33 Facts About Market segmentation

In marketing, market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics.

Market segmentation assumes that different market segments require different marketing programs – that is, different offers, prices, promotion, distribution, or some combination of marketing variables.

Market segmentation is not only designed to identify the most profitable segments, but to develop profiles of key segments in order to better understand their needs and purchase motivations.

Insights from segmentation analysis are subsequently used to support marketing strategy development and planning.

Market segmentation is the process of dividing up mass markets into groups with similar needs and wants.

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Practice of market segmentation emerged well before marketers thought about it at a theoretical level.

Such activities suggest that basic forms of market segmentation have been practiced since the 17th century and possibly earlier.

Contemporary market segmentation emerged in the first decades of the twentieth century as marketers responded to two pressing issues.

Until relatively recently, most segmentation approaches have retained a tactical perspective in that they address immediate short-term decisions; such as describing the current “market served” and are concerned with informing marketing mix decisions.

Geographic segmentation is widely used in direct marketing campaigns to identify areas that are potential candidates for personal selling, letter-box distribution, or direct mail.

Geo-cluster Market segmentation is widely used by Governments and public sector departments such as urban planning, health authorities, police, criminal justice departments, telecommunications, and public utility organizations such as water boards.

Psychographic Market segmentation, which is sometimes called psychometric or lifestyle Market segmentation, is measured by studying the activities, interests, and opinions of customers.

One common thread among psychographic Market segmentation studies is that they use quirky names to describe the segments.

Purchase or usage occasion Market segmentation focuses on analyzing occasions when consumers might purchase or consume a product.

Benefit Market segmentation was developed by Grey Advertising in the late 1960s.

Marketers using benefit segmentation might develop products with different quality levels, performance, customer service, special features, or any other meaningful benefit and pitch different products at each of the segments identified.

Benefit segmentation is one of the more commonly used approaches to segmentation and is widely used in many consumer markets including motor vehicles, fashion and clothing, furniture, consumer electronics, and holiday-makers.

Attitudinal Market segmentation provides insight into the mindset of customers, especially the attitudes and beliefs that drive consumer decision-making and behaviour.

An example of attitudinal Market segmentation comes from the UK's Department of Environment which segmented the British population into six segments, based on attitudes that drive behaviour relating to environmental protection:.

Hybrid Market segmentation is a family of approaches that specifically addresses this issue by combining two or more variable bases into a single Market segmentation.

Facebook has recently developed what marketing professor Mark Ritson describes as a “very impressive” hybrid segmentation using a combination of behavioural, attitudinal, and demographic data.

Generational Market segmentation assumes that people's values and attitudes are shaped by the key events that occurred during their lives and that these attitudes translate into product and brand preferences.

Cultural segmentation is used to classify markets according to their cultural origin.

Cultural Market segmentation enables appropriate communications to be crafted for particular cultural communities.

Cultural segmentation can be applied to existing customer data to measure market penetration in key cultural segments by product, brand, channel as well as traditional measures of recency, frequency, and monetary value.

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Cultural Market segmentation can be combined with other bases, especially geographics so that segments are mapped according to state, region, suburb, and neighborhood.

Online market segmentation is similar to the traditional approaches in that the segments should be identifiable, substantial, accessible, stable, differentiable, and actionable.

The most widely used segmentation bases used in business to business markets are geographics and firmographics.

Basic approach to retention-based Market segmentation is that a company tags each of its active customers on four axes:.

Choice of an appropriate statistical method for the segmentation depends on a number of factors including, the broad approach, the availability of data, time constraints, the marketer's skill level, and resources.

Main disadvantage of a-priori segmentation is that it does not explore other opportunities to identify market segments that could be more meaningful.

In contrast, post-hoc Market segmentation makes no assumptions about the optimal theoretical framework.

Post-hoc Market segmentation relies on access to rich datasets, usually with a very large number of cases, and uses sophisticated algorithms to identify segments.