Market Segmentation Definition
Regardless of the type of product or service you offer, different types of people have different degrees of demand for it. There are as many different types of people as there are ways of categorizing them. Your customers may be men, women, minorities, majorities, low-income, high-income . . . the list can literally go on forever. For example, if you’re marketing luxury homes, you’ll want to market it to people who fall into a certain income bracket. It won’t make sense to market to college students and children.
That is where market segmentation comes to the rescue. Market segmentation is a marketing concept that, when applied properly, can help you to better target your market and to tailor your message to the different groups of people that make up your market.
Below is a market segmentation definition. Below, we explore how market segmentation can save you money and help you to reach more people and at lower cost per conversion than when engaging in mass marketing efforts.
A market segment, loosely defined, is a group of your market made up of people or businesses with one or more characteristics that differentiate their demand for certain products or services. A market segment must meet all of the following four criteria.
- It is different from other segments along one or more key dimensions
- Individuals within the segment have similar needs for products and services
- The members of the segment respond predictably to marketing initiatives
- The segment can be reached via marketing efforts
In other words, each segment must be unique, its individuals must share a common set of characteristics and behaviors, and it must be made accessible via your marketing efforts.
In some cases, marketers have been able to charge different market segments a different price for the same product. The reason is that each segment has differing value perceptions and price points.
Engaging in market segmentation is smart because it allows you to target your marketing approach to each segment, rendering you a better return on investment (ROI) for your marketing efforts. Though it may take time and resources to go to the trouble of properly identifying your segments, market segmentation is design to save you money in the long run. This is because your marketing materials will reach the right people with the right message for your product, based on the segment(s) you are targeting.
Consider the alternative, when you’re marketing luxury condo in New York, it is probably a waste of your money to send a brochure directly to a 20-something who makes less than $28,000/yr. However, if you identify and plan your marketing efforts around your market segments, you can ensure that every expenditure you make yields the maximum results.
You can identify your market segments in a number of ways. For example, your segments may be defined geographically, based on nations, states, regions, counties, cities or even neighborhoods. You can further segment geographic markets by categorizing based on demographic dimensions.
You can also blend psychology with demographics to get a glimpse of how your segments will behave based on race, income level, or geographic location. Psychographic segmentation divides consumers according to their lifestyle preferences, values and opinions. People of the same race, income level, and even geographic location can still exhibit a wide array of behaviors. In other words, they may be the same demographically but vary widely from a psychographic perspective.
Contact MindEcology today to get started.