What Is Market Segmentation? Definition and Guide

Market segmentation is the dividing of a firm’s target market into groups and subgroups. By segmenting the market the firm may then tailor sales campaigns and marketing strategy so as to be specifically aimed at the identified groupings.

Market segmentation in action

As most businesses are unable to serve all the market, they must identify where they can best sell their products. A business, say a footwear retailer, will research their market for shoes. They will then segment the market into groupings such as:

• Age
• Sex
• Income
• Geographical area 
• Lifestyle

By segmenting the market the storeowner will then know what stock to carry in the store. If the immediate area is populated by females under 30 who work in financial services, they will stock smart, office-type shoes to attract sales. The management will devise adverts in local newspapers and radio, appealing to their target audience and may give the store a facelift too.

Benefits

In segmenting the market the store may also identify demographics previously not served by them or other stores. They may discover that there is a large population, possibly outside the immediate area, of retired, middle income males.

Now the store may stock suitable lines, target advertising in that area and do some leafleting via the mail. Identifying markets not already served is key to growth in any business.

By serving the market and doing it well, a business can build a relationship and a good name that is priceless as a marketing tool for the future.

Market segmentation may identify that stock in store bears little relation to the target area. The store will need to change lines or look beyond the area for sales. Early segmentation may help the business avoid many pitfalls, while also help to develop strategy suitable for the demographics of their market area.

Developing a portrait of a customer

A store will not be able to sell to everyone in the market.  But good market segmentation helps paint an accurate portrait of potential customers. By keeping a mind’s eye picture of their customer, the marketing department can develop strategy to attract them to the store.

The storeowner too can streamline staff suitable to deal with customer type, as well as stock products in the store that will sell in the market. Market segmentation is the ideal way to break the market down and know what will sell the best in store.

Market Segmentation FAQ

What is market segmentation in simple words?

Market segmentation is the process of dividing up a market into different groups of customers who have similar needs and wants. It is used to help companies better target their products and services to the right people.

What are the 4 types of market segmentation?

• Demographic: segmenting customers by age, gender, income, occupation, marital status, etc.
• Geographic: segmenting customers by region, country, city, neighborhood, etc.
• Psychographic: segmenting customers by lifestyle, values, interests, and opinions.
• Behavioral: segmenting customers by buying habits, brand loyalty, usage frequency, etc.