Describe Market Segmentation

Chances are, your mass marketing efforts aren’t working as effectively as you would like. It is likely that your marketing messages are reaching the wrong people, or worse, alienating your best prospects. While mass marketing allows for economies of scale to be realized through discounts on production, distribution, and communication, each customer’s needs and preferences will differ. The same offering will not be viewed by each customer in the same way.

Market segmentation can help with this. By targeting your best prospects and by tailoring your message to particular subsets of your market, you become more likely to convert more prospects into customers. By understanding the diversity of your customers, you can target your message with unique offerings for each subset, allowing you to get a higher volume of paying customers. In this article, I’ll describe market segmentation and how you can segment your market for maximum effectiveness today.

So how do you know what constitutes a market segment? Each segment of your market can be defined by any number of categories, and each will have different needs and preferences. Each market segment should have measurable identifying attributes, unique needs to justify separate offerings, and should be sufficiently large and stable to justify using resources to cater to them. Additionally they must be reachable through existing communication and distribution channels.

Here are a few of the most common bases for segmenting consumer markets: geographic, demographic, psychographic, and behavioral.

Geographic

Depending on your product, a good place to start when segmenting your market is by region, whether it is country, state, county, or even individual neighborhood. You can conduct segmentation by population or population density. Are you targeting a very large city or a rural farming community? You can even segment by climate, depending on your product. For example, is is much harder to sell umbrellas in Tucson than it is in Seattle.

Demographic

Demographic variables range far and wide, and typically have a few standard values. For example, gender can be expressed as male or female. Generation can be assigned the value of baby-boomer, Generation X, Generation Y, and so on. You can segment demographically by age, gender, family size, family lifecycle, generation, income, occupation, education, ethnicity, language preference, and religion… As you can see, the list goes on and on. In fact, demographic segmentation probably offers the widest variety of segmentation variables than any other technique.

Psychographic

Psychographic segmentation refers to a person’s choice of lifestyle and general attitudes toward life and the world. Activities, interests, opinions, attitudes and values are all variables that shape a person’s psychographic makeup.

Behavioral

Finally, behavioral segmentation is based on your customers’ actual behavior towards buying and using your products. Behavioral segmentation hinges upon key customer buying behaviors such as frequency of purchase, ticket (order) dollar amount, recency of purchase, and product mix.

Usually, the best segmentation employs a combination of each of these factors.

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