The 4 Main Types of Market Segmentation (+How to Implement It in Your Marketing Strategy)

Published by Hannah Tow, March 2019.

You’ve spent time and money creating the perfect marketing strategy, and you want your message to resonate well with your potential customers, right?

Communication is an art, and it’s incredibly easy for a message to become lost, confused, or avoided altogether as the size of your audience increases. The larger your audience grows, the broader their preferences, needs, and opinions become, which can put your marketing message at risk for being irrelevant to a large group of people.

This is why segmenting your target market is crucial. This practice allows you to focus your marketing efforts on an individual customer segment so you can better cater to their specific wants and needs. This method gives your brand an advantage over your competitors because you prove to potential customers that you understand them and know what they need best.

What is market segmentation?

Market segmentation is the process brands use to divide their target market into smaller segments of people that share common characteristics to optimize their marketing, advertising and sales efforts.

What is market segmentation?

Market segmentation is a business practice relying on research that leads the direction of how a business divides its target market into smaller, more manageable groups based on common ground they share. Simply put, customers of each market segment have similar characteristics that businesses can leverage to optimize their marketing, advertising, and sales efforts.

The purpose of segmentation is that you are able to introduce a more tailored message that will be received successfully. This is advantageous for companies who may have a product or service in the marketplace that boasts multiple benefits or uses for different types of customers.

Have you ever heard the phrase: “You can’t be everything for everybody”? The same proves true with one marketing solution. As a marketer, you can’t solve everyone’s problem or appeal to every single person, which is why market segmentation can be such an effective strategy to implement.

Four types of market segmentation

As you can imagine, there are many different approaches you can take when segmenting your target market. This article will walk you through the four main types of market segmentation and provide examples to help you get started.

Geographic segmentation

Geographic segmentation targets customers based on a predefined geographic border. Differences in interests, values, and preferences vary dramatically throughout cities, states, and countries, so it is important for marketers to recognize these differences and advertise accordingly.

Think about products such as parkas and bathing suits. Parkas will be sold for most of the year in the colder, northern half of the country, whereas southern areas may only be able to find parkas in specialty stores during the winter. Bathing suits, on the other hand, are sold year-round in the warmer states but only sold during spring and summer in the cooler states.

To understand where your prospects are utilize real-time buyer intent data from review platforms like G2. This data provides insights into the location of current and potential customers researching your product.

Demographic segmentation

Demographic segmentation divides a market through variables such as age, gender, education level, family size, occupation, income, and more. This form of segmentation is a widely used strategy due to specific products catering to obvious individual needs relating to at least one demographic element.

Perhaps the most obvious variable of them all, age is incredibly important for marketers to understand and advertise accordingly due to the fast-paced nature of preference changes within the various stages of life. Even media consumption differs greatly between each generation, so it’s important to recognize what your target age range is and which channels they use to consume information.

Psychographic segmentation

Unlike geographic segmentation and demographic segmentation, psychographic segmentation focuses on the intrinsic traits your target customer possesses. Psychographic traits can range from values, personalities, interests, attitudes, conscious and subconscious motivators, lifestyles, and opinions. To understand your target customers on this level, methods such as focus groups, surveys, interviews, and case studies can all prove successful in compiling this type of conclusion.

Think about the lifestyle of someone who lives in a small, beach town and surfs for a living versus someone who lives in a big city working in corporate America. Each of their wants and needs on a daily basis are incredibly different, and marketers must recognize those differences to be successful.

Characteristics will vary based on company size for B2B brands. Read customer reviews as part of your marketing strategy; they will give you a number of psychographic insights, including the needs and opinions of your target market.

Behavioral segmentation

Behavioral segmentation has similar measurements to psychographic segmentation but focuses on specific reactions and the way customers go through their decision making and buying processes. Attitudes towards your brand, the way they use it, and their knowledge base are all examples of behavioral segmentation. Collecting this type of data is similar to the way you would find psychographic data. Review websites can also be a helpful tool when searching for this information.

Brand loyalty is an excellent example of behavioral segmentation. I bet while reading this article you can think of one brand that you consistently buy and trust enough to purchase its new line without even reading the reviews. This type of brand loyalty produces a consistent buying pattern, which is categorized as a behavioral trait. Marketers work hard to get consumers to love and stay loyal to their brand for a consistent purchase cycle.

TIP: Do not feel confined by one segmentation method. It is common for brands to implement more than one segmentation technique and take a combination approach.

Common market segmentation mistakes

Now that you understand the basics of market segmentation, let’s focus on the common mistakes marketers make when segmenting their customer base for the first time.

Creating too small of segments

This can be rather easy to do if you what to ensure you have every last detail included. If a segment is created too small, you will lose the buying power of that group as well as create a segment with non-quantifiable metrics. At the end of the day, every single person is vastly different. You cannot appeal to every aspect of every person.

Not updating your strategy as your customer base changes

People change, and they can change fast. It is in your brand’s best interest to refresh its strategy and resurvey its customers from time to time.

Targeting the segment instead of the money

You may have segmented a large customer base that aligns with your strategy, but if that segment does not have the buying power or a legitimate need for your product, then you will not have a positive ROI.

Market segmentation can be a laborious and complicated task, and mistakes in the beginning stages may seem inevitable. Being aware of these common downfalls will better prepare you and your team so you don’t make them in the future.

Additionally, learn how to perform audience testing to get relevant feedback from your targeted demographic.

Ready to implement your own market segmentation strategy?

It’s time to put what you’ve learned to use. Here are five steps that lay the process out simply.

Tip: Explore a complete guide of all types of marketing you can use at your company to drive sales and gain awareness.

Define your market

Where does your brand and product fit within the current market landscape? Is there a need for the solution you promise to provide? How large is the market? These are all important questions to consider when starting this step.

Segment your market

This is where it gets fun. Decide which of the four segmentation methods you’re going to use. Remember that you can use more than one! Find the perfect mix for your brand.

Understand your market

Ask your customer base the questions that relate to the segmentation categories you chose. You should get to know your target market through and through at this step. You can use surveys, focus groups, polls, and more to obtain your answers. Make sure you are asking questions that will provide quantifiable answers.

Build your customer segment

Interpret the responses you received to create dynamic segments that are unique to your brand.

Test your strategy

Ensure that you have interpreted your responses accurately by testing it on the target market. If you are not relating to your customers with the segments you have created, then you will need to relook at your survey method and analysis.

TIP: Be sure that the strategy you choose has unique characteristics from others in the marketplace.

Take your marketing strategy to the next level

Market segmentation is a highly effective strategy for every marketing team. It proves to your customers that you understand them by providing a tailored message that resonates with specific facets of their lives.

Market segmentation comes down to knowing your customer base and providing a personalized experience for them. For a seamless customer journey across your segments, learn how to implement an omnichannel marketing strategy next.

Hannah Tow — a Content Marketing Associate at G2