Market segmentation is a very important initial step in the process of marketing. Before you market a product, you have to plan things so you hit the target. SEGMENTATION is the process of dividing customer groups into smaller sets with similar needs and wants. It allows for better targeting of the customers through targeted marketing techniques. When you have created a product to serve a specific need, you would not want to waste your marketing efforts on the other. For example, there are products that are meant for middle aged adults. There is no use marketing it to the teenagers. Similarly if there is a product meant for kids, marketing it to teenagers would not be effective. In this way segmentation also allows for better allocation of a firm’s resources and the marketing budget. If you target a broader group or without segmenting the buyers, the chances are high that a large part of your marketing budget is going to be wasted. In the modern era, people’s tastes, style, and needs have grown highly diverse. Marketers cannot sell the same product to every group. It is important to target the right group using focused marketing techniques. Segmentation is the first step based on which you can further plan your marketing strategy. In this way segmentation also reduces the risks involved in marketing by eliminating wastage. It increases the efficiency of marketing efforts by directing them specifically at the right group, marketing outside which will have little or no results.
Basically, there are four types of market segmentation.
Demographic segmentation divides consumer segments on the basis of variables like age, race, gender, income, education, occupation, generation, family size, religion, nationality etc. So, girls are a different market segment than boys and teenagers are a different market segment than adults. Similarly, some products are meant for the low income customer categories whereas others are meant for the high income consumers. There are products that suit the choice of well-educated, whereas there are some liked by less educated people. Based on these characteristics, people’s choices may differ. A teenager would not like the same product as a working professional in his mid-thirty’s. There are products that are meant to be used by women for example ‘Women’s Health’ magazine. Similarly, there are products that cater to the taste and needs of more than one category. Demographic segmentation is quite common across the industry. It is because it provides an easy basis of segmentation which is also very effective. Usually, the choice of products is similar across one group like the teenagers, the baby boomers, the millenials etc. Apple products are marketed to the high income groups whereas Samsung smartphones may be targeted at middle and low income consumers mainly. Demographic segmentation is an easy and effective method of segmentation. Sometimes more than two or three variables are used in combination to define a market segment like: Working Women in their thirty’s with incomes above $30,000 per annum.
Psycographic segmentation divides consumer segments on the basis of finer characteristics. Sometimes the psychographic characteristics of the people in the same demographic group may show wide variations. This type of segmentation uses variables like social class, lifestyle and personality to define customer segments. Two young girls that are from two different social classes will have different purchasing habits. Social class also affects people’s ability to purchase as well as their likes and dislikes. A person from upper class will spend on stylish and costly products. He will buy a Mercedes while someone from the lower class cannot afford it even if he is of the same age group. People buy things that suit their class. Similarly, two people that have different lifestyles will have different choices. Someone who is quite traditional in terms of taste and lifestyle would have a different choice than a modern and terndy person. In this way, despite being from the same demographic group people’s psychographic characteristics can vary greatly. However, psychographic characteristics are an important influence on people’s taste and purchasing habits.
Behavioral segmentation divides the buyers into groups based on their knowledge, uses, attitudes or based on their responses to a product. Behavioral variables typically include
- Benefits Sought
- User Status
- Usage Rates
- Loyalty Status
For example a consumer who wants to look beautiful would buy a beauty cream whereas one who wants just freshness would buy a fragrant soap. Similarly professionals would buy smartphones that come loaded with work features. Based on season or occasion, the level of sales of a product may differ. People shop for gift products more on the eve of the New Year and holidays. User status and usage rates also define people’s shopping habits. Some people are more loyal to particular products or brands whereas some would quickly switch between them. Many marketers consider behavioral segmentation the best starting point for a start.
Geographic segmentation divides people into segments on the basis of the geographic regions they belong to. The common variables used by marketers for geographic segmentation are
- Nations, Regions, States, Counties
- Cities, Neighborhoods, Climate, Density
Marketers divide their market segments into continental segments too if marketing to large market areas like Asia, Europe, America etc. Marketing efforts may need to be tailor made with the consumer group in mind. The strategy may be different for the Asian consumers and different for the European consumers. Similarly, the strategy will vary for the American consumer from the Japanese consumer. Several things including culture, language and lifestyle can differ from one region to another. The size and style of one IKEA Store in US can be different from another in Australia. People living in colder areas may have different needs than the ones living closer to the equator.
Things have changed a lot in the 21st century. Several new bases of segmentation are being used to segment customers into distinct groups. Marketers are using new classifications to be more effective in their efforts and generate better results. They also segment consumers based on their interests and professions and sometimes by the types of products and services they use. Several new models of segmentation have also appeared like the 4Cs model by Young and Rubican or the PRIZM model by Nielsen. These models are also in use and have served marketers well.