What is Market Segmentation? Basis, Types & Examples

Marketing segmentation is a tool which is commonly used by established business firms. It involves dividing a broad target market, the division can be into the subsets of businesses, consumers, or countries that have. Usually these units are perceived to have common interests, needs and priorities. After this comes the designing and implementing stage. It is a strategy which aims to target and divide the market.

What is the role of market segmentation?

Market Segmentation is generally done:
  • to identify and further define the target customers
  • provide supporting data for marketing plan elements
  • develop product differentiation
  • to help in positioning of the product better

Types of market segmentation

We will now see a few common types of segments:

1) Geographic segmentation

Geography includes nations, states, regions, countries, cities, neighbourhoods, or postal codes based on which a marketer can segment a market. Example: In hot regions, market demand would be of cotton clothing and in the winter or cold regions, the demand of woollen clothes will be higher.
Geographic segmentation is important It is a step to serving international markets which is followed by other types of segmentation. A small business has few targets, for example customers from the local neighbourhood. On the other hand, the target of a large departmental store would also be large.

2) Demographic segmentation

Demography includes age, gender, generation, religion, occupation and education level and segmentation done on this basis is called as demographic segmentation. Demographic segmentation divides markets into different life stage groups and allows for messages to be tailored accordingly. Segmentation according to demography is based on variables such as or according to perceived benefits which a product or service may provide. Benefits may be perceived differently depending on a consumer's stage in the life cycle.

3) Behavioural segmentation

This segment usually focuses on dividing the consumers on the basis of their behaviour . This behavioural aspect may include their knowledge of, attitude towards, usage rate, response, loyalty status, and readiness stage to a product.
It is important to know the behaviour of your customers, their demand, desires and expectations before entering the market. Behavioural segmentation divides buyers into segments based on their
-response/ reaction to a product.

4) Psycho-graphic segmentation

This is also called as segmentation on the basis of lifestyle. Psychology of the people play an important role in their buying decision and hence segmenting the market on this basis is important. Market researchers have found that the activities, interests, and opinions of customers are a key ingredient for marketing according to a specific need. We can see that Mass media has a predominant influence and effect on psychographic segmentation.
Psycho-graphics are very important to segmentation. They identify the personal activities and targeted lifestyle and then go ahead with their project attempt.

5) Segmentation by benefits

Segmentation can take place based on the individual benefits. It is set according to the benefits sought by the consumer or customer. It mainly focuses on the value or experience a customer derives from the product. This is a good way to segment the market because it helps the marketer know about the expectations of the prospective consumers.

6) Cultural segmentation

Cultural segmentation is a type of segmentation wherein the market is segmented according to cultural origin. Culture is an integral part of every human, and so it becomes a strong dimension of consumer behaviour and is used to enhance customer insight.
Cultural segmentation can also be found out on the basis of geography like state, region, suburb and neighbourhood.
For example: Indian culture is very different from American cultural, in all the aspects.
For instance, in India, sarees are considered to be the traditional outfit and thus here is a big market for sarees which may not be the case in other parts of the world and hence we can identify that India is a big market for sarees.
Talking about the different festivals, we have variety of sweets and confectioneries which have high demand during particular festivals and so has a big market at that point of time in the places where a festival holds importance. In countries where there is majority of Christian population, we find chocolates and chocolate products to be a big part of the eatables during Thanksgiving and Easter. This is how culture plays an important and integral role when it comes to knowing your customers and anticipating their requirement ahead of time so that they can be targeted based on specific needs and wants.

7) Multi-variable account segmentation

This is a method of segmentation which uses many variables using to develop a rich profile of a target group of customers. This might include consumers, government, media or investors.
There can be multiple ways to build a segment and multiple combinations of factors can also be used to build one. However the key is to make manageable segments, such that the number of segments is workable and the kind of requirements within a segment are neither too diverse (as a result of low number of segments) nor too similar (as a result of high number of segments).

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