Basics of Market Division or Classification
Market segmentation is a crucial tool in the marketing world, helping managers make informed decisions. To learn more about its influence on decision-making, check out this article.
However, it's important to note that market segmentation isn't without its limitations. For a comprehensive understanding, take a look at this article.
There are several main types of market segmentation in use today, including demographic, geographic, behavioral, psychographic, and value-based segmentation.
Demographic segmentation categorises customers based on socio-economic criteria such as age, gender, income, education, occupation, and marital status. This foundational approach is useful for tailoring products and messages to different groups, like millennials versus baby boomers 13.
Geographic segmentation divides the market by location, from broad regions or countries to specific neighbourhoods. This allows businesses to adapt offers to local preferences, climates, or cultural factors, such as customising menus for different countries or promoting seasonal clothing based on location 13.
Behavioral segmentation focuses on customer actions such as usage habits, brand loyalty, product interactions, and buying stages. This approach enables targeting based on what customers do rather than who they are 3.
Psychographic segmentation considers personality traits, values, lifestyles, and mindsets. Though more complex to measure, it reveals deeper motivations behind buying decisions, often inferred through surveys or engagement data 3.
Value-based segmentation groups customers by their economic worth, evaluating how much revenue or profit each segment generates. This approach optimises marketing spend to focus on high-value customers 4.
Additional segmentation models include technographic (based on technology usage), transactional, contextual, lifecycle, and predictive segmentation, which are also used in some modern marketing strategies but less universally than the core five types above 2.
These segmentation types are often combined to create nuanced customer profiles that allow businesses to personalise marketing, improve targeting, and increase customer satisfaction and loyalty 14.
It's also essential to understand the three pillars of modern marketing management: Segmentation, Targeting, and Positioning (STP). For a clear outline of the major differences between segmentation, targeting, and positioning, check out this article.
For a more visual understanding, a video by Marketing91 on Market Segmentation is available. For further reading on the topic of market segmentation, explore the complete series on Segmentation.
In the realm of finance, understanding market segmentation plays a pivotal role in business strategies as it aids decision-makers in tailoring products and marketing campaigns to specific demographic or behavioral groups, such as millennials or customers with particular usage habits.
A comprehensive evaluation of market segmentation should also include an examination of its limitations, as well as an exploration of additional segmentation models like technographic and predictive segmentation, to create a well-rounded understanding of modern marketing management.
