A Complete Guide to Marketing Segmentation

Segmentation, Targeting and Positioning is the second element of creating a Business Development Strategy. STP comes directly after Business Analysis to acknowledge the Vision, Mission, Customer Profile, Financial Statement and Management Style of the target Business.

Market Segmentation is the process of breaking the market into more strategically manageable parts that can be targeted and which needs can be satisfied more precisely.

Practically, Companies have recognized 4 bases of Segmentation:

- Geographic: Geographic Segmentation is the basic method to Segment the Market based on Region, Climate, Language and Population Density. On belief that common groups have common buying behaviors, companies use Geographic Segmentation to target common groups of customers. 

In a diverse and multi-lingual country like India, global companies like Vodafone, Nike, Adidas have to come up with different marketing strategy for different regions within the same country. While the south is passionate about Football, the north is more passionate about cricket. Thus, in the south of the country, Nike or Adidas market strongly based on football whereas in the north and west, they advertise more on the basis of Cricket.

- Demographic: Demographic Segmentation is the oldest and most widely used method to Segment the market into parts based on different variables such as Age, Sex, Education, Occupation, Income, Religion, Race, Nationality and Life Cycle Stage. 

Men are from Mars, Women are from Venus is a well suited example that Sex is a great variable in Demographic Segmentation. When Men might be interested in lates in Technology, Women are most likely to be interested in latest in Fashion.

BMW, Mercedes and Ferrari have been marketing themselves as Premium Car Manufacturers for Customers who are more Luxury Conscious with higher Income, where Samsung has an affordable price bracket.

- Psychographic: Psychographic Segmentation uses Personal Activities, Interests, Opinions, Values and Lifestyle as Segmentation variables. Lifestyle is inseparable from Income and Life Cycle Stage.

Managers with higher Income will have a Luxurious Lifestyle than a 25-Year-Old Self-Employed person with a lower Income bracket.

Personal Interests can, as well, be related to Sex while differ from Men to Women.

Activities dictate that Customer will have more time to buy from a Shop or more likely to buy Online.

Values are of primary importance to perform Psychographic Segmentation. Where Innovators are independent individuals willing to take risk and try new experiences, they are motivated in achieving the finer things in life. Believers do not like to risk new tastes, and they believe the opinions of others. While Makers are consumers who want self expression but they are limited by the number of resources they have.

- Behavioral: Behavioral Segmentation is based on a series of Behavioral Measures including Attitude, Knowledge, Benefits Sought, Loyalty Status and Usage Rate. Benefits Sought, of all, is the most used Segmentation Behavior used and is based on the assumption that it is the Benefits that people are seeking form a Product that provides the best bases for Segmentation.

Benefit segmentation begins therefore by determining the principal benefits customers are seeking in the product class, the kinds of people who look for each benefit, and the benefits delivered by each brand. Apple, for example, based its initial strategy, at least in part, on appealing to those looking for a more user-friendly system.

Customer Attitude of Buying in Celebrations, for example, differs significantly from the ordinary Attitude on usual days. Hotels and restaurants will target new year as they will have more customers over the new year which is a moment of outdoor celebration whereas Christmas is more of a family celebration.

Based on previous discussion, companies are able to break large markets into more manageable parts, which Needs, Wants and Demands can be easily addressed and satisfied. Each Segment, and each Quality in the Segment has different Needs, Wants and Demands.

- Needs: Key factors required for survival. People can not live without having their primary Needs. According to Maslow's Hierarchy of Needs, Physiological needs are the physical requirements for human survival. If these requirements are not met, the human body cannot function properly and will ultimately fail. Physiological needs are thought to be the most important; they should be met first.

Air, water, and food are metabolic requirements for survival in all animals, including humans. Clothing and shelter provide necessary protection from the elements. While maintaining an adequate birth rate shapes the intensity of the human sexual instinct, sexual competition may also shape said instinct.

For example, A baby needs Milk for well-being.

- Wants: A step ahead Needs, Wants are desireable luxury but not a requirement for survival. For example, we Need a soap to clean our hands, but we definitely Want a good-smelling soap.

- Demands: A Want that can be afforded is transformed to a Demand. You might want a BMW, when you can afford to buy a BMW, then the desire is transformed into a demand.