What is Market Segmentation: Demographic, Psychographic, Geographical

As market research becomes more accessible, companies are using it to better market their products. By understanding what the customer needs, a company can create products that fit those needs, which in turn leads to more satisfied customers who are then willing to purchase more from the company.

The practice of market segmentation is one of the many ways businesses are able to market their goods and services more effectively. But it's important for any business owner or entrepreneur to know how market segmentation works and what types of market segmentation are applicable to your business.

What is Market Segmentation?

Market segmentation is the process used to identify groups of people with similar needs and wants. It divides the population into different segments, or what we call "market segments."

Marketers use this information when developing a marketing strategy that will target the specific market segments that are most profitable for them, which can then lead to increased sales and higher profits.

For example, think about the cellphone industry. There are hundreds of different phones out on the market at any given time. Still, most fall into one of these categories: Apple iPhones, Microsoft Windows phones, Samsung Galaxy phones, Google Nexus phones.

To make it even simpler, you can break them down into smartphones and flip phones. This would be an example of a market segment- dividing all the cellphone companies into subsets or "segments."

Whether or not a company decides to do this depends on what kind of phone they are selling, who they are selling it to, and how much money they want to make.

Likewise, market segmentation does the same process of scaling down the target market by splitting them up into subsets or smaller groups. This, in turn, generates a marketing message or ad campaign that talks directly to a specific and well-defined demographic.

This allows a company to serve its smaller, niche market better while avoiding direct competition with larger enterprises focused on the overall market.

Without customer segmentation, there is a strong tendency to aim and wander too broadly in the market.

Types of Market Segmentation: Demographics vs Psychographic vs Geographical vs Behavioral

The audiences in each of your market segments should possess common characteristics. This is where the four primary methods or types of market segmentation come into play— geographic, demographic, psychographic, and behavioral segmentation.

Geographic Segmentation

One of the most common types is geographic segmentation, which takes place on a physical level. It's what we're talking about when we use terms like "local," "regional," and "national."

In this case, it involves dividing your market into different regions or territories geographically distinct from each other. This can be further subdivided to allow for "micro-markets" or much smaller customer segments based on cities, neighborhoods, and sometimes individual blocks.

This sort of segmentation is appropriate for small firms or marketers with little resources who want to reach many customers within a regional territory or local. It allows businesses to concentrate their marketing efforts on a particular field of interest, helping them to avoid wasting money.

Knowing where your clients were raised can enable you to provide greater value that meets their demands.

Example of Climate-Based Geographic Segmentation

As the name implies, climate-based segmentation entails marketing activities depending on a region's climate. Because Canada and Russia are cold countries, consumers require sweatshirts, jackets, or other winter clothing throughout the year.

If you try to promote and sell hot-weather clothing made from thin fabrics in these freezing countries, you will suffer financially.

But if you're selling swimwear, on the other hand, you might want to target customers who live in warmer temperatures, such as locations with resorts and beaches. In the scorching heat of the sun, no one would wear bulky winter clothes

Example of Population-Based Geographic Segmentation

Rural and urban inhabitants usually have contrasting needs and want since they live in different environment.

For instance, showing reel mowers adverts to people residing in exurban, suburban, or rural areas is a more targeted form of marketing because residents in these communities have bigger yards that call for a reel mower than those living in urban cities with limited spaces.

Demographic Segmentation

Demographically speaking, this market segmentation strategy allows you to break down the population by age group or what we call "demographics."

Demographic Segmentation is based on what sociologists call demographic variables, which simply means that it's all about how various people in the market appear and act.

Demographic variables include age, gender, income level, occupation or employment status, education level attained (or how far along a person is in their formal schooling), race/ethnicity, marital status (i.e., married vs. single), and where they live (a city, suburb, small town).

The primary reason marketers use demographic variables is that they can be used as proxies for what people's preferences, wants, needs might be. After all, everyone likes different things! So you can get a rough idea of what other groups might like based on what you know about them.

And because demographic data are is widely accessible and easies to collect, the information you need is readily available right at your fingertips. Psychographic Segmentation

Psychographic Segmentation

The third method of market segmenting is called psychographics, which refers to people's inherent personalities, lifestyle, attitudes, and beliefs, and not necessarily who they physically are or what age group they fall into.

This is what marketers refer to as a psychographic variable, which indicates that consumers' purchasing preferences are influenced by what motivates them to choose particular products and brands over others rather than what they need or want.

The variables include what a person reads, their favorite TV shows, their music, where they go on vacation, their favorite foods, activities they prefer, or sports they play.

This data can be used to reach people who share the same interests and preferences in the areas of life that are most important to them.

Example of Lifestyle-Based Psychographic Segmentation

If you're selling vehicles and your study suggests that people who spend time outdoors in the wilderness are more inclined to buy your product, it's a good idea to target them.

Example of Opinion-Based Psychographic Segmentation

For instance, if you're selling an organic shampoo that contains no harsh chemicals and promotes hair growth, you might want to target people worried about what they put on their skin and in their bodies.

Example of Personality-Based Psychographic Segmentation

Psychographic Segmentation can also target customers based on their personality traits or how they see themselves as individuals. For example, you might want to target people who are "upper-class" or have a high social position with expensive cars such as Porsche and Mercedes Benz.

Interestingly, the level of income a person has isn't what determines whether they'll end up purchasing a Porsche. Instead, it all comes down to how much money individuals are willing and able to spend on luxury items and the kind of personality traits that accompany such a desire for such commodities.

Behavioral Segmentation

Behavioral segmentation is what most marketers are familiar with because it's the type of market segmenting that takes place when people shop.

It's what retailers employ to keep track of everything the customers do in their stores and on their websites to better target offers that will appeal to them at any given time.

This marketing method takes the form of what people do or have done for them in terms of what products they purchased and where and when those purchases took place.

However, when determining how closely your demographics match up with other customers, it's crucial to remember that what you do in the marketplace says a lot more than what you say.

This means that marketers can acquire a remarkable lot of information simply by studying what customers buy and how they respond to a product or service during their encounters with it.

Example of Interest-Based Behavioral Segmentation

For example, what you purchase (or don't) on your last grocery run might reveal what kind of dietary habits and tastes you have.
Similarly, the television shows you watch might indicate a person's entertainment preferences and interests, which marketers can utilize to better target them with products or services.

Applying Market Segmentation Strategy to Your Business

Market segmentation is a powerful marketing strategy that can help you better understand what your customer wants and needs to be based on their purchase.

When building a successful plan, psychographic, demographic, geographic, and behavior-based market segmentation is crucial. But the type of market segmentation you choose will depend largely on your business model and industry.

Once you understand the different types of market segmentation, you can apply them to your business to better serve and communicate with each group.

If you need assistance in getting started in applying market segmentation or deciding which type of market segmentation is appropriate for your business, we, at Appointment Setting UK, can offer expert advice on how to increase sales by concentrating on specific consumer demands!