What is Market Segmentation?
While market segmentation may sound like a new way to do business, it’s actually a very old and time-proven method, dating back, in fact, to the 19th century.
The definition of market segmentation describes the process of dividing a whole market up into different customer segments (sub-groups of consumers) based on some types of shared characteristics. When segmenting markets, researchers typically look for shared behaviors, demographics, psychographics, and/or geographic characteristics. Some examples of the kinds of shared characteristics researchers look for are common needs and common interests, lifestyle similarities, or even similar demographic profiles (age, occupation, family, etc.).
The aim of market segmentation is quite simple. Market segmentation ( KeltonGlobal/Market-Segmentation ) is very useful for companies and advertisers because it allows them to identify high yield segments. In other words, through market segmentation, companies and advertisers are able to determine the segments that are most likely to be the most profitable or contain the most growth potential.
One aspect of market segmentation is that it assumes that different market segments necessitate different marketing strategies and programs. For example, one market may not respond to a certain kind of product or promotion, whether for a lack of need or interest. Another market, however, may be incredibly responsive to that same product or promotion. It’s the researcher’s job to determine which market that is.
Many marketers use what is known as the S-T-P Approach: Segmentation, Targeting, and Positioning. In other words, the results and insights obtained from market segmentation are subsequently used to develop specific marketing strategies, and products or services are positioned in a way that will most likely resonate with the intended target market via various offers, prices, promotions, distributions, or some unique combination of marketing tactics and variables.
Why is Market Segmentation Important?
In today’s fast-paced and highly consumer-driven market, it’s important for businesses to have a competitive advantage. Market segmentation is a great way to cut out the “guess-work” of businesses and gain an advantage over competitors by strategically targeting markets that are likely to be receptive and profitable. Guessing which market might be receptive to certain kinds of products or promotions can be a costly, time-consuming, and an ultimately disappointing way to approach business. As in life, it’s important to have all – or at least as many as possible – facts available before embarking on a new phase of business.
In addition, few companies ( KeltonGlobal ) are big enough or broad enough to supply the needs of an entire market, so it’s important that companies are able to identify which market segments are most appropriate for them. To put it simply, market segmentation is just a smart way to do business, as it allows businesses to be knowledgeable of their markets and market appropriately. It also helps businesses develop and grow customer loyalty within their market segments because they can adjust their products, services, and marketing techniques to match the needs, desires, and interests of their markets.