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Market segmentation occurs when a company divides all of its customers into market segments to make sure that marketing efforts can be more targeted and focused. The segments that are created via market segmentation can be based on many different characteristics like behavior, age, and income levels. If the marketing campaigns that you create are targeted to very specific subsets of customers, you should be able to obtain a better response rate when compared to a broad marketing campaign that advertises to the masses. The same is true when you're developing a product that you hope to bring to the market.

There are four key types of market segmentation that you should be aware of, which include demographic, geographic, psychographic, and behavioral segmentations. It's important to understand what these four segmentations are if you want your company to garner lasting success. Each segment of consumers that you create will have specific wants and needs, which you can effectively accommodate once you've performed the proper research. By making use of market segmentation, your company should benefit from being able to use its resources more efficiently and from making more informed marketing decisions.

The following article explains everything you need to know about the four primary types of market segmentation that you can use with your company.

The 4 Types of Market Segmentation

While there are dozens of subcategories and traits that can be used to identify different markets, there are only four types of market segmentation. The dozens of separate subcategories are placed under each of these four types of segmentation. The purpose of breaking the market up into four types of segments is that businesses can more accurately achieve similarity in each segment.

For instance, all of the subcategories that are placed under the demographic segment are similar to one another, which provides companies with the information they need to precisely target a specific customer-base. When performing market segmentation, make sure that you avoid combining two of the segmentations into a single one. Even though the demographic and geographic segmentations are similar, a combination of these variables is exceedingly difficult to create.

Demographic

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The demographic market segmentation is focused entirely on who the customer is. However, the traits that are placed into the demographic market segment depend on whether you run a B2B or B2C business. If you run a B2B company, the traits that you would likely include in this segment extend to industry type, company size, time in position, and role within the company. On the other hand, a B2C company would include such demographic traits as age, education, gender, occupation, family status, and income.

This is a very common segmentation type that's used within market research to determine what a company's main target audience is. This information is also easy to obtain. All you need to do to gain this information is to pull census data. Auto dealerships can use this information to market their brand to different genders, age groups, and income levels. This has also proven to be a useful type of market segmentation because it allows you to directly respond to the wants and needs of your customers.

If your main product is a high-end item, you may want to segment your audience based on a high household income. When you use these traits to categorize your audience for marketing purposes, you should be able to increase customer retention and loyalty. You also won't waste your resources on targeting an audience who would never be interested in the items or services that you provide. You can use several of the traits or segments within the demographic segmentation to reach a precise customer with your marketing.

The belief when using this type of market segmentation is that all of the customers within a demographic trait will have similar purchasing behaviors. For instance, customers within the 40-49 age bracket may be much more likely to purchase your product when compared to customers within the 20-24 age bracket, which is useful to know when you're looking to create an effective and efficient marketing campaign.

Geographic

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The geographic market segmentation allows you to effectively split your entire audience based on where they are located, which is useful when the location of the customers plays a part in their overall purchase decision. The core traits and segments that can be used with the geographic segmentation include region, continent, country, city, and district.

This is an exceedingly popular type of segmentation because most customers are influenced at least partly based on where they live. If a significant amount of your audience lives in the United Kingdom, you can use this information to create a co.uk website. This form of segmentation is considered to be ideal for international companies. Customers who live in different countries will have different wants and needs, which can be precisely targeted in a marketing campaign. This is considered by many companies to be the simplest form of market segmentation. It's also highly beneficial for small businesses with a limited budget. If your main geographic segment responds better to online ads than TV and print ads, this information should help you use your resources wisely.

Psychographic

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The psychographic market segmentation is aimed at separating the audience based on their personalities. The different traits within this segmentation include lifestyle, attitudes, interests, and values. However, extensive research will be necessary with this form of segmentation since identifying demographics based on personality is relatively subjective. If you find that your main audience values quality and energy-efficiency above all else, your marketing platform can be altered to account for these core values.

It's recommended that you cover at least several psychographic traits when forming your marketing approach to ensure that you don't miss a perspective that your audience might have. While this market segmentation is difficult to use, many companies believe that it can lead to high yields. When your marketing is targeted to someone's personality, it's more likely that the individuals who see this marketing will become increasingly loyal to your brand.

Behavioral

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The behavioral market segmentation divides your whole audience based on the previous behavior that they've exhibited with your brand. Some of the main traits within this segmentation type include product knowledge, purchase patterns, previous purchases, awareness of your business, and product rating.

To best understand how this market segmentation is used, an example of a business that might employ this type of segmentation is a restaurant. If a restaurant has different menus for lunch and dinner, they could compare purchase patterns between the dinner audience and lunch audience. It's possible that items on the lunch menu would be much more popular if they were instead available on the dinner menu. The restaurant could use this data to improve their menus and release new ones that would be more effective for each audience segment.

What Are The Benefits of Market Segmentation?

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The benefits of using market segmentation are numerous and should help you strengthen your marketing and product development efforts at the very least. Your audience won't be comprised entirely of like-minded individuals. If you want to increase customer loyalty and retention, it's recommended that you attempt to divide your audience into segments that will help you determine what your next steps should be. The main benefit of market segmentation is that it can help you create better marketing messages. When you understand who you are talking to in an ad, you won't need to use generic descriptors that could apply to anyone, which makes it much more likely that your target audience will respond well to the ad.

Using market segmentation will also allow you to determine which marketing approaches work best. If your target audience for a specific product is comprised of individuals who are between the ages of 25-29, it's likely that a campaign that uses digital marketing at a higher rate than traditional marketing will see better results. Market segmentation gives you the ability to create highly targeted ads that are centered around one or two traits, which should make your marketing campaigns more effective. Segmenting your primary market may also allow you to identify niche markets in your customer base that haven't been well-served. If you want better results and a higher ROI with your marketing campaigns, performing market segmentation may be very helpful for your company.

How Do You Use Market Segmentation?

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When you want to use market segmentation for your business, there are several straightforward steps that you should follow. First of all, you'll want to analyze your current customers via market research. This research can be performed in a many different ways, which include by interviewing customers, interviewing members of your sales team, using the website analytics that you've gathered, researching audience interests, and identifying what your customers are searching for on search engines.

Once you've gathered all of this data, you should create a detailed buyer persona for your core audience, which gives you the ability to better visualize the customer you want to appeal to with your products and marketing efforts. With the buyer persona in hand, you can start to look for market segment opportunities. Try to match elements of your brand and what you can offer with opportunities from the buyer persona.

Consider looking for segments that aren't currently being served. Once you've found several possible segments, you can research it to see what the competition provides and if your audience would be responsive to what you offer. If you're building a marketing campaign around this data, you should think about creating several campaigns to test your ideas. If one campaign provides to be more effective than the others, this could be an effective strategy going forward.

The Importance of Market Segmentations

Market segmentation is important because it allows you to more accurately understand who your audience is, what your business goals should be, and how you should structure your marketing campaigns. By using this tool, you can eliminate the need to create products or ad campaigns that broadly appeal to everyone. Identifying segments of your audience that you can effectively market to should help you increase brand loyalty and customer retention. Each segment of your audience has very specific wants and needs, which you can properly target once you've performed market segmentation.

To apply market segmentation, make sure to set your segmentation goals, identify potential customer segments in your audience with data collection, develop a segmentation strategy that focuses on a single segment, and go forward with a launch plan that reaches the right customers.

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