Market segmentation is a process that consists of sectioning the target market into smaller groups that share similar characteristics, such as age, income, personality traits, behavior, interests, needs or location. These segments can be used to optimize products, marketing, advertising and sales efforts.
Full Answer
How does market segmentation help businesses?
Through Market Segmentation, organisations can consider the basic needs of their customers more effectively. Instead of producing products for random groups, it becomes easier to service a specific target group. In this way, businesses can align, their product range, differentiation strategies, marketing strategies and price strategies etc. with their customers. This decreases the chance of company taking unnecessary risks.
What is segmentation?
Segmentation literally means dividing something into parts. This also happens on the sales market. A segment is a group of (potential) customers that share a number of characteristics. For example, when a group of approximately 50 people gathers, one can ask who is over 25 years old.
Why is segmentation important in marketing?
Market Segmentation is as old as marketing itself; because an organisation aims at specific target groups, they can match their products and / or services even better to the needs of their customers. In marketing, it's all about conquering the market and maintaining an advantage.
What is segmented market?
The market is segmented based on the target group’s level of education, their profession or the sector in which they work and their income. More expensive car brands, for example, target the higher income segment.
Why do hipsters travel to more diverse neighbourhoods?
This is one of the reasons why ‘hipsters’ travel to more diverse neighbourhoods to do their food shopping.
Why is segmentation bad for businesses?
One that’s frequently mentioned first is that it costs money. Each target group has to be approached individually. The C&A example demonstrates this well.
What are the 5 Ps of marketing?
Consumers differ from each other and therefore also respond differently to the entire marketing mix: the combination of 5 Ps, product, price, place (distribution), promotion, people (of your business).
What is market segmentation?
Market segmentation consists of sectioning the target market into smaller groups that share similar characteristics. Learn more.
What is the ultimate goal of segmentation?
Place: The ultimate goal of segmentation is to decide how you offer a product to each group of consumers and make it pleasant to them.
Why is segmentation important?
Segmentation allows brands to create strategies for different types of consumers, depending on how they perceive the overall value of certain products and services. In this way they can introduce a more personalized message with the certainty that it will be received successfully.
What is psychographic segmentation?
Psychographic segmentation consists of grouping the target audience based on their behavior, lifestyle, attitudes and interests.
What is behavioral segmentation?
Behavioral segmentation focuses on specific reactions, i.e. the consumer behaviors, patterns and the way customers go through their decision-making and purchasing processes.
How many types of market segmentation are there?
There are 4 types of market segmentation. Below, we describe each of them:
How to attract potential customers?
Attract potential customers: By sending direct and clear marketing messages, you attract the right audience and are more likely to convert them into buyers.
What Is Market Segmentation?
Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
How can a market be segmented?
Markets can be segmented in several ways such as geographically, demographically, or behaviorally. Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market. With risk minimized and clarity about the ...
What are some examples of market segments?
Companies can generally use three criteria to identify different market segments: For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements.
How does market segmentation increase efficiency?
Market segmentation allows a company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).
How do companies segment their market?
Companies can segment markets in several ways: Demographically by age, gender, family size, income, or life cycle. Psychographically by social class, lifestyle, or personality. The objective is to enable the company to differentiate its products or message according to the common dimensions of the market segment.
How to identify market segments?
Companies can generally use three criteria to identify different market segments: 1 Homogeneity, or common needs within a segment 2 Distinction, or being unique from other groups 3 Reaction, or a similar response to the market
What are the different types of segmentation?
Types of segmentation include homogeneity, which looks at a segment's common needs, distinction, which looks at how the particular group stands apart from others, and reaction, or how certain groups respond to the market.
What does segmenting the market mean?
Segmenting the market helps you understand your customers and their needs. Market segmentation consists of dividing your audience into different groups based on their common characteristics. These groups, or segments, are smaller and more manageable, making it easier to adapt your marketing campaign for different customers.
5 types of market segmentation with examples
Here are the five standard categories of market segmentation with examples of each:
10 benefits of segmenting the market
Segmenting your market allows you to define your audience's characteristics, like their ages, interests, buying habits and locations. Once you better understand your audience, you can deliver advertising that speaks to a specific category.
5 steps to begin segmenting your market
Here are some basic steps when you’re ready to implement your own market segmentation:
Best practices for segmenting the market
Consider the following market segmentation tips as you get started or begin exploring additional potential segments:
What Is Market Segmentation
What Is Segmentation?
- Segmentation literally means dividing something into parts. This also happens on the sales market. A segment is a group of (potential) customers that share a number of characteristics. For example, when a group of approximately 50 people gathers, one can ask who is over 25 years old. Subsequently, one can ask who’s older than 50. Finally, one can a...
Reasons For Market Segmentation
- Consumers differ from each other and therefore also respond differently to the entire marketing mix: the combination of 5 Ps, product, price, place (distribution), promotion, people (of your business). To use this effectively, it’s helpful to identify the segments, so different customer groups can be approached effectively. There’s another valuable aspect to segmenting customer …
Practical Example of Market Segmentation
- The various C&A brands are a perfect example of Market Segmentation. According to C&A(international fashion warehouse), the company offers ten different clothing brands for ‘every phase in life’. These different brands also have different styles. The following segments are differentiated: 1. The Babyclub intended for the babies and toddlers target group 2. Palomino int…
Market Variables
- Target groups can be differentiated, and therefore segmented, in many ways. The most common market variables can be found below:
Market Segmentation Disadvantages
- Despite the many reasons for businesses to partake in Market Segmentation, it also has a number of disadvantages. One that’s frequently mentioned first is that it costs money. Each target group has to be approached individually. The C&A example demonstrates this well. For all 10 subcategories, a season collection needs to be introduced four times a year. The second disadv…
Now It’S Your Turn
- What do you think? Are you familiar with the explanation of Market Segmentation? Do you use Market Segmentation in your company or are you planning to? What are your experiences with Market Segmentation? Do you have any tips or additional comments? Share your experience and knowledge in the comments box below.
More Information
- Dickson, P. R., & Ginter, J. L. (1987). Market segmentation, product differentiation, and marketing strategy. The Journal of Marketing, 1-10.
- Moorthy, K. S., & Png, I. P. (1992). Market segmentation, cannibalization, and the timing of product introductions. Management Science, 38(3), 345-359.
- Wedel, M., & Kamakura, W. A. (2012). Market segmentation: Conceptual and methodological …
- Dickson, P. R., & Ginter, J. L. (1987). Market segmentation, product differentiation, and marketing strategy. The Journal of Marketing, 1-10.
- Moorthy, K. S., & Png, I. P. (1992). Market segmentation, cannibalization, and the timing of product introductions. Management Science, 38(3), 345-359.
- Wedel, M., & Kamakura, W. A. (2012). Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.
Market Segmentation Definition
Benefits of Market Segmentation
Types of Market Segmentation
The Objective of Market Segmentation
- The market segmentation strategy seeks that businesses know well the physiognomies of persons when consuming a product or service. So that this lets them a proposal to them what they need, they try to get companies to focus on a few board markets instead of trying to target everyone. Thus achieving a competitive advantage in a given segment. Small ...
Example of Market Segmentation
Criteria of The Market Segmentation
Conclusion
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