Market Segmentation: A Precursor to Effective Communication Strategies

In a world where every business is looking to persuade as many clients as possible, effective communication strategies can help those who adopt them determine the ideal messaging that will influence their target audience. Companies looking to improve their marketing efforts through effective communication must rely heavily on segmentation to accurately define the tone and voice they need to adopt in their brand to reach the type of audience they aim to serve.

This brief article will explain the concept of market segmentation (not to be confused with market segmentation theory in the financial landscape), talk about the four most common types of segmentation, and others you might not have heard of before.

What is Market Segmentation?

According to Investopedia, market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. To simplify, market segmentation is a process upon which you identify, by assigning values to variables like age, hobby, country, and others, the typical traits that your brand’s ideal customer would have. In other words, you try to make theoretical groups of customers based on the variables you choose to identify later the best way to reach and engage them. These variables can be as generic or specific as one decides. However, some of the most common ones have already been categorized, and they make up what we know today as the types of market segmentation.

Types of Market Segmentation

If somebody asks about the type of market segmentation you are using to define your target market, they want to know the kinds of variables you chose to classify your customer groups. For example, if your product were a kid’s toy truck, then you would have probably picked “age” and “gender” as two of your variables. Still, instead of listing them, you could simply respond with: “I used a demographic segmentation approach.” This applies to other market segmentation approaches or types. 

Demographic Segmentation

Perhaps the first type of segmentation that comes to mind when somebody is asked to group people by certain variables. Demographic segmentation relates to the structure of the population and identifiable non-character traits such as:

• Age
• Gender
• Ethnicity
• Income
• Level of education
• Religion

Using income as a variable, for example, could help your brand target people that could effectively afford your product and thus increase your potential conversion rate. 

Psychographic Segmentation

This type of segmentation pertains to personalities and interests. Psychographic segmentation would look at people and classify them by their:

• Personality traits
• Hobbies
• Life goals
• Values & Beliefs
• Lifestyles

Identifying personal traits is much harder than demographic segmenting. Just consider asking someone what religion they practice versus what values they believe in; surely, the latter calls for a longer answer than the former. This is why thorough research is crucial for psychographic segmentation. When done right, a psychographic approach can be extremely powerful and effective at making consumers feel connected to the messaging.

Geographic Segmentation

On the other end of the spectrum, and by far the most accessible approach, is geographic segmentation. Grouping customers based on physical location, which can be by their

• Country
• Region
• City
• Zip Code

Identifying and grouping customers in or near a particular location could, for example, be very useful for event organizers to engage with local crowds who are in the vicinity and could easily attend. For instance, trade shows tailored for American entrepreneurs could combine psychographic and geographic segmentation to gather like-minded people under the same event.

Behavioral Segmentation

As the term suggests, behavior is the focus of study in this segmentation type. Like psychographic segmentation, this approach needs data to function correctly. Still, the difference is that behavioral data, unlike personal data, can be easily gathered from your website’s control or reporting panel. Some of the data websites can collect could be:

• Browsing & Spending habits
• Brand & Competitor Interactions
• Loyalty to brand
• Previous product ratings

For example, this approach can distinguish between first-time and returning visitors to tailor the message accordingly. With ever-increasing machine learning capabilities, the behavioral segmentation approach continually has more variables that it can track, offering marketers many opportunities to deliver highly relevant and targeted campaigns.

Other Types 

As marketers look to become more effective at grouping customers according to the particular targets of each company, other approaches to segmentation have been created, including:

• Technographic: it refers to the role technology plays in the lives of customers.
• Generational: expands the demographic approach to identifying generation.
• Life stage: factors marital status, home-ownership, fatherhood, and other lifecycle milestones.
• Firmographic: classifies B2B customers based on organizational attributes & characteristics (Industry, location, company size, number of employees, etc.).

Although more exists, it is up to the analyst’s discretion and creativity to determine the appropriate approach to narrow down the group to the ideal customer pool. 

Benefits and Impact of Market Segmentation

At this point, it should be evident how market segmentation’s impact on a business’s success could very well be incalculable. Although results will vary, all those who dedicate time and effort to segmenting their market are practically guaranteed to enjoy:

• More effective marketing campaigns
• More efficient spending (marketing budget allocation)
• Higher quality leads
• Identifying niche markets
• Improved customer retention
• Brand differentiation

When your brand decides to focus its efforts on satisfying a defined user’s needs, it automatically becomes the ideal type of business that the specified user would want to be buying from. Overall, adopting market segmentation strategies can help your company improve your marketing initiatives’ return on investment.