Market segmentation is a strategy that businesses use to ensure that their products or services are properly targeting the right consumer base. Experts say that market segmentation, when applied correctly, is mainly about understanding customer needs, and therefore, how they decide between one product (or offer) and another.
The basic concept behind market segmentation is that there are consumers who may want the same product but have different needs, and companies are able to focus on the needs of each individual through employing different strategies.
Companies that use market segmentation strategies are essentially able to divide a total market into individual market groups and focus on targeting these groups.
Market segmentation simplifies the decision-making process for developing products, services, and marketing messages. It reveals that many of the theoretically possible combinations of product features, service needs, or consumer attitudes are actually very rare in the marketplace
There are four major market segmentation strategies: geographic, demographic, psychographic, and behavioral.
Geographic market segmentation
There are cultural differences between people in different geographic locations – marketers can tailor their strategies according to these cultural differences.
Geographical market segmentation makes divisions based on geographical units, including:
- continents
- nations
- regions
- neighborhoods
Demographic market segmentation
Marketing experts can also use demographic variables.
Basing strategies on the characteristics of consumers gives companies a better opportunity to meet the needs and wants of specific people in the market.
Demographic variables include:
- gender
- age
- income
- socio-economic status
- religion
- race
Psychographic segmentation
Psycho-graphic segmentation is based on the belief that a person’s personality can influence what products they are in interested in.
According to Bournemouth University, UK, psychographic segmentation works well for ‘image-based products’ such as cosmetics, jewelry, clothing, cigarettes, alcohol, mobile phones, etc.
Psychographic segmentation divides markets based on:
- personality
- lifestyle
- values