Segmenting the Market

‘Market segmentation is based on key differentiators that divide the market (customers) into groups to be targeted.

It enables a business to make a distinction between customers based on certain characteristics.

We can actually segment the market in different ways.

In this lesson, we’ll learn about four methods of segmentation:

1. Demographics
2. Geographic
3. Psychographic
4. Behavioural

Market segmentation based on demographics means dividing customers into categories like their age, gender, employment status, life stage, family structure, religion and income.

Here are a few examples of demographic descriptions:

• College students with a part-time job
• Women of ages 40–50 with full-time employment with a yearly income of at least £40,000
• Retired people with no responsibility for children and a yearly income of at least £30,000

Let’s now look at the main categories of demographic segmentation.

Age – e.g. children, young adults, the elderly.

Gender – ​e.g. male, female, non-binary.

Marital Status​ – e.g. single, married, divorced, in a civil partnership

Race & Ethnicity​ – e.g. Asian, Asian British, Black, Black British, Caribbean, African, White, Mixed.

Religion​ – e.g. Christianity, Islam, Hinduism, Buddhism, Sikhism, Judaism.

Family size – ​e.g. no children, small family, large family.

Income – e.g. low income, lower-middle income, upper-middle income, high income.

Occupation – ​e.g. manager, professional, skilled labour, administrative, retail.

Education level – e.g. ​secondary, bachelor’s degree, master’s degree & above.

Socio-economic group – e.g. Higher & intermediate managerial, junior managerial, skilled manual occupation, unskilled manual.

Geographic segmentation describes the physical location of a company’s target customers.

When an enterprise thinks about geographic segmentation, they might focus on factors such as:

• The time zone and area of the country the target market/customers live in
• Is it a rural, suburban or urban environment
• The local language spoken in the geographical area.

Geographic segmentation can help to provide better support for customers by understanding their needs.

For example, there is no point in having a customer support line running during UK working hours when your target audience are all based in Australia.

It also allows you to understand specific factors based on the audience locations, such as how people in hot countries may be more interested in an ice cream product than people who live in very cold countries.

There are also other cultural factors based on location, like how red is viewed as lucky in China but is considered a sign of danger in the UK.

Psychographics describes the basic, inherent, fundamental, and intrinsic personal qualities of customers in your target market.

This includes things like their hobbies and leisure activities, entertainment interests and preferred sources of information.

For example, people who play a certain sport (football) as a hobby, people who watch a certain sport (football) as a leisure activity, viewers who prefer to watch romantic movies as opposed to horror movies, etc.

Let’s now look at the main categories of psychographic segmentation.

Social class​ – e.g. working class, middle class, upper class

Attitudes​ – e.g. liberal, conservative, old-fashioned.

Lifestyle – e.g. fitness fanatics, student, business professional, party-goers.

Personality​ – e.g. introverted, extroverted, friendly, opinionated.

Behavioural patterns are those habits that describe/state your customers’ purchasing habits, the reason why they want to purchase your product or service, when and how frequently they buy and use it, and the qualities they are looking for in the product or service.

It includes segmenting the customers based on their attitude toward your brand or products and their purchasing tendencies, such as buying on special occasions like birthdays or holidays only, etc.

Let’s now look at the main categories of behavioural segmentation.

Spending & Consumption – e.g. weekly, monthly, one-off.

Rate of Usage – e.g. daily, weekly, monthly.

Loyalty Status – e.g. high, medium, low.

Desired Benefits – e.g. convenience, price, uniqueness.

Market segmentation based on demographics means dividing customers into categories based on their age, gender, employment status, life stage, family structure, religion, and income.

Geographic segmentation describes the physical location of a company’s target customers.

Psychographics describes the basic, inherent, fundamental, and intrinsic personal qualities of customers in your target market.

Behavioural segmentation describes the habits customers have, such as when shopping.