Market segmentation

Market segmentation is the process of dividing consumers, into sub-groups of customers (known as segments) based on shared qualities to get better sales in marketing.

In these markets, people who study this idea usually look for common things between customers such as shared needs, common interests, and similar ways of living. The overall goal is to provide a more useful service for every type of customer. Many different ways to segment a market have been found. They usually do it by finding differences in customers to provide the most useful products for potential customers and regular customers alike.

The STP approach highlights the three areas of decision-making.

Market segmentation assumes that different people have different needs – that is, different offers, features, prices, and more. They usually advertise different products differently to get the product sold to the best customer for the best service. Market segmentation is also for the company to study to better understand an individual's needs and purchase reasons, as it helps brands understand ways to better marketing, strategy, planning, and more.

Definition and overview

Market segmentation, from an business view, assumes different people will want different products.^[1] It splits customers into groups with different needs and wants.^[2] The idea is to reach competitive advantage and that they should make more products to satisfy more people, thus getting more sales and customers.^[3] They must also consider how to make a product and many other things when doing this segmentation.

Brands and people studying segmentation have to consider many things, such as:

Examples of what is thought about when doing segmentation

• Purchase/Usage Reason: regular event, special event, gift-giving
• Benefit-Sought: economy, quality, service level, convenience, access, etc
• Types of Statuses: Type of user status, brand loyalty status, product adopter status
• Usage Rate/Purchase Frequency: Light user, heavy user, moderate user
• Buyer Readiness: Unaware, aware, intention to buy
• Attitude to Product or Service: Loves, likes, doesn't care/doesn't know it exists, dislikes, hates^[4]

These brands and people studying also have to consider the target markets to reach to, such as:

Examples of what is thought about when figuring out target markets

• What should be used to figure out markets?
• How many markets to enter?
• Which market segments are the most valuable?

Different types of segmentation

There are many different types of market segmentation, such as:

Demographic segmentation: To get better sales brands may make different products attracting people of certain types.^{[5] [6]}

Geographic segmentation: The belief that different peoples with different ways of living have different needs, so they segment with that idea in mind.^[7]

Psychographic segmentation: A segmentation applying psychology to sell a product, considering how a person may spend their time.^[8]

Behavioural segmentation: Divides potential customers into groups according to their seen behaviours. Many marketers believe this is the best type of segmentation.^{[9] [10]}

Generational segmentation: Segmentation by age-divide, or generations.^[11]

Cultural segmentation: Division by how a person was raised and how they live in a way.^[12]

Criticisms

Market segmentation has many critics. Despite its limits, market segmentation remains one of the most long lasting marketing practices.^[13] Criticisms and limitations of segmentation have been well documented.^[14] Such criticisms include:

• That it is no better than mass marketing^[15]
• Segments rarely show differences in the way customers use brands^[16]
• That it fails to find smaller groups of customers^[17]
• Segments are splits that brands create for people that may not represent all or certain people.^[18]

Related pages

• Marketing § Segmentation
• Product differentiation