Finding Your Market Segmentation Fit: What works and what doesn't

Market segmentation aims to understand the underlying psychological factors that drive consumer behavior. Find out what works for your brand.

Author

Shireen Noushad

Date

June 26, 2023

Market segmentation helps identify specific customer groups, enabling personalized strategies. However, finding the perfect market segmentation fit is a continuous process that requires diligent research, customer insights, and adaptability. However, the challenge lies in identifying the correct segmentation variables and understanding what works and doesn't for your business.

Explore how data-driven insights can help you identify untapped opportunities, avoid misalignment with your target audience, and tailor your offerings to build lasting customer relationships. Join us as we uncover the secrets to finding your market segmentation and provide valuable insights into discovering your niche market. So, let's dive in!

What is Market Segmentation?  

Market segmentation is the process of dividing a broad consumer or business market into smaller, more defined segments based on specific characteristics, needs, behaviors, or preferences. It involves identifying distinct groups of individuals or organizations that share similar traits and creating targeted marketing strategies to cater to their unique requirements.  

By segmenting the market, companies can better understand and connect with their target audience, tailor products or services to their specific needs, and deliver more relevant and effective marketing messages. Market segmentation allows businesses to optimize their marketing efforts, enhance customer satisfaction, and increase overall business performance by focusing resources on the most promising market segments.  

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What are the types of market segmentation?  

There are several types of market segmentation that companies can utilize to categorize their target audience based on various criteria. Here are some commonly used types of market segmentation:

Demographic Segmentation

Dividing the market based on demographic factors such as age, gender, income, occupation, education, and family size.

Psychographic Segmentation

Categorizing the market based on psychographic variables, including lifestyle, personality traits, values, attitudes, interests, and behavior patterns.

Behavioral Segmentation  

Segmenting the market based on consumer behavior, such as usage rate, purchasing habits, brand loyalty, occasions, benefits sought, and response to marketing stimuli.

Geographic Segmentation

Dividing the market based on geographic factors, such as location, region, climate, population density, urban or rural areas, or cultural preferences.

Firmographic Segmentation

Relevant for B2B markets, this type of segmentation involves categorizing businesses based on factors such as industry, company size, revenue, location, or purchasing behaviors.

Technographic Segmentation

Primarily applicable to technology-related products or services, this segmentation divides the market based on factors like technology adoption, usage, preferences, or digital behaviors.

Socioeconomic Segmentation

Segmenting the market based on socioeconomic variables, including social class, income level, occupation, and education.

Benefit Segmentation

Grouping consumers based on the specific benefits they seek or derive from a product or service, such as convenience, price, quality, status, or functionality.

These segmentation approaches can be used individually or in combination, depending on the nature of the product or service and the specific goals of the company. However, when it comes to consumer research, there are more types of market segmentation.  

Have a look: Reducing Customer Acquisition Cost through Advanced Consumer Research

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Attitudinal Segmentation  

Attitudinal segmentation involves segmenting consumers based on their attitudes, beliefs, opinions, motivations, and perceptions towards products, brands, or specific topics relevant to the research study. It aims to understand the underlying psychological factors that drive consumer behavior.  

By identifying distinct groups with similar attitudes and preferences, companies can tailor their marketing messages and strategies to resonate with each segment. Attitudinal segmentation may involve surveying consumers to gather data on their opinions, conducting focus groups to delve into their attitudes and motivations, or analyzing social media and online discussions to gain insights into their sentiment towards certain products or brands.

Example: A cosmetics company may conduct attitudinal segmentation research to understand consumers' attitudes towards cruelty-free and environmentally friendly beauty products. The company may identify segments with different levels of concern for animal welfare, environmental sustainability, and ethical sourcing. This information can guide product development, messaging, and marketing efforts targeted at each segment's specific values and preferences.

Usage-Based Segmentation

Usage-based segmentation involves categorizing consumers based on their usage or consumption patterns of a product or service. It focuses on understanding how consumers interact with and engage with a particular offering. Usage-based segmentation allows companies to tailor their marketing strategies and offerings based on consumers' behaviors, needs, and preferences related to usage.

Example: A mobile phone provider may employ usage-based segmentation to identify different segments of customers based on their usage patterns, such as heavy data users, frequent international travelers, or those primarily interested in social media and messaging apps. By understanding these usage-based segments, the company can develop targeted data plans, international roaming offers, or specialized app bundles to meet the specific needs of each segment.

Occasion-Based Segmentation

Occasion-based segmentation involves segmenting consumers based on specific occasions or situations when they are likely to purchase or engage with a product or service. It recognizes that consumer behavior can vary based on different contexts and occasions. By understanding the occasions that drive consumer needs and motivations, companies can design marketing campaigns, promotions, and product offerings that align with those occasions.

Example: A chocolate manufacturer may utilize occasion-based segmentation to identify different consumer segments based on specific occasions like birthdays, holidays, or romantic events. Each segment may have distinct preferences in terms of packaging, flavors, or gift ability. By tailoring their products and marketing messages to align with these occasions, the company can effectively target and engage consumers during key buying moments.

Have a look: Mastering Ad Creative Testing - Unlocking Success in Digital Advertising

What are the benefits of Market Segmentation

Market segmentation in consumer research offers brands targeted marketing, improved product development, competitive advantage, efficient resource allocation, enhanced customer satisfaction, loyalty, and better decision making. By understanding customer segments, brands can tailor their strategies, products, and experiences to meet specific needs and gain a competitive edge in the market.

Targeted Marketing

Segmenting the market allows brands to tailor marketing efforts to specific consumer groups with similar characteristics and preferences, increasing campaign effectiveness and customer engagement.

Enhanced Product Development

Market segmentation provides insights into diverse customer needs, enabling brands to develop products aligned with specific segment requirements, improving features, design, pricing, and packaging.

Competitive Advantage

Understanding market segments helps brands identify gaps, meet unmet needs, and create unique value propositions, differentiating themselves from competitors and attracting loyal customers.

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Efficient Resource Allocation

Market segmentation enables strategic allocation of resources to high-potential segments, optimizing marketing budgets, sales efforts, and operational resources for improved ROI and business performance.

Improved Customer Satisfaction and Loyalty

Tailoring offerings to specific segment needs enhances customer satisfaction, driving loyalty, repeat business, and positive referrals.

Better Decision Making

Data-driven segment analysis informs strategic decisions on product positioning, market targeting, pricing, messaging, and distribution, reducing risks and resonating with the target audience.

Have a look: Smart Insights from Qualitative Research with Generative AI Solutions


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One size does not fit all  

Market segmentation can vary across different sectors like CPG (Consumer Packaged Goods), automobile, and healthcare. Here are some ways in which market segmentation may differ in these sectors:

CPG Sector

Demographic Segmentation

CPG companies often target consumers based on demographic factors such as age, gender, income, and family size. They tailor their products and marketing messages to specific demographic groups.

Lifestyle Segmentation

Segmentation based on consumer lifestyles and psychographic characteristics is crucial in the CPG sector. This includes factors such as interests, values, attitudes, and buying behaviors.

Brand Loyalty

CPG companies focus on building brand loyalty and repeat purchases. Segmentation may involve identifying loyal customers and developing strategies to retain them while targeting potential new customers.

Automobile Sector

Psychographic Segmentation: In the automobile sector, psychographic segmentation plays a significant role. Consumers' lifestyles, personality traits, and values influence their vehicle choices. Segmentation may involve targeting luxury car buyers, eco-conscious consumers, or adventure-seeking individuals.

Usage-Based Segmentation

Usage patterns and preferences are essential in the automobile sector. Segmentation can be based on factors like commuting needs, family size, and specific vehicle requirements (e.g., SUVs for outdoor enthusiasts or compact cars for urban dwellers).

Geographic Segmentation

Geographic factors, such as regional preferences, climate conditions, and infrastructure, may impact segmentation strategies. For example, marketing strategies for electric vehicles might differ in regions with higher adoption rates.

Have a look: ChatGPT for Market Research - Transforming Consumer Insights

Healthcare Sector

Healthcare Needs

Segmentation in the healthcare sector focuses on identifying specific healthcare needs, conditions, or diseases. Segments may include patients with chronic illnesses, specific demographic groups requiring specialized care, or those seeking preventive services.

Behavioral Segmentation

Health-related behaviors and attitudes are important in this sector. Segmentation may target individuals interested in fitness and wellness, those with specific health goals, or individuals with certain risk factors.

Physician Segmentation

In the healthcare sector, segmentation may extend to physicians and healthcare providers. It can involve identifying specialists in specific fields, understanding their preferences for medical equipment, or targeting specific segments of healthcare professionals for pharmaceutical products.

Have a look: AI-powered Consumer Research Platform

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How to conduct market segmentation well  

Identify the Purpose Determine the objective of market segmentation. Clarify why you need to segment the market and what specific goals you aim to achieve through segmentation (e.g., better targeting, personalized messaging, increased customer satisfaction).

  1. Define Target Market: Clearly define the overall target market that you want to segment. Understand the broad characteristics of your customer base and identify the primary market you serve or intend to serve.

  1. Conduct Market Research: Gather relevant data and insights about your target market through market research. This can include demographic data, psychographic information, consumer behaviors, purchasing patterns, preferences, and other relevant data sources. Both primary research (surveys, interviews, focus groups) and secondary research (industry reports, existing data) can be utilized.

Have a look: Identify, measure and quantify emotions in human voice

  1. Analyze the Data: Analyze the collected data to identify patterns, similarities, and differences among your target audience. Look for variables or characteristics that can be used to segment the market effectively, such as age, gender, income, behaviors, needs, attitudes, or geographic location.

  1. Select Segmentation Variables: Based on the analysis, choose the segmentation variables or criteria that will be used to divide the market. Consider variables that are relevant to your product or service and align with your marketing objectives. It can be a single variable or a combination of variables.

  1. Create Segments: Apply the chosen segmentation variables to create distinct market segments. Group consumers who share similar characteristics within each segment. Ensure that each segment is identifiable, substantial, accessible, actionable, and differentiable.

  1. Develop Segment Profiles: Develop detailed profiles for each segment that include demographic, psychographic, behavioral, and other relevant information. This helps you understand the unique needs, preferences, motivations, and behaviors of each segment.

  1. Evaluate Segment Attractiveness: Evaluate the attractiveness of each segment based on factors such as size, growth potential, competition, profitability, and compatibility with your company's capabilities and resources. Prioritize segments that offer the most potential for your marketing efforts.
  1. Develop Marketing Strategies: Develop targeted marketing strategies for each segment based on their specific needs, preferences, and characteristics. Tailor product offerings, messaging, positioning, pricing, distribution channels, and promotional activities to effectively reach and engage each segment.

  1. Implement and Monitor: Implement the segmented marketing strategies and track their performance. Monitor and measure the effectiveness of your campaigns and make adjustments as needed. Continuously review and update your segments based on market changes, evolving consumer behavior, and new insights.

Have a look: Measure and quantify human emotions

Enhance market segmentation with integrated consumer research platform  

Decode is a SaaS DIY consumer research platform that simplifies the process of gathering and analyzing consumer data. With customizable surveys, advanced analytics, and segmentation capabilities, it helps businesses extract actionable insights for targeted marketing. Decode enables collaboration, supports iterative research, and empowers data-driven decision-making, making it a valuable tool for understanding and engaging with the target market.

Data Collection  

Decode enables users to collect large-scale, real-time data from diverse sources such as surveys, online communities, social media, and mobile apps. This extensive data collection capability allows researchers to gather valuable insights about consumer demographics, preferences, behaviors, and attitudes across various segments.

Customized Surveys

The platform offers flexible survey creation tools that allow researchers to design and deploy customized surveys tailored to specific segmentation variables. This enables the collection of data directly relevant to the segmentation criteria chosen, ensuring accurate and targeted insights.

Advanced Analytics

Decode provides powerful analytics features, including data visualization, sentiment analysis, text mining, and statistical analysis. These capabilities enable researchers to delve deeper into the collected data and uncover meaningful segment patterns, identify correlations, and gain actionable insights for effective segmentation strategies.

Have a look: Measure and quantify human attention

Segmentation Analysis

With its advanced analytics capabilities, Decode allows researchers to conduct segmentation analysis directly within the platform. Users can apply various segmentation techniques, such as clustering or factor analysis, to identify distinct consumer segments based on their shared characteristics, behaviors, or preferences.

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Targeted Messaging

Using the insights gained from segmentation analysis, researchers can leverage Decode's features to develop tailored marketing messages for each segment. The platform's content creation tools enable the creation of personalized communications that resonate with the unique needs and preferences of specific consumer segments.

Collaboration and Sharing

Decode promotes collaboration among researchers, insight professionals, and marketers by providing a centralized platform for data sharing, collaboration, and knowledge exchange. This fosters cross-functional teamwork, ensuring that segmentation insights are effectively communicated and utilized throughout the organization.

Continuous Iteration

Decode supports iterative research and segmentation processes. Researchers can conduct follow-up studies, track changes in consumer behavior over time, and refine their segmentation strategies based on evolving market dynamics. The platform's agility allows for ongoing adjustments and improvements to segmentation approaches.

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Supercharge your research with actionable insights faster on Decode's integrated consumer research platform with Insights AI.
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With lots of unique blocks, you can easily build a page without coding.

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Author Bio

Shireen adores writing and currently, she’s all about making B2B content fun, engaging, and 100% non-boring. She's intrigued by the scope of AI(not scared, yet), and how it helps advance operations on all fronts across industries. On a typical day, she scours the internet for anything and everything AI-related, and goes on a loop of writing and re-writing cause it’s just not perfect.

Shireen Noushad

Product Marketing Specialist

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