An Introduction to Market Segmentation as a Strategic Tool


Abs
By Abs | May 29, 2020 8:57 pm  | 3-min read
Types of Market Segmentation and how to implement them in your marketing strategy - Appy Pie

When you advertise, broadcasting compelling messages about your product or services isn’t enough. It’s crucial to target the messages towards the right audience. What is the right audience, and how does a business discover it?

Well, these are key questions, and we’ll tell you how to find the answers. In fact, the answer’s quite straightforward – it’s market segmentation.
Types of Market Segmentation and how to implement them in your marketing strategy - Appy Pie
Market segmentation is the process of dividing the market into homogenous groups of people who are similar in terms of attributes such as demographics, buying behaviors, income brackets, and more.

Address three questions before you initiate product design and development –

  • What needs are we satisfying?
  • Who shall buy my product?
  • Why shall they purchase my product and not my competitors’?

Market segmentation is the answer to the “Who.”

For example, one of your viable audience segments could be 25 – 34 years old, graduate, working professional, married, with an income above $100,000 annually.

This example centers on age, educational qualification, job sector, marital status, and income.

More the number of criteria added, the smaller the pool of customers.

The Two Most Significant Benefits of Marketing Segmentation

  1. Understand your customer
  2. Imagine that your employer tells you to coach a few high school athletes but does not tell you which sport they practice, where they practice, how long they would be able to devote daily to training, why they wish to get better at the sport, what led to the discovery of the sport, and so on.

    Would you be able to coach? No.

    It is exactly the same with a product development team trying to create a viable product. Precise market segmentation, leaves you significantly more aware of your customer’s needs, thus equipping you to satisfy them in a better way.

  3. Market expansion
  4. When you understand your market and can organize potential customers into segments, the possibilities of expansion are endless. The best part – you can do so with minimal risk, because the segmentation process tells you which groups are most viable, and hence, least risky.

    For instance, you could confidently expand from being a manufacturer of sneakers, to selling sports apparel, jeans, and hiking boots, if there’s a viable audience.

    When you market to specific segments, the core message of your brand has already been sharply honed and resonates with an identified segment. This lets you make incremental adjustments to further the potential of the segment or to tap into other segments with significant overlaps with your main segment.

How Is Market Segmentation Done?

Remember that once you have chosen to focus on a particular audience, the message cannot be rolled back. So, you need a strong understanding of the different types of market segmentation to do it right.

  • Demographic Segmentation
  • This is by far the most common type of segmentation employed by marketing and advertising teams. It entails dividing the market on the basis of age, gender, education, location, income, marital status, ethnicity, and other similar broad markers that identify the basic traits of an individual.

    If you are designing a new premium Bluetooth speaker priced at $500, you would aim it at age 30-45, male, with a high disposable income.

  • Psychographic Segmentation
  • Psychographic segmentation groups buyers according to their beliefs, interests, and attitudes.

    Harley Davidson aims its products at those who want to be different and not ride sleek bikes by the Japanese big three bike makers. A typical Harley buyer would be indifferent towards prevailing fads and fashions.

    This type of segmentation does not bother about income or education. One owner may be a wealthy surgeon and another a cop. However, they have similar tastes in lifestyle outside of their job, are likely to listen to similar playlists on Spotify and watch NBA or NASCAR every weekend.

    Types of Market Segmentation and how to implement them in your marketing strategy - Appy Pie

  • Behavioral Segmentation
  • This might seem to overlap with psychographic segmentation. While the latter is about taste and attitude, behavioral segmentation is about emotions and buying habits.

    A customer may purchase a pair of jeans after ten minutes of browsing. Another may take ten days to make a choice.

    Add to it their pattern of returning goods and you have a snapshot of their emotional state. Are they emotionally fickle or stable? It makes more sense to invest in a stable minded customer by offering them big discounts.

    Some are happy when they have less to choose from and feel overwhelmed by the variety, while others act just the opposite.

  • Geographic Segmentation
  • The easiest to understand of the four. No matter how many Ferraris are sold in China, it makes little sense to pitch it in India because of the huge tariffs on imported vehicles.

    It also depends on the climate and suitability of a product for a particular region. Geography plays a greater role in choosing a product than is commonly imagined. From taxes to logistics, everything plays a huge part.

How to Use Market Segmentation?

There are basically two ways in which a business could approach segmentation.

The first is to focus on one core market segment. This is useful for small startups that have just ventured into the market with a new product between 6 months to 24 months ago. They are trying to build a core group of users, roll out new improved versions for their particular segment.

There are several examples, and the most popular one is Facebook. Zuckerberg targeted Harvard students first, and then expanded to Stanford and Yale. After a year, it expanded to UK universities and then gradually expanded throughout the world.

Its initial target was people younger than 20, but that has now changed to 40. It has neatly handed off the younger generation to its sibling platform Instagram.

The other way to approach this is to aim at multiple segments at the same time. This is well achieved by brands such as Samsung that cater to a massive audience, spread across multiple segments. This is a safer approach, but it costs more to advertise to this many groups.

Last Words

Any business, from a small e-commerce store to a giant multinational, would have to indulge in market segmentation. The prerequisite to successful segmentation is adequate market research through surveys and feedback. Market segmentation is a long-term strategy and should not be expected to pay rich dividends immediately.

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Abs
About The Author

Founder and CEO, Appy Pie, Abs has a cumulative experience of over 10 years in the world of technological development and entrepreneurship. His in-depth knowledge of the mobile app development technology and his sharp observations offer valuable contributions to the blog. His areas of expertise are SEO, trends in the mobile app world, and the latest innovations in Artificial Intelligence & Machine Learning. He has a passion for fitness and likes to get his daily dose of endorphins from a run and a strenuous session in the gym.

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