TOP 4 Types Of Market Segmentation
Updated: Dec 22, 2022
In order to achieve success in targeting customers better, there is need for research, which can be carried out through any of the top 4 types of market segmentation or often a blend of these types of segmentation.
Note the common basis of market segmentation is the practice of dividing the prospective audience into separate groups based on their common needs, values, behaviour and traits such as gender, age or location, which will allow for the determination of the purchasing habits of each of these groups. Below is an outline of the top 4 types of market segmentation that are most commonly used by businesses.
1. Demographic segmentation
Demographic segmentation is focused on who the customer is and can be used for either B2C (business to consumer) or B2B (business to business). Firstly, for B2C it’s about individual person, so their age, gender, household income, family status and occupation. While 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.
The demographic traits can be used individually or grouped together such as single middle aged wealthy females or young wealthy professionals. For consumers, businesses can target the different life stages of potential customers, so car brands target those that have just passed their driving test with inexpensive stylish small cars to more larger cars that are fuel efficient and dependable for an older audience to ferry their families around.
Another example is clothing companies like H&M or Old Navy cater to men, women and children but they have different advertising, labelling and styles for each of these groups.
2. Geographic segmentation
Geographic segmentation in its simplest form is selecting segment markets based on location, where marketing strategies can be formed for specific cities, regions or countries. This allows for different locations to be compared by their market size, volume of sales, marketing and by extension the cultural traits of that area, which is key in terms of what the population expectations are, the media they use and messaging. For example, the cultural differences between the Europe and the United States differ greatly, so a one size fits all approach cannot be used and is vitally important to cater to the local audience. McDonalds integrates the local popular delicacies into their menu for each of the regions that operate in.
3. Behavioural segmentation
Behavioural segmentation divides the whole audience based on their previous behaviour they displayed with a brand. These could be traits such as buying patterns, product knowledge, awareness of the brand, product rating and previous purchases.
If there is a stand out brand that you trust such as Apple, you’re more likely to have less reservations of any new products from that brand compared to a brand you are less aware of. This is the brand loyalty that businesses strive to achieve and some utilise loyalty reward schemes to encourage customers to regularly purchase their products, which are very popular amongst retailers. For example, Starbucks offers customers a free drink on their birthday, free pastry after a number of points and more.
4. Psychographic segmentation
Psychographic segmentation is carried out by dividing the audience by their personalities including traits such as values, interests, lifestyle and attitudes.
Out of the 4 segmentation types this is the hardest to achieve as people are more conscious of the answers they provide. Therefore, the best businesses can do is build buyer personas based on the information and data they receive and utilise relationship building exercises to draw out qualitative insights of customers.
To better understand barriers surrounding customers values and lifestyle choices, psychographic segmentation is used to anticipate these occurrences and help to develop an empathetic approach. In other words, is the business environmentally friendly, do they source from sweat shops that use child labour, is the food they use genetically modified and so on.
Hybrid versions of the segmentations mentioned above may also be used with combination of segmentation types such as demographic with geographic or psychographic with behavioural.
Other types of market segmentation
There are more types of market segmentation that can be applied, below are some examples:
Over time each generation will have experienced different expectations, preferences or customer service. Therefore, it’s a great way to get insights relatively quickly by segmenting people according to what generation they belong to as it already covers attributes at a qualitative and quantitative level for a better understanding of your customers.
Products or services can be developed to meet all types of customer budgets rather than alienating certain audiences due to their spending power. This will allow businesses to tap into a variety of markets to cater to each audience despite their level of income. For example, supermarkets have both premium and budget lines of the same product type.
Seasonal segmentation as the name suggests is aimed at events, times of the year or special holidays such as Christmas in order to increase sales of relevant products or services. The times of year could range from Valentine’s Day, Mother’s Day to gearing up for the summer holidays.
Market segmentation helps to understand customers thoughts, views, behaviour and actions, which are paramount in servicing their needs and wants. This should be the first port of call when developing marketing strategies and will be integral to each part of the plan.
To find out more about the importance of market segmentation check out this great blog post – Benefit of Market Segmentation.
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