Segmentation involves dividing the marketplace into identifiable, accessible, actionable, and profitable segments with growth potential. This ensures effective targeting, considering limitations such as time, cost, and effort. In today’s competitive market, proper segmentation is crucial for a company’s success, allowing tailored product offerings to meet customer needs and increasing the chances of success.
Types of Segmentation
Segmentation Bases in Consumer Markets:
The four fundamental bases for segmenting consumer markets are as follows:
(1) Demographic Segmentation:
Demographic segmentation involves dividing markets based on variables such as age, gender, family size, income, occupation, education, religion, race, and nationality. This is a popular segmentation approach because consumer needs, wants, and usage rates often closely align with demographic variables. For example, McDonald’s tailors its advertising to different age groups, targeting children, teens, adults, and seniors with distinct ads and media. Products like clothing, toys, music, automobiles, soaps, shampoos, and foods are commonly segmented by age.
(2) Geographic Segmentation:
Geographic segmentation is dividing markets into different geographical units, such as nations, states, regions, cities, or neighborhoods. National newspapers, for instance, are published and distributed in different languages to cater to the needs of consumers in various cities. Geographic variables like climate, terrain, natural resources, and population density influence consumer product needs. Companies may segment markets into regions based on these differences.
(3) Psychographic Segmentation:
Psychographic segmentation is related to lifestyle and personality traits. For certain products, buying behavior predominantly depends on lifestyle and personality characteristics.
Personality characteristics: This refers to an individual’s traits, attitudes, and habits. Markets are segmented based on competitiveness, introversion, extroversion, ambition, aggressiveness, etc. This segmentation is employed when a product is similar to many competing products, and consumer needs for products are not affected by other segmentation variables.
Lifestyle: Lifestyle analysis provides marketers with a broad view of consumers by segmenting markets based on activities, interests, beliefs, and opinions. Companies in cosmetics, alcoholic beverages, and furniture segments market according to lifestyle.
(4) Behavioral Segmentation:
In behavioral segmentation, buyers are divided into groups based on their knowledge of, attitude toward, use of, or response to a product. Behavioral segmentation includes segmentation based on occasions, usage status, usage rate, loyalty status, buyer readiness stage, and attitude.
Occasion: Buyers can be distinguished based on occasions when they purchase or use a product. For instance, Cadbury’s advertising during the wedding season is an example of occasion segmentation.
Usage Status: Markets are sometimes segmented based on usage status, such as nonusers, ex-users, potential users, first-time users, and regular users.
Usage Rate: Markets can be distinguished based on usage rate, categorizing consumers as light, medium, or heavy users. Companies often prefer attracting heavy users with promotional efforts.
Loyalty Status: Buyers can be divided based on their loyalty status, including hardcore loyal, split loyal, shifting loyal, and switchers.
Buyer Readiness Stage: This involves a person’s psychological stages when deciding to purchase a product. Marketing campaigns play a significant role in moving the target audience through the buyer readiness stages.