Market segmentation types

Market Segmentation is the process of dividing a large and diverse market into smaller, homogenous groups of consumers who have similar needs, characteristics, or buying behaviours. This enables marketers to design and implement more focused and effective marketing strategies for each segment.
The main objective of market segmentation is to understand customer diversity and tailor products, pricing, promotion, and distribution strategies to match the specific requirements of different consumer groups.

Major Types of Market Segmentation

Market segmentation can be broadly classified into four main types — Geographic, Demographic, Psychographic, and Behavioural Segmentation.

1. Geographic Segmentation

Geographic segmentation divides the market based on location and geographical boundaries. This helps companies cater to regional differences in climate, culture, income levels, population density, and local preferences.

Basis of Segmentation:

• Region (North, South, East, West)
• Country or State
• City Size (urban, suburban, rural)
• Climate (hot, cold, tropical, arid)
• Population Density (metropolitan, small towns, villages)

Examples:

• A clothing brand selling winter wear in North India and light cotton wear in South India.
• A food chain like McDonald’s offering regional menus such as McSpicy Paneer in India and Teriyaki Burgers in Japan.
• Automobile manufacturers designing off-road vehicles for hilly areas and compact cars for cities.

Purpose: To adapt marketing strategies to local conditions and ensure relevance to geographic needs.

2. Demographic Segmentation

Demographic segmentation is one of the most common and measurable types of segmentation. It divides consumers based on quantifiable demographic variables such as age, gender, income, education, occupation, religion, and family size.

Basis of Segmentation:

• Age: Children, teenagers, adults, seniors.
• Gender: Male, female, unisex products.
• Income: Low, middle, and high-income groups.
• Occupation: Professionals, students, homemakers, workers.
• Education Level: Primary, secondary, graduate, postgraduate.
• Family Size and Life Cycle: Single, married, families with children, retired.
• Religion and Social Class: Hindu, Muslim, Christian, upper class, middle class, working class.

Examples:

• Toothpaste brands offering different variants — Colgate Kids for children and Colgate Sensitive for adults.
• Luxury car brands targeting high-income professionals.
• Fast-food restaurants creating student discount programmes.

Purpose: To identify specific consumer segments that can be served more effectively based on demographic traits.

3. Psychographic Segmentation

Psychographic segmentation classifies consumers according to their lifestyle, personality, values, attitudes, opinions, and interests. It helps businesses understand the psychological and emotional factors that drive purchasing behaviour.

Basis of Segmentation:

• Lifestyle: Modern, traditional, adventurous, health-conscious.
• Personality Traits: Ambitious, outgoing, conservative, creative.
• Values and Beliefs: Environmentally conscious, status-oriented, family-focused.
• Social Class: Upper, middle, or lower social groups based on living standards.

Examples:

• Nike targets consumers who are fitness-conscious and aspire for an active lifestyle.
• Luxury watch brands like Rolex appeal to customers with prestige-driven personalities.
• Organic food brands target health-conscious and environmentally aware consumers.

Purpose: To create emotionally appealing marketing strategies and build a strong brand identity aligned with customer lifestyles and values.

4. Behavioural Segmentation

Behavioural segmentation divides consumers based on their knowledge, usage patterns, and responses toward a product or brand. It focuses on how and why consumers make purchasing decisions.

Basis of Segmentation:

• Purchase Occasion: Regular use, seasonal purchase, festival buying.
• Benefits Sought: Quality, price, convenience, performance, status.
• User Status: Non-user, potential user, first-time user, regular user.
• Usage Rate: Light, medium, or heavy users.
• Loyalty Status: Brand-loyal, switchers, or variety seekers.
• Buyer Readiness Stage: Aware, interested, intending to buy, or decided.

Examples:

• Airlines offering loyalty programmes to frequent flyers.
• E-commerce platforms identifying heavy buyers for special offers.
• Cosmetic companies segmenting customers based on benefits such as anti-ageing or skincare.

Purpose: To personalise marketing efforts based on consumer behaviour, loyalty, and usage patterns.

Additional (Modern) Types of Market Segmentation

With technological advancements and changing consumer dynamics, newer forms of segmentation have emerged:

5. Technographic Segmentation

• Divides customers based on their use of technology, digital habits, and device preferences.
• Common in technology and digital marketing sectors.Example: Software companies targeting users based on their device operating systems (Windows, iOS, Android).

6. Firmographic Segmentation (for B2B markets)

• Used in business-to-business (B2B) marketing.
• Segments organisations rather than individual consumers based on factors such as industry type, company size, location, and revenue.Example: A financial software provider targeting small businesses and large enterprises separately.

7. Value-Based Segmentation

• Segments customers based on the economic value they bring to the company.
• High-value customers are given premium services, while low-value ones receive standard offerings.Example: Banks offering priority services to high net-worth individuals (HNIs).

Comparison of Major Types of Market Segmentation

Steps in Selecting the Right Segmentation Type

1. Understand the Market: Analyse customer characteristics and buying patterns.
2. Choose the Segmentation Basis: Decide whether to segment by geography, demographics, psychographics, or behaviour.
3. Evaluate Segment Attractiveness: Assess size, growth, and profitability of each segment.
4. Select Target Segments: Identify the most viable and reachable customer groups.
5. Design Marketing Strategies: Customise marketing mix (product, price, promotion, place) for each segment.