BBC Content Team
Marketing: Market Segmentation
Updated: Sep 14, 2019
Knowing and understanding a customer’s needs and wants is crucial. Since not everyone has the same needs, it is key to divide customers into smaller groups. This way companies are able to market towards targeted groups so they can brand and advertise to appeal to them. Also by segmenting the market, you are able to minimize risks and gain market share. Typically, there are four different types of market segmentation: demographic, geographic, behavioral, and psychographic. By focusing on these segments, marketers can be more efficient with his/her company’s money, time, and any resources.
The first type is demographic, which is the simplest out of the four as well as the most popular. Demographic is essentially dividing the population by their personal characteristics, consisting of variables such as age, gender, occupation, race, religion, life-cycle, etc. For example, the life-cycle stage defines what the consumer will need at a certain point in their life. Most toddlers will need toys, while middle-aged people may need insurance.
Furthermore, the geographic segment divides people based on their geography. Customers will need different things based on where they are located, whether it is a specific country, state, or region. Companies that are involved in channel marketing or have limitations when it comes to expanding, usually use geographic segmentation. For instance, McDonald's serves beer at their restaurants in Germany; however, they do not sell beer in the US. By doing this, McDonald’s is taking into account the cultural differences, as well as the different lifestyle, values, and attitudes in different countries.
Behavioral segmentation is segmenting the market based on the way customers, want, need, or use a product. This segmentation focuses on how the customer behaves towards the product or service. It also includes how someone acts toward a product and how they could show that they are loyal to the product (brand loyalty). An example of behavioral segmentation is with product usage, whether it is heavy, moderate, or less. People who use a heavy amount can buy a larger quantity and people who use less can buy a smaller quantity. Most of the time with a product that is not targeted towards the masses, companies will use behavioral segmentation.
The last type of segmentation is psychographic segmentation, which uses people’s social and psychological characteristics. This includes people’s lifestyles, the activities they participate in, their interests, personality, and opinions. It is also the specific type of segmentation that does not look at the obvious details, so marketers must go deeper to see what is not visible from the outside. The most popular is the lifestyle segment. For instance, with clothes, people have different clothes depending on their lifestyle, whether it is someone who goes to school, works in an office, or is in college. Rural lifestyle could be quite different from the lifestyle of someone who lives in an urban area.
In conclusion market segmentation is essential for a company to target its consumers, since segmentation shows which customers would be more likely to buy a product than others. In turn, marketers can focus their research, funds, and resources where it could be the most successful.
By: Helen Gillespie
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