What is Market Segmentation?

Types of Market Segmentation with Examples
March 11, 2022
Author : Olivia Moore

The business sector is fast evolving and ever-changing, various startups emerge every year, and a small startup today can be the next business leader. But what are the effective business strategies? How to approach the target audience more efficiently? Such questions are the most sought by businesses and management students. You will learn more about this in the blog; let's answer 'what is market segmentation?' with examples.

Market segmentation is the process used by businesses to divide the target market into various smaller and approachable groups. Dividing sub-groups based on buying habits, age groups, preferences, personality traits, and geographical division will help the business market its products more effectively. Such segmentation helps plan the marketing scope for different consumers depending on their personalised preferences and consuming habits. Marketing segmentation plans create a first-hand proposition for sales strategies to increase product sales and hence revenues.

The world-renowned brand Coca-cola's
market segmentation strategy focuses
on segmentation factors like lifestyle,
personality traits, and values.

Dividing the target market into different smaller groups helps companies minimise the risk of loss by planning according to consumer need and buying regime. Also, doing so helps provide clarity of the market, so businesses highlight the delivery of goods and services. Knowing the targeted market will help develop useful and better quality products. Beyond the marketing, good advertising, and attractive offers, a good quality product or service is more likely to attract customers.

what are the four main types of market segmentation

What Are the Four Distinct Types of Market Segmentation?

An extensive amount of research and planning is needed for developing a new product. The R & D operations team of an organisation conducts surveys, analyse, and examine the various similar available goods in the market. Time taken to plan, test, and release a product in the market is often months or years and examining the target audience is also crucial to know the scope and need of the product in the market. There are four types of segmentation that help businesses to gain more insight on this:

Geographic Segmentation

Dividing the target audience into subgroups based on geographic division is called geographic segmentation. Businesses divide their target market based on time zones and location or weather. E-mail marketing uses time-zones-based geographical segmentation as the varying time zones must be considered when sending a promotional message. Sending mail when a customer is sleeping or has just woken up won't help the sales of the goods and services; knowing the most productive hours of the customer is essential for effective marketing.

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Demographic Segmentation

Developing a business strategy based on family life, age, gender, nationality, income, etc is the most commonly used form of segmentation, called demographic segmentation. For example, when you see an infant-care brand, you are most likely to believe it is suited for new parents or the ones caring for a baby. Such a form of marketing is very effective as it caters to the needs of the consumers, and often the requirements are short-lived yet increasingly in demand, so the revenues never falter.

Did you know that aesthetic segmentation is
also an important segmentation category?
When the luxury car brand Ford introduced
the 1960 model to their pre-existing 1959
version resulted in revenue drops, and a
huge number of their loyal customers disliked
the new aesthetics.

Psychographic Segmentation

Segmentation based on the customers' lifestyle, interests, and preferences is psychographic segmentation. Such division is useful for marketing luxury goods or custom products developed for a niche market. A luxury bag is a product that most of the audience can't afford or aren't interested in; such products are made for high-end consumers specifically. The business will not face a loss as the price tag for such goods is high, and the demand depends on various other factors.

Behavioural Segmentation

The segmentation based on the buying habits of consumers is called behavioural segmentation. Consumers buy different goods based on their needs, seasons, and age, and the business uses this to create various business strategies. The best example can be seen during the festive season; the products we buy on Christmas are exclusively available in the Christmas season. Also, the increase of cold beverages in the market is comparatively more in summers than winters.

Now you know 'what is market segmentation?' and its various sub-types. Marketing segmentation supports production, pricing, promotion and placing a product in an accessible location so the target consumers can avail of it. These four P's are the objective of segmentation in any brand and marketing of goods. Making good quality products, informing the consumers about them and making them accessible at affordable prices make a business gain prominence and increase revenue.

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what are the benefits of market segmentation

How is Market Segmentation Advantageous For a Business?

Marketing segmentation helps in making goods and services accessible and affordable and helps businesses provide good-quality products to the consumers. A study by Brain and Co showed that businesses earned 10% more profit through segmentation. There are various other advantages of segmentation, which are:

  1. Unique marketing strategies can be developed by segmenting the audiences. The traditional marketing techniques focused on directly promoting the goods; segmentation helps develop new and unique ideas.
  2. Dividing the audience into smaller groups helps curate effective targeted digital promotion strategies.
  3. Marketers can curate better and more effective sales plans when dealing with specific groups with set requirements.
  4. Brands' revenue heavily depends on attracting the right audience, and segmentation helps achieve that.
  5. Providing better quality services for the audiences will result in more dedicated customers and increase brand loyalty.
  6. It helps the brand stand out from the competition as segmentation is often based on the user intent and requirements.
  7. Knowing what the consumers like will help the brand develop products that customers want to purchase and thus, increase product quality.

When you want to gather information on a larger
population, surveys are the best way to go.
Quote by Pooja Agnihotri

Various companies use segmentation to meet the buyer's requirements and stay on par with the trends. Knowing the customer's needs and preferences is the key to better marketing and enhancing the company's profits. Due to medical or ethical reasons, consumers with specific preferences often stay loyal to a brand. Brands that provide custom services or fulfil a specific requirement of their consumers are more likely to develop loyal customers and increase revenues; market segmentation supports just that.

Final Takeaways: Does Segmentation Mean Better Product Quality?

When a new business plans on entering the market or developing a new product, the Research and Development team is tasked with conducting surveys and reports on consumer behaviours. Every business wants to earn more revenues and develop a loyal customer base, the only effective way to ensure that is to provide what the customers need.

Many businesses are always on the lookout for introducing new products or services. When many of the same product types are already available in the market, how can businesses attract customers to buy their products? The precise answer to this question is by developing newer and better products; audiences will always prefer quality products that are also accessible.

Make your products useful, and people will
pay for them. Quote by Jay Baer

An example of such can be the new-age electronics we use today. Newer and advanced models of phones are introduced in the market every year, and the companies try to one-up their competitors and their previous products. It is good for marketing and also highly beneficial for the customers. A product specifically designed for a target audience ought to sell better than its competitors; such strategies are developed by dividing the target market into segments.

Hence, we can conclude that segmentation does help provide better quality for goods and services. It promotes user intent and makes services more accessible and affordable for the masses. Hopefully, this blog enables you to comprehend 'what is market segmentation?' and why it is important in the business world.

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About the Author

Olivia Moore

Olivia Moore

Olivia retired as a faculty of biotechnology and has been aiding students by answering their queries. Her works with the network formulations of a system and molecular biology allow her to aid the students to her full extent. She also has participated to understand the principles behind the organisation of biological systems. At My Assignment Services, she helps the students with their public health assignments, pharmacology case studies, pharmacology reports and clinical practices. The students call her a public health inspector because of her knowledge in the field.

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