Market Segmentation For Beginners

Marketing is a broad category of business knowledge that covers many facets of a company's products and services, but at its foundation is the identification of markets and their subdivisions. These subdivisions or segments form the basis for which all other areas of marketing are dependent. The following is an introduction to what segmented markets are, and why they are important.

market segmentation system


It is the starting point for marketing

Market segmentation forms the basis or starting point for all avenues of marketing your company's products or services. This includes branding, product development, distribution, advertising and all other forms of promotion. Of course, the market itself consists of all customers, but not everyone is in the market for your product.

In fact, most people are not likely a part of prospective customer base. However, looking at only those customers that buy products or services such as the ones you offer, segmentation is the process where you subdivide this market by various criteria.


An illustration of the concept

If you sell widgets, for example, there will be a group of people who buy widgets. However, you sell a particular type of widget that will appeal mostly to a subdivision of the larger market. For this reason, segmented markets must be identified. Knowing who is most likely interested in your specific widget will enable your company to maximize sales.


Various ways segmented markets can be viewed

There are different ways you can divide up a market.

market segmentation crowd

You can divide up your prospective customer base by demographics. This includes such things as gender, age and income. Market segmentation is also done by geography. Certain products may be successful in certain areas of the county or even in specific countries. A market can also be divided by activity.

For example, if your product relates to fresh water fishing, you only want to identify the segment of fishing enthusiasts found at rivers and lakes.


The broad area of behavioral psychology

Along with the three market segments listed above, there is a fourth area that is very large. It is often lumped together under the banner of consumer behavior. Under this large tent of market segmentation, there exist several interesting categories. There are markets that can be identified by social groups, lifestyles, attitudes and opinions. Again, this is a broad area of market segmentation, but what we think and how we live our lives determines, to a large extent, what types of products and services we buy.


Overlapping market segments and sales expansion

Identifying market segments is not only about particular subdivisions in the marketplace but also about identifying how they overlap. This can lead to a more narrow focus on a business's target customer. In addition, Once you have been successful selling to a single group of people, you may be able to sell to a similar group but in a different market segment.


Locating market segments

The whole purpose behind market segmentation is to identify your core base of prospective customers for your products or services. Once you know the people who are most likely to be interested in what you're selling, then the next step is to locate them. What magazines or newspapers do they read? What websites do they visit? What television shows do they watch?

If you can answer these and similar questions, then it is only a matter of choosing an advertising method to reach them. There is also the possibility of direct marketing through mail or email, but you need a method of getting names and addresses of your market segment to reach them directly with your advertising message.


Identifying the market segment before you have a product

In some situations, a marketing department may be able to identify various levels of demand within segmented markets before a product or service is developed. Although difficult to do, this allows product development professionals to create a tailor made product for a specific target group of customers.

Whether your business already has a product or is still in the development stage, you need to take the time to identify who your customers are or who you plan to sell to. Once this is done, you will have increased your chances of success substantially. All marketing begins with identifying your prospective customers.