7 Important Market Segments | (Explained)

Introduction

Market segmentation is the process of dividing a market into many groups of buyers whose needs differ, and who need separate products. Market segmentation is most often used to identify and target various types of customers with various needs and behaviors.

By segmenting a market, companies can create clear marketing strategies and plan that target various types of customers, thereby increasing the efficacy of their marketing strategy.

Meaning

Market segmentation is the method by which marketers split a market into many sub-markets to capture different markets for any product. Thus, market segmentation is the division of a market into similar groups of customers, each of whom responds to advertising, communication, price, and other marketing mix elements.

Within the market segment approach, a process of dividing the market based on similarities that exist among the various subgroups is performed. The similarities share qualities or shared wants and desires. Market segmentation started from the observation that, all consumers are not equal, so all strategies are also not equal to cover all.

Market segmentation and diversity are concepts that work together.

There is no need to segment markets if the market was not diversified, made up of many distinct people with there

• • origins,

• • places of origin,

• • interests,

• • needs and wants,

• views

The global marketplace’s diversity makes market segmentation an appealing, realistic, and even very effective technique.

Therefore, A large enough population with money to spend and enough diversity to allow dividing the market into small parts based on demographic or other strategic market segmentation needs conditions

When marketers offer a variety of product or service options to a variety of consumers on their interests. then, consumers are happier, and their happiness, joy, and quality of life improve. As a result, market segmentation benefits both consumers and marketers.

Definition

“Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments, each of which tends to be similar markets which are made up of individuals with a similar need, wants.”  – W.J.Stanton

 For More Author’s Definition on Market Segmentation Click Here 

MC Donald’s and other marketers have market segmentation to be a valuable technique for the following reasons : 

“Market segmentation is the process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same, or comparable, set of needs satisfied by a distinct marketing proposition” – MC Donald

Types of Market Segmentation

• Geographic – based on land, rural or metropolitan area.
• Demographic-based on age, gender, income, occupation, education, and nationality.
• Psychographic – based on social status, lifestyle type, and personality type.
• Behavioral- based on the intensity of product use, brand loyalty, user behaviors, price sensitivity, and technology adoption.
• Firmographic – individuals as well as business statistics organisations. Business market segmentation

Geographic Segmentation

Demographic Segmentation

Psychographic Segmentation

Behavioral Segmentation

Firmographics Segmentation

Market Segmentation and Market Strategy

When it comes to marketing techniques, most people think of the 4Ps (Product, Price, Place, Promotion). But now it is enhanced by three more Ps that are, People, Processes, and Physical Evidence.

Market segmentation and target market identification, but, are critical components of every marketing plan. They serve as the foundation for developing any specific marketing mix. The following are the fundamental steps in marketing strategy:

Top 8 Needs Effective Segmentation  

Market segmentation is used to achieve a specific practical goal. In order for this to happen, the segments selected must fulfill specific requirements, such as:

Identifiable 

The distinguishing characteristics of segments must measure in order for them to check. Marketers must be able to detect these factors to divide the market into several groups. Based on certain common features related to a certain product or service. Certain segmentation factors are identifiable because they are visible or observable.  Age, gender, marital status, education, and employment are examples of demographics. This demographic information can be collected either by observation or through study. 

Geographic segmentation (region, city size, density of area, and climate) may also be easily determined. Since it is visible or through mapping. But, there are certain features that are difficult to identify.

Reachable

Segments are accessible via communication and distribution methods. This point helps in identifying target customers, such as demographics, lifestyle, and behavior. Marketers use these points to identify and target the right consumers for their products and services.   

Reaching these points is essential for any successful marketing campaign. Because, it allows businesses to better understand their target audience and create content, products, and services according to them.

Sizeable

The segments must be large enough to justify the resources needed to target them. A tiny part may be unsuitable for economic use.

Profit

 Finding divisions that are large but not profitable is pointless. Yet, good marketing segmentation initiatives may boost a company’s long-term profitability and health. Market segmentation has several advantages, including increased resource efficiency. Marketing segmentation enables management to concentrate on certain demographics or clients.

Longevity 

The Segments should be generally stable to reduce the cost of frequent alterations. Longevity in market segmentation is helpful in that it allows firms to better understand their target audiences. This means, identify their needs and preferences, and crafting their strategies and products to meet those needs.   

It also enables firms to track changes in customer behavior over time, and change their strategies accordingly. This helps businesses stay competitive and relevant in a changing market. 

Measurable

The Segment potential as well as the influence of a given marketing mix on them should be quantifiable. Another important feature examines the level of measurability of segment size and purchasing power. The marketer must be able to form the market size, that is, how many individuals are in the sector and where they are situated.  The marketer must be capable of determining the level of effectiveness of the marketing mix. 

So that elements on the specific segment as well as measuring the segment’s sales potential. For example, a restaurant may wish to improve its food and beverage offerings.

Compatibility 

Segments must be compatible with the resources and capabilities of the company. Another point of worry for marketers is if the segments are large enough to warrant investment. A market segment must have a big number of consumers with unique requirements and interests to be worthwhile. The major sector must be large enough to be efficient. 

The size of the market is not the only determinant of the segment’s economic merit.  It is also vital to do consumer research to establish whether customers are unsatisfied or pleased with existing items and whether they are prepared to pay for the firm’s offering. The target segment should be a big homogenous group on which to focus a targeted marketing campaign.

Stability

Marketers want to target consumers whose actions can be predicted. Marketers want to be certain that consumers’ demographic and psychological characteristics, as well as their needs, will remain stable over time. Marketers want to avoid ‘fads’ that may fade away one day due to their erratic durability.

Nature of Market Segmentation 

The nature of market segmentation is that it requires a homogeneous group of consumers with similar needs or characteristics, as well as externally heterogeneous segments with unique features. This allows companies to create targeted marketing campaigns and tailor their products or services to the specific needs of each segment. 

Effective market segmentation is crucial for increasing sales and improving market performance. By understanding the distinct groups of consumers within a market, companies can develop strategies to effectively reach and serve them.

Objectives and Importance of Market Segmentation 

The objectives of market segmentation are to identify customer needs and wants, create unique marketing programs for each segment, divide marketing resources, and increase sales.   

Market segmentation is important because it allows businesses to target specific customer groups, and their messages to those groups, and create more effective campaigns. It also enables businesses to use their resources more efficiently, as they are able to focus on the most profitable customer segments.

Finally, market segmentation helps businesses identify new opportunities and areas for growth. 

Market segmentation tries to better understand customers so that firms may properly build plans to meet their requirements and desires. It not only helps to please the client, but it also allows the firm to use its resources more efficiently. 

The following are the primary goals of market segmentation:

Understanding the Attractive Marketing Opportunities  

Marketing segmentation separates a large heterogeneous market into tiny homogeneous market segments. So that collect specific consumer information. It is an important technique to learn about potential marketing possibilities. In return, the business can do a comparative study of segments and potential growth.

Helps in the selection of a target market  

Market segmentation assists the marketer in identifying his target market. Market segmentation allows an organization to separate one market segment from another by demonstrating which market segment is the best from it. This distinction helps in the formation of the firm’s target market.

Help in the determination of the marketing mix

It is easier to understand numerous elements of customers when the entire market is split. Marketers may learn all about their customers’ wants, needs, and desires. They may also learn about their age, location, education, religion, income, purchasing power, and so on. Marketers are so well-positioned to select the ideal marketing mix for them. Furthermore, they can alter the market mix.

Helps in the formation of an effective marketing strategy  

One of the primary goals of market segmentation is to collect detailed info on existing and prospective customers. Once you understand your consumer, you can successfully plan and implement your market strategy.

Process of Market Segmentation

Identify target market: The first step of market segmentation is to identify the target market. This involves understanding the market size, potential customers, and the needs and wants of the target market.    

Analyze customer data: The next step is to analyze customer data to gain insights into the target market. This can include demographic, socio-economic, and behavioral data.    

Develop segments: Once the data is analyzed, segments can be developed based on shared characteristics. This can include age, gender, location, lifestyle, income, and other factors.    

Select segments: After the segments are developed, the marketer will select the most relevant segments to target. This requires an assessment of the potential size of each segment and its potential for growth.    

Track segments: Finally, the marketer should check the segments regularly to ensure they remain relevant and continue to reach the desired target market. This includes reviewing customer data and adjusting the segments as needed. 

Disadvantages of Market Segmentation 

Market segmentation is an incomplete science. As you go through the process, review the results to ensure you’ve found the best solution for your marketing, sales, and product organisation needs.

How can you meet today’s customers’ expectations? Some fundamental rules should govern common market segmentation:

• Increased Cost: Market segmentation requires significant investments in terms of cost, time and resources to identify, analyze and target a specific market segment.
• Limitations of Data: Market segmentation relies heavily on data as it is used to identify target segments, but data can be limited or unreliable.
• Over-Segmentation: As companies strive to identify smaller and smaller segments, they can end up with too many segments that are too small to be profitable.
• Difficulty in Targeting: It can be difficult to reach the target market segments due to the varied needs and interests of each segment.
• Failure to Reach Consumers: Even if a segment is accurately identified, there is no guarantee that the target market will respond to the marketing efforts.
• Make sure the segments aren’t too small or too specialised. Smaller segments may be difficult to measure and accurate, and they may be more distracting than revealing.

• Don’t focus solely on segments, but on the purchasing power and need of the product as well
• Don’t be too rigid. Customers and circumstances change, so make sure your segment does not become too specialised. Prepare to evolve your market segment.

Profile of Market Segmentation

Theories of Marketing Segmentation

Homogeneity-Heterogeneity Theory

Niche-Market Theory

Example of Market Segmentation

References

Paliwoda, S. J. (1994). The essence of International Marketing. Prentice Hall.

Kotler, P. (2022). Principles of Marketing. Pearson.

Ansoff, H. Igor. Strategic Management. Palgrave Macmillan UK, 1979. DOI.org (Crossref), https://doi.org/10.1007/978-1-349-02971-6.