Root out friction in every digital experience, super-charge conversion rates, and optimize digital self-service
Uncover insights from any interaction, deliver AI-powered agent coaching, and reduce cost to serve
Increase revenue and loyalty with real-time insights and recommendations delivered to teams on the ground
Know how your people feel and empower managers to improve employee engagement, productivity, and retention
Take action in the moments that matter most along the employee journey and drive bottom line growth
Whatever they’re are saying, wherever they’re saying it, know exactly what’s going on with your people
Get faster, richer insights with qual and quant tools that make powerful market research available to everyone
Run concept tests, pricing studies, prototyping + more with fast, powerful studies designed by UX research experts
Track your brand performance 24/7 and act quickly to respond to opportunities and challenges in your market
Explore the platform powering Experience Management
- Free Account
- For Digital
- For Customer Care
- For Human Resources
- For Researchers
- Financial Services
- All Industries
Popular Use Cases
- Customer Experience
- Employee Experience
- Employee Exit Interviews
- Net Promoter Score
- Voice of Customer
- Customer Success Hub
- Product Documentation
- Training & Certification
- XM Institute
- Popular Resources
- Customer Stories
- Market Research
- Artificial Intelligence
The annual gathering of the experience leaders at the world’s iconic brands building breakthrough business results, live in Salt Lake City.
- English/AU & NZ
- Español/América Latina
- Português Brasileiro
- REQUEST DEMO
- Experience Management
- Brand Experience
What is market segmentation?
The benefits of market segmentation, the basics of segmentation in marketing, types of market segmentation, how to get started with segmentation, market segmentation strategy, market segmentation use case examples, ensuring effective segments, common segmentation errors, qualtrics solutions for market segmentation, see how qualtrics strategic brand works, market segmentation: definition, types, benefits, & best practices.
21 min read Market segmentation helps you send the right message, every time, by efficiently targeting specific groups of consumers. Here’s how it works.
By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies . Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs. women or high income vs. low income.
Read on to understand why segmentation is important for growth and the types of market segmentation to use to maximize the benefits for your business.
Free eBook: How to drive profits with customer segmentation
Companies who properly segment their market enjoy significant advantages. According to a study by Bain & Company , 81% of executives found that segmentation was crucial for growing profits. Bain also found that organizations with great market segmentation strategies enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.
Other benefits include:
- Stronger marketing messages : You no longer have to be generic and vague – you can speak directly to a specific group of people in ways they can relate to, because you understand their characteristics, wants, and needs.
- Targeted digital advertising : Market segmentation helps you understand and define your audience’s characteristics, so you can direct your online marketing efforts to specific ages, locations, buying habits, interests etc.
- Developing effective marketing strategies : Knowing your target audience gives you a head start about what methods, tactics and solutions they will be most responsive to.
- Better response rates and lower acquisition costs : will result from creating your marketing communications both in ad messaging and advanced targeting on digital platforms like Facebook and Google using your segmentation.
- Attracting the right customers : targeted, clear, and direct messaging attracts the people you want to buy from you.
- Increasing brand loyalty : when customers feel understood, uniquely well served, and trusting, they are more likely to stick with your brand .
- Differentiating your brand from the competition : More specific, personal messaging makes your brand stand out .
- Identifying niche markets : segmentation can uncover not only underserved markets, but also new ways of serving existing markets – opportunities which can be used to grow your brand.
- Staying on message : As segmentation is so linear, it’s easy to stay on track with your marketing strategies, and not get distracted into less effective areas.
- Driving growth : You can encourage customers to buy from you again , or trade up from a lower-priced product or service.
- Enhanced profits : Different customers have different disposable incomes; prices can be set according to how much they are willing to spend . Knowing this can ensure you don’t oversell (or undersell) yourself.
- Product development : You’ll be able to design new products and services with the needs of your customers top of mind, and develop different products that cater to your different customer base areas.
Companies like American Express , Mercedes Benz , and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers.
Understanding segmentation starts with learning about the various ways you can segment your market as well as different types of market segmentation. There are four primary categories of segmentation, illustrated below.
With segmentation and targeting, you want to understand how your market will respond in a given situation, like what causes people to purchase your products. In many cases, a predictive model may be incorporated into the study so that you can group individuals within identified segments based on specific answers to survey questions .
Demographic segmentation sorts a market by elements such as age, education, household income, marital status, family size, race, gender, occupation, and nationality. The demographic approach is one of the simplest and most commonly used types of market segmentation because the products and services we buy, how we use those products, and how much we are willing to spend on them is most often based on demographic factors. It’s also seen as a simple method of predicting future behavior, because target audiences with similar characteristics often behave in similar ways.
How to start demographic segmentation
Demographic segmentation is often the easiest because the information is the most readily available. You can send surveys directly to customers to determine their demographic data, or use readily available third party data such as government census data to gather further information.
Geographic segmentation can be a subset of demographic segmentation, although it can also be a unique type of market segmentation in its own right. As its name suggests, it creates different target customer groups based on geographical boundaries. Because potential customers have needs, preferences, and interests that differ according to their geographies, understanding the climates and geographic regions of customer groups can help determine where to sell and advertise, as well as where to expand your business.
How to start geographic segmentation
Geographic segmentation data again can be solicited from customers through surveys or available third party market research data, or can be sourced from operational data such as IP addresses for website visitors.
Firmographic segmentation is similar to demographic segmentation, except that demographics look at individuals while firmographics look at organizations. Firmographic segmentation would consider things like company size, number of employees and would illustrate how addressing a small business would differ from addressing an enterprise corporation.
How to start firmographic segmentation
Firmographic segmentation data can be found in public listings for companies and information that the business makes available, as well as trade publications. Again, surveying existing and potential customers can help to build out this data.
Behavioral Segmentation divides markets by behaviors and decision-making patterns such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to purchase bottled body wash, while older consumer groups may lean towards soap bars. Segmenting markets based on purchase behaviors enables marketers to develop a more targeted approach, because you can focus on what you know they are looking for, and are therefore more likely to buy.
How to start behavioral segmentation
Of all the types of market segmentation, behavioral segmentation is likely best started with the information you have on an existing customer base. Though it can be bolstered by third party market research data, the information you already have on customer purchase and usage behavior will be the best predictor of future behavior.
Psychographic segmentation considers the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers. Large markets like the fitness market use psychographic segmentation when they sort their customers into categories of people who care about healthy living and exercise.
How to start psychographic segmentation
Pychographic segmentation relies on data provided by the consumers themselves. Though market research might provide insights on what particular segments are most likely to believe or prefer, psychographic segmentation is best completed with information direct from the source. You can use survey questions with a qualitative focus to help draw out insights in the customers’ own voice.
On-demand webinar: How to drive product design and profits with customer segmentation
There are five primary steps to all marketing segmentation strategies:
- Define your target market : Is there a need for your products and services? Is the market large or small? Where does your brand sit in the current marketplace compared to your competitors?
- Segment your market : Decide which of the five criteria you want to use to segment your market: demographic, firmographic, psychographic, geographic, or behavioral. You don’t need to stick to just one – in fact, most brands use a combination – so experiment with each one to figure out which combination works best for your needs.
- Understand your market : You do this by conducting preliminary research surveys, focus groups, polls , etc. Ask questions that relate to the segments you have chosen, and use a combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open text responses) questions.
- Create your customer segments : Analyze the responses from your research to highlight which customer segments are most relevant to your brand.
- Test your marketing strategy : Once you have interpreted your responses, test your findings by creating targeted marketing, advertising campaigns and more for your target market, using conversion tracking to see how effective it is. And keep testing. If uptake is disappointing, relook at your segments or your research methods and make appropriate changes.
Why should market segmentation be considered a strategy? A strategy is a considered plan that takes you from point A to point B in an effective and useful way. The market segmentation process is similar, as there will be times you need to revisit your market segments, such as:
In times of rapid change: A great example is how the Covid-19 pandemic forced a lot of businesses to rethink how they sell to customers. Businesses with physical stores looked at online ordering, while restaurant owners considered using food delivery services.
If your customers change, your market segmentation should as well, so you can understand clearly what your new customers need and want from you.
On a yearly basis: Market segments can change year over year as customers are affected by external factors that could alter their behavior and responses.
For example, natural disasters caused by global warming may impact whether a family chooses to stay living in an area prone to more of these events. On a larger scale, if your target customer segment moves away from one of your sales regions, you may want to consider re-focussing your sales activities in more populated areas.
At periodic times during the year: If you’ve explored your market and created market segments at one time of the year, the same market segments may have different characteristics in a different season. Seasonal segmentation may be necessary for better targeting.
For example, winter has several holidays, with Christmas being a huge influence on families. This holiday impacts your market segments’ buying habits, how they’ll behave (spending more than normal at this time than any other) and where they will travel (back home for the holidays). Knowing this information can help you predict and prepare for this period.
When considering updating your market segmentation strategy, consider these three areas:
- Acknowledge what has changed: Find out what has happened between one time period and another, and what have been the driving forces for that change. By understanding the reasons why your market is different, you can make key decisions on whether you want to change your approach or stay the course.
- Don’t wait to start planning: Businesses are always adapting to long-te r m trends , so refreshing market segmentation research puts you in a proactive place to tackle these changes head-on. Once you have your market segments, a good idea is to consider the long-term complications or risks associated with each segment, and forward-plan some time to discuss problem-solving if those issues arise.
- Go from “what” to “why” : Why did those driving forces come about? Why are there risks with your target market? At Qualtrics, we partner with companies to understand the different aspects of target markets that drive or slow success. You’ll have the internal data to understand what’s happening; we help unleash insight into why with advanced modeling techniques. This helps you get smart market segmentation that is predictive and actionable, making it easier for future research and long-term segment reporting.
Where can you use market segmentation in your business? We’ve collected some use case scenarios to help you see how market segmentation can be built out across several departments and activities:
Market and opportunity assessments
When your business wants to enter into a new market or look for growth opportunities, market segmentation can help you understand the sales potential. It can assist in breaking down your research, by aligning your findings to your target audience groups.
For example, When you’ve identified the threats and opportunities within a new market, you can apply your customer segment knowledge to the information to understand how target customers might respond to new ideas, products, or services.
Segmentation and targeting
If you have your entire market separated into different customer segments, then you have defined them by set criteria, like demographics, needs, priorities, common interests, or behavioral preferences .
With this information, you can target your products and services toward these market segments, making marketing messages and collateral that will resonate with that particular segment’s criteria.
Customer needs research
When you know a lot about your customers, you can understand where your business is connecting well with them and where there can be improvements.
Market segmentation can help with customer needs research (also known as habits and practices research) to deliver information about customer needs, preferences, and product or service usage. This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up.
If the product or service you’ve developed doesn’t solve a stated problem of your target audience or isn’t useful, then that product will have difficulty selling. When you know what each of your market segments cares about an/d how they live their lives, it’s easier to know what products will enrich or enhance their day-to-day activities.
Use market segmentation to understand your customers clearly , so that you can save time and money developing products and services that your customers will want to purchase.
Marketing and content teams will value having detailed information for each customer segment, as this allows them to personalize their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective.
When their marketing campaigns are combined with strong calls to action targeted to the specific segment, they will be a powerful tool that drives your target market segments towards your sales channels.
After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:
- Measurable : Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much your segment will spend on your product. For example, one of your segments may be made up of people who are more likely to shop during a promotion or sale.
- Accessible : Understanding your customers and being able to reach them are two different things. Your segments’ characteristics and behaviors should help you identify the best way to meet them. For example, you may find that a key segment is resistant to technology and relies on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read email, but responds well to printed ads.
- Substantial : The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but realistically can’t afford them. Make sure an identified segment is not just interested in you, but can be expected to purchase from you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford your goods, and successful entrepreneurs who want to show off their wealth.
- Actionable : The market segment must produce the differential response when exposed to the market offering. This means that each of your segments must be different and unique from each other. Let’s say that your segmentation reveals that people who love their pets and people who care about the environment have the same purchasing habits. Rather than having two separate segments, you should consider grouping both together in a single segment.
Market segmentation is not an exact science. As you go through the process, you may realize that segmenting based on behaviors doesn’t give you actionable segments, but behavioral segmentation does. You’ll want to iterate on your findings to ensure you’ve found the best fit for the needs of your marketing, sales and product organizations.
We’ve outlined the do’s , so here are some of the dont’s :
- Avoid making your segments too small or specialized : Small segments may not be quantifiable or accurate, and can be distracting rather than insightful
- Don’t just focus on the segment rather than the money : Your strategy may have identified a large segment, but unless it has the buying power and wants or needs your product, it won’t deliver a return on investment
- Don’t be inflexible : Customers and circumstances change, so don’t let your segments become too entrenched – be prepared to let them evolve.
Market segmentation doesn’t need to be complicated to be effective. We would advise, though, to get automated from the beginning . Forget spreadsheets – choose market segmentation software to measure and streamline your marketing strategy; as you grow, the technology will scale with you.
Innovative features such as XM Directory allow you to build your own customer segments and start personalizing experiences at scale based on the rich insights into your critical customer groups.
If you want to get a feel for your market segmentation upfront, before taking a step towards a streamlined and integrated system, trust us to take you through the research with our Market Segmentation Research service .
Behavioral segmentation 20 min read, psychographic segmentation 11 min read, geographic segmentation 14 min read, demographic segmentation 14 min read.
Brand Sentiment 18 min read
Brand intelligence 12 min read.
How to Increase Brand Awareness 17 min read
Ready to learn more about Qualtrics?
Market segmentation — definition, types, and examples
If you’re a marketer or business owner, you know that segmentation is an effective way to expand your market and reach new customers.
But even if you understand market segmentation, sometimes you need a little inspiration to start doing it yourself. In this article, we’ll explore the key segment types with real-world examples to jump-start your company’s foray into market segments and help you improve your overall marketing efforts.
This post will cover:
What is market segmentation?
Types of market segmentation, demographic segmentation, examples of demographic segmentation, psychographic segmentation, examples of psychographic segmentation.
- Geographic segmentation
- Examples of geographic segmentation
- Behavioral segmentation
- Examples of behavioral segmentation
- Firmographic segmentation
- Examples of firmographic segmentation
Benefits of market segmentation
Frequently asked questions (faq).
Market segmentation is the practice of grouping customers together based on shared characteristics — including demographic information or common interests and needs. It’s a strategy for dividing a large, broader target audience into specific groups to create tailored and personalized marketing campaigns.
A market segment refers to the individuals who are grouped together based on their shared characteristics. The idea is that these people have similarities as consumers and respond similarly to marketing efforts. So companies need to communicate to them in a particular way, rather than just messaging their audience as a homogenous whole.
Businesses segment their market in different ways. Market segments should be based on extensive research of their potential customers’ demographics, lifestyles, needs, personalities, and more.
There are various types of segmentation that help businesses market to their target audience groups. We’ll go over the five main types of market segmentation and provide examples of each one.
Demographic segmentation is grouping customers based on data points like age, gender, marital status, occupation, and more. It’s essentially the “who” segment of your market. This is the most common type of segmentation because it’s easily identifiable. Demographic segmentation can help you understand the individuals that make up your audience and how to target your marketing efforts to them.
Demographic segmentation is typically sorted by characteristics like:
- Level of education
- Family size or status
- Professional occupation or role in a company
Demographic segmentation provides objective information on who is interested in your product or service. While it’s best to use other methods of segmentation as well, demographics provide an excellent starting point for marketers to group their audience.
Here are a couple examples of how demographic segmentation can be used:
Brooks Running Shoes and Dick’s Sporting Goods partnering on empowerment . Brooks and Dick’s are great real-life examples of using demographic segmentation to capture customer interest. The companies partnered to celebrate National Girls and Women in Sports Day with their “Empower Her” collection. It included a variety of women’s shoes and clothing, including products with phrases like “Dream Chaser” and “Respect Her Run.”
HelloFresh targeting female social media users . Lots of different people use meal delivery subscriptions, and marketing efforts often focus on making dinner prep easier for busy young professionals or families. But HelloFresh wanted to specifically target its primary market segment. Knowing its audience was 80% women and primarily between the ages of 30 and 50, HelloFresh created a female-oriented influencer campaign that produced buzz on foodie social media.
Demographic segmentation provides excellent initial information, but to understand the customer thought process, you need to use other segmentation methods too.
Psychographic segmentation is the “why” segment of your market. In this segmentation, you analyze how your audience thinks and create a strategy targeted toward customers’ attitudes and beliefs. These groups will likely have similar psychological characteristics, personal values, aspirations, and political opinions.
Companies generally divide psychographic segments based on:
- Hobbies and interests
- Lifestyle choices
- Social or political views
- Values and beliefs
Psychographic segmentation is more difficult to segment because it’s more subjective. Social media analytics can be a helpful tool, but you should also plan to conduct interviews and surveys and hold focus groups to gather all the information you can about your audience.
Here’s an example of psychographic segmentation:
Marvel Studios marketing toward movie fanatics . Marvel creates engaging social media posts that generate excitement and anticipation for its upcoming films. The studio posts countdowns to the days leading up to the movie and includes clips likely to pique its audience’s interest. Marvel can market to people based on their interests in comic books, superheroes, film, and more.
This segmentation is what makes customers who they are. But who they are can be influenced by other factors, such as where they are.
Geographic market segmentation
Geographic market segmentation is the “where” segment of your market. In this type, customers are segmented based on their geographic location. These people will live in the same city or state — perhaps even in the same zip code — and are likely to have similar attitudes, needs, and cultural preferences based on their geography.
Companies generally separate geographic segments by:
- Climate region
- Population density
- Rural, urban, or suburban setting
Examples of geographic market segmentation
Geographic segmentation works best for companies that are trying to focus their efforts on a particular area. It could involve simple changes, such as adapting product offerings or the language used in marketing to fit the main language of a region or slang that would typically be used in one area.
Some examples of geographic market segmentation include:
McDonald’s adjusting items for individual countries . McDonald’s started out as an American restaurant company, but as it grew to become a global mega-brand and expanded its locations all around the world, it adjusted some of its menu items to match the cuisine of different countries. For example, rather than just the typical burger and fries, there’s the Veggie Maharaja Mac in India, the McSpaghetti in the Philippines, and poutine in Canada.
Climate impacting fashion. One general example of geographic segmentation could be based on weather. If your company sells clothing, your marketing may vary by region. In colder regions you may want to highlight coats and beanies, while in a warmer area tank tops and shorts will be more suitable.
Physical environment has a huge impact on why customers purchase the way they do. It’s also important to analyze how they interact and respond to your brand.
Behavioral market segmentation
Behavioral market segmentation is the “how” segment of your market. This approach examines customer behavior and how people engage with your brand. From this type of segmentation, you can better understand how they may respond to changes in prices, new promotions, and more.
Audiences can be grouped by:
- Spending habits
- Browsing habits
- Interactions with your brand
- Loyalty to your brand
- Product feedback
Examples of behavioral market segmentation
Behavioral segmentation, like the other types, helps you gain a deeper understanding of who your client base is. This category, however, goes beyond noting stereotypical characteristics of the customer and reveals their interactions and spending tendencies.
Some examples of behavioral segmentation are:
Guinness advertising non-alcoholic beer. Guinness is a global brand with a loyal following of beer drinkers, but industry research shows there are millions of people who choose not to consume alcohol. To market to this growing group during the popular Six Nations Rugby Cup, Guinness produced clever ads for its new product “Guinness Clear” with slogans like “Make it a night you’ll remember.”
Amazon honing in on buying habits. Amazon displays recent customer purchases to show shoppers other products they may be interested in. For example, if someone purchased a soccer ball, they may get advertisements on their social media platforms for shin guards, cleats, and other soccer equipment.
Behavioral market segmentation gives businesses a close look into how customers interact with brands and spend their money.
Firmographic market segmentation
Firmographic segmentation is the B2B version of demographic segmentation. It’s the study and classification of B2B customers using information from similar company characteristics. This segmentation type is popular for firms to find businesses that would benefit the most from their product.
Companies generally separate the firmographic segment based on:
- Turnover and profit numbers
- Industry type
- Business size
- Number of employees
- Ownership (public, private, or government)
- Organizational trends (for example, more companies going remote)
- Average sales cycle
Examples of firmographic market segmentation
Most of the market segments detailed in this article focus on B2C marketing, but firmographic segmentation is helpful for B2B companies to create engaging campaigns.
Upwork advertising in New York City. Upwork is a popular platform for companies to hire freelancers. Since New York is one of the largest population centers and business hubs in the world, Upwork created a marketing campaign with digital billboards and other ads prominently placed around the city to attract the attention of businesses that might need freelancers.
There are many reasons why segmentation can create more personalized experiences for each customer. By doing research and keeping up with industry trends, your business can expand its market and improve marketing ROI.
Market segmentation provides a number of benefits for businesses. Not only does it help your teams better understand your audience and create the right messaging to attract customers and grow your reach, but it produces a stronger brand image, more efficient use of resources, a higher rate of success, and a better customer experience.
With market segmentation, you can:
- Identify high-value customers and the similarities and differences between different groups of customers.
- Create more personalized communications and more targeted marketing efforts.
- Reach new markets by showcasing your unique product or service and adjusting your messaging.
- Build better brand awareness and stand out by understanding individual customer needs and creating personalized experiences.
- Cut down on wasted marketing dollars by creating more impactful and efficient campaigns.
- Improve your products by meeting specific market expectations based on what customers want.
- Make it easier to learn about your audience and create more cost-effective campaigns in the future.
- Gain better marketing ROI by using existing data to improve the customer experience.
What is meant by market segmentation?
Market segmentation is the practice of grouping customers together based on certain characteristics they may share.
What are the types of market segmentation?
There are four main types of market segmentation — demographic, psychographic, geographic, and behavioral. But there are other types that your business can take advantage of as well, such as firmographic for B2B marketing.
What are the advantages of market segmentation?
Market segmentation helps you establish who your target market is and customize your message for individuals. It allows your business to expand across new markets and improve products to keep up with changing customer needs.
How do you identify market segments?
By becoming an expert on your business, doing extensive industry research, and categorizing people by identifiable characteristics, you can use the information to group potential customers that might be interested in your products or services.
What makes a good market segment?
A good market segment should be easily identifiable and different from other segments. The sample sizes of these segments should be large and able to be assessed for feedback.
Evaluate your marketing software for market segmentation capabilities
Your business can reach new markets by using market segmentation. When you’re ready to get started, evaluate your current marketing software to see how it handles segmentation. If there are gaps, look into a new solution.
Acting on insights requires an audience. Create and activate engaged audiences on any channel or device with Adobe Audience Manager .
Audience Manager turns insights into action so your teams can create memorable customer experiences and extend your reach further than before. As a data management solution, Audience Manager collects and merges information from practically any source — building intelligent audience segments that give you a complete view of your customers.
Watch the two-minute product tour to learn more.
Don't have a Shopify store?
5 Types of Market Segmentation with Examples
Drive 20-40% of your revenue with Avada
You’ve invested a large amount of money and much time into an efficient marketing strategy, and you really hope your message resonates perfectly with your potential customers. Is it right?
This is the reason why market segmentation is important. This practice enables you to concentrate your marketing efforts on each customer segment so you can better satisfy their demands. Your brand can leverage this method to combat your competitors as you show your potential customers that you understand them and apprehend what they need.
Therefore, to know more about What is Market Segmentation? 5 Market Segmentation Examples that will Inspire You , please read on.
Let’s start now!
- What is Direct Response Marketing
- Types of Digital Marketing
- Reach vs Impression: What Are The Differences?
What is market segmentation?
Market segmentation is the process of classifying a market of potential customers into small groups or segments based on multiple features significant to you. In a group, customers share the same characteristics and react similarly to your messages.
The aim of segmentation is that you are capable of introducing a more tailor-made message that will be accepted successfully. This is beneficial for organizations that have a product or service in the marketplace that shows off different uses for different groups of customers.
Market Segmentation based on business types
So what criteria can we base on to implement market segmentation? Here are the two criteria we want to introduce to you:
Except for professional customers or prosumers, customers are often more sensitive to price and tend to come up with an impulsive decision. Segmentation of these types of consumers shows their purchasing habits.
B2B purchasers are a different type. They are not sensitive to price. As your products can save the business money and time or make money, then it’s worth it. Price is just a secondary factor.
They will consider how much it impacts on their workflow and how difficult it is to carry out.
5 Types of market segmentation and examples
Demographic segmentation is the easiest and the most popular applied type of market segmentation. Organizations utilize it to form broad segments of the population in terms of age, gender, location, religion, family size and so on.
These are typically black and white groups that provide you a profile of whether or not someone can purchase your products. For instance, if you offer a product for people 21 and beyond, then those who under that age would not be for you.
Correspondingly, products for men usually won’t be relevant to women unless you offer it as a gift.
Behavioral segmentation involves the way people decide over time or react to stimuli. For instance, the method that a business uses during Christmas time will differ from the rest of the year.
They recognize that people are more receptive and may be willing to make bigger orders. Younger generation and athletes would love brands like Jordan and Air Max whereas older people would vote for brands like New Balance.
As its name, the market segmentation type divides people into different groups based on their physical location. This type may be helpful for your company as the demands of your consumers are different from area to area.
For instance, people living in the countryside wouldn’t need a subway but those who work in the city would.
It’s also possible for you to use geographic segmentation to bring special deals to your potential consumers. Besides, you can use it to acclimate the language and tone of your messages.
In Georgia, people would consider soda as coke until you ask several questions. In Chicago, every soda is called pop.
Psychographic segmentation is used to form groupings based on customers’ lifestyles, interest and activities. Demographic segmentation shows you someone is a younger male, while psychographic segmentation tells you they go to the cinema on the weekends.
This type of segmentation indicates what customers do and why they purchase. It is quite similar to behavioral segmentation, but there exists a difference.
Behavioral segmentation lets us know that this demographic segment buys paper straws. Psychographic segmentation tells us this demographic segment buys paper straw because they can be recycled and the buyers are environmentally conscious.
Lenovo collaborated with Newstar, carried out market segmentation, and built personalized banners on their homepage that boosted click-through rates by 30% and conversion rates by 40%.
This type of market segmentation refers to analyzing and grouping business-to-business audiences and customers according to similar features that are important to your business. The way a firmographic grouping will search for one company may differ from the way it searches for another company.
Does this mean one organization is compatible with their firmographic segmentation and another is not?. No, it just means their KPIs are different from each other. For instance, a domestic brand may divide their leads based on location and these locations are north, south, east and west. Meanwhile, an international brand may also divide based on location, but their groups are Asia, Europe, South America, North America, Australia and so on.
Firmographic segmentation can have an effect on the way you access potential customers, the information you push forward as advantages, and the solutions being recommended. For instance, if you have an accounting solution that can be suitable for small businesses and enterprise customers, you would not use the same method to access them.
For small businesses, you can implement paid ads and try to achieve direct sign ups. For enterprise clients, you may concentrate on lead generation, demos, and create tailored solutions to satisfy their demands. Firmographic segmentation provides you with the insights to come up with those decisions.
Examples of successful market segmentation business
The automobile industry can be a good example of market segmentation. Every person needs a car to travel. However, is traveling from one place to another is the one and only “need” on the basis of which brands market their products? Then why are there a lot of various makes, models and versions from one single company?
This is because purchasers mainly need private and convenient transportation. Nevertheless, there are some other considerations that people want to make. Some people want to buy a large and spacious car to have enough rooms for family members. Some may wish to own vehicles with strong power and high speed. And even others purchase a car as a status symbol.
Automobile companies totally understand how to identify and make use of these differences.
Regarding the Volkswagen Polo, what will spring to people’s minds would be some attributes such as robust, affordable and hatchback. But do you know the Volkswagen group produces Audi , Lamborghini and the Porsche among others?
Volkswagen has some different characteristics for different customer groupings. It can be trustworthy to some and elite to others. It has boosted the science of clustering purchasers with the same demands and invents a focused marketing mix for every cluster to position its vehicles as the perfect choice in the market.
Victoria’s Secret deals are creating and marketing women lingerie and beauty products. They concentrated on women and “women” is the main market segment in their marketing campaign. Applying demographics segmentation, this company is also classifying their target market with product differentiation as PINK for adolescent girls.
The company Victoria’s Secret also uses geographic segmentation to serve their customers not only in America but also in the UK and Europe. They currently own more than a dozen stores.
Victoria’s lingerie brand is available in nearly 75 countries with about 1000 stores worldwide. It also owns 990 sales points in the USA. In addition, this company developed geographical segments to China in the lingerie market.
Moreover, as an example of psychological market segmentation, Victoria’s Secret also grouped its consumers according to women’s personalities and self-confidence. Victoria is growing towards a sexy, fashionable and open-minded trait.
Furthermore, in behavioral segmentation, this company has loyal consumers because Victoria makes them feel alive and self-assured. Clients buy Victoria lingerie product lines for prestige and they also go for this brand during birthdays and holidays.
In demographic segmentation, Coca Cola company aims to serve youngsters from 15 to 25 years old. This organization creates income level groups including different packing, for instance, returnable glass bottles, plastic bottles and tins with various pricing programs.
Using geographic segmentation, Coca Cola has many customer groups in different regions such as Asia Pacific, North America, Latin America, Europe, and Eurasia and Africa.
Besides, Coca Cola is considered a great example of psychographic segmentation. They created Diet Coke for those who are health conscious, offered a number of energy drinks for those who need energy particularly in sport, and also provided Real Gold for busy people in offices.
Plus, in behavioral segmentation, Coca Cola consumers are classified into segments on the basis of their knowledge of, attitude toward, use of and response to a product. Coca Cola buyers can be recognized according to occasions such as weddings, festivals or birthdays. Sometimes, to promote Coke - a drink to quench thirst and to refresh, the company includes prizes in the top cover.
Apple has divided the overall electronics market into mainly early adapters and wealthy market groupings.
Wells Fargo and JP Morgan
The bank industry is another great example of market segmentation. Both Wells Fargo and JP Morgan are large banks with a variety of different products that request market segmentation to best market them individually.
What are the benefits of market segmentation?
Segmentation marketing was invented to serve one main goal: increase ROI
With the aid of customer segmentation and personalized marketing strategies, organizations decrease the risk of implementing campaigns to uninterested customers. This improved campaign effectiveness concentrates resources on more ROI-generating efforts. Now we’ll look deeper to see how it exactly works.
Boosted competitiveness and market expansion
By concentrating on a certain subset of potential customers, your competitiveness in that market group naturally accelerates. If you’re concentrating mainly on retired seniors, investing much time and a lot of resources into them, your brand recall and brand loyalty are probably to be enhanced, knocking out other competitors.
Your market share can also rise by concentrating on specific market segments. For example, with a geography-based market campaign, you can begin market your products to San Francisco, then the bigger bay area, and consequently the state of California.
Enhanced time and money efficiency
If you launch marketing campaigns tailored particularly for distinct groups, you are able to prioritize consumer segments that are likely to get involved and convert. By putting more conversion efforts on them, rather than distributing resources evenly throughout all segments, tie and money are spent more effectively.
Better relationships and customer retention
The process of market segmentation refers to continually learning more about your customers so you can better satisfy their demands. The more you understand them, the stronger your interaction and your relationship with them becomes.
Closer relationships make it more difficult for them to leave you - improved customer retention . As you implement customer segmentation to track their changing situations - they age, have families, change jobs, grow more interests, have more purchasing patterns - you can certainly market to them. By offering products and services that intrigue consumers at different life stages, you are able to keep customers who might switch to your competitors.
- Marketing to Children: The Good, The Bad and The Ugly
- What Is Market Orientation?
- How To Do Google Maps Markting?
Market Segmentation can help your business to target the right audience and the right goals. You can understand more about your customers, see how to better approach them and find new markets to expand.
If you feel it’s hard to have the exact data and implement it in your business, hope that the 5 Market Segmentation Examples can be useful. Let us know how you’re implementing Market Segmentation in the comment box or leave any questions you have.
Thank you for your time. Have a nice day!
- Market development strategy: How to choose the right strategy for your business?
- What is a Go To Market strategy? 7 Steps to build a successful Go To Market strategy
- --> --> --> -->