How to Identify Four Bases for Market Segmentation

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Market segmentation refers to the division of a market into different customer segments. This arises from the realization that it is impossible to satisfy all customers by treating them uniformly. Each market segment has its own unique needs and preferences. Market segmentation allows an organization to satisfy its customers’ needs more effectively by targeting each market segment according to its unique requirements. Market segments must be unique in terms of their needs, accessible through communication and distribution channels, substantial enough to be profitable, identifiable and sustainable. Markets are normally segmented into four bases, namely geographic, demographic, psychographic and behavioralistic segments.

Define your market in geographic terms by carrying out a geographical segmentation of the market. Analyze your geographic area to identify where your customers are located. Study the population density to identify high-demand areas and low-demand areas as well as potential markets. This will enable you to know where to increase advertising and marketing efforts. Analyze population growth rates to determine the sustainability of the market for your products.

Analyze the demographic variables of the market such as age, gender and social class. This helps in dividing the market into several segments, with each having a common variable. Based on this segmentation, you should be able to decide which group to target. For example, a company dealing in feminine beauty products will target women. Demographic segmentation ensures that the needs of each group are well-understood and that necessary steps are taken to ensure that such needs are fulfilled sufficiently.

Determine your customers’ behavioral demographics by assessing their brand loyalty, their consumption rates and the benefits they seek from a product. Assessing brand loyalty enables you to segment loyal customers from those who are not loyal, while knowing consumption rates helps you to segment the market in terms of high-use, medium-use and low-use consumers. Assessing the benefits sought by a customer enables marketers to understand the main benefits a customer seeks from a particular product, such as economic benefits or cosmetic benefits.

Conduct a psychographic analysis (analysis of consumer lifestyles) through personal interviews, questionnaires, focus group interviews to identify the interests, activities and opinions of your customers. Results from this analysis will enable you to divide the market into psychographic segments and to focus on designing marketing strategies that appeal to each psychographic segment identified.

Tips & Warnings

  • For market segmentation to be successful, members within a segment should be as similar as possible.

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