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4 Key Types of Market Segmentation: Explained & Explored

Market segmentation is when a business splits potential customers into groups based on shared characteristics. These characteristics include location, age, income, credit rating, usage rates, or buying habits. Market segmentation can help inform and create a marketing plan that meets the needs of a target audience instead of creating a one-size-fits-all marketing strategy.

Segmentation allows you to make your marketing more targeted, which in turn leads to higher quality leads who have a higher likelihood of converting to paying customers. If you spend money to market under the umbrella term fitness course, you’ll have very little ROI. However, by marketing each goal individually, your services will resonate with your potential clients who have 4 types of market segmentation different motivations, which will increase their likelihood of signing up for your classes. Under this type of segmentation, customers can be classified as heavy users, medium users, and light users. The different types of categorization under customer journey stage segmentation are awareness stage, engagement stage, evaluation stage, purchase stage, and post purchase stage.

If you advertise to an entire market, you will end up spending a massive amount of money on ads, but a relatively small percentage will convert. If you instead direct your marketing to a segment with the right characteristics, you can increase the conversion rate of your campaign considerably. Market segmentation can help you to improve the performance of your marketing campaigns by helping you to target the right people with the right messaging at the right time. Segmentation enables you to learn more about your audience so you can better tailor your messaging to their preferences and needs.

  1. Psychographic segmentation considers the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers.
  2. Over half of Honda’s scooter sales are too young professionals and older buyers – the over-50 group purchases 15 percent.
  3. The dozens of separate subcategories are placed under each of these four types of segmentation.
  4. With the help of segmentation, companies are able to cater to needs and requirements of each group appropriately.
  5. For instance, they could develop a more affordable product range and other workout wear designed for moderate training.

Collecting behavioral segmentation data is similar to how you would find psychographic data. Apple, the tech giant behind the iPhone and iPad, has skillfully used both demographic and psychographic segmentation. The company targets customers based on age and income — typically younger, affluent consumers — as well as social class and occupation. Behavioral segmentation divides consumers into market segments depending on their behavior patterns when interacting with a product or service (see Figure 5.4). Targeting a specific segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience.

The 4 Types of Market Segmentation

The needs and interests of potential consumers vary according to their geographic location, climate, and region. Understanding geographic segmentation allows you to determine where to sell and advertise a brand and where to expand a business. In this article, we will learn what market segmentation is and how it allows you to correctly direct your marketing efforts to the right audience to ensure the success of your business. If your customers are other businesses, rather than consumers, there are several key need-to-knows that’ll help you avoid pitfalls, create more actionable segments, and boost the results of your campaigns…. Alternatively, you’ll take a softer approach and use this as a more targeted variant of the niche marketing strategy. Occasion segmentation divides consumers (or potential consumers) on the basis of the occasions when they make purchases or plan to buy.

What Is Market Segmentation? How It Works, Careers, and More

If you want more information about how you can leverage market segmentation on your ecommerce website, check out this page on Yieldify’s audience segmentation capabilities. With Yieldify, global fashion brand Nautica used geo-targeting to show different customers when they could guarantee Christmas delivery. Customers in rural areas had to order earlier than urban areas, so Nautica’s delivery countdown timers adapted according to the customer’s location. Marketing analysts collect data from customers’ responses to different types of marketing.

Examples of market segmentation

Transactional segmentation looks at factors like how recently a customer has purchased from your business, how frequently they buy from you, how much they spend on average, and so on. This data can then be used to encourage different kinds of actions to different customers. This type of segmentation categorizes users based on how often they use your products, and how much time they spend with your products.

Market Segmentation Types: Conclusion

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. After market segmentation, you find out that one common thing about your consumers is that they are either married or have families. With this information, your shop can expand into weekend bags, customized leather organizers, and other leather goods your current shoppers can gift or recommend to their family members. Instead of trying to guess what your market wants, you could use data from existing consumers and use those to develop solutions that would directly address their needs. Psychographic segmentation is crucial if you want to understand roadblocks that occur because of lifestyle choices and values more so price or service or product quality. Modern consumers are typically concerned with a brand’s ethos, and performing a psychographic-based analysis can help you develop a more sympathetic approach to an otherwise unattainable customer base.

This system rests on the idea that people’s psychological traits influence consumer behavior. Your market can be divided based on characteristics such as gender, family size, age, income, occupation, education level, and nationality. Generational segments and cultural segments can also be included in a demographic basis for segmentation. Market segmentation gives you a more complete picture of who your customers are. With real, actionable insights, you can focus your efforts on product differentiation, adjusting your products, services, or content to customers’ needs. Knowing your market needs and reaching out to the right people at the right time may provide potential customers with what they want.

Its ads directed at teens feature dance-beat music, adventure, and fast­paced cutting from scene to scene; ads to seniors are softer and more sentimental. Geographic segmentation also enables a company to avoid areas where competition is severe and to select areas where competition is low. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, https://1investing.in/ and everything around growing a startup business. Attitudes are people’s perceptions of the world, which are usually shaped by their upbringing, as well as their cultural and religious backgrounds. Attitudes can be a bit complex considering that everyone has a unique worldview, but it is still possible to categorize customers by their attitudes. Most people will be willing to go out of their way to make purchases that enhance their social status.

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. They effectively use behavioral segmentation by analyzing viewers’ watching habits, categorizing users into segments based on genres they frequently watch, such as drama, comedy, or documentaries. This segmentation allows Netflix to personalize recommendations and target marketing for new shows or movies, enhancing user engagement and satisfaction. Research from SALESmango highlights this criticality, revealing that a staggering 77% of marketing ROI is attributed to segmented, targeted, and triggered campaigns.

Does your brand have a widespread reach around the country or perhaps across the world? As the name indicates, this type of market segmentation divides potential consumers on the basis of geography. Getting to know your consumers becomes much easier using various market segmentation types. In fact, it practically acts as a blueprint when coming up with effective marketing campaigns.

Surveys also reveal the specific demographics of a target market instead of available research data sources and uncover actionable insights. Keep in mind that a company doesn’t have to use just one or two segmentation bases; it can use all of them or a mix of them, a process that’s also known as multi-segment marketing. It’s not uncommon for companies to develop products that compete against their own offerings as long as the new products offer different perceived benefits to consumers. For instance, Procter & Gamble sells several different types of laundry detergent, such as Tide, Gain, and Cheer. Each of these brands offers different benefits like all-temperature use, fresh scent, unscented, stain removal, or whitening.