Market Segmentation

Market segmentation creates subsets of a market based on demographics, needs, priorities, common interests, and other psychographic or behavioral criteria used to better understand the target audience.

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Traditional market segments are identified using characteristics such as:

  • Demographics
  • Psychographics
  • Behavioral activities
  • Technical knowledge
  • Usage and purchase situations
  • Benefits sought from the products

Types of market segmentation

With segmentation and targeting, the researcher aims to understand the likelihood that a given respondent or segment will exhibit a specific desired behavior. In many cases, a predictive model may be incorporated into the study so that individuals can be grouped within identified segments based on specific answers to survey questions.

  • Demographic segmentation Demographic segmentation sorts a market by demographic elements such as age, education, income, family size, race, gender, occupation, nationality and more. Demographic segmentation is one of the simplest and most commonly used forms of 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.
  • Behavioral segmentation 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 body wash, while older consumer groups may lean towards soap bars. Segmenting markets based off purchase behaviors enables marketers to develop a more targeted approach.
  • Psychographic segmentation Psychographic segmentation takes into account 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.
  • Geographic segmentation Geographic segmentation 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.