What is market segmentation? This is a market strategy that involves breaking down of target market (customers) into smaller groups. It is a more refined group that allows businesses to perform a robust evaluation. Market segmentation is not a product of guesses; it has to do with facts.

It also means segmenting a broad market into subgroups to reach the best target for our products and services. Market segmentation reveals insight into – customers’ behavioral instincts, ways to bring in more customers, recommendations to boost loyalty, product, service innovation techniques, etc. Before you can perform market segmentation, you must have all you need in place.

For any business looking to improve sales, market segmentation is essential. Market segmentation can make a difference, especially in a competitive and dynamic market. In a market that doesn’t have a definite structure, market segmentation helps to fill in the blanks.

Market segmentation allows us to know precisely what drives customers. Segmenting the customers into groups helps to get vital information about each group. For instance, if your company produces high blood pressure drugs, you know your primary target. Those are the people in the adult age bracket.

Market segmentation is not just reaching the target customers effectively. And it also shows relevant information to your customers.

Market Segmentation

Types of Market Segmentation

Demographic Segmentation: Demographic segmentation comes first when targeting customers. It is looking into non-behavioral traits.  A business can target people with their age, ethnic group, gender, religion, profession, level of education, etc. One of the importance of demographic segmentation is that it helps cut the cost of marketing to people who have no interest in your product. Like the example above, high blood pressure often affects some set of age range. Advertising the product to youths is a waste of resources. It also helps to focus on the customers who can afford your products.

  • Psychographic Segmentation: Unlike demographic segmentation that looks into non-behavioral traits, psychographic segmentation classifies customers based on interest and personalities. This might be harder to do than demographic segmentation. Psychographic segmentation defines customers by their – hobbies, traits, values, goals, beliefs, lifestyle, etc. Psychographic segmentation can only be achieved by profound research on the customers. It allows you to relate with them on a personal level.
  • Geographical Segmentation: This type of segmentation is one of the easiest to identify. You can target customers with country, city, postal code, region, and so on. You can target regions based on their weather conditions and commercial interests. It helps businesses to advertise season-appropriate products to customers. Summer is coming, and you are advertising thick clothes. It is not season-appropriate.
  • Behavioral Segmentation: Regarded as the best form of market segmentation. It is very different from psychographic segmentation. This is studying the customers based on their behaviors. It can be defined by – Loyalty to the brand, spending habits, purchasing habits, borrowing habits, previous product ratings, customer satisfaction, and so on. It is easy to differentiate customers who have visited your website for some time but haven’t purchased anything yet. You get to target new customers and returning customers differently. It is a more detailed segmentation.
  • Technographic segmentation: This segmentation deals with the roles of technology in marketing. It is now easy to target customers based on the gadgets they use especially mobile phones. On visiting a website, it easily recognizes the type of phone you are browsing with. It will then present you with deals that suit your gadgets. Users of iOS and Android get different products in this segmentation. Sales of earbuds, phone accessories differ with products.
Market Segmentation

Other times of market segmentation include Life stage segmentation, transactional segmentation, and firmographic segmentation.

Advantages of market segmentation

  1. Effective marketing: The most apparent reason for market segmentation is effective marketing.  By knowing the needs of the customers, you can develop a better approach for each set. You can also improve on ways to improve the interaction between customers and your product.
  2. Quality leads: The more targeted your audience becomes, the more quality leads you to get. You are reaching the right people, and their needs are being met. The kind of leads you get when going broad is different from when the market is targeted. Your advertisement doesn’t reach the wrong people.
  3. Efficient spending: Market segmentation helps cut off excess spending on advertisement—less money is spent on advertisement, and more revenue is gained on product sales.
  4. Customer gain: You gain new customers when you target your audience. You efficiently relate with them on a personal level. You have a great chance of getting new customers when you target them based on details. It is easy to retain customers than gaining new customers. Market segmentation makes it easy to gain new customers.
  5. Customer retention: By targeting customers based on their traits, needs, and behavior, you can put up an irresistible package to make customers return.
  6. Customer loyalty: Market segmentation also helps to increase customer loyalty. By regular identification of the customers’ needs, they will keep coming.
  7. Promoting your brand: The goal of market segmentation is not only to reach your audience. It also helps to build your brand. It helps to put you above competitors.
  8. More earnings: Since you don’t waste money on running adverts for people who don’t need it, there is more profit. You get new and returning customers, which increases your earnings.
  9. New competitive advantage: Market segment allows companies to see the less accessed market with low competition. The company can then expand its customer base.
Market Segmentation

Process of Market Segmentation

Market segmentation is not guesswork, and it requires detailed information about the market you are looking at. What are the processes involved in market segmentation?

Information collection: The first step in market segmentation is information collection. You need vital information about the audience at large. It will allow an easy division of customers. This can be done by performing a survey. While doing this, the business must pay attention to customer’s needs, behavior, geographical location, psychographic traits, brand awareness, customer tendency, etc. Other information such as age, gender, religion, profession, ethnic group, values, and so on should be collected. Business owners should adopt proper methods to conduct a market survey.

Analysis: The second step in market segmentation is analysis. Analyze the information that you have collected. You can employ the use of proper statistical tools for efficiency. Variables noted should be divided into categories and analyzed concerning customer needs and characters.

Profiling: This is the third stage in market segmentation. Business owners should prepare profiles of each segment based on customers’ needs and character. You get to know the customers that fall into each segment and what are their needs and characters.

Selection of market segmentation: After the first three steps have been completed, you can select one or more segments for business.

Evaluation of market segmentation

After the market segmentation, the segments should be evaluated. What are the values to be evaluated?

Market Size and growth: Look into the size of the prospective customers. Some companies tend to target high-profile clients, while some target the masses.

Structural attractiveness: The components of structural attractiveness include: Competitors, substitute products, power of buyers, and power of suppliers.

Company’s values and objectives: Not all market segments will correlate with the company’s values. They should be neglected. While market segmentation is going on, the company’s resources should be considered as well. Resources such as staff strength, financial condition, proximity to raw materials, knowledge, technological advantage, etc.

How to conduct market segmentation

  1. Set an objective: What is the reason for the process. What do you plan to achieve? It’s essential to set goals.
  2. Create segments: Name the segments you want to have. Either by age, religion, location, beliefs, etc.
  3. Evaluate the segments: You have many potential customers at your reach; evaluate the segments to select the most viable option.
  4. Develop a market strategy: Since you know the segment you are targeting, develop a plan to attract them.
  5. Initiate the plan
  6. Evaluate your result: When your marketing plan is underway, you can start the evaluation. Check which segment is performing best.


Steps in market segmentation are easy to achieve, but they need urgency. Whether by interviewing customers, performing a market survey, or getting data on your website, data acquisition is essential to market segmentation. It’s therefore imperative to pay attention to quickly made mistakes. Those mistakes include:

Segments that are too small: Segments that are too small are difficult to organize. They can give statistically irrelevant data.

Ignoring new customer interest: The market can change at any time, don’t make rigid plans. Don’t be too attached to a particular segment for long.

Imbalance assessment:  Imbalance assessment will lead to the wrong approach.

Rigid segments: Focus on your profit. If the planned segment is not working, switch to another segment.

Avoiding these mistakes, you can choose from the types of market segmentation that we have. Your customers will consistently judge your products if they need or more than what they need. For adequate customer satisfaction, market segmentation is essential.

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