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4 types of market segmentation and how to use them

12 minutes read
September 11, 2023

Ever wondered why you receive those tempting email offers from your favorite coffee shop just when you’re craving a latte? 

Or how that adventure gear website knows you’re an adrenaline junkie even before you’ve bought anything? Well, it’s all thanks to something called ‘market segmentation.’ 

Dive in with me, and I’ll unpack the four main types of market segmentation, sprinkle in some real-world examples, and unveil the benefits businesses reap from this strategy. 

Trust me, by the end of this, you’ll be spotting market segmentation in action everywhere you go!

What is market segmentation?

Think of market segmentation as a clever way of grouping your customers based on certain traits they share – it could be their age, earnings, interests, or even where they hang out. The whole idea? To craft marketing messages that hit home for the folks most likely to grab what you’re selling.

Imagine this: you own an organic food store. A good chunk of your customers probably fit this mold:

  • Gender: Any
  • Age: Between 25 and 44
  • Earning: Over $100,000 annually
  • Current Phase: Living in their own home, sans kids
  • Passion Points: A love for healthy diets, eco-friendliness, and maybe a sport or two

Now, instead of splurging on ads for everyone and their cousin, you’d focus on reaching out to this group in a way that speaks to them. And you’ve got to pick the right hangout spot too.

For this organic food store scenario, Pinterest might just be the golden ticket. Why? Well, almost every Pinner (9 out of 10 to be exact) is hunting for shopping ideas there. 

Plus, it’s a hit with the Millennial crowd – with around 80% of the ladies and 40% of the gents scrolling through it. 

So, a Pinterest campaign showcasing sustainable eats? Sounds like a winner!

Why should you care about market segmentation?

Well, Bain and Company dropped a stat that’s hard to ignore: businesses tweaking their approach for different customer segments see their profits grow by a whopping 15% annually!

In contrast, those that don’t cater to segments? They’re looking at a modest 5%. Bottom line: market segmentation is your ticket to accelerated growth.

Here’s why segmentation is a game-changer:

  • Targeted Strategy: It lets you zoom in on your ideal customers and ensures they see your product or service as tailor-made for them.
  • Personal Touch: Today’s shopper craves personalization. About 73% of them, to be precise, expect brands to get personal, delivering spot-on messages at just the right moment.

Beyond that, market segmentation opens doors to:

  • Try selling in new places.
  • Build stuff people actually want.
  • Have smoother sales chats.
  • Make more money from emails and social media.
  • Keep online shoppers coming back.

Types of Market Segmentation

Market Segmentation 1

Let’s talk about market segmentation. You know there are typically four main types, right? But here’s a twist: one of those types can be divided further into individual and organizational segments. So, in total, we’re looking at five key types of market segmentation. Cool, huh?

Demographic Segmentation

Imagine you’re throwing a themed party. You wouldn’t invite just anyone, right? You’d want people who share similar tastes or interests. In the world of business, that’s pretty much what ‘Demographic Segmentation’ does.

Demographics

So, What Exactly Is It?

At its core, demographic segmentation is like grouping people based on certain characteristics – think age, gender, occupation, and so on. It’s like saying, “Hey, all you 20-somethings who love indie music, this new album is just for you!”

Why Does It Matter?

This method is gold for businesses. First off, gathering this information is often a breeze – a quick survey or a peek at social media analytics, and voila! More importantly, once you understand these characteristics, you can tailor your offerings to the exact audience you want to reach. Imagine trying to sell the latest video game console; knowing that a large portion of your target is young males with a penchant for gaming can be invaluable.

Who Should Use It?

While it’s a versatile strategy, B2C companies, in particular, find this super handy. It’s a simple equation: The better you understand your audience, the more likely they’ll resonate with your product.

A Quick Example:

Picture a company launching a new skincare product targeted at mature skin. With demographic segmentation, they can focus on reaching out to older adults, ensuring their marketing isn’t wasted on teenagers.

Behavioral Segmentation

Behavioral Segmentation is all about understanding your customers based on their actions and experiences with your offerings. Think of it as being a detective, but instead of solving mysteries, you’re figuring out shopping habits, website interactions, loyalty, and needs.

The magic of this segmentation is that it lets you target your ads super precisely. You’re not just throwing messages out there and hoping they stick. Byunderstanding behaviors, you can ensure your marketing speaks directly to potential customers. Imagine showing a repeat customer a special offer tailored just for them – powerful, right?

Online stores, listen up! This strategy is gold for you. Here’s a snapshot: Someone pops onto your site. Based on their behavior, you can figure out if they’re a first-time visitor or a loyal returnee. With that insight, you can showcase different ads or product recommendations that match their stage in the customer journey.

Geographic Segmentation

Imagine sorting your customers based on where they hang their hats – be it country, state, or city. That’s Geographic Segmentation for you! It zeroes in on the physical locations of your audience.

It’s all about being strategic. Say you’re a local business and don’t ship outside your city; why waste ad money on folks in another state or country? By focusing on specific geographic regions, you can get the best bang for your buck and pinpoint where your products or services are in demand.

Let’s say you run a bakery in Boston. With Geographic Segmentation, you’d push your delightful pastry ads to Bostonians instead of trying to tempt someone in, say, Los Angeles, where you can’t deliver.

Psychographic Segmentation

Ever wonder why some people swoon over organic products while others geek out over the latest tech? Psychographic Segmentation is here to answer the ‘why’ behind our buying decisions. It’s not just about what customers buy, but the feelings and motivations behind those choices.

We’re talking about diving deep into:

  • Purchase motives (Why did they buy?)
  • Preferences (What do they like?)
  • Values and beliefs (What matters to them?)
  • Lifestyles (How do they live their lives?)

By understanding these emotional drivers, businesses can fine-tune their approach. Two people might both be 30-year-old professionals living in New York, but one values sustainability while the other prioritizes luxury. They’ll resonate with different messages! With Psychographic Segmentation, you’ll get why certain ads click with some and miss the mark with others.

Geographic Segmentation

Imagine two women of the same age and income. One buys eco-friendly products because she values sustainability, while the other splurges on luxury brands because she cherishes exclusivity. Knowing this helps in crafting the perfect ad message for each.

10 Benefits of Market Segmentation

Imagine being at a party. There are so many folks to chat with. But who do you really connect with? Similarly, in the bustling market party, segmentation helps you find your kind of people. Let’s break it down:

  • Finding Your Tribe

With segmentation, it’s like wandering the party and finding the group that laughs at your jokes. You invest where you’re most appreciated, avoiding the party-poopers.

  • Getting to Really Know Them

Think of those heart-to-heart talks on the porch. That’s what segmentation offers: a deep dive into what your customers truly desire.

  • Focusing on True Friends

Why waste time with the crowd when you can chill with your squad? Segmentation helps you hang out more with folks who truly value your company.

  • Discovering Hidden Gems

Ever found a secret spot at a party? That’s what spotting untapped market niches feels like. It’s your little secret to success.

  • Personalized Invitations

Tailored invites always feel special. Know your audience, and you can send them messages that feel like they’re just for them.

  • Refining the Playlist

If your party gang loves 80s rock over modern pop, you’d change the track, right? Similarly, adjust your strategy based on what your audience digs.

  • Being the Best Host

Serve snacks your guests love, and they’ll keep coming back. That’s what understanding and catering to customer needs feels like.

  • Deep Conversations Over Small Talk

Segmentation is about getting past the “How’s the weather?” to really understand what makes your customers tick.

  • Smart Spending

Don’t overspend on decor if your friends love a chill vibe. Likewise, target the right audience and get more bang for your buck.

  • Efficient Party Planning

Knowing who’s coming and what they like ensures everyone has a great time, without overspending on unwanted snacks or tunes.

Market Segmentation Examples

Nike: Speaking to Sports Lovers’ Hearts

Have you ever watched a sport, seen those flashy sneakers on a star player, and thought, “I’ve GOT to have those!”? That’s Nike’s magic. They know we love associating with winners. Just consider the Nike Air Force 1 x Colin Kaepernick sneakers. They weren’t just shoes; they told Kaepernick’s powerful stance against racial discrimination in America. And guess what? They flew off the shelves! It’s like wearing a piece of a hero’s journey.

Coca-Cola: The Drink for Every Mood and Moment

Coca-Cola’s genius lies in understanding we all have different tastes. So, whether you’re eco-conscious and looking for recyclable packaging, trying to cut down on sugar, or just hunting for that special festive can during the holidays – Coca-Cola’s got you covered. It’s like walking into a party and realizing there’s a drink for every vibe and preference!

McDonald’s: Serving Up More Than Just Meals

Ever had that late-night burger craving and found McDonald’s open just in the nick of time? Or been pleasantly surprised by a unique menu item while traveling? That’s McDonald’s mastery in market segmentation at play. They pop up right where you need them, globally adapting their offerings from diverse menus to drive-thrus tailored for the busy bee in all of us. Whether it’s a Happy Meal toy for kids or understanding the ideal time to serve breakfast for early risers, they’re not just feeding stomachs; they’re feeding moments, memories, and moods. Because at McDonald’s, it’s about getting the meal AND the moment right.

In a Nutshell…

Think of market segmentation like a chef crafting unique dishes for different diners at a banquet. Companies use it to group their diverse crowd of potential customers into distinct categories.

By doing so, they can whip up tailor-made marketing campaigns, ensuring everyone gets a taste of what they truly crave. It’s about making sure every dish (or campaign) hits the mark just right!

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