Segmentation Guidelines for Market Division
Market segmentation is a crucial strategy for businesses seeking to target specific consumer groups effectively. By analyzing and dividing a market into smaller groups of consumers based on specific criteria, businesses can tailor their products and services to meet the unique needs of each segment.
The first step in market segmentation is demand pattern analysis. This process helps understand the uniformity or diversity of demand for a product. For instance, homogenous demand refers to products that are always in demand, regardless of external factors, such as soap, shampoo, or food. On the other hand, diffused demand exists when customers have a wide variety of preferences, making it challenging to predict which product they will choose, such as the cosmetic market.
Beyond customer needs and customer profiling, market segmentation criteria include several important dimensions. Demographics, such as age, gender, income, education, occupation, marital status, and geographic location help identify segments with common observable traits and potential buying behaviors. Psychographics, on the other hand, target customers based on their values, attitudes, and lifestyles. Behavioral segmentation distinguishes segments based on customer interactions with products or services, while geographics groups customers by their physical or cultural environment.
In B2B contexts, additional segmentation focuses on buying processes involving multiple stakeholders, rational decision criteria like efficiency, scalability, and return on investment, and the need for product/service customization reflecting technical, regulatory, or service-level differences.
Profiling of customers is essential for any type of segmentation, as it helps to better understand the customer. Profiling can vary based on the type of segmentation being carried out. For example, geographic segmentation profiles customers based on their location.
Once the demand pattern and the profiling of the customer is ready, the market segment that should be targeted is determined. Based on the demand pattern analysis, various types of segmentation can be carried out, including demographic, geographic, psychographic, behavioral, benefit, or lifestyle segmentation.
For further understanding, a video by Marketing91 on Market Segmentation is available. The complete series on Segmentation is also available for more in-depth learning. This targeting can ultimately help with positioning of the product or service.
Investing wisely in a business department requires understanding the market segmentation process. By conducting demand pattern analysis, businesses can identify whether the demand for their product is homogeneous or diffused, helping in tailoring marketing strategies accordingly. Furthermore, for an effective business operation, it's essential to use various market segmentation criteria such as demographics, psychographics, behavioral, and geographic segmentation to profile customers and make informed investment decisions.
