Comprehensive market segmentation definition
Learn what market segmentation is and how it’s important for your business.
What is market segmentation?
The easiest market segmentation definition simply put would be: sub-grouping prospective customers in to different portions based on various factors and characteristics.
Compared to the now outdated and traditional mass marketing methods, market segmentation is a more efficient tool that allows businesses to increase sales by exploiting a particular market portion.
Instead of rolling out a blanket campaign that has no specific audience, businesses can design marketing strategies that specifically target a particular group of potential buyers while intricately matching their needs.
What are the advantages of market segmentation?
- Enhances customer relationship.
The number one factor in any business to consider is the customer. Since market segmentation allows you to tailor a product to fit a certain portion of the market, businesses can take advantage of that.
A targeted marketing campaign not only converts potential customers into returning consumers, but also develops lasting relationships. - Expand the business and increase revenue.
The best way to increase revenue and grow your business is understanding what specific customers want. This is where market segmentation comes in. Identifying a particular niche in the massive and homogeneous market can help you narrow down to a particular lucrative market.
Moreover, a targeted marketing campaign will help set your business apart and accelerate growth. - Cut costs and reduce spending.
A blanket campaign cost a lot of money and especially if the business is just starting out. It also fails to speak to a particular portion of the market. This in turn hurts sales simply because customers take their money to another business.
However, if a business uses market segmentation they can drastically cut on marketing costs by focusing on a sub group of the market. Once this is achieved and the business has secured that specific audience they can focus on increasing sales.
What are examples of market segmentation?
In order for any campaign to be successful the business has to first understand the product they are selling, who they are selling it to, and how they intend to sell it.
The marketing team has to further understand the size of the market they intend to target, accessibility to that market, responsiveness and profitability of the targeted market among other factors.
After establishing those critical frame works a business can therefore go ahead and segment a homogeneous market in the following categories:
- Psychographic or lifestyle segmentation.
As the name suggests this particular type of segmentation is based on specific interests demonstrated by a particular segment. It also involves targeting certain activities that a particular group of people engage in. - Geographic segmentation.
Geographic segmentation involves tailoring a marketing campaign that specifically suits people of a certain region. - Demographic segmentation.
This particular market segmentation uses various factors to achieve its goals and is one of the most used by businesses. A mass market can be divided into small sub groups based on: age, gender, income and marital status among others.
Conclusion
The importance of segmenting a market cannot be stressed enough. In order to reduce spending and increase revenue businesses have to target particular segments of a market and fulfill their needs.
Market segmentation applies to all business sizes and can be especially important to small and medium businesses that are just starting up.
