Segment of the market

From CEOpedia | Management online

Segment is a group of people (customers) who are reacting in the same way to a set of marketing activities. Marketer has to choose which segment is the best for company to archive goals. Customers are divided in groups based on many different factors. Process of identifying target groups based on their needs, geographic, behavioral and other factors is called marketing segmentation.

Segmentation starts with selecting variables to set a segment. Next step is about constructing profile of a potential customer in segments and sub-segments and at the end implement emerging segments.

Segments can be identified in two ways:

  • By identifying the potential customer by general characteristic.

General characteristic defines potential customer age, earnings, education, or location. In this case company is able to find out how is really buying the product.

  • By the way customer behave which tells what, why, where and when customers are purchasing the product.

Purpose of and benefits from segmentation

Segmentation helps company to choose segment to sell their product or services. The main goal is to analyze market and customers needs. Segments can be defined by groups of people in the same age or sex, people with the same habits or expectations about the product. Every company want perfectly match customers need to avoid expenses. The other purpose of segmentation is to show customers differences from competition's offer.

Segmentation benefits company on many ways like:

  • attracting the right customer and make him loyal to the brand,
  • product that corresponds to customers demands don't need expensive marketing activities,
  • setting a specific segment as a target.

Process of segmentation

By P. Kotler process of segmentation consists of three stages:

  1. Research - starts with setting a profile of customers needs, behaves, motivations. Then the questionnaire that consist this variables is made.
  2. Analysis - analyze data to remove highly correlated variables then determining maximal number of differ segments.
  3. Profile - profiling every group by their demographics, behaves, psychographics.

Every segment is named after characteristic variable that dominates.

By E. J. McCarthy that process consists seven stages:

  1. General definition of segmented market.
  2. Formulating demand list of potential customers.
  3. Defining segments by creating combinations of needs that are answered on the market.
  4. Removing common features.
  5. Naming easy to separate segments of the market.
  6. Making detailed characteristic each of those segments.
  7. Defining relative scale of segments.

Criteria of segmentation

1 Customers characteristics:

  • Demographic - age, gender, education, marital status, religious beliefs.
  • Geographic - location (city, suburbs, village), climate, population, political system.
  • Economic - profession, earnings, assets.
  • Socio-psychographic - lifestyle, social class, personality

2 Purchasing patterns:

  • Conditions - type of shopping place, frequency/time/scale of shopping,
  • Patterns - loyalty, frequency of use
  • Benefits - product knowledge, customer's predisposition

Examples of Segment of the market

  • Demographic Segmentation - Segmenting customers by their age, gender, income, ethnicity, nationality, and family size. For example, a car dealership might target customers with a mid-range income level between 25 and 45 years of age who live in a certain geographic area.
  • Psychographic Segmentation - Segmenting customers according to their lifestyle, personality, attitudes, and values. For example, a fashion retailer might target young professional women who are trend-conscious and fashion-forward.
  • Geographic Segmentation - Segmenting customers according to their physical location. For example, a restaurant chain might target customers in urban areas with a high population density.
  • Behavioral Segmentation - Segmenting customers according to their purchasing behavior, usage patterns, and loyalty. For example, an airline might target customers who are frequent flyers and offer them special discounts or rewards.
  • Product-Related Segmentation - Segmenting customers based on their preferences for certain products or services. For example, a home improvement store might target customers who are looking for specific products like paint, flooring, or appliances.

Limitations of Segment of the market

Segmenting the market can be a powerful tool for marketers, however, it also has its limitations. These include:

  • Cost - Segmenting the market can be expensive as it involves conducting research, analysing data and creating campaigns.
  • Time - It takes time to analyse the data and come up with a viable segmentation strategy.
  • Accuracy - There is a risk that the segmentation process may not accurately reflect the target market.
  • Complexity - It can be difficult to identify the right criteria for segmenting the market.
  • Over-segmentation - Segmenting the market too finely can lead to too much fragmentation and make it difficult to effectively target the right customers.

Other approaches related to Segment of the market

  • Demographic Segmentation: This approach divides the market into segments based on demographic characteristics such as age, gender, family size, income, education, occupation and ethnicity.
  • Psychographic Segmentation: This approach divides the market into groups based on consumers' lifestyle, values, attitudes and interests.
  • Geographic Segmentation: This approach divides the market into segments based on geographic criteria such as region, state, city, climate or population density.
  • Behavioral Segmentation: This approach divides the market into segments based on consumer knowledge, attitude, use or response to a product.

In summary, these four approaches of segmenting the market can help companies understand their target customers and better target their marketing activities. By understanding their target customers' needs, preferences, and behaviors, companies can create more successful marketing campaigns and reach their goals faster.

Segment of the marketrecommended articles
Market segmentation processSelection of target marketsGeodemographic segmentationAnalysis of customerSegmentation and targetingGeographic market segmentationDifferentiated marketing strategyTypes of market segmentationTarget population


Author: Monika Stempień