What is market segmentation? Definition, 5 types, and examples LogRocket Blog

This can include pre-built customer segments like potential customers, recent customers in the past 30 days, and inactive customers who haven’t made a purchase in 8 months. Marketing to the right people, at the right time, and in the right way can elevate the campaigns of any company. Market segmentation—which allows businesses to tailor sales campaigns and marketing plans to target, engage, and appeal to niche groups—can help you reach that marketing utopia. Digital marketing managers are responsible for marketing products or services using digital channels, such as search engines, email, social media, and websites. Their primary focus is to drive specific types of people to the company website.

  1. Market segmentation is a strategy defined as the organization of various types of audiences, to reach them with your ads and campaigns.
  2. Answers can help tighten the parameters around your segmentation strategy.
  3. For example, world-renowned camera company Canon took a 40% share in the low-end digital camera market by spotting an opportunity to sell cameras to children without smartphones.

Other than physical factors, marketers also segment the market on the basis of lifestyle. Lifestyle includes subsets like marital status, interests, hobbies, religion, values, and other psychographic factors which affect the decision making of an individual. Occupation, just like income, influences the market segmentation definition and examples purchase decision of the audience. A need for an entrepreneur might be a luxury for a government sector employee. There are even many products which cater to an audience engaged in a specific occupation. Victoria’s lingerie brand is available in nearly 75 countries with about 1000 stores worldwide.

When to use customer segmentation and market segmentation

The fifth main type of segmentation is volume segmentation, which is based on the amount of the product purchased. Just about every product has heavy, moderate, and light users, as well as nonusers. Heavy users often account for a very large portion of a product’s sales.

By identifying and analyzing your target market, you can tailor your products and services to meet the specific needs and preferences of your customers. This personalized approach can increase brand loyalty and make customers feel valued and understood, fostering a deeper emotional connection with the brand. Instead of using one generic strategy for all of your customers, market segmentation can help you to cater your efforts to specific groups of people. This means you won’t be wasting time and money on ineffective campaigns, because your efforts will be targeted and based on customer data.

Market segmentation strategy

Geographic segmentation is technically a subset of demographic segmentation. This approach groups customers by physical location, assuming that people within a given geographical area may have similar needs. This strategy is more useful for larger companies seeking to expand into different branches, offices, or locations. Psychographic segmentation considers the psychological aspects of consumer behaviour 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.

Types of Market Segmentation with Examples

It’s a way for store owners to separate their visitors into different groups. This way, they can create a more personal experience based on the customers’ traits, behaviors, needs, and desires. Many brands that use market segmentation in their marketing plan make more money, have happier customers, and perform better against their competitors.

How to create a market segmentation strategy

Market segmentation is the process of dividing a target market into groups or subgroups. This could mean country (national marketing), state (regional marketing), city (local marketing), or neighborhood (micro-marketing). Firms that employ geographic segmentation may market differently to potential customers in specific areas to maximize the effectiveness of their marketing efforts.

John and Michelle founded Manly Bands—a men’s wedding ring company with a strong unique selling proposition—out of this small market segment. You may offer different prices to different groups based on location, demand, and income level. A good example is flexible airline pricing, where prices rise and fall based on who will travel and how much they are willing to pay. By changing your price based on the type of customer you’re dealing with, you’ll maximize profitability. Consumers in each may have different needs, wants, desires, and buying behaviors. Your research can involve surveys, or other types of research, such as focus groups and interviews.

Demographic segmentation includes age, gender, nationality, education level, family size, occupation, income, etc. Marketing and content teams will value having detailed information for each customer segment, as this allows them to personalize their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective. For example, winter has several holidays, with Christmas being a huge influence on families. This holiday impacts your market segments’ buying habits, how they’ll behave (spending more than normal at this time than any other) and where they will travel (back home for the holidays).

With market segmentation, you can spend money on promoting products to segments that are more likely to buy from you. For example, if your product is expensive and designed for business users, you may not want to invest your budget on social media channels that appeal to teenagers. The banking industry provides a very good example of how a company markets to specific market segments. All commercial banks service a wide range of people, many of whom have relatable life situations and monetary goals.

Moreover, market segmentation ensures a return on investment while guaranteeing profitability and market success. Businesses can make marketing plans for each segment when the market is divided into segments. This could mean making customized products and services, running targeted marketing campaigns, and adjusting pricing strategies to meet the needs and preferences of each segment.

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Geographic segmentation means segmenting markets by region of the country, city or county size, market density, or climate. Market density is the number of people or businesses within a certain area. Many companies segment their markets geographically to meet regional preferences and buying habits. Pizza Hut, for instance, gives easterners extra cheese, westerners more ingredients, and midwesterners both. Both Ford and Chevrolet sell more pickup trucks and truck parts in the middle of the country than on either coast. The well-defined “pickup truck belt” runs from the upper Midwest south through Texas and the Gulf states.

That could be an Ebook on parenting, courses on how to travel the world, a book with great recipes, or even a service that helps them book the best flights. The point is, you’re only sending messages they’ve expressed an interest in receiving. Customer segmentation, on the other hand, is when you divide your current customers into discrete groups that https://1investing.in/ are important to you. They’re aware people are in a more receptive mood and may be willing to make larger purchases. Younger people and athletes prefer brands like Jordan and Air Max while the older generations prefer brands like New Balance. Over time, you’ll discover the best ways to spend your money and achieve a positive return on investment.

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