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Market Segmentation

Provided by the International Finance Corporation

How much more effectively would you promote your facial creams as a cosmetics firm, if you knew the gender, race and age of your target audience? If you are targeting your product to women, be sure that not all women look for creams for wrinkle removal, sun protection, acne reduction or rejuvenation – age and geography are determining factors here, as well as social status.

Unlike mass marketing, where you mass produce and mass promote your product, market segmentation is a strategy used in marketing to break down a larger target group into small clusters of consumers, to build an understanding of their unique characteristics and habits so that you can craft a customized marketing message appropriate for that particular consumer group.

Being able to combine your customers into a group with similar needs and wants will aid you in developing your tailored marketing mix.  It will also make your communications efforts more effective as you know what communication channels would best deliver your message to them. Some of your clients may prefer a personalized approach, a telephone call for example, while others may favor a less invasive method such as television advertising.


You can use the following criteria to segment your target audience:

Customer Type

 One of the first things you should consider as a marketer is whether your target customers are individuals, businesses, or a combination of both. If you are dealing with the latter, your marketing message should be carefully refined to appeal to distinctly different types of needs.


Geographic Segmentation

Geographic segmentation means dividing your market into different zip codes (continents, countries, states, cities or even neighborhoods) and catering to specific needs and tastes in those particular areas. You may consider variables such as region, city, or whether your target market is in an urban city or in suburbia, and what weather patterns are typical to their geographies. Multinational companies are known to use geographic segmentation as they carefully adjust their marketing mix to meet the needs of their clients in a specified area.


Demographic Segmentation

You conduct a demographic analysis of your customers by dividing them up into groups using criteria such as gender, income, family size and cycle, education, job (blue collar or white collar), generation, nationality, ethnicity, social class and religion. You may not use all of these variables at once, but only those that are relevant to the product/service you offer.

Analyzing demographic differences of your target market will increase your understanding of your client’s buying behavior and will help you retain clients that could otherwise look for competing brands. Human needs, wants, habits and disposable incomes vary greatly, and even the same person may exhibit different behaviors and habits during different times in life. As a 20-year-old male, one may be attracted to a fast, bright-colored sports car, while a 30-year-old father of 2 is more likely to be concerned with the safety features of the car he is considering to purchase. Therefore, automobile companies benefit from information such as age, gender and income level of their target clients.  


Psychographic Segmentation

Psychographics looks into the psychology and demographics combined to understand consumer behaviors. Within the same demographic group, you will find people with varying psychographic cases. Psychographic segmentation therefore entails separating your market into segment groups on the basis of your customers’ personality characteristics and lifestyle.

Looking into personality characteristics such as traits and habits and segmenting your target customers according to their level of competitiveness, or whether they are introvert or extrovert is especially convenient when there are many similar products competing with one another, and other segmentation variables may not play a big role in the study.

Analysis of lifestyle further divides markets into various clusters on the bases of interests, opinions, activities and beliefs. Generally, furniture, clothing and alcoholic beverages companies use this segmentation type as it further helps them understand clients’ predisposition to purchase one product over another.


Behavioral Segmentation

In behavioral segmentation, customers are segmented according to their knowledge of a product, attitude towards it, use of a product, or response to it. Occasions, user status, usage rate, loyalty status, buyer-readiness stage and attitude are frequently used behavioral segments. 


You can differentiate your customers according to temporal aspects of their lives, such as occasions when they may use, develop a need for, think of or purchase a certain product. For example, wedding gown retailers may use occasion segmentation to promote their products during the season when most weddings occur.

User Status

Grouping your clients according to the following criteria is an example of user status segmentation: first-time user, non-user, potential user, ex-user or a regular user. This study helps you further analyze and understand, for example, whether non-users dislike your product or they are simply not informed of it and therefore, with a little effort could become your potential users.

Usage rate

As a marketer, you will promote your product differently to heavy, medium or light users. In general, heavy users comprise a small portion of the market, but form a high percentage of the overall consumption, which makes them the preferred type of consumers for businesses. Nonetheless, one thing to keep in mind is, in alcoholic beverages industry, for instance, heavy users go for much cheaper drinks and seem to be less loyal to a single brand.

Loyalty status

You can categorize your client groups as extremely loyal, somewhat loyal, or switchers. Clients in the first category are ones who stick to their preferred brand, while clients who are somewhat loyal usually have more than one preferred brand, and they go back and forth between them. Switchers are those who make their purchasing decisions on availability of the product or it being on sale, instead of considering the brand itself.

Buyer readiness stage

Your client may fall under one of the following stages of readiness to purchase your product: he may be familiar with the product, have an understanding of what it does, may have some interest in it, choose it over another product, have confidence in it being exactly what is needed and finally he may be ready to purchase it. When you look at buyer readiness stage, as a marketer, your main goal is to move your clients through all the stages from product awareness to purchase.


In short

Consumers vary in where they get their information about a product, what they look for in it, how much they are able and willing to pay for it, how often they buy it and when and where they may look for it. Market segmentation takes into consideration what types of consumers with different wants and needs exist.

It may take a lot of time and effort for you to conduct market segmentation. However, it gives you a relevant knowledge base on which you can build your marketing mix and choose proper communication channels to reach your audiences and effectively sell. 

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