January 20, 2017


4 types of Market segmentation and how to segment with them?

Market segmentation is one of the oldest marketing trick in the books. With the customer population and preferences becoming more wider, and the competitive options becoming more available, market segmentation has become critical in any business or marketing plan. In fact, people launch products keeping the market segmentation in mind.

There are three ways to classify what the customer wants. It is known as needs, wants and demands. However, to decide the needs, wants and demands, you need to carry out segmentation first. And in segmentation, the first step is to determine which type of customer will prefer your products. Accordingly, that customer will be from your targeted segment. Who would want your product and whether it falls in the needs segment, the wants segment or the demands segment. Once you decide the product you are going to make, then you decide on the market segmentation.

Types of Market segmentation

There are 4 different types of market segmentation and all of them vary in their implementation in the real world. Let us discuss each of them in detail.

Demographic segmentation – Demographic segmentation is one of the simplest and most widest type of market segmentation used. Most companies use it to get the right population in using their products. Segmentation generally divides a population based on variables. Thus demographic segmentation too has its own variables such as Age, gender, family size, income, occupation, religion, race and nationality. To read more, click on this link for demographic segmentation.

Demographic segmentation can be seen applied in the automobile market. The automobile market has different price brackets in which automobiles are manufactured. For example –  Maruti has the low price bracket and therefore manufactures people driven cars. Audi and BMW have the high price bracket so it targets high end buyers. Thus in this case, the segmentation is being done on the basis of earnings which is a part of demography. Similarly, Age, life cycle stages, gender, income etc can be used for demographic type of market segmentation.

Behavioral segmentation – This type of market segmentation divides the population on the basis of their behavior, usage and decision making pattern. For example –  young people will always prefer Dove as a soap, whereas sports enthusiast will use Lifebuoy. This is an example of behavior based segmentation. Based on the behavior of an individual, the product is marketed. This type of market segmentation is in boom especially in the smart phone market. For example –  Blackberry was launched for users who were business people, Samsung was launched for users who like android and like various applications for a free price, and Apple was launched for the premium customers who want to be a part of a unique and popular niche.

Another example of behavioral segmentation is marketing during festivals. Say on christmas, the buying patterns will be completely different as compared to buying patterns on normal days. Thus, the usage segmentation is also a type of behavioral segmentation. To read more in depth about behavioral segmentation, do read this article.

Psychographic segmentation –  Psychographic segmentation is one which uses peoples lifestyle, their activities, interests as well as opinions to define a market segment. Psychographic segmentation is quite similar to behavioral segmentation. But psychographic segmentation also takes the psychological aspects of consumer buying behavior into accounts. These psychological aspects may be consumers lifestyle, his social standing as well as his AIO. Do refer more to Activities, interests and opinions.

Application of psychographic segmentation can be seen all across nowadays. For example –  Zara markets itself on the basis of lifestyle, where customers who want the latest and differential clothing can visit the Zara stores. Similarly Arrow markets itself to the premium office lifestyle where probably your bosses and super bosses shop for the sharp clothing. Thus, this type of segmentation is mainly based on lifestyle or AIO.

Geographic segmentation – This type of market segmentation divides people on the basis of geography. Your potential customers will have different needs based on the geography they are located in. In the article on geographic segmentation, i have explained how people who are located in non municipal areas might require a RO water purifier whereas those located in municipal areas might need UV based purifiers. Thus, the need can vary on the basis of geography.

Similarly in cold countries, the same company might be marketing for heaters wheresa in hot countries, the same company might be targeting air conditioners. Thus, many companies use geographic segmentation as a basis for market segmentation. This type of segmentation is the easiest but it was actually used in the last decade where the industries were new and the reach was less. Today, the reach is high but still geographic segmentation principles are used when you are expanding the business in more local areas as well as international territories.

Thus, the above are the 4 main types of market segmentation. Usage based market segmentation, price based market segmentation, all these different types of segmentation are a derivative of the above 4 types only. So what type of market segmentation can you use for business and how would you like to implement segmentation?


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About Hitesh Bhasin

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Comments

  1. Vei nyc examples

  2. This is a great article! It helped me so much in figuring out how exactly segmentation works! Thank you!

  3. thenmozhi says:

    THANK YOU VERY MUCH IT IS HELPS TO MY STUDIES

  4. Timitosin says:

    Thanks you help me in making my study become easy,infact you help in great way.

  5. What about Zurich Insurance. What market segmentation it is?

    • Dear Nurul, Zurich insurance clearly has a mass market Demographic segmentation. This is because the company deals in general insurance, life insurance and several other types of insurance. As we know, life insurance can be applicable to college going students to people in their mid life. Hence, zurich insurance uses Demographic segmentation to target the right people.

      • Ohh i see. Thank you very much for your explanation. It is very helpful.

      • Anthony Perrone says:

        Hitesh

        How does Samsung segment its Smart Tvs, specifically in Australia?

  6. Hi, what possible data analysis can be done with this type of market segmentation? I need to show cost saving and revenue generation that can happen from proper segmentation

    • Dear Ada, Quote simply, segmentation data is important to know the scope of business that you can do with a particular segment. For example – if you were going to offer salt as a product, then there is no segment possible. Everyone needs salt or sugar. But still, there are nowadays sugar free sugar targeted towards diabetic patients. So segmentation data can help you increase revenue.

      Cost saving part comes when you dont want to waste revenue targeting a particular segment. For toys, the segment is children yet the target is parents because the children are influencers and the parents are decision makers. Thus, by only targeting children they are wasting money. They need to create a brand in front of parents also.

  7. Martha Asheeke says:

    Was wondering when was this article this article published. I’d like to use it as a reference. Very insightful.

  8. Joe Michaels says:

    Can you please clarify the statement, “And in segmentation, the first step is to define your target audience?” Isn’t the *point* of segmentation to define one’s target audience? Please explain.

  9. What type of market segmentation applies to the beverage industry since non alcoholic drinks target everyone but alcoholic can be broken down to mostly men.

    • Alcohol industry uses demographic segmentation. On the basis of gender, we have differentiation. Alcoholic beverages like Vodka, Breezers are targeted towards women whereas Beer and Rum is mainly targeted to men. Alcoholic drink is targeted towards men mainly because men are proven to have a better capacity / freedom when it comes to drinking alcohol. If the consumption is higher, sale will be higher too. Hence alcohol industry targets men. But otherwise, there are products targeted towards women as well. So i would say alcoholic or non alcoholic brands both use demographic segmentation.

  10. Hello, please I have an assignment on market segmentation in the beverage industry and i’m a little confused as to how to go about the report. Do you have any write up on this and if no, can you be of help? Thanks

  11. How do I know my product is an evoke set? Thanks.

  12. Hi, nice article.

    What kind of segmentation is prevalent in the healthcare industry?Mass demographic?If so, how would a healthcare startup target individuals to increase revenue?Will having different products for different age groups be a better idea than having a common product for all?

  13. Hey Hitesh, Psychographic segmentation is the most difficult one for my team, maybe for everyone. Because this is the era where people do micro-searches while having a cup of coffee or while waiting for the traffic signal to turn green etc. It is really challenging to serve those people with the right content since the interest changes so dramatically.

    • Yes. Very true. And that is why companies like google step forward with their content based analysis. Ahrefs and many other sites are up for content analysis so that they understand what users want from internet searches. These can help you segment the market.

  14. can u clarify the difference between bases of market segmentation and types of market segmentation

  15. What type of market segmentation base applies to low cost airlines operating domestically?

  16. Hi, That was a nice one.
    So would market segments mean the same thing as market segmentation? If not, what’s the difference?

  17. serendipity says:

    hi what about pldt, what type of market segmentation they used?thankyou in advance 🙂

  18. Is any geographical Zara’s market segmantation?

  19. Emmanuel Ayeni says:

    hey please what kind of segmentation does a mobile data provider use? (that is a telecommunications company)

    • Demographic segmentation. Because youngsters are bound to consumer more data then Adults. Similarly they have to consider the budget of Post paid vs prepaid consumers and how likely are they to prefer the company over competitors.

  20. nice article
    targeting affluent customers with luxurious goods is an example of which segmentation

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