What Is Market Segmentation? Definition of Market Segmentation, Market Segmentation Meaning and Concept
Market segmentation is a marketing process by which a company divides a large market into smaller groups for members with similarities or certain characteristics in common.
Once the target audience is divided , it will be easier to develop a more effective marketing strategy for each group in question. In this way, the effort and work are focused, reducing the cost, compared to a campaign focused on a larger and more heterogeneous audience. In addition, the result is usually faster and more satisfactory.
Objective of market segmentation
The market segmentation strategy seeks that companies know well the characteristics of people when consuming a product or service. So that this allows them to offer them what they really need. They try, therefore, to get companies to focus on a few target markets instead of trying to target everyone. Thus achieving a competitive advantage in a given segment.
It is a strategy often used by small businesses, since they do not usually have the necessary resources to attract the entire public. Although not necessarily, since sometimes the competition is so great that large companies also specialize in a market segment . Companies that use this method often focus on the needs of the customer and how the products or services could improve their daily lives. Also, some companies may allow consumers to participate in their product or service.
Market segmentation criteria
The way in which companies or other types of organizations carry out the grouping into segments can depend on variables as disparate as tastes, fashions, styles, personality types, geographical location or level of wealth.
Taking into account this high number of criteria, companies seek to know the behavior of people when consuming a product or service. This being so, the next step will be to classify individuals into public segments that have a response as similar as possible to the product offered. A classification of the main types of market segmentation could be as follows:
- Demographic characteristics: Which could focus on details such as age, social class, gender, culture or religion.
- Geographical area: Answer questions such as what region you are from, in which areas you buy the products, what is your country of residence or the relief of the place where you live.
- Consumer behavior: It rests on the idea of the end of the consumer, that is, knowing why he buys and what he looks for when he wants something. For example, you can look for efficiency, value for money or the image you project to others.
- Psychological traits: Refers to tastes, fashions, styles, character.
- Economic factors: Job position, job stability or income level.
Therefore, knowing the details and behaviors of each segment with great precision will be a basic element when developing an effective marketing mix to sell efficiently. In other words, it will be vital to be clear that the product in question is created and aimed at a certain part of the consumer population.
Using segmentation helps to reliably measure the effort and optimization of the resources dedicated to a project.
Market segmentation example
It may seem self-evident, for example, that if I own a brand of guitar accessories, it wouldn't be very wise to put commercials on every television and in prime time. What could we do? Locate individuals who are potentially going to use my product. For example, of course, people interested in music. It will be much more effective to place advertisements in music magazines, musical instrument stores, and related sites.
Just as the previous example may seem excessively basic and logical, we must not forget that segmentation is a basic marketing process for companies. In other words, it will also be necessary to take into account essential factors such as profitability. Since the segment must be large enough to make a profit or be located in locations that the company is able to supply.