market segment for business plan

The No-Nonsense Guide to Market Segmentation (With Tips and Examples)

Marketing to the wrong segment can feel like barking up the wrong tree, or more specifically, barking up tens of thousands of wrong trees. That’s where effective marketing segmentation can bring in some serious value for your business.

Nearly everybody in sales has, at one point or another, heard someone reasoning that simply adding more people to the funnel will improve their sales numbers while preserving their conversion rate.

If you’re a sales rep making 30 calls a day, you might reasonably extrapolate that making 60 calls a day would double your closed deals. Unfortunately, it’s not that straightforward.

Building a sales process can be complicated. What one audience might find valuable might just be noise for another.

Different demographics respond differently to marketing campaigns, and finding the right market segment for your products or services can help you tailor your marketing strategies to be the most impactful they can be.

This guide to marketing segmentation will help you find your target audience and choose the best market segmentation strategies.

Table of Contents

What is market segmentation, what are the benefits of market segmentation, the 4 most common types of market segmentation, 10 other market segmentation techniques you should know.

• Market segmentation strategies
• How to do your own market segmentation

Frequently asked questions about market segmentation

Market segmentation in a nutshell.

Market segmentation is the process of qualifying companies (or people) into groups that respond similarly to specific marketing strategies. This is the first critical step in creating a marketing and sales process tailored to differentiate your business in the market and resonate across multiple demographics.

Market segmentation divides customers into segments based on shared characteristics, behaviors, or other attributes so you can create marketing strategies that appeal to entire groups. Your marketing segmentation strategy will be mainly influenced by what your product is and which types of companies are already buying it.

The history of market segmentation

Wendell R. Smith first coined the expression “market segmentation” in his 1956 publication Product Differentiation and Market Segmentation as Alternative Marketing Strategies . Smith wrote that modern marketing appeals to selective rather than primary buying motives.

In other words, consumers actively contrast products against one another rather than simply purchasing a product to satisfy an immediate need. This realization was the inception of the modern market segmentation we practice today.

Before 1956, there wasn’t a huge market variety, and general stores tended to carry only one or two brands’ versions of the same product. As time passed, more and more emerging brands began offering similar products and thus needed to differentiate themselves through branding and targeting different markets.

It wasn’t enough to just manufacture ketchup. You had to identify your brand as America’s ketchup , kids’ ketchup , or fancy ketchup .

Market segmentation provides several benefits to small teams and enterprises alike, including:

• Bang for your buck: With tailor-made, demographic-specific messages and advertising, companies can more effectively communicate with their audiences, begin boosting their conversion rates, and actually spend less on broad advertising.
• Better conversion rate: The more information you have about your various audiences, the more specificity you can add to your outreach, which will help your prospects convert more easily.
• Customer retention: By marketing toward customers who have already gone through their own buyer’s journey, segmentation makes it easier to keep them engaged and pitch them with occasional upgrades. And with the segment data you’ve captured, you know how to talk to them.
• Expanding your efforts: Segmentation can be a great way to pursue new markets that have something in common with your current markets.  

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Market segmentation helps savvy marketers categorize their target customers based on shared characteristics to keep their efforts focused and effective. Below are the 10 most common types of market segmentation: 

• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation
• Geographic segmentation

1. Demographic segmentation

Demographic market segmentation is the most commonly used form of market segmentation and entails categorizing your market based on age, gender, income, profession, race, religion, education, location, family situation, etc.

Demographic market segmentation examples:

• Switch to the cartoon channel and check out those commercials. Do Nerf guns and neon-colored slime appeal to someone your age? Yeah, us, too— bad example .
• Commercials for vacation homes may target people across ages, genders, locations, and other demographics, but they all appeal to customers with disposable income who are interested in travel.

2. Psychographic segmentation

More specific characteristics are categorized under the umbrella of psychographic segmentation. Less tangible than demographic segmentation, this classification method includes details like lifestyle, personality, beliefs, values, and social class.

This evaluation is essential because two individuals can possess identical demographic information but make purchasing decisions completely differently, thus requiring different marketing.

Psychographic market segmentation examples:

• Health and wellness advertisements might not go a long way with someone who prefers to spend their money on video games and energy drinks, even if they work in the same industry and live in the same apartment building.
• Advertisements for large social gatherings (events, clubs, bars) might not appeal to introverts who would much rather snuggle up with a book than be surrounded by other people.

3. Behavioral segmentation

Another example of market segmentation is behavioral segmentation. At its core, behavioral segmentation is the act of categorizing prospects based on their actions, usually within your marketing funnel. For instance, prospects who visited a landing page for an upcoming event might benefit from receiving a personalized invitation.

Segmenting your market based on behaviors is typically done by marketers within their marketing automation software. Still, any company with a mailing list has already performed behavioral segmentation simply by tracking prospects who have signed up to receive emails.

Behavioral market segmentation examples:

• Sending emails to website visitors who have left items in their cart. “But wait…come back!”
• A retargeting campaign that only displays ads to people who have previously purchased an item.

4. Geographic segmentation

Geographic market segmentation takes into account prospects’ locations to help determine marketing strategies. Although SaaS sales are relatively unaffected, a salesperson of gigantic coats knows to avoid pitching to Arizona residents.

Geographic segmentation variables and examples:

• Climate: Swimwear brands shouldn’t be targeting Alaska residents in January.
• Cultural preferences (based on location): For obvious reasons, McDonald’s in Germany sells beer.
• Population type: A bicycle company may segment its audience differently depending on the population type—rural (mountain bikes, thicker tires, and more durable frames), urban (road bikes, thin tires, and lightweight frames), etc.
• Density: A giant strip mall may require a high density of foot traffic to thrive.

5. Price segmentation 6. Firmographic segmentation 7. Generational segmentation 8. Life stage segmentation 9. Seasonal segmentation 10. Technographic segmentation 11. Needs-Based Segmentation 12. Value-Based Segmentation 13. Usage Rate Segmentation 14. Micro-Segmentation

5. Price segmentation

Price segmentation alters the price of similar products and services sold to different consumer groups. If you ever forced your kids to pretend to be under a certain age to qualify for the “kids eat free” special, then you understand the power and utility of price segmentation.

However, price segmentation can get much more granular. This type of segmentation can be used to identify customers willing to pay more for a particular product or service that they perceive to be more valuable.

Done correctly, price segmentation can capture the maximum revenue for each transaction.

Price market segmentation examples:

• Broad: Senior discount, veteran discount, coupons, etc.
• Granular: Computer processors are priced differently when sold to a company as a part (like inside an iMac) than when sold to a consumer as a standalone product.
• Even more granular: A marketing consultancy may base its prices entirely on the value it can generate for each client’s unique situation.

6. Firmographic segmentation

Instead of categorizing consumers based on age, location, income, etc, firmographic segmentation categorizes companies based on industry, annual revenue, job function, company size, location, status, performance, etc.

For B2B marketers, utilizing firmographic segmentation is non-negotiable to a high-performing marketing strategy.

Just as the demographic segmentation variables can help you form a buyer persona at the consumer level, firmographic segmentation can help you develop a buyer persona at the company level.

Firmographic market segmentation examples:

• Running different ads for different industries—real estate, finance, legal firms, etc.
• A B2B sales team only targeting companies with revenues over $100m.

7. Generational segmentation

Generational segmentation is almost comparable to the “age” variable in demographic segmentation. However, generational market segmentation goes beyond age by considering a particular generation’s preferences, habits, lifestyles, and attitudes.

It’s self-evident that the generations are vastly different. Someone born in the 1960s will likely have experienced a different culture than someone born in the 2000s.

Generational market segmentation examples

• Utilizing more memes on Facebook to target a larger percentage of Millennials.
• Altering your content publishing schedule to mornings to target a more significant percentage of Baby Boomers.

8. Life stage segmentation

Life stage market segmentation is the process of dividing your market based on the life stage of your target audience. For example, someone married with five kids may respond well to an emotional advertisement about convertibles during their midlife crisis.

Life stage market segmentation examples

• Ads about life insurance may not appeal to sophomores in college, but they may appeal to someone who just started a family.
• Someone who just entered the workforce for the first time may be more interested in a new apartment than someone who is retired.

9. Seasonal segmentation

Seasonal segmentation targets people based on their purchasing habits during certain periods of the year. It can include actual seasons (spring, summer, fall, winter), events (Coachella, Super Bowl), and holidays (Christmas, Mother’s Day).

Seasonal market segmentation examples

• A local you-pick berry farm may want to target its ads based on the fruit in season.
• A flower shop specializing in same-day delivery may want to ramp up its ad spend around Mother’s Day, targeting forgetful children.

10. Technographic segmentation

Much like firmographic market segmentation, technographic segmentation only applies to B2B audiences. It’s used to target companies based on the types of technology they’re using.

Whether it’s a customer relationship management (CRM) platform, a website CMS, or a niche-specific software tool, utilizing technographic segmentation can help enhance sales and marketing efforts.

Technographic market segmentation examples

• A company that develops WordPress plugins would have no business targeting companies that use a different CMS, like Wix.
• It would make sense for a SaaS company to target businesses using an app it just integrated with.

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11. Needs-based segmentation

The needs-based segmentation method focuses on the underlying needs and motivations of the target audience. This technique requires drilling down below the psychographic, demographic, and behavioral surface to uncover the “why” behind the customer’s actions.

With a needs-based analysis and market segmentation approach, marketers can deliver messaging that resonates with their audience on a much deeper level. When done correctly, needs-based segmentation often results in higher audience engagement, conversions, and customer retention.

Needs-based market segmentation examples

• A financial services company with a recently developed mobile banking app may want to target young adult career starters looking for guidance on managing their finances.
• It would benefit a sports apparel company with a high-performance, sweat-wicking line to market to athletes who seek a balance of functionality and comfort in their sportswear.

12. Value-based segmentation

Once marketing teams have determined a customer’s financial worth to the company, they can employ a value-based market segmentation strategy to define their target market. Knowing how much your customers contribute to your bottom line separates the high-value customers from the others for optimized revenue growth campaigns.

At the heart of this market segmentation technique is the customer lifetime value (CLV), which is an estimate of the total revenue expected from the customer during their relationship with the company. Marketers must consider factors such as purchase history, average order value, and retention rate to determine the CLV.

Value-based market segmentation examples

An airline might divide its target audience into two primary value-based segments: High-value and low-value segments. 

The high-value segment could include frequent flyers, possibly those who travel often for business and purchase more expensive seats and upgrades. Its low-value segment might consist of price-sensitive travelers who travel occasionally and usually opt for discounted options.

These are the marketing strategies the airline might implement for each:

• High-value segment: The airline could offer this segment priority boarding, VIP airport lounge access, and travel miles points to encourage brand loyalty.
• Low-value segment: Setting up an email campaign for this segment with messages about flight promotions, deals, and tips on stretching your travel budget could have a positive impact.

13. Usage rate segmentation

In usage rate market segmentation, marketers group their target audience according to two variables: The degree and frequency with which they interact with the company’s products and services. With this segmentation technique, marketers can create marketing strategies hyper-focused on a particular subset of customer needs and behaviors.

This is another segmentation approach that requires serious data analysis. It delves deep into when and how customers engage with your products and services. Some important metrics to consider are purchase frequency, feature usage, and website engagement.

Usage rate market segmentation examples

• It may make sense for an e-learning platform to offer high-usage students advanced course options, personalized recommendations, and opportunities to interact with instructors.
• A fitness tracker app could create in-app educational campaigns showcasing app functionality and personalized workout recommendations for users who don’t actively engage with the app.

14. Micro-segmentation

Micro-segmentation involves dividing a customer base into even more precise target groups in line with various factors. These factors can include any one or more of the segmentation techniques mentioned above. But, these micro-groups can also be determined through predictive analytics.

Marketers opt for micro-segmentation when they plan to run highly targeted campaigns to ensure they resonate with everyone in the target group. This type of segmentation calls for in-depth data analysis to pinpoint ideal candidates for the target audience.

Micro-market segmentation examples

• To promote a new line of work-appropriate attire, an ecommerce clothing retailer may target the following group: Young professionals between 25 and 35 living in urban areas who have recently purchased business casual clothing.
• A streaming service advertising its broad range of children’s shows and educational programs could consider targeting a group like this: Families with young children who primarily watch shows and other content on tablets.

Market segmentation strategies (and their pros and cons)

Every market segmentation strategy is different, but most of them follow one of two fundamental outlines:

1. Concentration strategy

Concentration strategy is when a company determines that its efforts are best focused solely on a single market segment. This strategy is particularly great for small, growing businesses with a viable use case within a specific market. Focusing on one segment will allow the company to invest more time, energy, and resources into one specific market, which minimizes advertising spend and potentially mitigates wasting efforts across multiple segments.

Concentration strategy is like putting all your cards on the table—if it doesn’t work out, it can end badly. If the market segment hasn’t been properly vetted and turns out to be a bust, all your marketing efforts could be wasted. Be sure to carefully plan and execute thorough market testing before committing your business to a single market segment.

• Pros: High conversion percentages, repeatable marketing practices, less marketing spend
• Cons: “All-or-nothing” growth potential is limited to segment size

2. Multi-segment strategy

Multi-segment marketing, or differentiated marketing, is when a company’s marketing strategies are designed to advertise one product to more than one market segment.

Although apparently “safer” than the concentration strategy, multi-segment marketing is a much larger tax on a company’s marketing spend, as it requires completely different campaigns for each market segment.

However, if a particular segment is highly receptive and converts well, it’s easy to tailor your strategy to market more directly to that segment.

• Pros: Safer, appeals to more consumers, diverse marketing, high growth potential
• Cons: Lower conversion percentages, greater marketing spend

How to do your own market segmentation in phases

Ready to complete market segmentation for your company? Here are three phases to follow during the process that will help you ensure you’re analyzing your markets effectively:

Phase 1: Gather the data

First things first—it’s time to gather data so you can use it to form your market segments. There are many ways to go about it—some people like to buy pre-made lead lists , and others prefer to do their own research. 

Two helpful methods of researching prospects are web forms and surveys. You can place high-quality data behind web forms that require site visitors to submit their name, email address, and other information to access the content. Surveys can get specific information from potential buyers in exchange for tangible rewards, like a gift card or special offer.

If you’re doing your own research, you can frame your searches along the following categories:

• Researching by company size: Size can mean several things, but it is most often measured by the number of employees, number of customers, or overall sales revenue a company claims. Some companies have greater transparency on their websites, which makes reaching out to the correct person much easier.
• Researching by industry: It’s unlikely that your product is applicable across all industries, which is why industry segmentation exists. Industry segmentation will help you ensure you’re not wasting your time by targeting a company without needing your product.
• Researching by location: If you’re offering a location-specific product or service, like landscaping services within the local community, your geographic market segmentation is probably pretty airtight—You probably use handy tools like lead maps, and engage in local marketing wherever possible. For other industries, like IT staffing, your reach might be international. Whatever your product, location is a crucial thing to know about a company because it will help you decide which sales tactics to use and when to send your emails if you’re communicating across time zones, at the least.
• Researching by requirements : This segmentation method entails qualifying companies based on whether they need your products or services. While this definition is straightforward, the process behind making this determination may not be, depending on what you’re offering. You can use Google Maps to look up a company’s HQ if you sell landscaping services. If their office is in a tower in New York City, they probably don’t need any landscaping.

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Phase 2: Sort the data into segments

There are many ways to sort data. Most involve expensive analysts, marketers, and lots and lots of time. Although the DIY route is faster, it is no substitute for a comprehensive market segmentation strategy.

Assuming time and money are an obstacle—You can approximate your own market segmentation by compiling your data into one single source and running filters on it to group your prospects and companies manually by segment.

Remember, ask yourself the following:

• Is this segment measurable?
• Is this segment large enough to earn a profit?
• Is this segment stable and not going to vanish after a short time?
• Is this segment reachable with my marketing strategies?
• Is this segment homogenous, and will they respond similarly to my marketing strategies?

Phase 3: Plug in your marketing channels

Now that your segments have been firmly established, it’s time to connect the dots and breathe life into your marketing. This means establishing a plan for each of your marketing tools and channels and coming up with real ways to reach your segments with them.

You’ll be attributing different marketing and sales tactics to each stage of your pipeline and determining what sticks. The good news is that your market segments are clearly defined, and you’ll be able to speak to them clearly.

The real challenge is continuously improving your efforts with trial and error to get the best possible conversion rates.

There’s a good, old-fashioned way to map this out quickly and easily:

• Draw your pipeline stages horizontally across a sheet of paper.
• Above each pipeline stage, jot down marketing channels, like Linkedin, emails, or webinars, with blank space in between them.
• Below each marketing channel, write exactly how you will use this tool at this pipeline stage, like “email prospects a link to a recorded webinar.”

Repeat this exercise for each market segment to help establish a concise and repeatable process for marketing to your various audiences. You can fully flesh out your segmented marketing strategy by configuring your sales software and email automation around the outline you’ve created, then make tweaks as needed.

To this end, some CRMs offer reporting and performance tracking , as well as custom reporting , to help you figure out what’s working and what needs to change.

Still have questions about market segmentation? Check out the FAQs below for answers to some common questions:

What are some common challenges faced when implementing market segmentation? 

Here are a few of the challenges you may encounter when implementing your market segmentation strategy:

• Creating segments that are too broad: Your product or service may appeal to several different market segments, but trying to appeal to too many can lead to ineffective marketing and high ad spending.
• Creating segments that are too narrow: The opposite problem can also arise. Small segments might be challenging to quantify and distract from other segments with greater buying power.
• Not being flexible: Just because a particular segment currently buys from you doesn’t mean they always will. Be willing to reevaluate your market segments over time to maximize your marketing spending and revenue.

What are the key factors to consider when selecting a target market segment? 

Five key factors to consider when selecting market segments for your marketing strategies are:

• Whether the segment is measurable
• Whether the segment is large enough to generate a profit for your business
• If the segment is stable and won’t vanish after a short time
• If the segment is reachable by your marketing strategies
• Whether the segment is homogenous and will respond similarly to your marketing strategies

How can you effectively redefine your target market?

If you’ve determined that your target market no longer fits, you can always identify new markets . Here are a few tips for doing so: 

• Identify trends and patterns: Do companies that make a certain amount of annual revenue seem to be shying away from your offerings? If you want to reach those customers, identify any patterns in which products or services they choose instead and strategize for how to provide the value they’re looking for.
• Listen to customer feedback: Your current (or former) customers are valuable sources of feedback. Consider what they say about your product or service and whether you’re meeting their needs. You may be able to identify new opportunities.
• Diversify your marketing channels: Using multiple channels to reach your target market can be a highly effective way to increase your brand’s exposure. Consider diving into new channels like content marketing, email marketing, SEO, and online advertising to drive engagement with your target audience.

Additional resources:

• How to Use Data Insights to Inform Marketing Strategies
• 11 Expert Digital Marketing Communication Tips
• What Is CRM Data & How to Use It for Marketing
• The 30 Best Online Marketing Resources
• Creating and Implementing Effective Sales Strategies
• 7 Types of Sales Leads and How to Close Them
• The Ultimate Guide to Cold Calling
• The Ultimate Guide to Writing Cold Emails That Get Replies

Now, you’ve clearly segmented your demographics, figured out your strategy, and mapped your sales processes tightly to your market segments.

Because of this, you should clearly understand how to talk to your prospects and differentiate your outreach efforts based on the market segment.

The challenges that lie ahead are rooted in constantly adjusting your marketing. That means testing your messages and tactics and measuring your audiences’ responses.

If you’re ready to put your sales and marketing automation into action, get started with a free trial of Nutshell today!

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Target Market Segmentation

Target market segmentation helps you market better to potential customers. Let's take a look at what this means and how you can grow your small business.

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arget market segmentation helps you market better to potential customers. It's crucial to boost sales and increase the chances of long-term success.   Let's take a closer look at what this term means and how you can use it to focus your marketing efforts.

What is Target Market Segmentation, and Why Does It Matter?

Target marketing segmentation is where you divide your potential customers into segments. You'll then focus on a few segments (or groups of people) that align most with your product or services. Doing so helps you tap into their needs and desires to attract new sales and increase longevity.   You can also drill it down further by creating a marketing strategy for more specific groups of people  -  such as using different promotions and how you deliver your products or services. That way, it helps your marketing campaigns be more cost-effective, allowing you to spend time only on one focus at a time.   Let's say you have a wedding and event photography business . Instead of spending thousands of dollars on print ads in random publications, you'll first see who your target customers are. Based on this information, you'll then focus your marketing campaigns by placing ads in publications where your target audience is most likely to see them. That way, it'll increase the chances you'll get a return on your investment.  

How Do I Segment My Target Market?

The good news is that you can approach segmenting the market in many ways based on your company's market research. Four common ways are behavioral, demographic, geographic, and psychographic segmentation.  Here's a bit more detail on the types of market segmentation:  

Behavioral Segmentation

This segment looks at how consumers interact with brands and products. For instance, you can look at which platforms your ideal customer most frequents, their social media usage, and their customer journey online.  

Demographic Segmentation

Businesses tend to feel this is the most important criteria to identify their target market. These include age, gender, education level, income level, social class, nationality, family size, marital status, and religion. Knowing these demographics about your ideal customer can help you with how you want to create marketing campaigns (Gen Xers may not understand the slang Gen Z tends to use, for instance).  

Geographic Segmentation

Yes, this segment has to do with details on a consumer's location or where they live. Aside from nationality, you can consider their state, county, town, or city.

Psychographic Segmentation

Businesses can look at elements such as parts of a consumer's personality traits  -  like whether they lean towards being an extrovert or introvert. You can even consider a consumer's belief systems and lifestyles and consumer behavior.  

How to Effectively Create Target Market Segmentation

Creating a target market analysis will help you understand the types of consumers you need to market to and will even help you break into niche markets. Don't worry; creating one isn't a difficult task, though you'll want to make sure you take the time to get it right to ensure effective marketing messages.   Here are four steps you can take.  

1. Gather Accurate and Current Data

Gathering details from outside sources can be incredibly valuable to help you gain better insights into your market segment, potential customers, and even your industry as a whole. Plus, if you're just starting out, you may not have enough internal data to get a good enough view of what customer groups you need to target based on customer needs.   The challenge when gathering data is that there is plenty out there. Make sure what you're using is both current and accurate.  

2. Divide up Market Based on Chosen Characteristics

Now's the time to wade through data and eliminate what isn't relevant to your target market. You'll want to create customer segmentations. Consumers who are most likely attracted to your brand, product, or service will share the same types of characteristics. Identifying these will ensure you're efficient when creating your messaging in your marketing campaigns.  Here are some questions to help you get the ball rolling:

• What do my target customers have in common?
• How does my target customer research products and services?
• How does my target define themselves?

Once you have some shared characteristics, you can then use them to create customer profiles or personas. It will also help give you even better insight into what really matters to them, plus any trends and insights to help you develop more ideas to increase sales.  

3. Gather Intel on Your Competitors

Understanding the competition in the market is critical. This will tell you exactly what your product or service is up against and what tactics you need to take on to compete.  Ask questions like:  How many businesses have a comparable offering to you?  What's their pricing structure?  What reach do they have?  Who do they appeal to most?  You may find that one group of people is very well served by competitors while another group has yet to be tapped into.  Answering these questions will help you identify the most profitable group to target in your marketing plans, as well as identify what types of marketing communications may or may not have worked prior.

4. Use Market Segmentation As Part of Your Business Plan

Now that you've identified your target segment, it's time to use this knowledge as part of your overall business plan. Yes, you want to use the data to create better marketing plans, but this data can also help you tap into other insights. Think about how you can develop new products and services, order the right amount of stock, and even anticipate demand at certain months of the year.   That is the essence of knowing your market. For instance, if you know you want to test certain products, look at how you can further segment your target market to see whether you should include this new item as part of your regular offerings. Or, if you know that sales are slow at a particular time of the year, you can look at the data to create campaigns to encourage quick sales.  

Using Target Market Segmentation in Your Marketing Strategy

All in all, the goal of target market segmentation is to inform your company's overall business and marketing strategy. It'll help you easily create goals and develop ideas that are more audience-centric.   Doing so means you know what they want and when they want it. This will increase brand loyalty in your customer base. Imagine how your business will benefit from this wealth of knowledge!

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Market Segmentation

What is market segmentation?

The benefits of market segmentation, the basics of segmentation in marketing, types of market segmentation, how to get started with segmentation, market segmentation strategy, market segmentation use case examples, ensuring effective segments, common segmentation errors, qualtrics solutions for market segmentation, see how qualtrics strategic brand works, market segmentation: definition, types, benefits, & best practices.

21 min read Market segmentation helps you send the right message, every time, by efficiently targeting specific groups of consumers. Here’s how it works.

By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies . Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs. women or high income vs. low income.

Read on to understand why segmentation is important for growth and the types of market segmentation to use to maximize the benefits for your business.

Free eBook: How to drive profits with customer segmentation

Companies who properly segment their market enjoy significant advantages. According to a study by Bain & Company , 81% of executives found that segmentation was crucial for growing profits. Bain also found that organizations with great market segmentation strategies enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.

Other benefits include:

• Stronger marketing messages : You no longer have to be generic and vague – you can speak directly to a specific group of people in ways they can relate to, because you understand their characteristics, wants, and needs.
• Targeted digital advertising : Market segmentation helps you understand and define your audience’s characteristics, so you can direct your online marketing efforts to specific ages, locations, buying habits, interests etc.
• Developing effective marketing strategies : Knowing your target audience gives you a head start about what methods, tactics and solutions they will be most responsive to.
• Better response rates and lower acquisition costs : will result from creating your marketing communications both in ad messaging and advanced targeting on digital platforms like Facebook and Google using your segmentation.
• Attracting the right customers : targeted, clear, and direct messaging attracts the people you want to buy from you.
• Increasing brand loyalty : when customers feel understood, uniquely well served, and trusting, they are more likely to stick with your brand .
• Differentiating your brand from the competition : More specific, personal messaging makes your brand stand out .
• Identifying niche markets : segmentation can uncover not only underserved markets, but also new ways of serving existing markets – opportunities which can be used to grow your brand.
• Staying on message : As segmentation is so linear, it’s easy to stay on track with your marketing strategies, and not get distracted into less effective areas.
• Driving growth : You can encourage customers to buy from you again , or trade up from a lower-priced product or service.
• Enhanced profits : Different customers have different disposable incomes; prices can be set according to how much they are willing to spend . Knowing this can ensure you don’t oversell (or undersell) yourself.
• Product development : You’ll be able to design new products and services with the needs of your customers top of mind, and develop different products that cater to your different customer base areas.

Companies like American Express , Mercedes Benz , and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers.

Understanding segmentation starts with learning about the various ways you can segment your market as well as different types of market segmentation. There are four primary categories of segmentation, illustrated below.

With segmentation and targeting, you want to understand how your market will respond in a given situation, like what causes people to purchase your products. In many cases, a predictive model may be incorporated into the study so that you can group individuals within identified segments based on specific answers to survey questions .

Demographic segmentation

Demographic segmentation sorts a market by elements such as age, education, household income, marital status, family size, race, gender, occupation, and nationality. The demographic approach is one of the simplest and most commonly used types of market segmentation because the products and services we buy, how we use those products, and how much we are willing to spend on them is most often based on demographic factors. It’s also seen as a simple method of predicting future behavior, because target audiences with similar characteristics often behave in similar ways.

How to start demographic segmentation

Demographic segmentation is often the easiest because the information is the most readily available. You can send surveys directly to customers to determine their demographic data, or use readily available third party data such as government census data to gather further information.

Geographic segmentation

Geographic segmentation can be a subset of demographic segmentation, although it can also be a unique type of market segmentation in its own right. As its name suggests, it creates different target customer groups based on geographical boundaries. Because potential customers have needs, preferences, and interests that differ according to their geographies, understanding the climates and geographic regions of customer groups can help determine where to sell and advertise, as well as where to expand your business.

How to start geographic segmentation

Geographic segmentation data again can be solicited from customers through surveys or available third party market research data, or can be sourced from operational data such as IP addresses for website visitors.

Firmographic segmentation

Firmographic segmentation is similar to demographic segmentation, except that demographics look at individuals while firmographics look at organizations. Firmographic segmentation would consider things like company size, number of employees and would illustrate how addressing a small business would differ from addressing an enterprise corporation.

How to start firmographic segmentation

Firmographic segmentation data can be found in public listings for companies and information that the business makes available, as well as trade publications. Again, surveying existing and potential customers can help to build out this data.

Behavioral segmentation

Behavioral Segmentation divides markets by behaviors and decision-making patterns such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to purchase bottled body wash, while older consumer groups may lean towards soap bars. Segmenting markets based on purchase behaviors enables marketers to develop a more targeted approach, because you can focus on what you know they are looking for, and are therefore more likely to buy.

How to start behavioral segmentation

Of all the types of market segmentation, behavioral segmentation is likely best started with the information you have on an existing customer base. Though it can be bolstered by third party market research data, the information you already have on customer purchase and usage behavior will be the best predictor of future behavior.

Psychographic segmentation

Psychographic segmentation considers the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers. Large markets like the fitness market use psychographic segmentation when they sort their customers into categories of people who care about healthy living and exercise.

How to start psychographic segmentation

Pychographic segmentation relies on data provided by the consumers themselves. Though market research might provide insights on what particular segments are most likely to believe or prefer, psychographic segmentation is best completed with information direct from the source. You can use survey questions with a qualitative focus to help draw out insights in the customers’ own voice.

On-demand webinar: How to drive product design and profits with customer segmentation

There are five primary steps to all marketing segmentation strategies:

• Define your target market : Is there a need for your products and services? Is the market large or small? Where does your brand sit in the current marketplace compared to your competitors?
• Segment your market : Decide which of the five criteria you want to use to segment your market: demographic, firmographic, psychographic, geographic, or behavioral. You don’t need to stick to just one – in fact, most brands use a combination – so experiment with each one to figure out which combination works best for your needs.
• Understand your market : You do this by conducting preliminary research surveys, focus groups, polls , etc. Ask questions that relate to the segments you have chosen, and use a combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open text responses) questions.
• Create your customer segments : Analyze the responses from your research to highlight which customer segments are most relevant to your brand.
• Test your marketing strategy : Once you have interpreted your responses, test your findings by creating targeted marketing, advertising campaigns and more for your target market, using conversion tracking to see how effective it is. And keep testing. If uptake is disappointing, relook at your segments or your research methods and make appropriate changes.

Why should market segmentation be considered a strategy? A strategy is a considered plan that takes you from point A to point B in an effective and useful way. The market segmentation process is similar, as there will be times you need to revisit your market segments, such as:

In times of rapid change: A great example is how the Covid-19 pandemic forced a lot of businesses to rethink how they sell to customers. Businesses with physical stores looked at online ordering, while restaurant owners considered using food delivery services.

If your customers change, your market segmentation should as well, so you can understand clearly what your new customers need and want from you.

On a yearly basis: Market segments can change year over year as customers are affected by external factors that could alter their behavior and responses.

For example, natural disasters caused by global warming may impact whether a family chooses to stay living in an area prone to more of these events. On a larger scale, if your target customer segment moves away from one of your sales regions, you may want to consider re-focussing your sales activities in more populated areas.

At periodic times during the year: If you’ve explored your market and created market segments at one time of the year, the same market segments may have different characteristics in a different season. Seasonal segmentation may be necessary for better targeting.

For example, winter has several holidays, with Christmas being a huge influence on families. This holiday impacts your market segments’ buying habits, how they’ll behave (spending more than normal at this time than any other) and where they will travel (back home for the holidays). Knowing this information can help you predict and prepare for this period.

When considering updating your market segmentation strategy, consider these three areas:

• Acknowledge what has changed: Find out what has happened between one time period and another, and what have been the driving forces for that change. By understanding the reasons why your market is different, you can make key decisions on whether you want to change your approach or stay the course.
• Don’t wait to start planning: Businesses are always adapting to long-te r m trends , so refreshing market segmentation research puts you in a proactive place to tackle these changes head-on. Once you have your market segments, a good idea is to consider the long-term complications or risks associated with each segment, and forward-plan some time to discuss problem-solving if those issues arise.
• Go from “what” to “why” : Why did those driving forces come about? Why are there risks with your target market? At Qualtrics, we partner with companies to understand the different aspects of target markets that drive or slow success. You’ll have the internal data to understand what’s happening; we help unleash insight into why with advanced modeling techniques. This helps you get smart market segmentation that is predictive and actionable, making it easier for future research and long-term segment reporting.

Where can you use market segmentation in your business? We’ve collected some use case scenarios to help you see how market segmentation can be built out across several departments and activities:

Market and opportunity assessments

When your business wants to enter into a new market or look for growth opportunities, market segmentation can help you understand the sales potential. It can assist in breaking down your research, by aligning your findings to your target audience groups.

For example, When you’ve identified the threats and opportunities within a new market, you can apply your customer segment knowledge to the information to understand how target customers might respond to new ideas, products, or services.

Segmentation and targeting

If you have your entire market separated into different customer segments,  then you have defined them by set criteria, like demographics, needs, priorities, common interests, or behavioral preferences .

With this information, you can target your products and services toward these market segments, making marketing messages and collateral that will resonate with that particular segment’s criteria.

Customer needs research

When you know a lot about your customers, you can understand where your business is connecting well with them and where there can be improvements.

Market segmentation can help with customer needs research (also known as habits and practices research) to deliver information about customer needs, preferences, and product or service usage. This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up.

Product development

If the product or service you’ve developed doesn’t solve a stated problem of your target audience or isn’t useful, then that product will have difficulty selling. When you know what each of your market segments cares about an/d how they live their lives, it’s easier to know what products will enrich or enhance their day-to-day activities.

Use market segmentation to understand your customers clearly , so that you can save time and money developing products and services that your customers will want to purchase.

Campaign optimization

Marketing and content teams will value having detailed information for each customer segment, as this allows them to personalize their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective.

When their marketing campaigns are combined with strong calls to action targeted to the specific segment, they will be a powerful tool that drives your target market segments towards your sales channels.

After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:

• Measurable : Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much your segment will spend on your product. For example, one of your segments may be made up of people who are more likely to shop during a promotion or sale.
• Accessible : Understanding your customers and being able to reach them are two different things. Your segments’ characteristics and behaviors should help you identify the best way to meet them. For example, you may find that a key segment is resistant to technology and relies on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read email, but responds well to printed ads.
• Substantial : The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but realistically can’t afford them. Make sure an identified segment is not just interested in you, but can be expected to purchase from you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford your goods, and successful entrepreneurs who want to show off their wealth.
• Actionable : The market segment must produce the differential response when exposed to the market offering. This means that each of your segments must be different and unique from each other. Let’s say that your segmentation reveals that people who love their pets and people who care about the environment have the same purchasing habits. Rather than having two separate segments, you should consider grouping both together in a single segment.

Market segmentation is not an exact science. As you go through the process, you may realize that segmenting based on behaviors doesn’t give you actionable segments, but behavioral segmentation does. You’ll want to iterate on your findings to ensure you’ve found the best fit for the needs of your marketing, sales and product organizations.

We’ve outlined the do’s , so here are some of the dont’s :

• Avoid making your segments too small or specialized : Small segments may not be quantifiable or accurate, and can be distracting rather than insightful
• Don’t just focus on the segment rather than the money : Your strategy may have identified a large segment, but unless it has the buying power and wants or needs your product, it won’t deliver a return on investment
• Don’t be inflexible : Customers and circumstances change, so don’t let your segments become too entrenched – be prepared to let them evolve.

Market segmentation doesn’t need to be complicated to be effective. We would advise, though, to  get automated from the beginning . Forget spreadsheets – choose  market segmentation software  to measure and streamline your marketing strategy; as you grow, the technology will scale with you.

Innovative features such as Experience iD allow you to build your own customer segments and start personalizing experiences at scale based on the rich insights into your critical customer groups.

If you want to get a feel for your market segmentation upfront, before taking a step towards a streamlined and integrated system, trust us to take you through the research with our Market Segmentation Research service .

Related resources

Market fragmentation 9 min read, behavioral segmentation 20 min read, psychographic segmentation 11 min read, geographic segmentation 14 min read, demographic segmentation 14 min read.

Brand Perception

Brand Sentiment 18 min read

Brand intelligence 12 min read, request demo.

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What Is Market Segmentation? How It Works, Careers, and More

Discover how market segmentation helps you reach new customers. Find out about marketing jobs and market segmentation salaries.

What is market segmentation?

Market segmentation is when a business splits potential customers into groups based on shared characteristics. These characteristics include location, age, income, credit rating, usage rates, or buying habits. Market segmentation can help inform and create a marketing plan that meets the needs of a target audience instead of creating a one-size-fits-all marketing strategy.

Given that marketing, advertising, publicity, and promotion have begun to focus more on personalized marketing and retargeting, market segmentation is key to marketing success.

Market segmentation vs customer segmentation

In your research into market segmentation, you may come across a similar term: customer segmentation. The main difference between these approaches to segmentation is the following:

Market segmentation divides the market of potential customers into segments.

Customer segmentation divides your existing customer base into segments.

Read more: What Is Customer Segmentation? + How to Reach Customer Segments

Retargeting and personalized marketing

Knowing your market needs and reaching out to the right people at the right time may provide potential customers with what they want. Personalized marketing typically leads to higher conversion rates, reduced acquisition costs, and less wasted revenue on marketing efforts that aren’t productive.

Marketers are continuously searching for new opportunities to personalize their message. A powerful way to do this is through retargeting , also called remarketing . This strategy is used to target ads specifically at internet users who've previously interacted with your site, mobile app, or online content and thus may have some level of interest in your products.

Retargeting works by placing a cookie on a user's browser, which allows marketers to serve ads based on the pages that the user has visited. For example, if someone visits a city vacation destination on your website, it makes sense for you to show them city-based hotel advertisements on other channels that they see. Retargeting also allows you to get the right message to customers at the right time.

4 reasons why market segmentation is important

There are several benefits of market segmentation, including:

1. Increasing the efficiency of marketing campaigns

When specific subsets of customers are targeted, your marketing content can become more relevant and effective with the audience you are targeting.

2. Understanding your target market better

Market segmentation gives you a more complete picture of who your customers are. With real, actionable insights, you can focus your efforts on product differentiation, adjusting your products, services, or content to customers' needs.

Read more: What Is a Target Market? And How to Define Yours

3. Spending your marketing budget more effectively

With market segmentation, you can spend money on promoting products to segments that are more likely to buy from you. For example, if your product is expensive and designed for business users, you may not want to invest your budget on social media channels that appeal to teenagers.

4. Becoming more competitive

Market segmentation can build brand awareness and authority in your niche . Market segmentation can also help you identify gaps in the market and fill certain segments' unmet needs.

5 types of market segmentation

You can segment your market in several ways. As a marketer, you’ll need to decide which segmentation strategy works best for your business:

1. Behavioral segmentation

Behavioral segmentation groups consumers based on their use of or response to a product. Behavioral segments are typically difficult to identify because behavior is not always consistent over time. 

Example: Banking customers can be divided into segments like online banking users and those who use physical branches. Online banking products may then be more successful when marketed to a receptive group of online banking users. 

2. Attitudinal segmentation

Attitudinal segmentation categorizes potential customers based on their attitudes, beliefs, opinions, and values. Unlike behavioral segmentation, which is based on observable actions that consumers take, attitudinal segmentation focuses on the psychological and emotional aspects of how consumers behave.

Example: An eco-friendly company can market to consumers who prioritize sustainable products and practices.

3. Demographic segmentation

Demographic segmentation is a very common form of segmentation. Your market can be divided based on characteristics such as gender, family size, age, income, occupation, education level, and nationality. Generational segments and cultural segments can also be included in a demographic basis for segmentation.

Example : Diapers will likely sell best to families with infants and young children.

4. Geographic segmentation

Geographic segmentation groups consumers based on where they live. This could mean country (national marketing), state (regional marketing), city (local marketing), or neighborhood (micro-marketing). Firms that employ geographic segmentation may market differently to potential customers in specific areas to maximize the effectiveness of their marketing efforts.

Example : New Orleans marketing might mention the Saints and the term Big Easy.

5. Psychographic segmentation

Psychographic market segmentation is a system that groups consumers by their interests, opinions, and lifestyle perspectives. This system rests on the idea that people's psychological traits influence consumer behavior.

Example : Outdoor gear companies may choose to target people who consider themselves active, adventurous, and outdoorsy.

The market segmentation process

The segmentation process is an initial step in marketing your business. Once your market is split into segments, you can use appropriate marketing strategies to target these segments effectively. The steps involved in this process are as follows:

1. Define your market and the opportunity.

The first step is to define the boundaries of the market, such as a specific geographic area, an age group, or income level. Develop a clear picture of the products or services you offer and the type of consumers who might want to buy them. If you’re highly specific, you can build better segments.

2. Segment your market.

Split up the market you've identified into groups that share common characteristics, including behaviors, attitudes, demographics, location, beliefs, and more.

3. Research your market to understand it.

You need to develop a good understanding of each segment. Consumers in each may have different needs, wants, desires, and buying behaviors. Your research can involve surveys, or other types of research, such as focus groups and interviews.

4. Create your products and marketing strategy.

Once you have defined and researched each segment of target customers, you can develop the products and marketing strategies to best reach each group. Your strategy should tell you how each product fits into the market, what price to charge , what promotions to run, which channels to sell through (e.g., online vs. in person), and so on.

5. Test your marketing strategy.

Before launching a new product or marketing campaign, test it out with a small group of people from within that segment. Improvements can then be made before going ahead with a full launch. Honest feedback from consumers is important for a product’s success.

6. Get feedback and review your success.

After launching a new product or marketing campaign, collect customer feedback and review how successful it has been. Evaluate success based on sales volume, profit margins, and other key metrics. Make any necessary changes, and use the process again with future products or services.

Market segmentation strategies and their benefits

Market segmentation strategies allow you to create tailored messages that will resonate with your target audience. Here are three main ways that marketing segmentation strategies can help:

Adaptable prices

You may offer different prices to different groups based on location, demand, and income level. A good example is flexible airline pricing, where prices rise and fall based on who will travel and how much they are willing to pay. By changing your price based on the type of customer you're dealing with, you'll maximize profitability.

Personalized content and messaging

This form of segmentation involves delivering customized content to a particular audience based on their interests. An e-commerce website showing recommendations based on browsing history is an example of content personalization. Customers are more likely to engage with content relevant to their needs and interests.

Read more: How to Develop a Content Strategy: Step-By-Step Guide

Precision targeting

A precise target market is a specific subset of a larger market you can target with your marketing efforts. The precise targeting strategy involves narrowing down the larger market to a small, specific group of people who are likely to buy for similar reasons.

The precise targeting approach aims to improve conversion rates by carefully targeting prospects with similar characteristics and needs. Instead of casting a wide net, identifying and targeting specific segments helps you reach customers who are more likely to make a purchase.

How different jobs use market segmentation

Many marketing professionals use market segmentation in their work. Some have to carry out analysis themselves while others use the analysis provided by other professionals.

*All salary data is sourced from Glassdoor as of September 2023.

Product manager

Average annual base salary (US): $147,018 [ 1 ]

Product managers are responsible for defining and establishing a product’s product strategy, roadmap, and features. They are responsible for getting feedback from customers, gathering market intelligence, and using this information to guide their product decisions.

Read more: What Does a Product Manager Do? And How to Become One

Market segment manager

Average annual base salary (US): $177,097 [ 2 ]

Segment marketing managers deal with a particular segment of the market. For example, a bank might have one segment marketing manager who deals with small businesses and another with large enterprises. A segment marketing manager should understand the needs of the customer segment they are targeting and define what messaging and products will appeal to them.

Brand manager

Average annual base salary (US): $95,146 [ 3 ]

Brand managers are responsible for defining a brand's voice and managing its presence in the marketplace. This involves overseeing the content creation that communicates consistently with the brand's positioning and objectives. By forming different buyer personas, brand managers can develop specialized messaging for customers as part of the brand voice.

Read more: What Does a Brand Manager Do? Guide

Digital marketing manager

Average annual base salary (US): $89,929 [ 4 ]

Digital marketing managers are responsible for marketing products or services using digital channels, such as search engines, email, social media, and websites. Their primary focus is to drive specific types of people to the company website. Segmentation is important when planning pay-per-clicks, search engine optimization , and social strategies.

Read more: Digital Marketing: What It Is and How to Get Started 

Content marketing specialist

Average annual base salary (US): $55,957 [ 5 ]

Content marketing specialists create content, such as blog posts, videos, or podcasts that engages customers and supports a brand's message. These specialists have to understand how to segment customers based on what type of content they like. They can produce content for each customer segment that will catch their attention and make them more likely to buy from the brand.

Marketing analyst

Average annual base salary (US): $69,966 [ 6 ]

Marketing analysts collect data from customers' responses to different types of marketing. This data can help companies determine which segments are profitable, which need more attention, and which are no longer valuable.

Read more: Marketing Analytics: Definition, Benefits + Career Guide

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Article sources

Glassdoor. “ Product Manager Salaries , https://www.glassdoor.com/Salaries/us-product-manager-salary-SRCH_IL.0,2_IN1_KO3,18.htm.” Accessed September 5, 2023.

Glassdoor. “ Segment Marketing Manager Salaries , https://www.glassdoor.com/Salaries/us-segment-marketing-manager-salary-SRCH_IL.0,2_IN1_KO3,28.htm?clickSource=searchBtn.” Accessed September 5, 2023.

Glassdoor. “ Brand Manager Salaries , https://www.glassdoor.com/Salaries/us-brand-manager-salary-SRCH_IL.0,2_IN1_KO3,16.htm?clickSource=searchBtn.” Accessed September 5, 2023.

Glassdoor. “ Digital marketing Manager Salaries , https://www.glassdoor.com/Salaries/us-digital-marketing-manager-salary-SRCH_IL.0,2_IN1_KO3,28.htm?clickSource=searchBtn.” Accessed September 5, 2023.

Glassdoor. “ Content marketing Specialist , https://www.glassdoor.com/Salaries/us-content-marketing-specialist-salary-SRCH_IL.0,2_IN1_KO3,31.htm?clickSource=searchBtn.” Accessed September 5, 2023.

Glassdoor. “ Marketing Analyst Salaries , https://www.glassdoor.com/Salaries/us-marketing-analyst-salary-SRCH_IL.0,2_IN1_KO3,20.htm?clickSource=searchBtn.” Accessed September 5, 2023.

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This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

Target Market Examples

Elon Glucklich

7 min. read

Updated April 24, 2024

Imagine your dream is to own a diner.

You have restaurant experience and a great location in mind – you just need the bank to approve your loan to get started.

But the bank has questions. A big one it wants answered is: who is your target market?

It might be tempting just to say, “hungry diners.” But you’ll need to dig deeper to truly define your target market . 

In this article, we’ll use this diner scenario to walk through the market research process and illustrate what the final result could look like.

• Questions about your target market

Before you even set foot in the bank, you should already have asked – and taken steps to answer – several key questions about your target market.

Let’s call our example business the Bplans Diner. Where is that perfect location you’ve found for the diner? Is it in a densely populated urban area, suburban neighborhood, or rural?

What are your hours of operation? Some diners cater to a breakfast crowd, while others might offer 24-hour dining to be a favorite among night owls. When you expect your peak hours could help determine whether you should expect to sell more omelets or hamburgers.

What’s the area’s median income, and what types of businesses or institutions are nearby? This information will help you determine pricing and marketing strategies for your diner. For instance, if your diner is located in a business district, you may want to offer lunch specials. But if it’s near a college or university, you might want to offer student discounts.

This is what a thorough target market analysis looks like, providing key insights and data to pinpoint the specific groups of customers most likely to patronize your diner. Gathering all of this information may sound intimidating, but it’s really just a matter of doing research. If you need help and guidance, check out our complete guide to conducting market research for your business . 

Let’s look at an example of a target market analysis for this diner. Then, we’ll break it down and discuss each element in detail.

• Example of a target market analysis

As you can see, the target market analysis follows the basic market segmentation process of splitting out potential customers into their demographic, geographic, psychographic and behavioral traits.

Next, let’s take a look at each in more detail. Afterward, we’ll look at how you can harness your target market analysis into actual business strategies.

• Demographic

You may have noticed that the demographic analysis in our example is very broad – 18 to 65 years old, including students, workers, and some seniors.

Finding your target market isn’t always about identifying a narrow demographic to cater to. In the case of a restaurant, it makes sense to focus on the geographic location and who currently frequents the area (more on that in the next section).

A different approach may be needed for a technology product that’s sold online. In that case, narrowing the demographic focus to specific age ranges or needs would be much more important than where the business is located.

In the case of the diner, we reached our decision by conducting a demographic analysis, examining the age ranges, occupations, and other concrete data points about potential customers near the proposed location (Reminder: we didn’t do this for the Bplans Diner, we’re just providing an example). 

There are several ways to go about collecting this information for your business. The most straightforward is to get out in the neighborhood, take a look around and talk to people. Are you mostly seeing students, or families? Are there a lot of office workers in the area? 

You can also look up data from the U.S. Census Bureau , which includes population, age, income and other useful information, often down to the neighborhood level.

After conducting this research, one valuable step is to create a detailed customer persona that represents the typical customer you expect for your business (we provide an example of a customer persona for the diner further down in this article).

While the demographic analysis considers the type of people who might frequent your business, the geographic analysis considers the characteristics of the neighborhood itself. 

Our target market analysis for Bplans Diner noted that we plan to operate in an urban area near a university with heavy foot traffic and expect a fair amount of late-night diners.

A key reason for examining the geographic makeup of your businesses is to size up your competition. If there’s already a popular diner in the area you plan to target, getting customers could be a major challenge. But if there’s a lack of dining options or no one is serving diner-style food, you’re more likely to be successful. Determining the size of your market will help you create reasonable revenue projections. 

We also mentioned the plan for Bplans Diner to cater to a late-night crowd. Examining the geographic makeup of the neighborhood will help you determine if there are the kinds of businesses – bars, music venues, or businesses such as hospitals where people are working all hours – to justify targeting this group.

• Psychographic

You know the demographics and geographic characteristics of your market. Now it’s time to consider the attitudes and values of your potential customers.

The psychographic analysis helps to understand the lifestyle of potential customers and how that might affect their preferences as consumers. If many of your potential customers are health-conscious, for instance, you’ll want to ensure your diner provides options like salads or gluten-free menu items. But if most customers are families looking for a place to bring their children, it may be important to keep classic items like hamburgers and french fries on the menu.

The best way to understand your potential customers’ attitudes is to get out and talk to them. Customer interviews are among the most powerful methods of validating a business idea , since you’ll get honest, real-time feedback from the kinds of people your business would depend on.

Finally, the behavioral analysis expands on customer psychographics by examining what customers do, given their values. This is another place where it’s worth considering the broad demographics of the diner’s target market – 18 to 65 years old, split among students, workers, and seniors.

They may all want the diner’s food, but their behaviors will vary widely. College students might be looking for a late-night study spot, or a place to meet up with friends for dinner before a concert or sporting event. But workers and seniors might be more interested in breakfast or lunch specials. 

Each of these behaviors gives a business owner valuable information to target individual segments of their target audience. For instance, you might want to play popular music in the evenings to get young diners ready for a night out on the town. But you’ll want a quieter ambiance at the time of day when seniors are most likely to come in. The environment can be adjusted based on when certain customers frequent the business.

Addressing behavioral aspects like buying motivations and concerns of your potential customers will also help you effectively market your diner. For example, you could create marketing campaigns based on student discounts, late-night specials, or a family-friendly atmosphere, depending on your customers’ behaviors.

• Connecting a target market analysis to business strategy

So far, we’ve touched on each of the components of a target market analysis for a diner: customer demographics, geographics, psychographics, and behaviors. (It’s also important to conduct an industry analysis to understand competitive and macroeconomic forces affecting your planning.)

With the target market analysis complete, you’re better equipped to demonstrate a thorough understanding of your customers to a lender.

Here are a few insights a business owner could use for the Bplans Diner, developed through the above analysis.

• Bplans Diner Competitive Analysis

Market Trends: Growing demand for late-night food options, increasing preference for healthy dining options.

Competitor Strengths and Weaknesses:

Competitor A: Strong brand but limited menu options.

Competitor B: Wide variety of options but lacking in ambiance.

• Bplans Diner Marketing Strategy

Product Differentiation: Offering a diverse menu that caters to various preferences, including healthy options.

Positioning: Establishing Bplans Diner as a reliable, quality, 24-hour dining option in the region.

Promotion: Utilizing social media to announce special night-time deals and promotions.

• Get started with your business plan template

A target market analysis is a key part of any business plan. But it’s just one piece. At Bplans, we take some of the pain out of business planning. We’ve developed a free business planning template to help reduce entrepreneurs’ time to create a full, lender-ready business plan. Bplans has also collected over 550 free sample business plans across numerous industries. Find a plan in your industry to get inspiration for your plan.

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Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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The Ultimate Guide to Market Segmentation

Want to improve your product-market fit? You gotta segment your market better. Here's how to use market segmentation as your secret weapon to scale your business.

Rakefet is the CMO at Mayple. She manages all things marketing and leads our community of experts through live events, workshops, and expert interviews. MBA, 1 dog + 2 cats, and has an extensive collection of Chinese teas.

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Updated March 14, 2024.

"Don't try to boil the sea" - Peep Laja, CXL

That pretty much sums it up, doesn't it? You can't be everything to everyone.

Companies that try to develop every feature for every type of customer go out of business. Companies that focus on a specific customer segment and zero in all their R&D and marketing efforts on that one type of customer usually win.

Market segmentation has to be an integral part of your digital marketing plan, otherwise, you will go extinct. In this post, we break down what market segmentation is, different types of it, examples, and use cases (Click here to download your free marketing plan template) .

Let's begin.

What is market segmentation?

Market segmentation is a marketing strategy where a company identifies groups of consumers and selects specific segments of their target market based on demographics, priorities, common interests, and other psychographic or behavioral criteria.

Why is market segmentation important?

Market segmentation realizes that not all customers have the same interests, purchasing power, or consumer needs. And companies can't cater to all of them and meet everyone's needs. So brands create segments that help them focus their product on specific target audiences and increase the chances of generating sales.

Market segmentation helps companies become more efficient in their marketing and sales campaigns, saves money on unnecessary A/B tests and unused product features, and helps scale the brand much quicker.

Now, there are different types of market segmentation companies can use to their advantage.

Types of market segmentation

There are four main forms of segmentation that brands use:

Demographic segmentation

Demographic segmentation is the process of dividing a market into groups based on age, gender, education, income, and other demographic factors. Demographic segmentation is important because it helps companies to understand the needs of their customers and to develop products that will meet those needs.

Example : a luxury brand should target consumers in a specific income bracket or above a certain income threshold.

Geographic segmentation

Geographic segmentation is the process of dividing a market into different geographic regions. These regions can be countries, states, cities, postal codes, or even neighborhoods. Each region has its own unique characteristics and needs that must be considered when developing products or services for them.

Example : Mcdonald's offers different menu items in different countries in the world. Here is an example of their Maharaja Mac.

Firmographic segmentation

Firmographic segmentation is based on the type of firm. A firm might be a manufacturer, retailer, distributor, or service provider. It's most used by B2B companies and is popularized in what's known as ABM or account-based marketing.

B2B companies often create segments target leads based on their role in a company, the company size, the business size, and the industry.

Behavioral segmentation

Behavioral segmentation is based on how customers behave. This could be user behavior on your site or via any of your marketing channels. It could also include things like:

• if it's for business or personal use
• if the product is purchased online or in-store
• how often the product is purchased

Psychographic segmentation

Psychographic segmentation is a way to divide the market into groups based on a person's values and lifestyle. These segments tend to share attitudes, interests, and values. One example of this would be a political organization that sells products to a specific political party.

Example : a clothing company that creates t-shirts for skaters and skateboarders would segment the market to find 15-25-year-olds who are single, in school, and like to skateboard.

Benefits of market segmentation

There are significant advantages to properly segmenting your market. Studies show that 81% of executives find that segmentation is crucial for growing profits. Here are a few other benefits of segmentation:

1. Targeted digital advertising - you can hyper-target your advertising to each customer segment and increase your click-through rates and sales.

2. Develop effective marketing strategies - focusing on a customer segment helps you select the right tactics and channels to use in your marketing efforts.

3. Create better products - knowing the needs and wants of your target segment can help you with product differentiation and building features that stand out in the marketplace.

4. Identify niche markets - companies often find new segments to target during the segmentation process or new markets to expand to.

5. Increase brand loyalty - focusing on a specific market segment helps you delight your customers better and cater to their needs, which helps decrease your churn.

6. Stay on brand - create better and more focused marketing messages that stay true to your brand voice.

Limitations of market segmentation

How to get started with market segmentation.

there are five main steps to the market segmentation process.

1. Define your market

First, look at your market. Is your market big or small? Is there a need for your product or service? And where does your brand fit into the market?

2. Segment your market

Decide on which of the five types of segmentation you want to use (demographic, firmographic, psychographic, geographic, or behavioral). And you can use more than one to create your segment.

3. Understand your market

Conduct some qualitative and quantitative research about the segment that you've chosen. Try to understand who your potential customers are and what their motivation is for buying your product.

4. Create your customer segment

Take your research and create your customer segment(s).

5. Test your marketing strategy

Now take that data and test your findings on your target market. Use analytics tools to test your conversion rates and engagement to see if your segmentation worked.

Now that you know how to create your customer segments let's talk about specific use cases.

How to pick the right segment

According to the Harvard Business Review , there are six main criteria for choosing the right segment to target.

1) Identifiable - you should be able to identify the customers in each segment and distinguish them by their characteristics.

2) Substantial - segment size matters. It's not usually cost-effective to target a segment that's too small for your business. If your potential market segment is too small or doesn't have the buying power to actually purchase your product, try to expand it to other geographic locations, interests, and user behaviors.

3) Accessible - your company should be able to access the segment you chose and it may require building a presence on specific online platforms or marketing channels to do that.

4) Stable - your segment has to be stable long-term to be able to market to it strategically.

5) Differentiable - the people in your segment should have needs that are different than those of other segments.

6) Actionable - you have to be able to provide products or services to your segment. They have to be reachable by your marketing efforts.

Now that you know what to look for in a segment, and how to go about creating it, let's look at some use cases of market segmentation.

Market segmentation use cases

Market research.

To grow your business, you need to know who your ideal customer is and where they hang out online. You can use segmentation to break down your research, so you can better understand your customer base.

For example, when you've analyzed a potential new market, you can use your customer insights to identify how your target customers would react to new concepts, offerings, or services. Want to streamline the process? Check out our free market research template .

Segmentation and targeting

Say you're not seeing a high enough ROAS on your advertising campaigns and you want to try to advertise to a new target audience.

If you've gone through the process of market segmentation then you've identified different segments and have defined them by their demographics, needs, priorities, behaviors, or common interests.

You can use this information to improve your paid advertising campaigns, create better marketing messages, and advertise to the ideal audience.

Customer needs research

Sometimes a company has a churn problem where their customers aren't happy with the product or service. This is a great time to step back and do some research about your target segment.

Look at their preferences, and needs, and adjust your product's job to be done accordingly. You may also discover product features that you're missing and ways you can better differentiate yourself from the competition.

Product development

Whether you're developing a brand new product or want to improve your existing offering, doing some market research is a great way to make sure that there's a product-market fit.

"Positioning is the act of designing the company's offering and image to occupy a distinctive place in the minds of the target market" - David Ogilvy, advertising guru

Marketing campaign optimization

Running an omnichannel marketing campaign but not seeing the results you were hoping for? You may need to better segment your market.

Having more information on each customer segment allows brands to personalize their campaigns at scale, and improve their campaign results. It could also help the brand define the right marketing mix of digital channels to better target its segment.

Common segmentation errors

We've talked a lot about what to do , let's talk about what not to do in your segmentation efforts. Here are the top segmentation mistakes brands do.

Making your segment too small

The most common mistake with segmentation is when brands create a segment that's too small. Use the actionable insights from your research to broaden your target market to a size that makes sense for your business.

Not being flexible enough

Audiences change over time and if you see that one segment is not working go back to the larger market and expand it. Test out different characteristics of the broad population and find new variables to filter by.

Prioritizing segment size over everything else

Some brands take a very broad approach to segmentation and focus on creating the biggest segment possible instead of focusing on the buying power of that segment. Make sure you reach out to customers that are able to buy your product.

Leverage the power of segmentation in your marketing campaigns

Seeing good profits with customer segmentation? Don't rest on your laurels. Take the most successful segments and use hyper-personalization to really dig deep and find the specific characteristics that make them the ideal customer.

Then, test out new segments using those variables. And if someone on your team isn't basing their decisions on data, challenge them. Which segment are they targeting with their efforts? And why?

Don't have the resources on your marketing team? Need a hand with segmentation? Come find your ideal marketer at Mayple.

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Market Segmentation: Types, Examples + [Free Templates]

by Formplus | Last updated: Aug 4, 2020

Related Posts

Geographic segmentation: examples, advantages + [free templates], psychographic segmentation: definition, examples + [variables], demographic segmentation: examples, advantages + [variables], customer segmentation: types, strategy, + [analysis], behavioral segmentation: definition, types + [examples].

Multiple experiences and characteristics come together to determine how consumers make purchasing decisions and interact with your product or service. To understand how these factors influence consumer choices, you often need to carry out market segmentation. 

Market segmentation helps you to identify shared characteristics that define different customer segments. In this article, we will explain how market segmentation works, and show you how to collect data for market segmentation using Formplus. 

What is Market Segmentation?  

Market segmentation means splitting your customers into smaller, defined categories based on specific variables and characteristics. In other words, it is the process of dividing your customer base into segments as determined by numerous factors ranging from demographic variables to psychographic information. 

As a business, you most likely have a vague idea of who your product is meant for. Unfortunately, working with this vague idea means that you would invest a lot of time and resources in generic processes that may not yield the best results for you. 

Market segmentation helps you to define your target audience within specific contexts, and this gives you a better idea of your customers’ interests and preferences. Although this process can be demanding, it helps you to optimize your resources in the long run and create more personalized content for your users. 

Types of Market Segmentation

Behavioral segmentation.

This is a type of market segmentation that places customers in categories based on behavioral patterns. Here, organizations study consumer behaviors as they interact with a specific product or service and then, place consumers who exhibit similar characteristics in the same group. 

Behavioral segmentation helps you to understand how your product appeals to your target market and fits into the lifestyle of your consumers. With this, you can focus on creating targeted messages that complement the behavioral patterns of different customer categories. 

To effectively divide your target market into smaller groups, you need to consider multiple behavioral segmentation variables including purchasing behavior, benefits sought, the buyer’s journey, and customer engagement. For instance, consumers exhibit different behavioral characteristics as they move from one stage to the other in the buyer journey.

You can collect data for behavioral segmentation by conducting an online survey with Formplus . Also, website cookies, third-party data assets, and the purchase data stored in customer relationship management software can provide insights into consumer behavior.  

Examples of Behavioral Segmentation in Marketing

• Choosing one product over the other because of the product functionality and features. 
• Choosing one product over another due to customer loyalty.
• Choosing one product over another due to the customer’s pain points. 

Tips for Behavioral Segmentation

• Get familiar with your target market.
• Create multiple buyer personas in line with the different uses and features of your product.
• Understand the buyer journey.

Customer Segmentation

Customer segmentation is the act of dividing your customer base into defined groups based on specific criteria. It is an important step that helps you to identify different consumer needs and preferences in your target market, and also satisfy them accordingly. 

This type of market segmentation is useful for B2B and B2C marketing. In B2B marketing, you can place customers in defined segments based on industry, location, and in B2C marketing, you can place customers in segments based on age, gender, and lifestyle. 

Customer segmentation results in multiple benefits for businesses such as helping you decide on the best communication channel for your business. It also helps you to tailor your product to create value for different customer segments, improve customer experience, and boost customer satisfaction. 

You can gather data for customer segmentation using different methods and tools including face-to-face interviews, surveys, observation method s, and focus groups. These tools and methods allow you to gather specific information about your target audience and create customer segments that reflect different market peculiarities. 

Tips for Customer Segmentation

• Outline the goals and objectives of customer segmentation for your business.
• Collect the right information from the right sources. Customer segmentation works best with data and analytics.
• Understand the value of each customer segment. 

Psychographic Segmentation

In psychographic segmentation, customers are placed in categories based on their psychological traits. Here, you pay attention to how a customer's psychological disposition affects his or her purchasing habits, lifestyle, and product preferences. It is widely considered as the most effective type of market segmentation. 

5 key variables drive psychological segmentation in market research and these are Personality, Lifestyle, Social Status, AIO (Activities, Interests, Opinions), and Attitudes. These variables work separately and co-dependently to help you place customers in the right psychological segments. 

Psychological segmentation allows you to know how your product fits into the habits, dreams, and aspirations of your target audience. It helps you to understand how consumers perceive your product and to identify the pain points of your target market. 

In psychological segmentation, organizations draw data from observing how consumers think and what they picture their lives to be in the short, middle, or long-term. Let's consider some examples of psychographic segmentation in marketing. 

Examples of Psychographic Segmentation in Marketing

• Businesses that deal with luxury items such as certain cars, clothing, and jewelry.
• Certain products appeal to individuals who have a specific lifestyle such as vegetarians or pescatarians.
• Some products appeal to individuals who belong to a particular social class. 

Demographic Segmentation

Demographic segmentation is the process of breaking your target market into defined categories based on demographic variables. In this type of market segmentation, the organization pays attention to how consumer preferences are influenced by demographic factors like age, education, religion, and income levels. 

Demographic segmentation provides specific insights into your target and helps you to understand who they are and what they want. This, in turn, makes it possible for you to create targeted ads and specialized marketing campaigns that appeal to different consumer demographics. 

As we stated earlier, numerous demographic variables influence consumer choices in the marketplace including age, gender, and income levels. Many times, these variables are interdependent and come together to determine how a consumer perceives your product or service. 

Demographic segmentation helps you to forge lasting relationships with your target audience and to also create a better customer experience for your users. In addition to this, it provides useful insights that you can leverage to improve your product and service delivery. 

Examples of Demographic Segmentation

• Products are gender-specific; that is, created for members of a particular gender. 
• Products that can only be afforded by individuals who earn a certain level of income. 
• Some products only provide value for people in a particular education class. 

Geographic Segmentation  

Geographic segmentation makes use of different geographic variables to place customers into different market categories. It is one of the easiest ways to discover the diversity of your target market and use this information to your advantage; especially in marketing. 

In geographic segmentation, you look beyond variables that bother on location and physical habitation, and you consider other geographic factors like cultural preferences, population type, and density. This gives you a holistic understanding of how these things nudge consumers towards certain choices. 

Common geographic segmentation variables are climate, religion/cultural practices, and population type. Geographic segmentation is important because it helps you to identify market clusters that present the most viable opportunities for you as a business owner. It also provides data for marketing and strategy campaigns. 

Examples of Geographic Segmentation

• Products that are unique to specific climates like winter clothing and beachwear.
• Urban-rural segmentation.
• Cultural preferences and food inclinations

Tips for Conducting a Successful Market Segmentation 

• Break your target market into specific segments comprising consumers with specific characteristics. Be sure to narrow down to the primary characteristics that differentiate one segment from the other.
• Clearly communicate the value of your product to each market segment. Ensure that you emphasize how your product satisfies the needs of the different market categories.
• Clearly define your market segmentation goals and objectives.
• Identify the most important segmentation variables for your target market. This would help you arrive at the best results for your business.
• Collect valuable data from the right sources. You can administer surveys and questionnaires with Formplus forms to gather the right information.
• Develop a solid market segmentation strategy that identifies your target market and outlines recommendations. 
• Execute a go-to marketing plan that appeals to different market segments and can drive acquisitions at every level. 
• Keep your eyes on the data and analytics. Ensure that your decisions are data-driven. 

Top Form Templates to Collect Data for Market Segmentation  

• Market Survey

Use this market survey to collect useful data from your target market for market segmentation. You can add different form fields that help you to easily collect a variety of information from respondents ranging from geographic information to demographic data. 

• Demographic Survey

This demographic survey is easy to use and it helps you to gather relevant demographic information from respondents. With this form, you would be able to collect necessary information from your customers for demographic segmentation. You can edit this template to suit your needs in the form builder. 

• Product Evaluation Survey

Do you want to find out what your customers think about your new product or service? This Formplus product evaluation survey is all you need to gather the relevant information from your users and improve your product. You can use the multiple form sharing options to share your survey with numerous respondents. 

• Online Feedback Form

This form would help you gather feedback on different product features from your customers to improve your overall service delivery. This form is easy to use and you can modify it to suit your needs in the form builder. 

• Customer Satisfaction Survey

This form would help you understand what consumers think about your product and overall service delivery. With the Formplus online feedback form, you would be able to collect information about customer pain points and know how well your product meets their needs. 

• Brand Personality Survey

This form is an easy way to collect information for psychographic segmentation. This survey is easy to administer and can help you understand how your customers perceive your brand; that is, their thoughts and feelings about your brand. 

• Product Pricing Survey

Use this product pricing form to find out what your customers think about the cost of your goods and services. This form would help you arrive at the best pricing system for your goods and services. 

Importance of Market Segmentation  

Market segmentation helps you to understand your target audience and create a product that better appeals to them. Let’s consider some other reasons you should prioritize market segmentation as an organization.

• Market segmentation allows you to identify niches that offer better prospects for your product or service. By breaking your market into segments, you can spot and compare marketing opportunities. 
• It is an effective way for you to manage limited resources strategically. Market segmentation helps you utilize resources in the most profitable manner for better returns. 
• Market segmentation is an easy way for you to identify your competitors and understand their strengths and weaknesses. This way, you’d be better equipped to face the competition.  
• When you place customers in defined segments, you can implement specific marketing strategies and programs in tune with the demands of each category. 
• Great market segmentation results in an effective advertisement strategy. It will give you a clear idea of who your audience is and what is most likely to pique their interests. 
• Market segmentation plays a crucial role in product improvement and product design. 
• It helps you to create the right customer experience for users and achieve maximum customer satisfaction levels plus increased sales volumes. 

Disadvantages of Market Segmentation

As beneficial as market segmentation is for your business, it also has some disadvantages. Let’s look at a few of them and what they mean for your business. 

• Market segmentation can be time-consuming as it involves organizing a lot of information in order to arrive at the best results. In many cases, you have to develop specific strategies for each segment and this can be quite challenging.
• You would need to invest more in the implementation of multiple marketing strategies for different market categories. For instance, instead of running a single ad campaign for your brand, you may have to run multiple ads to cater to the needs of your customers. 
• Market segmentation can lead to cannibalization. This is a situation where certain segments are over-prioritized to the detriment of other market categories. To avoid this, you need to prioritize each market segment.  
• Although you need to narrow it down to specific market categories, this can also lead to over-segmentation. 

Conclusion  

Without any doubt, market segmentation is an integral process that every organization must implement as it looks to meet the needs of its consumers. While there are different types of market segmentation, it is necessary for you to identify and implement the ones that are relevant to your business and product. 

In doing this, however, be sure to create a balance and avoid certain market segmentation pitfalls as we have highlighted in this article. Finally, gather and utilize the right data sets to help you achieve the most objective market segmentation results. 

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5 Types of Market Segmentation with Examples

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You’ve invested a large amount of money and much time into an efficient marketing strategy, and you really hope your message resonates perfectly with your potential customers. Is it right?

This is the reason why market segmentation is important. This practice enables you to concentrate your marketing efforts on each customer segment so you can better satisfy their demands. Your brand can leverage this method to combat your competitors as you show your potential customers that you understand them and apprehend what they need.

Therefore, to know more about What is Market Segmentation? 5 Market Segmentation Examples that will Inspire You , please read on.

Let’s start now!

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What is market segmentation?

Market segmentation is the process of classifying a market of potential customers into small groups or segments based on multiple features significant to you. In a group, customers share the same characteristics and react similarly to your messages.

The aim of segmentation is that you are capable of introducing a more tailor-made message that will be accepted successfully. This is beneficial for organizations that have a product or service in the marketplace that shows off different uses for different groups of customers.

Market Segmentation based on business types

So what criteria can we base on to implement market segmentation? Here are the two criteria we want to introduce to you:

B2C business

Except for professional customers or prosumers, customers are often more sensitive to price and tend to come up with an impulsive decision. Segmentation of these types of consumers shows their purchasing habits.

B2B business

B2B purchasers are a different type. They are not sensitive to price. As your products can save the business money and time or make money, then it’s worth it. Price is just a secondary factor.

They will consider how much it impacts on their workflow and how difficult it is to carry out.

5 Types of market segmentation and examples

Demographic Segmentation

Demographic segmentation is the easiest and the most popular applied type of market segmentation. Organizations utilize it to form broad segments of the population in terms of age, gender, location, religion, family size and so on.

These are typically black and white groups that provide you a profile of whether or not someone can purchase your products. For instance, if you offer a product for people 21 and beyond, then those who under that age would not be for you.

Correspondingly, products for men usually won’t be relevant to women unless you offer it as a gift.

Behavioral Segmentation

Behavioral segmentation involves the way people decide over time or react to stimuli. For instance, the method that a business uses during Christmas time will differ from the rest of the year.

They recognize that people are more receptive and may be willing to make bigger orders. Younger generation and athletes would love brands like Jordan and Air Max whereas older people would vote for brands like New Balance.

Geographic Segmentation

As its name, the market segmentation type divides people into different groups based on their physical location. This type may be helpful for your company as the demands of your consumers are different from area to area.

For instance, people living in the countryside wouldn’t need a subway but those who work in the city would.

It’s also possible for you to use geographic segmentation to bring special deals to your potential consumers. Besides, you can use it to acclimate the language and tone of your messages.

In Georgia, people would consider soda as coke until you ask several questions. In Chicago, every soda is called pop.

Psychographic Segmentation

Psychographic segmentation is used to form groupings based on customers’ lifestyles, interest and activities. Demographic segmentation shows you someone is a younger male, while psychographic segmentation tells you they go to the cinema on the weekends.

This type of segmentation indicates what customers do and why they purchase. It is quite similar to behavioral segmentation, but there exists a difference.

Behavioral segmentation lets us know that this demographic segment buys paper straws. Psychographic segmentation tells us this demographic segment buys paper straw because they can be recycled and the buyers are environmentally conscious.

Lenovo collaborated with Newstar, carried out market segmentation, and built personalized banners on their homepage that boosted click-through rates by 30% and conversion rates by 40%.

Firmographic segmentation

This type of market segmentation refers to analyzing and grouping business-to-business audiences and customers according to similar features that are important to your business. The way a firmographic grouping will search for one company may differ from the way it searches for another company.

Does this mean one organization is compatible with their firmographic segmentation and another is not?. No, it just means their KPIs are different from each other. For instance, a domestic brand may divide their leads based on location and these locations are north, south, east and west. Meanwhile, an international brand may also divide based on location, but their groups are Asia, Europe, South America, North America, Australia and so on.

Firmographic segmentation can have an effect on the way you access potential customers, the information you push forward as advantages, and the solutions being recommended. For instance, if you have an accounting solution that can be suitable for small businesses and enterprise customers, you would not use the same method to access them.

For small businesses, you can implement paid ads and try to achieve direct sign ups. For enterprise clients, you may concentrate on lead generation, demos, and create tailored solutions to satisfy their demands. Firmographic segmentation provides you with the insights to come up with those decisions.

Examples of successful market segmentation business

Automobile industry

The automobile industry can be a good example of market segmentation. Every person needs a car to travel. However, is traveling from one place to another is the one and only “need” on the basis of which brands market their products? Then why are there a lot of various makes, models and versions from one single company?

This is because purchasers mainly need private and convenient transportation. Nevertheless, there are some other considerations that people want to make. Some people want to buy a large and spacious car to have enough rooms for family members. Some may wish to own vehicles with strong power and high speed. And even others purchase a car as a status symbol.

Automobile companies totally understand how to identify and make use of these differences.

Regarding the Volkswagen Polo, what will spring to people’s minds would be some attributes such as robust, affordable and hatchback. But do you know the Volkswagen group produces Audi , Lamborghini and the Porsche among others?

Volkswagen has some different characteristics for different customer groupings. It can be trustworthy to some and elite to others. It has boosted the science of clustering purchasers with the same demands and invents a focused marketing mix for every cluster to position its vehicles as the perfect choice in the market.

Victoria’s secret

Victoria’s Secret deals are creating and marketing women lingerie and beauty products. They concentrated on women and “women” is the main market segment in their marketing campaign. Applying demographics segmentation, this company is also classifying their target market with product differentiation as PINK for adolescent girls.

The company Victoria’s Secret also uses geographic segmentation to serve their customers not only in America but also in the UK and Europe. They currently own more than a dozen stores.

Victoria’s lingerie brand is available in nearly 75 countries with about 1000 stores worldwide. It also owns 990 sales points in the USA. In addition, this company developed geographical segments to China in the lingerie market.

Moreover, as an example of psychological market segmentation, Victoria’s Secret also grouped its consumers according to women’s personalities and self-confidence. Victoria is growing towards a sexy, fashionable and open-minded trait.

Furthermore, in behavioral segmentation, this company has loyal consumers because Victoria makes them feel alive and self-assured. Clients buy Victoria lingerie product lines for prestige and they also go for this brand during birthdays and holidays.

In demographic segmentation, Coca Cola company aims to serve youngsters from 15 to 25 years old. This organization creates income level groups including different packing, for instance, returnable glass bottles, plastic bottles and tins with various pricing programs.

Using geographic segmentation, Coca Cola has many customer groups in different regions such as Asia Pacific, North America, Latin America, Europe, and Eurasia and Africa.

Besides, Coca Cola is considered a great example of psychographic segmentation. They created Diet Coke for those who are health conscious, offered a number of energy drinks for those who need energy particularly in sport, and also provided Real Gold for busy people in offices.

Plus, in behavioral segmentation, Coca Cola consumers are classified into segments on the basis of their knowledge of, attitude toward, use of and response to a product. Coca Cola buyers can be recognized according to occasions such as weddings, festivals or birthdays. Sometimes, to promote Coke - a drink to quench thirst and to refresh, the company includes prizes in the top cover.

Apple has divided the overall electronics market into mainly early adapters and wealthy market groupings.

Wells Fargo and JP Morgan

The bank industry is another great example of market segmentation. Both Wells Fargo and JP Morgan are large banks with a variety of different products that request market segmentation to best market them individually.

What are the benefits of market segmentation?

Segmentation marketing was invented to serve one main goal: increase ROI

With the aid of customer segmentation and personalized marketing strategies, organizations decrease the risk of implementing campaigns to uninterested customers. This improved campaign effectiveness concentrates resources on more ROI-generating efforts. Now we’ll look deeper to see how it exactly works.

Boosted competitiveness and market expansion

By concentrating on a certain subset of potential customers, your competitiveness in that market group naturally accelerates. If you’re concentrating mainly on retired seniors, investing much time and a lot of resources into them, your brand recall and brand loyalty are probably to be enhanced, knocking out other competitors.

Your market share can also rise by concentrating on specific market segments. For example, with a geography-based market campaign, you can begin market your products to San Francisco, then the bigger bay area, and consequently the state of California.

Enhanced time and money efficiency

If you launch marketing campaigns tailored particularly for distinct groups, you are able to prioritize consumer segments that are likely to get involved and convert. By putting more conversion efforts on them, rather than distributing resources evenly throughout all segments, tie and money are spent more effectively.

Better relationships and customer retention

The process of market segmentation refers to continually learning more about your customers so you can better satisfy their demands. The more you understand them, the stronger your interaction and your relationship with them becomes.

Closer relationships make it more difficult for them to leave you - improved customer retention . As you implement customer segmentation to track their changing situations - they age, have families, change jobs, grow more interests, have more purchasing patterns - you can certainly market to them. By offering products and services that intrigue consumers at different life stages, you are able to keep customers who might switch to your competitors.

Further readings

• Marketing to Children: The Good, The Bad and The Ugly
• What Is Market Orientation?
• How To Do Google Maps Markting?

Market Segmentation can help your business to target the right audience and the right goals. You can understand more about your customers, see how to better approach them and find new markets to expand.

If you feel it’s hard to have the exact data and implement it in your business, hope that the 5 Market Segmentation Examples can be useful. Let us know how you’re implementing Market Segmentation in the comment box or leave any questions you have.

Thank you for your time. Have a nice day!

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