What is Segmentation in Marketing

peopleThis article will offer a quick and simple answer to the question “what is segmentation in marketing?”. Basically, it is the process by which companies market to specific groups that have certain identifiable characteristics in common. It is equally relevant in regular marketing as it is in web marketing. Without market segmentation, companies would be marketing the same product or service to everybody. While this would certainly create wider reach, it would also make the product more general (or less customized) and therefore less competitive in many markets.

What is a market segment?

There are many ways to perform segmentation in marketing, but the key is to segment using characteristics that are relevant to your product or service. Some examples include segmenting by age, gender, specific locations, social class, income, level of education, behaviour and so on. Relevancy should be determined so that by targeting a specific segment, one can then either customize the product/service or tailor one’s marketing efforts to better serve or better reach this segment.

For example, targeting high income people might allow a company to create a more high-end and hence expensive product. This would limit their market, but at the same time it could make them more competitive for this particular segment (assuming that they would want/need such a device). Similarly, another great example is beer, where some brands market themselves as more “manly” without making any change to the product whatsoever – this is an example of branding and of fulfilling a psychological need for a certain image in the target segment (silly men).

How is segmentation performed?

As with everything business related, one must always gather the right intelligence. Segmentation in marketing involves three distinct steps:

-        Surveying: Gathering date through interviews, questionnaires.

-        Analysis: Data is analysed for patterns.

-        Segmentation: Patterns are organized into segments that represent distinct groups with similar characteristics/behaviour.

As mentioned earlier, the key issue here is relevance. For example, it makes no sense to talk of men and women as different segments if they demand and use a product similarly (e.g. milk).

When companies target very small segments in the market – more like segments within segments – then that is usually referred to niche marketing. These companies serve small groups with very specific needs and in so doing they carve out a small but (usually) profitable corner of a segment or market.

Conclusion: What is segmentation in marketing?

Segmentation in marketing is when a company uses its market data to divide a market into groups that share certain characteristics, and which have significantly different needs/buying patterns/behaviour, thereby enabling the company to better market a product or service to them.

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