Market segmentation divides the market into different subgroups. A market segment consists of a group of customers who have similar needs and wants. It is the marketer's goal to identify the appropriate subgroups of consumers. Market segmentation is essential to marketing strategy. Let's consider why that is. Show
The Purpose of Market SegmentationTo understand the purpose of market segmentation, let's first take a look at its definition. Market segmentation is the process of dividing a market into groups of consumers that share similar characteristics and attributes. The market is defined by the group of people who would potentially be interested in your products or services. They are people with wants, needs, and the ability and willingness to buy products and services. The rule of thumb in segmentation is that the difference within groups (segments) should be low (e.g., consumers in a group should share similar characteristics), and the difference between groups should be high. It is possible to segment consumer markets based on descriptive characteristics like demographics or geographic location. Another type of segmentation involves looking at a consumer group's different types of behavior. On the other hand, marketers might use micro and macro segmentation to segment business markets. This explanation will focus on segmenting consumer markets. To learn more about segmentation in business-to-business (B2B) environments, check out our explanation of business markets. Target Market SegmentationFigure 1 below shows the four different types of target market segmentation. Fig. 1 - Types of Market SegmentationDemographic Market SegmentationOne of the most popular types of market segmentation is demographic segmentation. Demographic segmentation includes dividing your market into different subgroups based on demographic factors. It is quite common for marketers to segment based on demographics, as demographic factors are often associated with the wants and needs of consumers. Demographic characteristics are also relatively easy to measure. For example, measuring someone's age is more straightforward than measuring their values. Popular demographic variables used to segment markets are:
Many toothpaste brands have different lines of products for children and adults. For example, Colgate markets its natural fruit-flavored toothpaste and extra soft toothbrushes that feature cartoon characters for children and babies.
Car manufacturers often have a wide range of cars available for customers based on the amount they are willing to pay. For example, Tesla targets its Model 3 cars as a more affordable version of its Model S line.
A couple with four children is more likely to buy a 7-seater car than a couple with one child.
Women's shower gels or deodorants tend to be packaged in lighter and softer colored bottles, whereas men's products are packaged in dark-colored bottles. Check out our explanation of demographic segmentation to learn more about the implications of segmenting by gender.
The CEO of a company will have the authority to purchase new software for the company, whereas an intern will most likely not. Geographic Market SegmentationThe following form of segmentation is geographic segmentation, which creates customer groups based on location. Geographic segmentation involves dividing the market into geographical groups like countries, states, cities, or neighborhoods. Geographic segmentation can be a valuable tool for marketers, as certain customers from different parts of a country could have varying wants and needs. For example, people living in a country's rural areas might have different needs than those living in large cities. It is also possible that people living in different parts of the world will have distinct needs due to their country's climate. People living in the Alps want strenuous winter tires for colder months. On the other hand, winter tires will most likely not be one of the needs of consumers living in Jamaica. Psychographic Market SegmentationPsychographic market segmentation is a more complex form of segmentation as it involves examining specific customer traits. Psychographic segmentation is a technique in which consumers are divided based on psychological traits that influence their purchase patterns. Psychographic segmentation divides consumers into groups based on psychological and personality traits, values, or lifestyles. Sometimes people in the same demographic group can exhibit different psychographic characteristics. Psychographic segmentation considers the 'how' and 'what' people do in their lives. Psychographic segmentation is beneficial to organizations as it helps them understand consumers' thought processes. Dividing your customers into subgroups based on their opinion or values on a particular topic or their lifestyle (food habits, daily activities) is an example of psychographic segmentation. Behavioral Market SegmentationFinally, behavioral market segmentation involves creating subgroups based on consumer behavior. In behavioral segmentation, marketers divide consumers into subgroups based on their attitudes and behavior. Behavioral segmentation might include creating customer segments with similar knowledge of, attitudes toward, or usage of a product or service. Take a look at our behavioral targeting explanation to explore the different forms of behavioral targeting further. There are four ways a marketer might approach behavioral segmentation based on product attitudes:
Benefits of Market SegmentationMarket segmentation is a handy marketing tool for businesses. Segmentation can guide companies in developing appropriate market strategies by gaining helpful insight into consumers. Here are some of the main advantages of market segmentation.
Disadvantages of Market SegmentationAlthough market segmentation has many advantages, it also has its set of disadvantages. Let's take a closer look. The following are some of the primary disadvantages of market segmentation:
Market Segmentation ProcessLet's now examine the market segmentation process through an example. Imagine you are a marketing manager at Coca-Cola. You interview some of your customers, talk to your sales team, and look at previous sales data. Based on this data, you find out that creating multiple customer segments would be most effective. Fig. 2. Coca-Cola Segmentation Example Demographically, you segment customers based on family size. You find that you can divide customers into different groups - individual buyers who tend to purchase small cans of Coca-Cola, smaller families who tend to buy large bottles of Coca-Cola, and larger families who tend to purchase family packs or value packs of Coca-Cola. Psychographically, you segment your customers based on lifestyle. Here, you find that customers with busy lifestyles occasionally purchase Coca-Cola cans from an office vending machine as a quick caffeine boost during the day. You also notice that some customers purposefully go to the shop searching for Coca-Cola products. Behaviourally, you segment your customers based on loyalty. Here you find that some hardcore loyals only drink Coca-Cola when it comes to soft drinks. You also notice that there are shifting loyal customers who used to drink Coca-Cola but now drink Pepsi. Finally, you can group some customers into the 'switchers' category - they are not loyal to any soft drink brand. This information allows you to tailor your marketing strategy and communications efforts to suit the different customer segments. Which term refers to the process of dividing the total market into several groups?Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, there are clusters of needs.
Which of the following refers to the process of dividing the total market into several groups of similar characteristics?Dividing the total market into several groups on the basis of consumer characteristics is known as market segmentation. In this process, potential consumers are divided into different groups. Market segmentation is done to facilitate market research.
Which of the following refers to the process of dividing the total market into several groups with similar characteristics quizlet?Market segmentation is the process of dividing a total market into several homogeneous groups. It is used in identifying a target market for a good or service. Segmentation is the key to deciding a marketing strategy.
What is the process of dividing a total market into smaller groups seeking similar needs and wants from a product or service?Market segmentation is the process of dividing a broad population into subgroups according to certain shared factors. These groups may have common demographics (age, gender, etc.), geographic location, attitudes, behaviors, or a combination of similar characteristics. A consumer may belong to multiple market segments.
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