channels.

7. Customise marketing and promotions

You can tailor you marketing efforts as you will have more of a clearer idea of the characteristics, needs and channels used to respond to particular segments.

8. Scheduling marketing efforts

Segmentation will allow businesses to be better prepared in timing their promotions to maximise profits at the highest peaks in segments needs. For example, this could be a seasonal thing or tie in around a big event.

9. Settle on a pricing strategy

10. Improve service to customers

Segmentation can assist in customer satisfaction and retention by identifying the needs of the customers where marketing efforts are focused on in providing reasons to buy and delivering a better service to your target audience.

11. Improved efficiency of resources

By customising marketing efforts towards particular segments will bring on more efficient use of resources and allow for budgets to be assigned to certain segments especially if budgets are limited. This will result in a better return of investment rather than spreading thinly across a mass audience.

Disadvantages of market segmentation

It’s best to bear in mind some limitations of market segmentation before running a segmentation survey and checking your social media analytics.

Segments maybe too small

Segments maybe too small if certain segments are too small then they will not generate enough turnover for it to be a viable business proposition.

Consumers may be misinterpreted

Consumers may be misinterpreted meaning the right product to the wrong customer. So, it’s best to be careful that the product or service are closely aligned to the customer’s needs and wants.

There are too many brands

You need to check out the competition along with the segmentation as you may go into a segment that is fully saturated with too many brands to compete with, so higher costs and lower profit margins.

4 types of market segmentation

There are 4 main types of market segmentation that are most commonly used:

1. Demographic segmentation – is focused who the customer is and can be used for either B2B (business to business) or B2C (business to consumer). Firstly, for B2B it’s more about business traits such as the industry sector they are in, estimated turnover, number of employees and the role of the participant. While for B2C it’s about individual person, so their age, gender, household income, family status and occupation.

2. Geographic segmentation – in its simplest form of choosing segment markets based on location, where marketing strategies can be formed for specific countries, regions or cities.

3. Behavioural segmentation – this divides the whole of your audience based on their previous behaviour they displayed with your brand. These could be traits such as buying patterns, product knowledge, awareness of your business, product rating and previous purchases.

4. Psychographic segmentation – this is done by dividing the audience by their personalities including traits in this segmentation such as lifestyle, values, interests and attitudes.

Also, hybrid versions of segmentation may be used with combination of segmentation types such as geographic with demographic or psychographic with behavioural.

Key take out

So, market segmentation is important to fully understand your customers and what drives them to make certain purchases. In doing so, you can move forward to help further define your business goals and how best to structure your marketing campaigns and product offerings around your target segments.

Therefore, to apply market segmentation, ensure the segmentation goals are set, recognise potential customer segments within your audience via data collection (social media analytics, surveys or with qualitative research) and focus on a strategy based on one or two segments first in moving forward with a launch plan to reach the right customers.



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