Market Segmentation Guidelines
In the dynamic world of business, understanding your customers is paramount. One effective way to achieve this is through market segmentation, a strategy that divides the market into smaller groups of consumers with shared characteristics. This article is part of a comprehensive series on Segmentation and will delve into the various approaches to market segmentation.
Market segmentation can be based on several criteria, each providing unique insights into consumer behaviour.
Demographic Segmentation is one such method, which divides the market based on observable characteristics such as age, gender, income, education, occupation, marital status, and geographic location. These traits help identify groups with shared demographic profiles and often correlate with buying behaviour.
Psychographic Segmentation goes a step further, segmenting by attitudes, values, interests, personality traits, lifestyle, and opinions to understand psychological and behavioural motivations behind purchasing decisions.
Behavioural Segmentation is based on customers' behaviours, including usage patterns, brand loyalty, purchase frequency, benefits sought, and product usage occasions. This method reflects how consumers interact with products or services.
Geographic Segmentation groups customers by physical location, such as country, region, climate, culture, language, or urban vs. rural settings. This is important for regional marketing and product localization.
Beyond these, other important segmentation criteria include Firmographic Segmentation (for business customers), Technographic Segmentation, Generational or Life-Stage Segmentation, and Transactional Segmentation. These criteria can be combined for more refined segments, such as targeting “urban Millennials who are fitness enthusiasts and recent buyers of sports apparel,” merging geographic, demographic, psychographic, and behavioural characteristics.
The purchase behaviour of customers or the market can be determined once the type of demand pattern is known. There are three types of demand patterns: homogeneous, clustered, and diffused. For example, soap, shampoo, detergent, and food are examples of homogeneous demand products, while the difference between a fancy restaurant and a fast food chain is an example of clustered demand. The cosmetic market, with its large variety of customer preferences, is an example of a market with diffused demand.
Analyzing the needs, wants, and demands of customers indicates the uniformity or diversity of demand for a product. Demand pattern analysis is crucial for market segmentation. Once the demand pattern and customer profiling are ready, the market segment can be targeted, which can aid in positioning.
By employing these segmentation approaches, businesses can develop tailored marketing strategies that increase customer relevance and engagement. A video by Marketing91 is available on Market Segmentation for a more comprehensive understanding.
[1] Kaplan, A. M., & Haenlein, M. (2010). Users of the world, unite! The challenges and opportunities of social media. Business Horizons, 53(1), 59-68.
[3] Kotler, P., & Armstrong, G. (2016). Principles of marketing (14th ed.). Pearson Education.
Investing in a solid understanding of market segmentation is crucial for business success, as it can lead to targeted and engaging marketing strategies. By using methods such as demographic, psychographic, behavioral, geographic, firmographic, technographic, generational or life-stage, and transactional segmentation, businesses can gain unique insights into customer behavior, preferences, and motivations. Understanding the purchase behavior of customers and the demand pattern for a product is essential for effective market segmentation, which allows businesses to position themselves more effectively and increase their relevance.
