Market Segmentation

Market Segmentation Overview:

  • Market segmentation is the process of dividing a broad consumer or business market into sub-groups of consumers or segments based on some type of shared characteristics.

  • These shared characteristics could be demographic (age, gender, income, family size), geographic (region, city, country), psychographic (lifestyle, values, personality) or behavioural (brand loyalty, usage rate).

  • The main reason businesses use market segmentation is to pinpoint specific demographics and target them with appropriate marketing techniques. This allows companies to efficiently allocate their resources and make better strategic decisions.

Benefits of Market Segmentation:

  • It allows businesses to target their products or services to the right people, potentially leading to increased sales.

  • Helps in understanding customer needs more accurately and thus can create value added products/services.

  • It can help in developing and improving the marketing mix (the 4 P’s: Product, Price, Place, Promotion) significantly.

  • Reduces risk in deciding where, when, how, and to whom a product or service will be marketed.

  • It encourages the development of new goods that meet your consumers’ specific needs.

Techniques for Market Segmentation:

  • Demographic segmentation: This is the most common form of segmentation that divides the market into groups based on variables such as age, gender, income, occupation, etc.

  • Geographic segmentation: This divides the market into different geographical units like nations, regions, cities, etc.

  • Psychographic segmentation: Here, the groups are divided on the basis of lifestyle, personality traits, values, attitudes, and interests of customers.

  • Behavioural segmentation: This divides customers into groups on the basis of their knowledge, attitudes, usage, or responses to products.

Remember, effective market segmentation should be sustainable, accessible, measurable, and differentiable. Markets need to be segmented in a way that is profitable for the business; otherwise, there might be no advantage to segmenting the market.

Most importantly, businesses must remember to review market segments regularly. As society and individuals change, so too can market segments. Regular review allows businesses to keep their marketing efforts appropriate and effective.

Fixation on segmentation should not lead to ignoring the wider market. Even after successful segmentation, it’s important to consider the broader market whilst preparing the marketing strategies.

Finally, remember that product development should focus on the needs of the target market - what works for one segment may not work for another. Marketing efforts must be customised to appeal to specific segments in the market.