One of the most basic forms of market segmentation, Geographic segmentation divides the market based on the units of geography – such as location, languages used and other such basic elements which separate one geography from the other. For example – The UK and the USA are both very different markets, with different values, attitudes and lifestyle. Thus, the segmentation for both these countries need to be different.
Similarly, the differentiation can be done on regional basis, because one region might contain A grade customers (urban areas) whereas another region might contain average customers (rural or town areas). Thus, segmentation devises the marketing mix based on the geography which the company is going to target.
How are marketing geographic segmentation data used?
While using geographic segmentation, the company might launch different products for that particular market or might also use different marketing strategy to attract the said geography. For example – In a diverse and multi lingual country like India, global companies like Vodafone, Nike, Adidas have to come up with different marketing strategy for different regions within the same country. While the south is passionate about Football, the north is more passionate about cricket. Thus, in the south of the country, Nike or Adidas market strongly based on football whereas in the north and west, they advertise more on the basis of Cricket.
FMCG companies also use the advantage of geography for their sales effort. For any FMCG brand, the territories are clearly marked, on the basis of pin code, area, region or even the complete town. Thus, the marketing is done specifically keeping the sales point in mind. On the other hand, managing inventory, as well as liquidation of products also happens based on the preference of that geography. On the basis of geography, a brands high end shampoo might sell much more then its soap brand. Whereas, in another geography, the soap might be selling in higher quantities.
How geographic segmentation affects product features?
Geography can affect the type of product being sold in a particular region. Take water purifiers for example – purifiers with UV technology (light purification) are used for areas which have clean water. But purifiers with RO technology (heavy purification) are used for areas which have unclean water. Thus, products can also be decided on the basis of geography. Similarly, all the different P’s need to be changed based on geography. Besides product, people used in a retail showroom need to be localites only, otherwise it will directly affect the sales figures.
Thus, overall geographic segmentation can help the company in the following manner.
- It becomes a very basic but very useful form of segmentation.
- It helps you penetrate the market better because you become aware of the geographical gaps in the market.
- It helps you manage your distribution channels better
- It makes your marketing strategy more focused based on geographical preferences
- It helps the sales team in keeping clear targets on the basis of geographical potential of the market.
The most common companies which use geographic segmentation are FMCG companies as well as durable products companies. The bottom line is that any company involved in channel marketing, or a company which has limitations to its expansion / penetration,
Steps in Geographic Segmentation
1) Explore the local geography first
It would be a smart thing to get in touch with your local business associations who are the best source when trying geographic segmentation. These organizations generally have data of the businesses operating in their geography.
If you do get the data you need, you can start looking for information that would match the data you originally have (data of the geography where you are already selling in good numbers). Here you will have found a cluster of people who have the same data as your present customers. When you finally expand, you will know where to go and how to get there.
2) Sources of geographic segmentation
To increase your customer base through geographic segmentation, you need to approach people who know a lot about the local geography. The data collection is the main step to increase customer base. Once you know what type of businesses or public reside in the area, you can plan business expansion.
Generally, the people who have the most information on the local areas are the guys working in marketing, promotions, and customer research. You can take recommendations from the local business bodies as to who they would recommend for your marketing needs.
Once you have a few names of marketing agencies or research companies, then you need to talk to these companies to get maximum geographic data to make geographic segments. These people might be associated with you in future, should you decide to establish a market presence in their locality. These three companies have, at one point or another, probably worked with each other on different projects.
Thus, the best sources of data for geographic segmentation are
- Marketing Firms are the people who get to see geographics data in their raw and sorted forms. They will, along with the researchers, have a hand in compiling the data. They will also have a hand in geographics data comparisons. If you are searching for geographics data in all their forms, marketers are the people to see.
- Research companies are those organizations who will have a ton of statisticians employed. It is the research company that gathers the data. Raw data comes from them because they are the ones who do the footwork for physical surveys, email surveys and other, clandestine data mining missions. They will also compile all the raw data and manipulate them into a more recognizable form, like geographics data.
- Advertising firms are pretty much the last cog in the wheel. Depending on what the marketing and research specialists tell them, they will advise a very aggressive advertising campaign or, a light advertising campaign. They do not really handle the data themselves, but they will have records of them from time to time.
- Publishers of the really technical business magazines are another good source for geographics data. If going to the publisher is too much of a hassle, you can try going through their relatively old issues first. Not so old, because you need as close to current geographics data to read your market correctly.
- Libraries – People like to compile statistics. It is most likely that your very own city library has copies of publications containing geographic data. When you travel to the area you want to expand to, your best bet is the local library situated there. If you do manage to find geographics information under all those other books, consider yourself lucky, because you just saved yourself a lot of time and money trying to gather and compile statistics by yourself.
Once you have found your sources, be sure to remember who they are and/or what publication your geographics data came from. You will need updated information, after all. Be sure to remember your sources so you will have an easy time of updating your geographics data.
Now that you have all that you need, you can begin the process of geographic segmentation.
Here is a video by Marketing91 on Geographic Segmentation.
Example of using geographic segmentation
A basic example would be if you were a restaurant offering Italian cuisine. You know that your first restaurant worked best in places which were premium and which had shopping malls in the vicinity. Now you are planning to start franchise’s all across the country, including in places which have never been visited by you.
The net result would be that you will insist that all franchises send you the geographic data. This geographic data of regions across states can help you decide which areas are premium, why some of them are more suitable, and how others having competition will need more focus on marketing. Thus, through geographic segmentation, you know which areas will be best for expansion and useful for increasing the customer base.