Contents
- What is market segmentation?
- The importance of customer segmentation
- Segmentation criteria
- Stages of segmentation
- Segmentation strategies
What is market segmentation?
Market segmentation is the process of dividing the target audience and existing customers into groups based on various characteristics that influence their consumer behavior. These characteristics may include gender, age, income level, beliefs, and lifestyle. Companies recognized the advantages of segmentation as early as the 20th century when General Motors began producing different brands of cars in 1920, targeting various income levels and customer preferences. This allowed them not only to reach a broader market but also to increase profits through more precise targeting.
Historically, the concept of "market segmentation" was first introduced by Wendell Smith in 1956 in an article published in the Journal of Marketing. He emphasized that segmentation allows companies to categorize customers, enabling them to more effectively engage with them by offering products that best meet their interests.
The importance of customer segmentation
Customer segmentation plays a key role in increasing business profitability, optimizing resources, and strengthening competitiveness. It helps companies:
- Create an accurate portrait of the target audience and understand who buys the product and why.
- Identify needs for which there are no solutions on the market yet and find new niches.
- Create products or package offerings tailored to specific segments and set appropriate prices.
- Formulate a unique selling proposition (USP) that differentiates the company from competitors.
- Develop a marketing strategy and select the most effective promotion channels.
Thus, segmentation not only enhances the effectiveness of advertising campaigns but also improves communication with customers by directing efforts towards the most promising segments of the market.
Segmentation criteria
Segmentation criteria depend on the company's goals and the specifics of its activities. Several main criteria are distinguished:
Geographic criteria
- Country, city, region.
- Population size and density.
- Climatic conditions.
Geographic segmentation helps optimize logistics and advertising placement, which in turn increases conversion rates.
Demographic criteria
- Gender, age, marital status.
- Education level and income.
These criteria allow for an in-depth analysis of the target audience and adaptation of offerings for different groups.
Socio-economic criteria
These include occupation, employment status, and income level, which help determine purchasing power and shape pricing policies.
Behavioral and psychographic criteria
These criteria provide insight into consumer motivation and their attitude towards the product. For example, consumers can be grouped based on their loyalty to a specific brand or how frequently they make purchases.
Stages of segmentation
The segmentation process includes several key stages:
- Information gathering: Utilize available data sources, such as analytics, social media, and market research.
- Selection of criteria: Compile a list of characteristics that are most important to your company.
- Formation of segments: Combine consumers with similar characteristics and formulate hypotheses about their behavior.
- Assessment of attractiveness and selection of segment: Determine audience size and level of competition.
- Product positioning and strategy selection: Develop a marketing mix for the chosen segments.
Segmentation strategies
There are several main segmentation strategies:
- Undifferentiated: Focuses on the largest segment and develops a universal product.
- Differentiated: Offers different products for multiple segments.
- Concentrated: Focuses on one segment, which carries high risks.
- Variety-based: Launches multiple products in one segment.
Each of these strategies has its own characteristics and can be applied depending on the company's goals and resources.