Benefits of Marketing Segmentation

Benefits of Marketing Segmentation


Tailoring your business to a single market helps you find a niche in that market. However, having a single market does not necessarily mean you have narrowed it down to the specifics nor that getting a grip of that market would be child’s play.

A single market can have as few as 5 segments to as many as 15. It is therefore significantly advantageous for businesses in their marketing plans and campaigns to target specific segments of the market in order to get better results rather than targeting the market as a whole. This is where the process of marketing segmentation comes into play.

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What Is Marketing Segmentation?

Marketing segmentation is the process of dividing a market of potential customers into groups based on demographics. Each segment comprises of customers having similar responses to marketing strategies and those sharing similar interests, needs, location, demands, and preference.

Basis of Marketing Segmentation

Marketers divide customers on the basis of the following:

1. Gender

As nature would have it, so would marketers divide customers into the first basic group of men and women. The differing sexes have different requirements, different tastes, and different mind sets. Therefore, it is only but fitting to separate men and women into segments. A lot of industries rely on this particular segmentation as basis on their marketing such as jewelries, footwear, and apparel.

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2. Age Group

Another obvious division or segment would be separating consumers in age groups. Basically it is divided into children, teens, and adults. Children generally have different needs to that of adults or of teens so separating them into these segments also separates the different products that can be of use for each age group.

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3. Income

Naturally, consumers would be segregated into groups dependent on their income or monthly earnings. They are namely the high-income group, mid-income group, and the low-income group. Each income group have a different range of products that can be offered and also present different strategies in terms of convincing them to buy. For example, department stores cater more to the mid-income range while specialty or designer shops target the higher income-generating population.

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4. Marital Status

This segment is divided for individuals who are single and those who are married. Some businesses target customers based on this civil status. The singles population tend to have a different spending habit compared to that of married consumers. Married consumers, for example, tend to be more frugal when it comes to spending while singles are more likely to indulge themselves on shopping sprees. But not always and not for all products and services. Which is why marketing research of your customers’ real-time behavior is so important.

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5. Occupation

Another segment in classifying markets would be in an individual’s occupation. An office worker would have different needs compared to that of students. In-house professionals used to a certain kind of wardrobe would have less interest in buying cool or hip clothing that appeal to the freelance group, for example.

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Basic Types of Marketing Segmentation

1. Geographic Segmentation

Segmenting the market using geographic segmentation means marketing brands or products to a particular location say a particular state or region of a particular country. Another example would be for coffee shops or restaurants focusing on areas near offices. An air conditioning company could also set shop near regions where it is humid and hot. Just as an outdoor clothing company may set up shop near camp sites or hiking trails. This is perhaps the easiest type of segmenting a market and the most common as well.

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2. Demographic Segmentation

Dividing a market into age, gender, or education level are the most common demographic variables in demographic segmentation. Some brands exist only to cater to men or to women. A particular app may target only teens, while an energy drink may target athletes (or those who wish they were). This type of segmentation commonly used by clothing apparel makers target specifics in a demographic and uses that to define the segment.

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3. Behavioral Segmentation

Behavioral segmentation is based upon, you guessed it right, customer behavioral patterns. It is commonly observed that people tend to overspend on holidays as compared to other regular days. So based on this, marketing strategies are adjusted.

4. Psychographic Segmentation

The most complex of the four segmentation techniques, psychographic segmentation is a varying mix of segmentation based on consumer behavior, values, perceptions, beliefs and interests. This involves a number of segmentation variables.

This type uses the lifestyle of people, activities, interests and opinions to define the market segment. This technique is quite similar to behavioral segmentation. An example would probably be for designer stores where the fashionable or fashion wannabees shop for latest trends in clothing. Or for Alienware catering to the geek gamers.

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Why Is Market Segmentation Important for Marketers?

Personalizing marketing campaigns becomes a tad easier thanks to market segmentation. By dividing a company’s target market into segmented groups as opposed to aiming for individual customers, time, resources, and money is saved and more efficiently handled, which is what you want when setting up your marketing budget. The grouping of the customers allow the marketers to target audiences in a cost-effective way.

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Market segmentation also reduces risks involved in individual marketing campaigns. By focusing more on key characteristics and prioritizing strategies based on that information, there is a likely higher chance of success than creating a generic campaign introduced across all segments of the market.

Marketers can also use segmentation in prioritizing target audience by knowing which of them are likely to buy a product or service and in turn allocate the proper resources.

Benefits of Market Segmentation

Marketing segmentation obviously reaps benefits for marketers. But what are these benefits?

1. Customer Matching

Marketers are able to separate and match products that are more appropriate for each segment to the customers who need them in a specific market.

2. Increase Profits

In segmenting markets, the differing customers who have different disposable incomes are divided and thus marketers can raise average prices for each segment in the market which in turn equates to increase in profits.

3. Customer Retention

By catering to different segments of age groups, businesses retain customers during the different cycles of their life. Customers who could have been just buying teen’s clothing can be retained since through segmenting, a company offers particular products on the next phase or stage of the customer’s life.

4. Customer Communications

By segmenting a market, a business is able to target the correct audience with a specific message which can significantly lower costs.

5. The Right Product at the Right Time

Through geographical segmentation, a business is able to prepare the inventory of what products to offer at a particular season or area. For example, a clothing company will stock up on jackets and warm clothing in preparation for winter or a store near the state of Alaska would naturally contain more jackets compared to a store in Nevada or say California.

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Segmentation not only helps in targeting the correct customers but also helps the business reduce costs both in the whole marketing flow chart and in other aspects of the business. It also means that efforts directed at marketing will not be wasted and would have a bigger chance of succeeding through segmentation of the markets.