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What is Market Segmentation : The Ultimate Guide

Athira Unnikrishnan

25 September 2023

9 min read

Do you ever feel like certain businesses just ‘get you’? Like they seem to deliver the products and services exactly to your liking, as if it was carefully planned exclusively for you. And again, have you ever wondered why you receive ads for products that looks like they were tailor-made for you? Well, its not magic. Those brands focus on one crucial aspect. What? Market segmentation. In this blog, we will look into the what’s why’s and how’s of this age old strategy! 

What is Market Segmentation? 

Essentially, Market Segmentation is a concept of marketing where you divide your brand’s larger target audience into smaller subsets/segments based on certain characteristics like age, gender, region, etc. Each subset will contain customers with common interests.

By segmenting your customers, you understand them better and this helps you in formulating sales and marketing strategies that are more efficient. Market Segmentation tells you how to develop your product further so that it strongly resonates with your customer’s needs. And what’s even better is that the risks of an unproductive marketing campaign is almost wiped off by this methodology! You can come up with strategies and promotional schemes as per the preferences of each segment of customers.what-is-market-segmentation

Surprisingly too, you are helping your customers to buy the right product that suits their needs and why, even budget. Like, a person with medium income wouldn’t get himself a Rolls Royce, he would rather buy a Toyota or Nissan; neither would a college student go to a store that sells executive wear, when he needs casuals. Yes, it is therefore imperative to segment your market.

The digital platform further amps up the importance of market segmentation. Today, customers are a much-informed lot and the buying decisions are made faster than ever. From what the buyers want, to how they think, you need to keep a check on every small distinguishing factor to draw them closer to your product. And this is where market segmentation comes into play. Creating Ads based on your segmentation in social media platforms like Facebook will help you in garnering a remarkable response rate.

Whatever or wherever your business might be, segmentation is an empowering factor and enhances your chances of success.

Market Segmentation: Use Cases

Here are some use cases to highlight it’s significance:

1. Automotive Industry

Car manufacturers use market segmentation to tailor their vehicle models to different consumer segments. For example, they create luxury models for high-income customers, compact cars for urban dwellers, and family-friendly SUVs for households.

2. Healthcare

Pharmaceutical companies segment the market to understand the unique needs of various patient groups. They develop medications and treatment plans specifically designed for different medical conditions or age groups.

4. Media and Entertainment

Streaming platforms like Netflix and Spotify use market segmentation to curate content playlists and recommend movies, TV shows, or music based on user viewing/listening history and genre preferences.

5. Fast Food Chains

Fast food restaurants customize their menus and promotional offers based on regional preferences. For instance, they might offer different types of spicy food in regions where spicy cuisine is popular.

6. Financial Services

Banks and credit card companies segment their customers to offer tailored financial products. For example, they might provide different credit card options for students, travelers, or business professionals, each with specific benefits and features.

7. Travel and Hospitality

Airlines and hotels segment their customers based on factors like frequent flyer status, travel preferences (business or leisure), and loyalty program participation. This helps them offer personalized perks and rewards.

Market Segmentation Example

Need more motivation? Here is a use case to understand things better. And what better example to begin with than the e-commerce giant, Amazon!

Stats say that a whopping 76% of shoppers do their holiday shopping from the ever-growing e-commerce platform Amazon. 76 ! That is huge!
So, what sets Amazon apart? What makes them the talk of this ‘highly competitive business’ town? Look no further for there’s just a single answer. Market Segmentation at its best!

You want to sell a product and make some good revenue out of it, then you ought to group your target audience according to their specific characteristics and provide them with products/services that are best suited for them. This is the crux of market segmentation and arguably, no one does it better than Amazon!

Amazon focuses largely on the purchase patterns of its world-wide audience and renders them services accordingly. And, when I say purchase patterns of its audience, I mean each customer individually. That’s how deep Amazon dives! The enterprise segments its audience at a micro-level to find their buying patterns and then finds them the product/service that can specifically address their needs.

So, don’t you want your brand to stand out as well?

Here’s what you need to do. Research your market. Segment your market effectively. Find out what kind of products your customers like, why they like it, what are their buying patterns, age group, and the like. The golden rule is to listen and innovate. You must continuously listen to your customers to understand them and tweak your products accordingly.

The Bases of Market Segmentation

Now, since you know the importance of market segmentation, you would want to implement it. Here are the bases that will help you to filter and engage with your target audience for producing robust marketing plans:


Age and Patterns of Purchase

Your buyer population might have expanded. New buyers will have joined your existing group. When that’s the case, you will have to diligently segment your older buyers from recently joined ones. Such a step ensures a healthy relationship and you will know how to engage with each segment.

You can also segregate your customers based on the products they prefer or even their buying cycle so that the future purchases of the customers hinges on the inference you have drawn from segmenting them. That is, you should be able to put out products according to their buying behavior. Trust me, this works like magic. The buyers will have bought your product before they even know.

Identifying the Dominant Social Channels

We live in an era powered by digital platforms, which is why this is one of the integral steps. You need to identify the social channel that boosts your brand effectively. The social channel should be able to leverage your content in finding a large unique audience for you. This way you are able to realize what types of products they prefer, when, their behavior of purchase, the circle of individuals they interact with and why, you can even discover the preferences of your customer’s connections. Segmentation is as close to a cakewalk with social media.

Targeting Customers

You should target your audience after segmenting them. Once you are done with segmenting your customers, you should be focusing on tips and tricks to entice them towards your product or revamp it to suit their needs. Marketing Campaigns and schemes should be curated to address the needs of your customers and match them with your product in the best possible ways. Your product should be the solution that can fill up the ‘void’ of their requirements. Build your programs by keeping the buyer persona and demographics as the foundation to deduce the features and requirements valued by the audience.

Once the part of marketing communication is taken care of, you need to dive deeper into the results. You will want to know why a certain section of customers didn’t show up for the purchase. You will also want to find ways to interact, engage with and retain customers who responded to your marketing programs and made a purchase.

Surveys can do the trick here. There are many tools out there for you. Advanced platforms such as  SurveySparrow can be of great help in this case. It provides you with highly engaging and quick surveys that deliver insightful information on customer loyalty. You can create, collate, analyze and take action, all at one place.


Why didn’t your customer open your mail? Why did he/she not stay on your website for long enough? Now this calls for retargeting. The techniques of retargeting uses cookies to trace the activities of your audience once they leave your website. The cookies aid in reaching your targeted ads to this particular section of people who have left your site after a visit or two. The main aim of retargeting is engaging your audience in a real-time manner to lure them to your site and purchase your products. If you are aiming for conversions across numerous platforms, then you can incorporate it with both inbound and outbound content marketing.

Retargeting never fails you. Yes, it may or may not fail in retaining the customer, but it sure gives you adequate information to restructure and strategize your product marketing.

The Types of Market Segmentation

Depending on the customer information collected, the industry and the brand, you can segment your audience. Ideally, there are 4 types of segmentation:

1. Demographic Segmentation

The customers are separated into different groups based on demographic characteristics like age, gender, marital status, income, and occupation, etc. Demographic segmentation is quite popular among marketers and is used widely.

2. Geographic Segmentation

People from different regions would have different requirements. Geographic segmentation addresses this matter by dividing the audience based on their location. Geographic Segmentation is of great help when it comes to International Marketing.

3. Psychographic Segmentation

This segmentation helps you categorize audiences based on their lifestyles, their likes, dislikes, opinions, and activities. Psychographic segmentation helps you connect with your customers and engage with them on a topic of their interests that match with your product; thereby helping you to develop or modify it accordingly.

4. Behavioral Segmentation

In this segmentation, your audience is divided into subsets based on the knowledge or relation the customer has with your product. The factors include customer loyalty, product usage, consumption rate, etc.

Benefits of Market Segmentation

Here’s a look at the benefits of market segmentation:

#1 Convey Specific, more Powerful Marketing Messages

You will be able to create to-the-point marketing messages, addressing the needs and requirements of the customers.

#2 Recognize and Implement constructive marketing strategies

When you segment your market, you understand the customers better. Therefore you can find the most effective methods to woo them.

#3 Be Ahead of the Curve

Market Segmentation helps you be more specific with your prepositions and focus on the unique needs of your customers. This eventually differentiates you from your competitors to grow into a ‘customer’s brand’.

#4 Understand Niche Markets

The process of identifying the larger audience of particular segments of the industry and finding new ways to serve them is often referred to as niche marketing. By employing market segmentation, you can come up with new products or services by identifying the underserved section of the niche market.

#6 Cost-Efficient Marketing

You can save money on marketing by targeting specific groups, rather than trying to reach everyone. This means you spend your marketing budget more wisely.

#7 Improved Customer Satisfaction

When you understand your customers better, you can provide them with what they need, making them happier and more likely to stay loyal to your brand.

#8 Adapt to Changing Trends

Market segmentation helps you stay flexible. You can quickly adjust your strategies to match new trends or shifts in customer preferences, staying relevant in the market.

Strategies for Effective Market Segmentation

Now that we have a clear idea on the what and why, it is time for the how!

How do we make marketing segmentation effective?  Well, it requires thoughtful strategies. Here are some simple ways to enhance the effectiveness of your market segmentation efforts:

1. Collect Data

  • Insights rule! Use customer surveys, website analytics, social media insights, and purchase history to gather relevant customer data.
  • Implement data tracking tools to capture customer interactions and behaviors.

2. Define Clear Segments

  • Ensure that your segments are distinct and easily distinguishable from one another.
  • Avoid overlapping characteristics between segments to maintain clarity.

3. Prioritize Segments

  • Analyze the potential profitability of each segment and focus your resources on the most promising ones.
  • Consider the alignment of segments with your business goals.

4. Personalized Marketing

  • Craft marketing messages that directly speak to the unique needs and preferences of each segment.
  • Develop products or services tailored to specific segment requirements.

5. Test and Refine

  • Regularly evaluate the performance of your segmentation efforts.
  • Adjust segments and strategies based on the feedback and data analysis.

6. Use Technology

  • Implement customer relationship management (CRM) software to streamline data management and customer interactions.
  • Use data analytics tools to gain deeper insights into customer behavior.

7. Customer Feedback

  • Encourage customers to provide feedback through surveys, reviews, or social media.
  • Act on feedback to improve products, services, and the customer experience.

8. Cross-Selling and Upselling

9. Consistent Messaging

  • Ensure that your messaging and branding remain consistent across all marketing channels (website, social media, email, advertisements).
  • Maintain a coherent brand identity to build trust.

10. Competitive Analysis

  • Study your competitors’ segmentation strategies to identify gaps or potential areas of improvement.
  • Learn from their successes and failures in addressing specific customer segments.

11. Segmentation Evolution

  • Stay flexible and adapt your segments as customer behaviors and preferences change.
  • Regularly update your segmentation criteria to remain relevant in the market.

12. Education and Training

  • Train your marketing and sales teams on the importance of market segmentation.
  • Ensure that your team members are proficient in implementing segmentation strategies effectively.

13. Regular Review

  • Periodically review and assess the accuracy and relevance of your segmentation criteria.
  • Make adjustments to accommodate shifts in market dynamics.

14. Ethical Considerations

  • Adhere to ethical practices in data collection and use to maintain customer trust.
  • Comply with data privacy regulations and obtain customer consent when collecting and using their data.

15. Feedback Loop

  • Foster communication between marketing and sales teams to exchange insights and experiences related to customer interactions.
  • Use this feedback loop to fine-tune segmentation strategies and improve customer engagement.

Winding up!

Know more, boost sales! Filter and reap more!

According to studies conducted by Bain and Company, firms that followed well-defined segmentation strategies savored a 10% higher profit. And yes indeed! Market Segmentation is one of the best things that could happen to your business. The process helps you to make the most out of your marketing schemes.

I agree. It’s no science but at the end of the day, it helps you level up your game. And that’s what you need ultimately.

The interesting thing is that market segmentation has been here since time immemorial. Well, evidently, it wasn’t as advanced as it is now nor was it termed so. Come to think of it, why did and why do ice-cream vans pull over near schools and not offices? Another simple example of market segmentation! Segmenting and focusing on particular sections of customers has been a part and parcel of marketing. Well, it doesn’t matter when and where it all began. But yes, certainly, market segmentation is here to stay.

Before you go, why not give SurveySparrow a try? It’s absolutely free!

Athira Unnikrishnan

Content Marketer at SurveySparrow

Just a plain soul enthralled by the power of words and the aroma of food!

Everything about delighting customers.
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