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What is Segmentation and how is it useful?

TypeMarket Segmentation

There is no law stating you can’t target your product to everyone however, in order to generate the most sales and lock in costs its best to target a specific group of customers who are most likely to engage with you.

Market segmentation involves subdividing the total market into groups having similar needs, wants or demand characteristics. Organisations can then identify those segments they are equipped to target. Everyone has individual needs and preferences though there are common variables that can be found amongst individuals in order to segment to group them together.

The types of Market or Customer Segmentation and the variables used are:

1. Geographical

Geographical segments focus on continent, country, country region, county, city, density, climate, population, city area, urban/suburban/rural areas, local/regional/ national/ international. The location can alter how many people you want to reach or what type of person you want to reach.

2.  Demographic

Demographic segments focus on age, gender, family size, occupation, income, education, religion, race or nationality.  These segments are usually the most common form of segmentation as it focuses directly on the type of individual using the most basic information about them. If the market needed to be more specific then you have the freedom to combine variables.

3. Psychographic

Psychographic segments focus on lifestyle, social class, AIOs (activity, interest, opinion), personal values, lifestyles attitudes. Emphasis is placed on characteristics. A Sports brand will be more inclined to target people who regularly exercise, live a healthy life, outdoor enthusiasts etc.

4. Behavioural

Behavioural segments focus on occasions, degree of loyalty, benefits sought, usage, buyer readiness stage, user status. The occasion or time period can affect who you target and what benefits you want to achieve whether you want to target during a seasonal event such as Christmas.

A person’s situation will alter whether they want to buy the product based on their needs. New parents will be likely to buy essential products for a baby. Whereas, students may be interested in buying products that are relatively cheap or products that promise longevity.

Why is segmentation useful?

Segmentation is the basis for developing a targeted and effective strategy for growth. Segmentation helps organisations to better serve the needs and wants of their customers, which is important for brand loyalty. Identifying the different segments and their needs enables organisations to adopt different strategies to engage with their customers.

For more information on Segmentation and how important it is to a business click here.