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Customer Insight, Online Survey, Research

5 Types of Market Segmentation & How To Segment Markets Effectively

Are you targeting the right audience? Are you providing a good customer experience? Or are you throwing money down the drain trying to appeal to a group that’s not interested in your product? 

Market segmentation, combined with survey research, gives you answers to these questions. It provides insights into your customers so you can reach them more effectively. In addition, it can uncover an audience you never even knew you had! Market segmentation powers product development cycles, informs advertising messages and mediums, and so much more.

What Is Market Segmentation in Research?

Market segmentation is all about breaking up, or segmenting, your target audience into smaller groups. These groups are based on demographics, behaviors, needs, opinions, and interests. Therefore, it helps marketers better understand subsets of their core audience. Also, market segmentation enables marketers to more effectively meet the needs of different subsets of customers. Now, armed with this data, they can improve products, sales, brand awareness, and most importantly, customer retention.

As an example, market segmentation research can be used to better understand differences in product or service usage or brand perception between men versus women, boomers versus zoomers, high-income earners versus low-income earners, and so on. 

Importance of Market Segmentation

Market segmentation helps companies save time and money by getting to the heart of what matters to specific groups of consumers. Six benefits of market segmentation include:

Understanding the pain points of specific segments

Not every type of customer will have the same pain points. For example, an elderly demographic may find your website confusing to navigate, while a younger, tech-savvy audience will not. By getting to know your audience more intimately, you can resolve issues you may not have even known about.

Creating stronger marketing messages

Some members of your target market may find your messaging too impersonal; others may find it too in-your-face. By understanding your different segments, you can create more specific, personalized messages that speak to different groups in different ways, helping to attract them all.

Avoiding the competition’s mistakes

You’re unlikely to know about your competitors’ shortcomings. Segmenting your markets gives you an understanding of how your competitors fell short in the eyes of different consumers so that you don’t repeat the same mistakes.

Using the right marketing channels

Where are various segments of your audience getting their information? Are they consuming their media online, through social media, on television, or through magazines? By segmenting your audience, you can find out where your customers spend their time and begin zeroing in your efforts on the mediums where your most lucrative customers can be found.

Identifying niche markets

Through segmentation, you may be able to identify underserved markets, and find you have customers that you didn’t even know existed. By understanding these niche markets, you can make a concerted effort to reach out to them and turn them into brand loyalists.

Increasing brand loyalty

By appealing differently to various segments in ways that they’ll respond to, you’ll be showing them that you understand who they are and what their needs are. This in turn will foster brand loyalty, which is important with today’s fickle consumers.

5 Types of Market Segmentation

Here are the five classifications of market segmentation that marketers use to identify different groups within their target audience.

1. Demographic Segmentation

This type of segmentation groups your audience based on demographics such as age, gender, race, education, occupation, and so on (check out our blog on demographic survey questions for more). Demographics are the most common segmentation method and most consumers are used to these types of questions.

2. Geographic Segmentation

As the name suggests, this segmentation method focuses on geographic location. This could mean country, state, city, county, zip code, etc. While location is often part of demographic segmentation, it can be used as its own form of segmentation – and this is very important within certain industries, such as real estate. Other marketers will use geographic segmentation when they know or believe that their customers in different locations have different needs. For example, a rural farmer’s cellular phone needs may be far different from that of a corporate urban dweller.

3. Behavioral Segmentation

This method of segmentation divides markets up by behavioral patterns of different consumers, looking at purchase habits, loyalty, lifestyle, and other brand interactions. So, by understanding the behaviors of various segments of a target market, marketers can create more tailored and personalized messages that address the different segments in unique ways. 

4. Psychographic Segmentation

Psychographic segmentation looks at what drives consumers psychologically. That is to say, it explores the different opinions, values, personalities, and inclinations of a target market. This form of market segmentation is particularly useful in qualitative research as it allows marketers to pinpoint trends in opinions and uncover the causes behind actions. 

5. Firmographic Segmentation

Last but not least is firmographic segmentation, which focuses more on organizations versus individuals. It’s a form of segmentation most used by business-to-business (B2B) organizations. It allows one company to understand how to better market to another company. In other words, firmographic segmentation looks at company industry, type, size and employee count, annual revenue, etc. 

How To Segment Markets Effectively

After determining market segments, marketers need to employ the MASA rule to make sure the data is useful. MASA stands for Measurable, Accessible, Substantial, and Actionable, and many companies use a market segmentation survey to get to the bottom of things.

  • Measurable means that segmentation variables must be related to the purchase of a product or service. Therefore, it requires an understanding of how much each segment will spend – and when. For example, one segment may buy regardless of the time of year or price, while another may only shop during a promotion or sale.
  • Accessible means not just understanding your customers, but understanding how to reach them too. So, when segmenting, you should be able to identify how to connect with them. For example, this could mean determining whether an online ad or a television commercial will be most effective.
  • Substantial means for a market to matter, the individuals within it have to have the ability to make a purchase. For instance, consider a high-end clothing store; some people window shop, but never make a purchase because the fashions are out of their price range. So, be sure that your markets are more than just interested in your brand, but can afford it as well. After all, it wouldn’t make sense to adjust your messaging for non-buyers; it could even damage your brand to do so.
  • Actionable means the results of your segmentation study need to be actionable. So ask yourself, are you able to serve each identified segment? Also, if you can’t take the appropriate action necessary to meet the needs of a particular segment, you should not be focusing your money or energy on them. 

Conclusion

Market segmentation is not an exact science. Therefore, as you go through the segmentation process, you may realize that breaking up your audience based on demographics doesn’t provide actionable insight, but psychographics does. So, in time, you’ll determine which segmentation method is right for your business, and it’s critical for any company that wants to grow in today’s hyper-competitive environment.

Oftentimes, a market research segmentation survey is the best way to determine your target market. That’s where we come in! SurveyLegend’s pre-designed, secure, and affordable surveys are easy to use, and give you access to data that can help inform your product development, marketing messaging, and more. Check out some of our marketing research survey templates here, or just sign up now to get started!

Does your company use market segmentation surveys? Which type do you find most beneficial? Let us know in the comments below!

What is market segmentation?

Market segmentation breaks up your target audience into smaller groups based on demographics, behaviors, needs, opinions, and interests.

What are the five types of segmentation?

The five types of market segmentation are demographic, geographic, behavioral, psychographic, and firmographic.

What does MASA stand for in marketing?

MASA stands for insights that are Measurable, Accessible, Substantial, and Actionable.

Should I use a survey for market segmentation?

A survey is a quick, easy, and cost-effective way to gain consumer insight that will help with product development, advertising messaging, and much more.

About the Author

Jasko Mahmutovic

Born entrepreneur, passionate leader, motivator, great love for UI & UX design, strong believer in "less is more”. Big advocate of bootstrapping. BS in Logistics Service Management. I don't create company environments, I create family and team environments.

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