Market Segmentation Definition, Levels, Types and Examples

Market segmentation is a marketing concept of aggregating potential buyers into subsets or segments, based on common preferences, needs or other similar characteristics. The main reason behind market segmentation strategies is to make it easier to target and personalize marketing campaigns. Successful marketing strategy is to target a segment or section of a market through dividing them into groups that share similar characteristics. This allows targeting of a larger number of potential customers, instead of targeting each customer individually. Market Segmentation is a process that makes efforts of marketing more efficient in terms of costs, time and other resources.

Definition

Divide a potential market into distinct groups of buyers with relatively similar product needs, characteristics and behavior.

Wendell R. Smith was probably the first one who introduced the concept of market segmentation, published in his article “Product Differentiation and Market Segmentation as Alternative Marketing Strategies.” According to the Smith article, he had observed “many examples of segmentation” in the marketplace and considered it a natural force. Nowadays market segmentation is shifting towards mass customization that can help marketers to increase the rate of conversion. Mass customization means reaching customers at a personal level and provide the products and services and develop customized marketing mix strategies according to segment needs and wants.

Different Levels of Market Segmentation

Marketers subdivide markets into segments, so they can do focus on marketing plans. Each Level of market segmentation determines the strategy a company will follow to promote, distribute and position its product in the market and respectively target audience or its customers. Before developing a marketing plan, one must know the what are the levels of market segmentation.

Mass Marketing

In Segemetation, Mass marketing refers to the strategy of targeting the entire potential customer market by means of a single marketing message. The marketing strategy used in this segmentation does not target the specific requirements or needs of customers. Mass marketing strategy, instead of focusing on a subset of customers, focuses on the entire market segment that can be a probable customer of a product.

An example of mass marketing strategy is of Baygon cockroach spray or Mortein mosquito repellent coils that target all its potential customers through a single marketing message.

Segment Marketing

Segment marketing refers to a strategy where the company divides its target audience into different segments based on their unique needs and requirements. This way the company targets different messages to different segments, appealing them towards the unique features the product offers. This strategy creates product differentiation for customers with similar needs and preferences, based on their gender, age, income and location.

The example of segment marketing within clothing industry may be men, women, casual, fashionable and business clothing segments.

Niche Marketing

This strategy of marketing focuses on a narrower customer segmentation. Customers may want or desire a product that is not met completely by the products offered in a market. When companies move forward and develop highly specialized products to offer these customers their specific needs, they offer distinct products in a market that caters to specific customer segments only.

Mountain bikes are an example of a niche marketing segment. where the market segmentation will be individuals interested in mountain biking only. Since not every bike manufacturing company caters to mountain bikers, it is a niche segment. Companies that produce mountain bikes target the niche segment of mountain bikers and cater to their specific needs, preferences and requirements.

Micro Marketing

Micro marketing follows an even narrower segmentation marketing strategy, catering to the attribute of a much-defined subset of potential customers such as catering to individuals of a specific geographical location or a very specific lifestyle.

An example of niche marketing is luxury cars that are very high priced and offer exceptional features such as high speed, customized look, etc. Since these cars are very expensive and limited in number, the niche market for these vehicles target rich, car lovers that are interested in the unique features and has the financial capability to buy them.

Types of Market Segmentation

Market segmentation process is imperative for marketers as it allows them to efficiently design and convey messages to target market. It allows marketing budgets to be utilized effectively through reaching to potential customers that will ultimately transform into leads, instead of being wasted on impressions that will never convert. 4 Types of market segmentation strategies include

Geographic Segmentation

Geographic segmentation refers to divide markets based on geography. Considering where your potential customer is located, some companies market their goods with the specific requirement to specific areas. For example, LG Electronics, the leading electrical appliances company markets for its heaters in cold geographical areas whereas the same company markets for Air Conditioners in hot geographical areas.

Demographic Segmentation

This is one of the widest market segmentation, marketers divide customer population based on different variables in this segmentation. For example, segmentation based on age, gender, income, religion, nationality, race, occupation, family size, etc is taken up by companies to target potential customers. An example of demographic segmentation is of cereal giant Kelloggs that offers different cereal brands for kids and adults, healthy eaters and weight watchers, etc.

Psychographic Segmentation

This type of market segmentation targets the lifestyle, activities, interests and opinions of potential customers. Psychographic segmentation considers the psychological aspect of how the potential customer responds to a product. For example, Mountain Dew uses a marketing strategy that promotes its product through associating masculinity and a daring personality with the drinkers of the brand, targeting young individuals who crave for such a personality and associate themselves with it. Branded clothing lines such as Zara involve in psychographic segmentation, offering clothing range for individuals that follow a trendy and chic lifestyle.

Behavioral Segmentation

Behavioral segmentation refers to customer segmentation based on how they use, behave or make decisions related to a product. Here I am giving you an example of behavioral market segmentation is of soap bars. Young girls will prefer using Dove as it is a beauty soap bar, whereas sports enthusiast will prefer using the Zest soap bar. While girls will prefer drinks such as Minute Maid or Rani, owing to their general behavior of preferring healthy and natural drinks, boys will prefer energy drinks such as Lucozade or Sting, owed to their decision of likeness towards energy drinks.

Examples of Market Segmentation

Market segmentation is the most common activity of every business organization. Marketers and Business owners cannot focus on mass marketing with one marketing strategy. Here are a few examples of market segmentation for better understanding this point.

  • Fast food restaurant should target teenagers and younger couples if target older people it will be a mistake and will affect their revenue generation.
  • If marketing Lingerie and beauty products like “Victoria Secret” focus on young, successful and working-class women.
  • Sports brand, for example, Nike and Lululemon segment the market and target health conscious, athletes, gym lovers and sportsmen and sportswomen.
  • Market segmentation is the best strategy to increase the conversion rate and cut down on the product cost. It helps marketers to always target niche market and attain your objectives.
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