how to make market segmentation in business plan

The No-Nonsense Guide to Market Segmentation (With Tips and Examples)

Marketing to the wrong segment can feel like barking up the wrong tree, or more specifically, barking up tens of thousands of wrong trees.

Nearly everybody in sales has, at one point or another, heard someone reasoning that simply adding more people to the funnel will improve their sales numbers while preserving their conversion rate. If you’re a sales rep making 30 calls a day, you might reasonably extrapolate that making 60 calls a day would double your closed deals. Unfortunately, it’s not that straightforward.

Building a sales process can be complicated. What one audience might find valuable might just be noise for another.

That’s where effective customer segmentation can bring in some serious value for your business. Different demographics respond differently to marketing campaigns, and finding the right target market for your products or services can help you tailor your marketing strategies to be the most impactful they can be.

This guide to marketing segmentation will help you find your target audience and choose the best market segmentation strategies.

Table of Contents

What is market segmentation, what are the benefits of market segmentation, the 10 most common types of market segmentation.

• Market segmentation strategies
• How to do your own market segmentation

Frequently asked questions about market segmentation

Market segmentation in a nutshell.

Market segmentation is the process of qualifying companies (or people) into groups that respond similarly to specific marketing strategies. This is the first critical step in creating a marketing and sales process tailored to differentiate your business in the market and resonate across multiple demographics.

Market segmentation divides customers into segments based on shared characteristics, behaviors, or other attributes so you can create marketing strategies that appeal to entire groups. Your marketing segmentation strategy will be mainly influenced by what your product is and which types of companies are already buying it.

The history of market segmentation

The expression “market segmentation” was first coined by Wendell R. Smith in his 1956 publication Product Differentiation and Market Segmentation as Alternative Marketing Strategies . Smith wrote that modern marketing appeals to selective rather than primary buying motives.

In other words, consumers are actively contrasting products against one another rather than simply purchasing a product to satisfy an immediate need. This realization was the inception of the modern market segmentation we practice today.

Before 1956, there wasn’t a huge market variety, and general stores tended to carry only one or two brands’ versions of the same product. As time went on, more and more emerging brands began offering similar products and thus needed to differentiate themselves with branding and by targeting different markets.

It wasn’t enough to just manufacture ketchup, you had to identify your brand as America’s ketchup , or kids’ ketchup , or fancy ketchup .

Market segmentation provides several benefits to small teams and enterprises alike, including:

• Bang for your buck: With tailor-made, demographic-specific messages and advertising, companies can more effectively communicate with their audiences, begin boosting their conversion rates, and actually spend less on broad advertising.
• Better conversion rate: The more information you have about your various audiences, the more specificity you can add to your outreach, which will help your prospects convert more easily.
• Customer retention: By marketing towards customers who have already gone through their own buyer’s journey, segmentation makes it easier to keep them engaged and pitch them with occasional upgrades. And with the segment data you’ve captured, you know how to talk to them.
• Expanding your efforts: Segmentation can be a great way to pursue new markets that have something in common with your current markets.  

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Market segmentation helps savvy marketers categorize their target customers based on shared characteristics to keep their efforts focused and effective. Below are the 10 most common types of market segmentation: 

1. Demographic segmentation

Demographic market segmentation is the most commonly used form of market segmentation and entails categorizing your market based on age, gender, income, profession, race, religion, education, location, family situation, etc.

Demographic segmentation examples:

• Switch to the cartoon channel and check out those commercials. Do Nerf guns and neon-colored slime appeal to someone your age? Yeah us too, bad example .
• Commercials for vacation homes may target people across ages, genders, locations, and other demographics, but they all appeal to customers with disposable income who are interested in travel.

2. Psychographic segmentation

More specific characteristics are categorized under the umbrella of psychographic segmentation. Less tangible than demographic segmentation, this classification method includes details like lifestyle, personality, beliefs, values, and social class.

This evaluation is important because two individuals can possess identical demographic information but make purchasing decisions completely differently, and thus require different marketing.

Psychographic segmentation examples:

• Health and wellness advertisements might not go a long way with someone who prefers to spend their money on video games and energy drinks, even if they work in the same industry and live in the same apartment building.
• Advertisements for large social gatherings (events, clubs, bars) might not appeal to introverts who would much rather snuggle up with a book than be surrounded by other people.

3. Behavioral segmentation

At its core, behavioral segmentation is the act of categorizing prospects based on their actions, usually within your marketing funnel. For instance, prospects who visited a landing page for an upcoming event might benefit from receiving a personalized invitation.

Segmenting your market based on behaviors is typically done by marketers within their marketing automation software , but any company with a mailing list has already performed behavioral segmentation simply by tracking prospects who have signed up to receive emails.

Behavioral segmentation examples:

• Sending emails to website visitors who have left items in their cart. “But wait…come back!”
• A retargeting campaign that only displays ads to people who have previously purchased an item.

4. Geographic segmentation

Geographic market segmentation takes into account prospects’ locations to help determine marketing strategies. Although SaaS sales are relatively unaffected, a salesperson of gigantic coats knows to avoid pitching to Arizona residents.

Geographic segmentation variables and examples:

• Climate: Swimwear brands shouldn’t be targeting Alaska residents in January.
• Cultural preferences (based on location): For obvious reasons, the McDonald’s in Germany sells beer.
• Population type: A bicycle company may segment its audience differently depending on the population type—rural (mountain bikes; thicker tires; more durable), urban (road bikes; thin tires; lightweight), etc.
• Density: A giant strip mall may require a high density of foot traffic to thrive.

5. Price segmentation

Price segmentation alters the price of similar products and services sold to different consumer groups. If you ever forced your kids to pretend to be under a certain age to qualify for the “kids eat free” special, then you understand the power and utility of price segmentation.

However, price segmentation can get much more granular. It can be used to identify customers who may be willing to pay more for a particular product or service that they perceive to be more valuable.

Done correctly, price segmentation can capture the maximum amount of revenue for each transaction.

Price segmentation examples:

• Broad: Senior discount, veteran discount, coupons, etc.
• Granular: Computer processors are priced differently when sold to a company as a part (like inside an iMac) than when sold to a consumer as a standalone product.
• Even more granular: A marketing consultancy may base its prices entirely on the value it can generate for each of its client’s unique situations.

6. Firmographic segmentation

Instead of categorizing consumers based on age, location, income, etc, firmographic segmentation categorizes companies based on industry, annual revenue, job function, company size, location, status, performance, etc.

For B2B marketers, utilizing firmographic segmentation is non-negotiable to a high-performing marketing strategy.

Just as the demographic segmentation variables can help you form a buyer persona at the consumer level, firmographic segmentation can help you develop a buyer persona at the company level.

Firmographic segmentation examples:

• Running different ads for different industries—real estate, finance, legal firms, etc.
• A B2B sales team only targeting companies with revenues over $100m.

7. Generational segmentation

Generational segmentation is almost comparable to the “age” variable in demographic segmentation. However, generational market segmentation goes beyond age by considering the difference in preferences, habits, lifestyles, and attitudes of a particular generation.

It’s self-evident that the generations are vastly different. Someone born in the 1960s will likely have experienced a different culture than someone born in the 2000s.

Generational segmentation examples

• Utilizing more memes on Facebook to target a larger percentage of Millennials.
• Altering your content publishing schedule to mornings to target a larger percentage of Baby Boomers.

8. Life stage segmentation

Life stage segmentation is the process of dividing your market based on the life stage of your target audience. Someone who is married with 5 kids may respond well to an emotional advertisement about convertibles during their midlife crisis.

Life stage segmentation examples

• Ads about life insurance may not appeal to sophomores in college, but they may appeal to someone who just started a family.
• Someone who just entered the workforce for the first time may be more interested in a new apartment than someone who is retired.

9. Seasonal segmentation

Seasonal segmentation targets people based on their purchasing habits during certain periods of the year. It can include actual seasons (spring, summer, fall, winter), events (Coachella, Super Bowl), and holidays (Christmas, Mother’s Day).

Seasonal segmentation examples

• A local you-pick berry farm may want to target their ads based on the fruit in season.
• A flower shop that specializes in same-day delivery may want to ramp up its ad spend around Mother’s Day targeting forgetful children.

10. Technographic segmentation

Much like firmographic market segmentation, technographic segmentation only applies to B2B audiences. It’s used to target companies based on the types of technology they’re using. Whether it’s a customer relationship management (CRM) platform, a website CMS, or a niche-specific software tool, utilizing technographic segmentation can help enhance sales and marketing efforts.

Technographic segmentation examples

• A company that develops WordPress plugins would have no business targeting companies that use a different CMS, like Wix.
• It would make sense for a SaaS company to target businesses using an app it just integrated with.

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Market segmentation strategies (and their pros and cons)

Every market segmentation strategy is different but most of them follow one of two fundamental outlines:

1. Concentration strategy

Concentration strategy is when a company determines that its efforts are best focused solely on a single market segment. This strategy is particularly great for small, growing businesses that have demonstrated a viable use case within a specific market. Focusing on one segment will allow the company to invest more time, energy, and resources into one specific market, which minimizes advertising spend and potentially mitigates wasting efforts across multiple segments.

Concentration strategy is like putting all your cards on the table—if it doesn’t work out, it can end badly. If the market segment hasn’t been properly vetted and turns out to be a bust, all of your marketing efforts could be wasted. Be sure to do some careful planning and execute thorough market testing before committing your business to a single market segment.

• Pros: High conversion percentages, repeatable marketing practices, less marketing spend
• Cons: “All-or-nothing,” growth potential is limited to segment size

2. Multi-segment strategy

Multi-segment marketing, or differentiated marketing, is when a company’s marketing strategies are designed to advertise one product to more than one market segment.

Although apparently “safer” than concentration strategy, multi-segment marketing is a much larger tax on a company’s marketing spend, as it requires completely different campaigns for each market segment.

However, if a particular segment is extremely receptive and converts well, it’s easy to tailor your strategy to market more directly to that segment.

• Pros: Safer, appeals to more consumers, diverse marketing, high growth potential
• Cons: Lower conversion percentages, greater marketing spend

How to do your own market segmentation in phases

Ready to complete market segmentation for your company? Here are three phases to follow during the process that will help you ensure you’re analyzing your markets effectively:

Phase 1: Gather the data

First things first, it’s time to gather data so that you can use it to form your market segments. There are many ways to go about it—some people like to buy pre-made lead lists and others prefer to do their own research . 

Two helpful methods of researching prospects are webforms and surveys. You can place high-quality data behind webforms that requires site visitors to submit their name, email address, and other information to access the content. Surveys can get specific information from potential buyers in exchange for tangible rewards, like a gift card or special offer.

If you’re doing your own research, you can frame your searches along the following categories:

• Researching by company size: Size can mean a number of things, but is most often measured by the number of employees, number of customers, or overall sales revenue a company claims. Some companies have greater transparency on their websites, which makes reaching out to the correct person much easier.
• Researching by industry: It’s unlikely that your product is applicable across all industries, which is why industry segmentation exists. Industry segmentation will help you ensure that you’re not wasting your time by targeting a company with no need for your product.
• Researching by location: If you’re offering a location-specific product or service, like landscaping services within the local community, your geographic market segmentation is probably pretty airtight: You probably use handy tools like lead maps , and engage in local marketing wherever possible. For other industries, like IT staffing, your reach might be international. Whatever your product, location is a crucial thing to know about a company, because it will help you decide which sales tactics to use and when to send your emails if you’re communicating across time zones, at the least.
• Researching by needs: This method of segmentation entails qualifying companies based on whether they need your products or services. While this definition is straightforward, the process behind making this determination may not be, depending on what you’re offering. If you sell landscaping services, you can use Google Maps to look up a company’s HQ. If their office is in a tower in New York City, they probably don’t need any landscaping.

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Phase 2: Sort the data into segments

There are many ways to go about sorting data. Most involve expensive analysts, marketers, and lots and lots of time. Although the DIY route is faster, it is no substitute for a comprehensive market segmentation strategy.

Assuming time and money are an obstacle, you can approximate your own market segmentation by compiling your data into one single source and running filters on it to manually group your prospects and companies together by segments.

Remember, ask yourself the following:

• Is this segment measurable?
• Is this segment large enough to earn a profit?
• Is this segment stable, and not going to vanish after a short time?
• Is this segment reachable with my marketing strategies?
• Is this segment homogenous, and will they respond similarly to my marketing strategies?

Phase 3: Plug in your marketing channels

Now that your segments have been firmly established, it’s time to connect the dots and breathe life into your marketing. This means establishing a plan for each of your marketing tools and channels and coming up with real ways to reach your segments with them.

You’ll be attributing different marketing and sales tactics to each stage of your pipeline and determining what sticks. The good news is that your market segments are clearly defined and you’ll be able to speak to them clearly.

The real challenge is continuously improving your efforts with trial and error to get the best possible conversion rates.

There’s a good, old-fashioned way to map this out quickly and easily:

• Draw your pipeline stages horizontally across a sheet of paper.
• Above each pipeline stage, jot your marketing channels, like Linkedin, emails, or webinars, with blank space in between them.
• Below each marketing channel, write exactly how you will use this tool at this pipeline stage, like “email prospects a link to a recorded webinar.”

Repeat this exercise for each market segment to help establish a concise and repeatable process for marketing to your various audiences. You can fully flesh out your segmented marketing strategy by configuring your sales software and email automation around the outline you’ve created, and then make tweaks as needed.

To this end, some CRMs have reporting and performance tracking as well as custom reporting to help you figure out what’s working and what needs to change.

Still have questions about market segmentation? Check out the FAQs below for answers to some common questions:

What are some common challenges faced when implementing market segmentation? 

Here are a few of the challenges you may encounter when implementing your market segmentation strategy:

• Creating segments that are too broad: Your product or service may appeal to several different market segments, but trying to appeal to too many can lead to ineffective marketing and high ad spending.
• Creating segments that are too narrow: The opposite problem can also arise. Small segments might be difficult to quantify and distract from other segments with greater buying power.
• Not being flexible: Just because a particular segment is currently buying from you doesn’t mean they always will. Be willing to reevaluate your market segments over time to maximize your marketing spending and revenue.

What are the key factors to consider when selecting a target market segment? 

Five key factors to consider when selecting market segments for your marketing strategies are:

• Whether the segment is measurable
• Whether the segment is large enough to generate a profit for your business
• If the segment is stable and won’t vanish after a short time
• If the segment is reachable by your marketing strategies
• Whether the segment is homogenous and will respond similarly to your marketing strategies

How can you effectively redefine your target market?

If you’ve determined that your target market no longer fits, you can always identify new markets . Here are a few tips for doing so: 

• Identify trends and patterns: Do companies that make a certain amount of annual revenue seem to be shying away from your offerings? If you want to reach those customers, identify any patterns in which products or services they choose instead and strategize for how to provide the value they’re looking for.
• Listen to customer feedback: Your current (or former) customers are valuable sources of feedback. Consider what they’re saying about your product or service and whether you’re meeting their needs. You may be able to identify new opportunities.
• Diversify your marketing channels: Using multiple channels to reach your target market can be a highly effective way to increase exposure for your brand. Consider diving into new channels like content marketing, email marketing, SEO, and online advertising to drive engagement with your target audience.

Additional resources:

• Sales tactics encyclopedia: 19 strategies for prospecting, qualifying, and closing
• The complete guide to researching sales prospects: 13 tools to help you understand your buyers
• The ultimate guide to cold calling
• 16 B2B cold email templates that sales experts swear by
• How to build a sales process: The complete guide
• Buying a lead list: The pros, the cons, and the things that might land you in jail

Now you’ve got your demographics clearly segmented, your strategy figured out, and your sales processes mapped tightly to your market segments.

Because of this, you should have a clear understanding of how to talk to your prospects, and how to differentiate your outreach efforts based on the market segment.

The challenges that lie ahead are rooted in constantly adjusting your marketing—testing your messages, your tactics, and measuring your audiences’ responses.

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7 Steps in Market Segmentation: How to Get it Right Every Time

Knowing the right steps in market segmentation saves time and helps you reach vital insights faster.

The process of market segmentation involves three phases:

• Implementation

This article will help you create segments that make sense for your business, complement your research strategy, and drive insights that have the power to impact your bottom line.

How to do market segmentation: challenges and opportunities

Choosing the right criteria for market segmentation is not as simple as it seems. Segmentation builds on data, and you need robust data analytics to keep your segments precise. You’ll see why shortly.

How do you segment your market? By dividing your potential customers into smaller, more specific groups, or customer segments. It involves intensive research and a deep understanding of the total addressable market and your target audience . Splitting the market into sub-groups makes it more approachable and helps you create more targeted and curated marketing materials for different audiences.

How can markets be segmented? While still relevant, markets aren’t just defined by audience geography or demographics . You may want to add behavioral segmentation to identify target markets more accurately or consider psychographic criteria to determine your audience’s interests and values. You’ll need to correlate the segmentation types to create targeted campaigns.

Don’t forget some prospects belong to more than one segment. By creating these audience sub-groups, you could find opportunities to combine different types of segmentation .

Market segmentation may start small with personalized email sequences or segment-specific banners. But, eventually, it will affect your business on a larger scale. Oh, and there are plenty more reasons to learn the steps in market segmentation.

Take a look ⬇️ ⬇️ ⬇️

7 steps in market segmentation

Success in a digital environment often depends on the quality of your insights. Your strategy is only as good as the data it uses. Let’s see what information you need to segment the market and how to put it to use.

Step 1 – Define your market

Start by defining your market and collect information about your customer base through market research . Dig into the data of your closest competitors to understand their market position and where you can win back traffic share . Take it further by benchmarking against industry standards and conducting a SWOT analysis to fully understand your strengths, weaknesses, opportunities, and threats.

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Step 2 – Analyze existing customers

The process of market segmentation involves a structured audience analysis . The more comprehensive your data, the better you can identify groups and address their needs, so we recommend using various research techniques and types .

Learn about demographics, behavior, preferences, and trends. Again, benchmark against the competition. You may stumble upon market segments or niches you didn’t consider.

Step 3 – Create buyer persona(s)

If you already have a buyer persona , skip this step. But it’s always good to double-check and review. Markets are dynamic, and you need to be aware of changes. Forming several buyer personas can help you clearly define and address different segments.

Step 4 – Compare and identify gaps, groups, and opportunities

Comparing the data from the first three steps helps you identify gaps in the market. You can define an audience you previously didn’t cover or discover groups with common interests or behaviors that you can target collectively. Map the audience to identify market segmentation opportunities. Here are possible questions to ask:

• What group of prospects stands out or is particularly active or profitable?
• Which customer characteristics or qualities do they have in common?
• What type of customer is not converting? What characterizes them?
• Do different types of customers take a different consumer journey ?
• Which group of customers is your competition reaching that you aren’t? What do they have in common?
• How strong is my brand loyalty ?

Step 5 – Define and name segments

Based on what the different groups have in common, define your market segments. Set data-based criteria that let you allocate prospects to segments and track performance. Make sure each target segment is clearly defined so anyone on your team knows exactly what niche you are referring to.

Step 6 – Research segments separately

That’s it. You’ve segmented your market and can start creating funnels, campaigns, and messages accordingly. Before you jump into any creative activity, use your market research tool again, but this time for each segment individually. Follow these steps:

• Do a separate conversion analysis to discover divergence and where your funnel may leak.
• Evaluate engagement metrics for each segment to help refine your segmented marketing strategy based on audience preference or specific needs. One group might be more active on certain marketing channels than others.
• Conduct competitive analysis for each segment. Not all competitors are equally strong in each target group. This will help you focus on segments with the highest potential or discover strategies that might work well for other companies.
• Use a benchmarking tool to get a granular view of your site’s performance across different marketing channels, over time, and within your market. You can see if your performance differs per segment or is relatively stable. The better the results, the stronger that market segment is.

Step 7 – Test and optimize

Monitor the results of your new segmentation strategy. Test different approaches and keep evaluating for continuous improvement.

What are the pros and cons of market segmentation?

• Tailor marketing and advertising efforts.
• Better understand a target market and identify opportunities.
• Tailor products and services to meet the specific needs of a target market .
• Improve customer experience by delivering tailored offers.
• Reduce marketing costs by targeting specific markets.
• Better assess the competitive environment.
• Can be costly and time-consuming to properly segment a market (unless you use Similarweb)
• It can be difficult to accurately predict market trends and changes.
• A challenge to accurately segment a market, unless using real-time analytics (like Similarweb)

Discover your market

Market segmentation will only yield significant results if coupled with data-driven insights. Even in a niche market , you can still segment your audience to create more personalized marketing efforts and enhanced user experience.

Similarweb gives you the tools you need for the in-depth research and market analysis behind every successful strategy.

What are the 4 main types of market segmentation?

Demographic, psychographic, behavioral, and geographic segmentation are the four main market segmentation types.

What are the steps of market segmentation?

The steps of market segmentation can be consolidated into three phases: research, analysis, and implementation.

Is market segmentation useful?

Yes. Market segmentation allows businesses to identify and target customers based on their specific needs and interests. It enables organizations to tailor products and services to appeal to different customer segments and increase their chances of success. It also helps businesses save money by focusing their resources on the most lucrative segments.

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Market Segmentation Study Guide

A Step-by-step Guide to Segmenting a Market

• 1.0.0.1 Which Segmentation steps to complete?
• 1.0.1 Step One – Define the market
• 1.0.2.1 Main segmentation base
• 1.0.2.2 Segmentation variable
• 1.0.2.3 Example/s
• 1.0.3.1 Evaluation Criteria
• 1.0.3.2 Our assessment
• 1.0.4 Step Four – Construct segment profiles
• 1.0.5 Step Five – Evaluate the attractiveness of each segment
• 1.0.6 Step Six – Select target market/s

How to segment a market

Market segmentation, the selection of appropriate target markets, and the design of an appropriate and competitive positioning is critical to success in most marketplaces. This article walks through a step-by-step guide of the initial steps, from the defining the overall market where we are competing to the selection of a attractive target market.

Please follow the step-by-step guide below. Please note that there are additional helpful topics available on the Market Segmentation Study Guide, which have been linked throughout this article, alternatively you could use a search bar all the top-level menu to find relevant information.

Which Segmentation steps to complete?

Depending upon your segmentation task you may need just to complete steps one to three below, or you may need steps one to six – so check what is required first.

Steps 1 to 3 cover the process of market segmentation only – where we decide on a market and then segment it into different groups of consumers with common needs or behaviors.

The further steps of 4 to 6 cover the steps of how to choose an attractive and viable target market.

(Please note: There are actually nine steps of the full segmentation, targeting and positioning process, which are discussed in the article on the full STP process .

Step One – Define the market

The first step in creating market segments is to clearly define the market of interest. As discussed in the markets, sub-markets and product-markets section, it is important not to define a market too broadly.

For instance, let’s assume that you are looking to segment the market for a firm that operates a chain of book stores. It would be too top-level and too awkward to define the market as all retailing consumers, as it is unlikely to lead to any meaningful segmentation.

As shown in the following diagram, we need to split out the overall broad market (retailing) into its various sub-markets (such as, supermarkets, specialty stores and so on).

We can also further define some of these sub-markets (if they are still too broad) as is shown for specialty stores below.

And finally, we need to determine the market’s geographic boundaries. It this case a list of possibilities has been provided in the figure.

Let’s pick the UK; so our defined product/market is book retailers in the UK.

Primarily they define their market as takeaway and dine-in quality coffee retailing, rather than at home coffee and other forms of out-of-home food.

Therefore, a clear definition of the market makes it much simpler to understand the market, to conduct segmentation, and ultimately to develop an appropriate marketing mix offering.

Step Two – Create market segments

Now that we have defined the product/market clearly (which we will refer to as ‘the market’ from this point on), we need to determine what types (segments) of different consumers form that overall market.

To do this, we need to review the list of segmentation bases/variables and choose two or three of those variables that we think (or know from market research) affect the purchasing behavior of book consumers.

Note: When segmenting a business market, please see segmentation bases for business markets instead of the above link.

For this market, let’s pick a couple of segmentation variables, as shown in the following table. These particular segmentation variables have been chosen as they are likely to influence the purchasing behavior of books and, therefore, should lead to the identification of interesting segments.

Please note that we have used two top-level segmentation bases – of demographic and behavioral – and have selected a broad age group variable (from the demographic base), as well as shopping enjoyment/style (from the behavioral base).

Now we have chosen the segmentation variables, we can use a segmentation tree structure to help map out the segments, as shown below. Other examples for segmentation trees can be found in how is market segmentation actually undertaken.

And please note there is a free Excel template available on this website to allow you to construct a segmentation tree and segment profiles easily from any market research survey data or customer base data that you have access to.

As you can see, five different segments have been created by applying these segmentation variables. In the first stage, a broad demographic split has been used (to create children, young adults and older adults segment). The two adult segments then have a behavior variable applied to them (whether they enjoy shopping or just like to get in and out quickly).

Remember that are many ways to segment the same market. Provided that the segmentation variables have some logic to them, most outcomes should be quite acceptable.

Therefore, our five market segments in this example are:

• Young adults (18-40 years), who enjoy the shopping experience
• Young adults (18-40 years), who are functional/convenience shoppers
• Older adults (40+ years), who enjoy the shopping experience
• Older adults (40+ years), who are functional/convenience shoppers

Please see the article on market segmentation examples , as well as the list of market segment ideas .

By going through this exercise, we also gain a greater understanding of the marketplace overall and the different types of needs that may exist across different consumer groups. Therefore, market segmentation is usually a helpful analytical exercise for marketers to undertake, as it generates knowledge and potential market insights.

Step Three – Evaluate the proposed market segments for viability

Now that we have developed some market segments we may be required to evaluate them to ensure that they are usable and logical. This would happen in a real-life firm, but it may not form part of your particular task if this is a student activity.

To do this, you need to quickly assess the segments against a checklist of factors. This is discussed in more detail in c riteria for effective segmentation . Basically, all that is required is to list the evaluation criteria and to provide a supporting comment, as is demonstrated in the following table.

If, on occasion, the segments that you have created don’t appear to meet the evaluation criteria, then simply revisit step two and change the segmentation variables that you have selected.

Step Four – Construct segment profiles

You may be required to describe the segments (develop a segment profile). The following is a checklist of factors that you might consider. For some of these items below you may not know actually – in that case either make a logical assumption or do not include the factor in the segment profile. Remember that the task here is to describe and understand the segments a little more.

An example of how to complete this table is shown in segment profiles .

Step Five – Evaluate the attractiveness of each segment

If you are required to select one target market from you list of market segments, then you need to use some form of objective assessment. Again, this topic is covered in detail in how are target markets selected , but as a quick guide you should use some of the following factors in assessing the attractiveness of each market segment.

Financial Issues

• Segment size
• Segment growth rate
• Profit margins

Structural Attractiveness

• Competitors
• Distribution channels

Strategic Direction

• Fit with firm’s strategy
• Fit with firm’s goals

Marketing Expertise

Step Six – Select target market/s

Using the assessment information you have just constructed, you can select the most appropriate target market for the firm. While there are many factors to consider, you should at least take into account: the firm’s strategy, the attractiveness of the segment, the competitive rivalry of the segment, and the firm’s ability to successfully compete.

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Market Segmentation

What is market segmentation?

The benefits of market segmentation, the basics of segmentation in marketing, types of market segmentation, how to get started with segmentation, market segmentation strategy, market segmentation use case examples, ensuring effective segments, common segmentation errors, qualtrics solutions for market segmentation, see how qualtrics strategic brand works, market segmentation: definition, types, benefits, & best practices.

21 min read Market segmentation helps you send the right message, every time, by efficiently targeting specific groups of consumers. Here’s how it works.

By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies . Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs. women or high income vs. low income.

Read on to understand why segmentation is important for growth and the types of market segmentation to use to maximize the benefits for your business.

Free eBook: How to drive profits with customer segmentation

Companies who properly segment their market enjoy significant advantages. According to a study by Bain & Company , 81% of executives found that segmentation was crucial for growing profits. Bain also found that organizations with great market segmentation strategies enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.

Other benefits include:

• Stronger marketing messages : You no longer have to be generic and vague – you can speak directly to a specific group of people in ways they can relate to, because you understand their characteristics, wants, and needs.
• Targeted digital advertising : Market segmentation helps you understand and define your audience’s characteristics, so you can direct your online marketing efforts to specific ages, locations, buying habits, interests etc.
• Developing effective marketing strategies : Knowing your target audience gives you a head start about what methods, tactics and solutions they will be most responsive to.
• Better response rates and lower acquisition costs : will result from creating your marketing communications both in ad messaging and advanced targeting on digital platforms like Facebook and Google using your segmentation.
• Attracting the right customers : targeted, clear, and direct messaging attracts the people you want to buy from you.
• Increasing brand loyalty : when customers feel understood, uniquely well served, and trusting, they are more likely to stick with your brand .
• Differentiating your brand from the competition : More specific, personal messaging makes your brand stand out .
• Identifying niche markets : segmentation can uncover not only underserved markets, but also new ways of serving existing markets – opportunities which can be used to grow your brand.
• Staying on message : As segmentation is so linear, it’s easy to stay on track with your marketing strategies, and not get distracted into less effective areas.
• Driving growth : You can encourage customers to buy from you again , or trade up from a lower-priced product or service.
• Enhanced profits : Different customers have different disposable incomes; prices can be set according to how much they are willing to spend . Knowing this can ensure you don’t oversell (or undersell) yourself.
• Product development : You’ll be able to design new products and services with the needs of your customers top of mind, and develop different products that cater to your different customer base areas.

Companies like American Express , Mercedes Benz , and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers.

Understanding segmentation starts with learning about the various ways you can segment your market as well as different types of market segmentation. There are four primary categories of segmentation, illustrated below.

With segmentation and targeting, you want to understand how your market will respond in a given situation, like what causes people to purchase your products. In many cases, a predictive model may be incorporated into the study so that you can group individuals within identified segments based on specific answers to survey questions .

Demographic segmentation

Demographic segmentation sorts a market by elements such as age, education, household income, marital status, family size, race, gender, occupation, and nationality. The demographic approach is one of the simplest and most commonly used types of market segmentation because the products and services we buy, how we use those products, and how much we are willing to spend on them is most often based on demographic factors. It’s also seen as a simple method of predicting future behavior, because target audiences with similar characteristics often behave in similar ways.

How to start demographic segmentation

Demographic segmentation is often the easiest because the information is the most readily available. You can send surveys directly to customers to determine their demographic data, or use readily available third party data such as government census data to gather further information.

Geographic segmentation

Geographic segmentation can be a subset of demographic segmentation, although it can also be a unique type of market segmentation in its own right. As its name suggests, it creates different target customer groups based on geographical boundaries. Because potential customers have needs, preferences, and interests that differ according to their geographies, understanding the climates and geographic regions of customer groups can help determine where to sell and advertise, as well as where to expand your business.

How to start geographic segmentation

Geographic segmentation data again can be solicited from customers through surveys or available third party market research data, or can be sourced from operational data such as IP addresses for website visitors.

Firmographic segmentation

Firmographic segmentation is similar to demographic segmentation, except that demographics look at individuals while firmographics look at organizations. Firmographic segmentation would consider things like company size, number of employees and would illustrate how addressing a small business would differ from addressing an enterprise corporation.

How to start firmographic segmentation

Firmographic segmentation data can be found in public listings for companies and information that the business makes available, as well as trade publications. Again, surveying existing and potential customers can help to build out this data.

Behavioral segmentation

Behavioral Segmentation divides markets by behaviors and decision-making patterns such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to purchase bottled body wash, while older consumer groups may lean towards soap bars. Segmenting markets based on purchase behaviors enables marketers to develop a more targeted approach, because you can focus on what you know they are looking for, and are therefore more likely to buy.

How to start behavioral segmentation

Of all the types of market segmentation, behavioral segmentation is likely best started with the information you have on an existing customer base. Though it can be bolstered by third party market research data, the information you already have on customer purchase and usage behavior will be the best predictor of future behavior.

Psychographic segmentation

Psychographic segmentation considers the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers. Large markets like the fitness market use psychographic segmentation when they sort their customers into categories of people who care about healthy living and exercise.

How to start psychographic segmentation

Pychographic segmentation relies on data provided by the consumers themselves. Though market research might provide insights on what particular segments are most likely to believe or prefer, psychographic segmentation is best completed with information direct from the source. You can use survey questions with a qualitative focus to help draw out insights in the customers’ own voice.

On-demand webinar: How to drive product design and profits with customer segmentation

There are five primary steps to all marketing segmentation strategies:

• Define your target market : Is there a need for your products and services? Is the market large or small? Where does your brand sit in the current marketplace compared to your competitors?
• Segment your market : Decide which of the five criteria you want to use to segment your market: demographic, firmographic, psychographic, geographic, or behavioral. You don’t need to stick to just one – in fact, most brands use a combination – so experiment with each one to figure out which combination works best for your needs.
• Understand your market : You do this by conducting preliminary research surveys, focus groups, polls , etc. Ask questions that relate to the segments you have chosen, and use a combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open text responses) questions.
• Create your customer segments : Analyze the responses from your research to highlight which customer segments are most relevant to your brand.
• Test your marketing strategy : Once you have interpreted your responses, test your findings by creating targeted marketing, advertising campaigns and more for your target market, using conversion tracking to see how effective it is. And keep testing. If uptake is disappointing, relook at your segments or your research methods and make appropriate changes.

Why should market segmentation be considered a strategy? A strategy is a considered plan that takes you from point A to point B in an effective and useful way. The market segmentation process is similar, as there will be times you need to revisit your market segments, such as:

In times of rapid change: A great example is how the Covid-19 pandemic forced a lot of businesses to rethink how they sell to customers. Businesses with physical stores looked at online ordering, while restaurant owners considered using food delivery services.

If your customers change, your market segmentation should as well, so you can understand clearly what your new customers need and want from you.

On a yearly basis: Market segments can change year over year as customers are affected by external factors that could alter their behavior and responses.

For example, natural disasters caused by global warming may impact whether a family chooses to stay living in an area prone to more of these events. On a larger scale, if your target customer segment moves away from one of your sales regions, you may want to consider re-focussing your sales activities in more populated areas.

At periodic times during the year: If you’ve explored your market and created market segments at one time of the year, the same market segments may have different characteristics in a different season. Seasonal segmentation may be necessary for better targeting.

For example, winter has several holidays, with Christmas being a huge influence on families. This holiday impacts your market segments’ buying habits, how they’ll behave (spending more than normal at this time than any other) and where they will travel (back home for the holidays). Knowing this information can help you predict and prepare for this period.

When considering updating your market segmentation strategy, consider these three areas:

• Acknowledge what has changed: Find out what has happened between one time period and another, and what have been the driving forces for that change. By understanding the reasons why your market is different, you can make key decisions on whether you want to change your approach or stay the course.
• Don’t wait to start planning: Businesses are always adapting to long-te r m trends , so refreshing market segmentation research puts you in a proactive place to tackle these changes head-on. Once you have your market segments, a good idea is to consider the long-term complications or risks associated with each segment, and forward-plan some time to discuss problem-solving if those issues arise.
• Go from “what” to “why” : Why did those driving forces come about? Why are there risks with your target market? At Qualtrics, we partner with companies to understand the different aspects of target markets that drive or slow success. You’ll have the internal data to understand what’s happening; we help unleash insight into why with advanced modeling techniques. This helps you get smart market segmentation that is predictive and actionable, making it easier for future research and long-term segment reporting.

Where can you use market segmentation in your business? We’ve collected some use case scenarios to help you see how market segmentation can be built out across several departments and activities:

Market and opportunity assessments

When your business wants to enter into a new market or look for growth opportunities, market segmentation can help you understand the sales potential. It can assist in breaking down your research, by aligning your findings to your target audience groups.

For example, When you’ve identified the threats and opportunities within a new market, you can apply your customer segment knowledge to the information to understand how target customers might respond to new ideas, products, or services.

Segmentation and targeting

If you have your entire market separated into different customer segments,  then you have defined them by set criteria, like demographics, needs, priorities, common interests, or behavioral preferences .

With this information, you can target your products and services toward these market segments, making marketing messages and collateral that will resonate with that particular segment’s criteria.

Customer needs research

When you know a lot about your customers, you can understand where your business is connecting well with them and where there can be improvements.

Market segmentation can help with customer needs research (also known as habits and practices research) to deliver information about customer needs, preferences, and product or service usage. This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up.

Product development

If the product or service you’ve developed doesn’t solve a stated problem of your target audience or isn’t useful, then that product will have difficulty selling. When you know what each of your market segments cares about an/d how they live their lives, it’s easier to know what products will enrich or enhance their day-to-day activities.

Use market segmentation to understand your customers clearly , so that you can save time and money developing products and services that your customers will want to purchase.

Campaign optimization

Marketing and content teams will value having detailed information for each customer segment, as this allows them to personalize their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective.

When their marketing campaigns are combined with strong calls to action targeted to the specific segment, they will be a powerful tool that drives your target market segments towards your sales channels.

After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:

• Measurable : Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much your segment will spend on your product. For example, one of your segments may be made up of people who are more likely to shop during a promotion or sale.
• Accessible : Understanding your customers and being able to reach them are two different things. Your segments’ characteristics and behaviors should help you identify the best way to meet them. For example, you may find that a key segment is resistant to technology and relies on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read email, but responds well to printed ads.
• Substantial : The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but realistically can’t afford them. Make sure an identified segment is not just interested in you, but can be expected to purchase from you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford your goods, and successful entrepreneurs who want to show off their wealth.
• Actionable : The market segment must produce the differential response when exposed to the market offering. This means that each of your segments must be different and unique from each other. Let’s say that your segmentation reveals that people who love their pets and people who care about the environment have the same purchasing habits. Rather than having two separate segments, you should consider grouping both together in a single segment.

Market segmentation is not an exact science. As you go through the process, you may realize that segmenting based on behaviors doesn’t give you actionable segments, but behavioral segmentation does. You’ll want to iterate on your findings to ensure you’ve found the best fit for the needs of your marketing, sales and product organizations.

We’ve outlined the do’s , so here are some of the dont’s :

• Avoid making your segments too small or specialized : Small segments may not be quantifiable or accurate, and can be distracting rather than insightful
• Don’t just focus on the segment rather than the money : Your strategy may have identified a large segment, but unless it has the buying power and wants or needs your product, it won’t deliver a return on investment
• Don’t be inflexible : Customers and circumstances change, so don’t let your segments become too entrenched – be prepared to let them evolve.

Market segmentation doesn’t need to be complicated to be effective. We would advise, though, to  get automated from the beginning . Forget spreadsheets – choose  market segmentation software  to measure and streamline your marketing strategy; as you grow, the technology will scale with you.

Innovative features such as Experience iD allow you to build your own customer segments and start personalizing experiences at scale based on the rich insights into your critical customer groups.

If you want to get a feel for your market segmentation upfront, before taking a step towards a streamlined and integrated system, trust us to take you through the research with our Market Segmentation Research service .

Related resources

Market fragmentation 9 min read, behavioral segmentation 20 min read, psychographic segmentation 11 min read, geographic segmentation 14 min read, demographic segmentation 14 min read.

Brand Perception

Brand Sentiment 18 min read

Brand intelligence 12 min read, request demo.

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Market segmentation — definition, types, and examples

If you’re a marketer or business owner, you know that segmentation is an effective way to expand your market and reach new customers.

But even if you understand market segmentation, sometimes you need a little inspiration to start doing it yourself. In this article, we’ll explore the key segment types with real-world examples to jump-start your company’s foray into market segments and help you improve your overall marketing efforts.

This post will cover:

What is market segmentation?

Types of market segmentation, demographic segmentation, examples of demographic segmentation, psychographic segmentation, examples of psychographic segmentation.

• Geographic segmentation
• Examples of geographic segmentation
• Behavioral segmentation
• Examples of behavioral segmentation
• Firmographic segmentation
• Examples of firmographic segmentation

Benefits of market segmentation

Frequently asked questions (faq).

Market segmentation is the practice of grouping customers together based on shared characteristics — including demographic information or common interests and needs. It’s a strategy for dividing a large, broader target audience into specific groups to create tailored and personalized marketing campaigns.

A market segment refers to the individuals who are grouped together based on their shared characteristics. The idea is that these people have similarities as consumers and respond similarly to marketing efforts. So companies need to communicate to them in a particular way, rather than just messaging their audience as a homogenous whole.

Businesses segment their market in different ways. Market segments should be based on extensive research of their potential customers’ demographics, lifestyles, needs, personalities, and more.

There are various types of segmentation that help businesses market to their target audience groups. We’ll go over the five main types of market segmentation and provide examples of each one.

Demographic segmentation is grouping customers based on data points like age, gender, marital status, occupation, and more. It’s essentially the “who” segment of your market. This is the most common type of segmentation because it’s easily identifiable. Demographic segmentation can help you understand the individuals that make up your audience and how to target your marketing efforts to them.

Demographic segmentation is typically sorted by characteristics like:

• Level of education
• Family size or status
• Professional occupation or role in a company

Demographic segmentation provides objective information on who is interested in your product or service. While it’s best to use other methods of segmentation as well, demographics provide an excellent starting point for marketers to group their audience.

Here are a couple examples of how demographic segmentation can be used:

Brooks Running Shoes and Dick’s Sporting Goods partnering on empowerment . Brooks and Dick’s are great real-life examples of using demographic segmentation to capture customer interest. The companies partnered to celebrate National Girls and Women in Sports Day with their “Empower Her” collection. It included a variety of women’s shoes and clothing, including products with phrases like “Dream Chaser” and “Respect Her Run.”

HelloFresh targeting female social media users . Lots of different people use meal delivery subscriptions, and marketing efforts often focus on making dinner prep easier for busy young professionals or families. But HelloFresh wanted to specifically target its primary market segment. Knowing its audience was 80% women and primarily between the ages of 30 and 50, HelloFresh created a female-oriented influencer campaign that produced buzz on foodie social media.

Demographic segmentation provides excellent initial information, but to understand the customer thought process, you need to use other segmentation methods too.

Psychographic segmentation is the “why” segment of your market. In this segmentation, you analyze how your audience thinks and create a strategy targeted toward customers’ attitudes and beliefs. These groups will likely have similar psychological characteristics, personal values, aspirations, and political opinions.

Companies generally divide psychographic segments based on:

• Personality
• Hobbies and interests
• Lifestyle choices
• Social or political views
• Values and beliefs

Psychographic segmentation is more difficult to segment because it’s more subjective. Social media analytics can be a helpful tool, but you should also plan to conduct interviews and surveys and hold focus groups to gather all the information you can about your audience.

Here’s an example of psychographic segmentation:

Marvel Studios marketing toward movie fanatics . Marvel creates engaging social media posts that generate excitement and anticipation for its upcoming films. The studio posts countdowns to the days leading up to the movie and includes clips likely to pique its audience’s interest. Marvel can market to people based on their interests in comic books, superheroes, film, and more.

This segmentation is what makes customers who they are. But who they are can be influenced by other factors, such as where they are.

Geographic market segmentation

Geographic market segmentation is the “where” segment of your market. In this type, customers are segmented based on their geographic location. These people will live in the same city or state — perhaps even in the same zip code — and are likely to have similar attitudes, needs, and cultural preferences based on their geography.

Companies generally separate geographic segments by:

• Climate region
• Population density
• Rural, urban, or suburban setting

Examples of geographic market segmentation

Geographic segmentation works best for companies that are trying to focus their efforts on a particular area. It could involve simple changes, such as adapting product offerings or the language used in marketing to fit the main language of a region or slang that would typically be used in one area.

Some examples of geographic market segmentation include:

McDonald’s adjusting items for individual countries . McDonald’s started out as an American restaurant company, but as it grew to become a global mega-brand and expanded its locations all around the world, it adjusted some of its menu items to match the cuisine of different countries. For example, rather than just the typical burger and fries, there’s the Veggie Maharaja Mac in India, the McSpaghetti in the Philippines, and poutine in Canada.

Climate impacting fashion. One general example of geographic segmentation could be based on weather. If your company sells clothing, your marketing may vary by region. In colder regions you may want to highlight coats and beanies, while in a warmer area tank tops and shorts will be more suitable.

Physical environment has a huge impact on why customers purchase the way they do. It’s also important to analyze how they interact and respond to your brand.

Behavioral market segmentation

Behavioral market segmentation is the “how” segment of your market. This approach examines customer behavior and how people engage with your brand. From this type of segmentation, you can better understand how they may respond to changes in prices, new promotions, and more.

Audiences can be grouped by:

• Spending habits
• Browsing habits
• Interactions with your brand
• Loyalty to your brand
• Product feedback

Examples of behavioral market segmentation

Behavioral segmentation, like the other types, helps you gain a deeper understanding of who your client base is. This category, however, goes beyond noting stereotypical characteristics of the customer and reveals their interactions and spending tendencies.

Some examples of behavioral segmentation are:

Guinness advertising non-alcoholic beer. Guinness is a global brand with a loyal following of beer drinkers, but industry research shows there are millions of people who choose not to consume alcohol. To market to this growing group during the popular Six Nations Rugby Cup, Guinness produced clever ads for its new product “Guinness Clear” with slogans like “Make it a night you’ll remember.”

Amazon honing in on buying habits. Amazon displays recent customer purchases to show shoppers other products they may be interested in. For example, if someone purchased a soccer ball, they may get advertisements on their social media platforms for shin guards, cleats, and other soccer equipment.

Behavioral market segmentation gives businesses a close look into how customers interact with brands and spend their money.

Firmographic market segmentation

Firmographic segmentation is the B2B version of demographic segmentation. It’s the study and classification of B2B customers using information from similar company characteristics. This segmentation type is popular for firms to find businesses that would benefit the most from their product.

Companies generally separate the firmographic segment based on:

• Turnover and profit numbers
• Industry type
• Business size
• Number of employees
• Ownership (public, private, or government)
• Organizational trends (for example, more companies going remote)
• Average sales cycle

Examples of firmographic market segmentation

Most of the market segments detailed in this article focus on B2C marketing, but firmographic segmentation is helpful for B2B companies to create engaging campaigns.

Upwork advertising in New York City. Upwork is a popular platform for companies to hire freelancers. Since New York is one of the largest population centers and business hubs in the world, Upwork created a marketing campaign with digital billboards and other ads prominently placed around the city to attract the attention of businesses that might need freelancers.

There are many reasons why segmentation can create more personalized experiences for each customer. By doing research and keeping up with industry trends, your business can expand its market and improve marketing ROI.

Market segmentation provides a number of benefits for businesses. Not only does it help your teams better understand your audience and create the right messaging to attract customers and grow your reach, but it produces a stronger brand image, more efficient use of resources, a higher rate of success, and a better customer experience.

With market segmentation, you can:

• Identify high-value customers and the similarities and differences between different groups of customers.
• Create more personalized communications and more targeted marketing efforts.
• Reach new markets by showcasing your unique product or service and adjusting your messaging.
• Build better brand awareness and stand out by understanding individual customer needs and creating personalized experiences.
• Cut down on wasted marketing dollars by creating more impactful and efficient campaigns.
• Improve your products by meeting specific market expectations based on what customers want.
• Make it easier to learn about your audience and create more cost-effective campaigns in the future.
• Gain better marketing ROI by using existing data to improve the customer experience.

What is meant by market segmentation?

Market segmentation is the practice of grouping customers together based on certain characteristics they may share.

What are the types of market segmentation?

There are four main types of market segmentation — demographic, psychographic, geographic, and behavioral. But there are other types that your business can take advantage of as well, such as firmographic for B2B marketing.

What are the advantages of market segmentation?

Market segmentation helps you establish who your target market is and customize your message for individuals. It allows your business to expand across new markets and improve products to keep up with changing customer needs.

How do you identify market segments?

By becoming an expert on your business, doing extensive industry research, and categorizing people by identifiable characteristics, you can use the information to group potential customers that might be interested in your products or services.

What makes a good market segment?

A good market segment should be easily identifiable and different from other segments. The sample sizes of these segments should be large and able to be assessed for feedback.

Evaluate your marketing software for market segmentation capabilities

Your business can reach new markets by using market segmentation. When you’re ready to get started, evaluate your current marketing software to see how it handles segmentation. If there are gaps, look into a new solution.

Acting on insights requires an audience. Create and activate engaged audiences on any channel or device with Adobe Audience Manager .

Audience Manager turns insights into action so your teams can create memorable customer experiences and extend your reach further than before. As a data management solution, Audience Manager collects and merges information from practically any source — building intelligent audience segments that give you a complete view of your customers.

Watch the two-minute product tour to learn more.

https://business.adobe.com/blog/basics/market-segmentation

https://business.adobe.com/blog/basics/psychographic-segmentation

https://business.adobe.com/blog/basics/get-a-quick-refresher-on-market-segmentation

Target Market Segmentation

Target market segmentation helps you market better to potential customers. Let's take a look at what this means and how you can grow your small business.

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arget market segmentation helps you market better to potential customers. It's crucial to boost sales and increase the chances of long-term success.   Let's take a closer look at what this term means and how you can use it to focus your marketing efforts.

What is Target Market Segmentation, and Why Does It Matter?

Target marketing segmentation is where you divide your potential customers into segments. You'll then focus on a few segments (or groups of people) that align most with your product or services. Doing so helps you tap into their needs and desires to attract new sales and increase longevity.   You can also drill it down further by creating a marketing strategy for more specific groups of people  -  such as using different promotions and how you deliver your products or services. That way, it helps your marketing campaigns be more cost-effective, allowing you to spend time only on one focus at a time.   Let's say you have a wedding and event photography business . Instead of spending thousands of dollars on print ads in random publications, you'll first see who your target customers are. Based on this information, you'll then focus your marketing campaigns by placing ads in publications where your target audience is most likely to see them. That way, it'll increase the chances you'll get a return on your investment.  

How Do I Segment My Target Market?

The good news is that you can approach segmenting the market in many ways based on your company's market research. Four common ways are behavioral, demographic, geographic, and psychographic segmentation.  Here's a bit more detail on the types of market segmentation:  

Behavioral Segmentation

This segment looks at how consumers interact with brands and products. For instance, you can look at which platforms your ideal customer most frequents, their social media usage, and their customer journey online.  

Demographic Segmentation

Businesses tend to feel this is the most important criteria to identify their target market. These include age, gender, education level, income level, social class, nationality, family size, marital status, and religion. Knowing these demographics about your ideal customer can help you with how you want to create marketing campaigns (Gen Xers may not understand the slang Gen Z tends to use, for instance).  

Geographic Segmentation

Yes, this segment has to do with details on a consumer's location or where they live. Aside from nationality, you can consider their state, county, town, or city.

Psychographic Segmentation

Businesses can look at elements such as parts of a consumer's personality traits  -  like whether they lean towards being an extrovert or introvert. You can even consider a consumer's belief systems and lifestyles and consumer behavior.  

How to Effectively Create Target Market Segmentation

Creating a target market analysis will help you understand the types of consumers you need to market to and will even help you break into niche markets. Don't worry; creating one isn't a difficult task, though you'll want to make sure you take the time to get it right to ensure effective marketing messages.   Here are four steps you can take.  

1. Gather Accurate and Current Data

Gathering details from outside sources can be incredibly valuable to help you gain better insights into your market segment, potential customers, and even your industry as a whole. Plus, if you're just starting out, you may not have enough internal data to get a good enough view of what customer groups you need to target based on customer needs.   The challenge when gathering data is that there is plenty out there. Make sure what you're using is both current and accurate.  

2. Divide up Market Based on Chosen Characteristics

Now's the time to wade through data and eliminate what isn't relevant to your target market. You'll want to create customer segmentations. Consumers who are most likely attracted to your brand, product, or service will share the same types of characteristics. Identifying these will ensure you're efficient when creating your messaging in your marketing campaigns.  Here are some questions to help you get the ball rolling:

• What do my target customers have in common?
• How does my target customer research products and services?
• How does my target define themselves?

Once you have some shared characteristics, you can then use them to create customer profiles or personas. It will also help give you even better insight into what really matters to them, plus any trends and insights to help you develop more ideas to increase sales.  

3. Gather Intel on Your Competitors

Understanding the competition in the market is critical. This will tell you exactly what your product or service is up against and what tactics you need to take on to compete.  Ask questions like:  How many businesses have a comparable offering to you?  What's their pricing structure?  What reach do they have?  Who do they appeal to most?  You may find that one group of people is very well served by competitors while another group has yet to be tapped into.  Answering these questions will help you identify the most profitable group to target in your marketing plans, as well as identify what types of marketing communications may or may not have worked prior.

4. Use Market Segmentation As Part of Your Business Plan

Now that you've identified your target segment, it's time to use this knowledge as part of your overall business plan. Yes, you want to use the data to create better marketing plans, but this data can also help you tap into other insights. Think about how you can develop new products and services, order the right amount of stock, and even anticipate demand at certain months of the year.   That is the essence of knowing your market. For instance, if you know you want to test certain products, look at how you can further segment your target market to see whether you should include this new item as part of your regular offerings. Or, if you know that sales are slow at a particular time of the year, you can look at the data to create campaigns to encourage quick sales.  

Using Target Market Segmentation in Your Marketing Strategy

All in all, the goal of target market segmentation is to inform your company's overall business and marketing strategy. It'll help you easily create goals and develop ideas that are more audience-centric.   Doing so means you know what they want and when they want it. This will increase brand loyalty in your customer base. Imagine how your business will benefit from this wealth of knowledge!

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How to Write Up and Develop a Market Segmentation Plan

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How to Determine a Customer Base

How to approach new clients, how to conduct a high-level swot for business.

• How to Access Your Target Market
• Examples of Quantitative Marketing Objectives

A written market segmentation plan that has measurable targets attached to specific customer groups can help a business maximize profits. The more a business' owners understands the market, the better their chances of forming a strategy that reaches the most productive customer groups without wasting resources.

Divide and Conquer

Customer segmentation involves grouping customers together based on criteria relevant to your business. You can divide them up by any measure you choose, such as demographically or geographically, and clients can fit into more than one category. The goal is to separate out those segments that your business can serve most profitably, ideally in a way that makes them less prone to switching vendors based on a price decrease or marketing pitch from a competitor.

Market Analysis

The first part of a segmentation plan is market analysis. The plan should describe the industry and its major customer groups -- particularly the ones that your business is targeting. Identify the needs of both current and potential customers. Also note the size of the market and what percentage of it you can reasonably get. A big-picture trend analysis is also helpful. You want to finish this process knowing both why people buy what you are selling now and why that may change in the future.

Information Is Key

The more information you get about your market, the better a segmentation plan is going to be. In addition to commercially available sources, you may find it useful to gather your own data, perhaps by asking existing customers to fill out surveys or by gathering information from trade shows or conferences. It’s worth asking customers how they use your products or services to find out if they are using things in unintended ways that may provide additional means of generating sales, or if they are unaware of what you consider to be a key differentiator that gives you a comparative advantage over the competition.

Kick Customers Out

Don’t forget to also consider whether you’re currently serving customers that perhaps you shouldn’t be. If you’re spending a lot of money marketing your products to a group that isn’t responding and the return on investment is disappointing, it’s time to either come up with a more effective strategy for dealing with that group or abandon that segment to concentrate on more lucrative portions of the customer base.

Write it Up

Once you’ve decided which segments to target, it’s time to write up the findings. Be as specific as possible about your targeted segments, with a detailed action plan and measurable goals. If you continue to monitor the situation once the plan is in effect, you should know quickly whether everything is on the right track or changes need to be made and resources reallocated.

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Market Segmentation: Types, Examples + [Free Templates]

by Formplus | Last updated: Aug 4, 2020

Related Posts

Geographic segmentation: examples, advantages + [free templates], psychographic segmentation: definition, examples + [variables], demographic segmentation: examples, advantages + [variables], customer segmentation: types, strategy, + [analysis], behavioral segmentation: definition, types + [examples].

Multiple experiences and characteristics come together to determine how consumers make purchasing decisions and interact with your product or service. To understand how these factors influence consumer choices, you often need to carry out market segmentation. 

Market segmentation helps you to identify shared characteristics that define different customer segments. In this article, we will explain how market segmentation works, and show you how to collect data for market segmentation using Formplus. 

What is Market Segmentation?  

Market segmentation means splitting your customers into smaller, defined categories based on specific variables and characteristics. In other words, it is the process of dividing your customer base into segments as determined by numerous factors ranging from demographic variables to psychographic information. 

As a business, you most likely have a vague idea of who your product is meant for. Unfortunately, working with this vague idea means that you would invest a lot of time and resources in generic processes that may not yield the best results for you. 

Market segmentation helps you to define your target audience within specific contexts, and this gives you a better idea of your customers’ interests and preferences. Although this process can be demanding, it helps you to optimize your resources in the long run and create more personalized content for your users. 

Types of Market Segmentation

Behavioral segmentation.

This is a type of market segmentation that places customers in categories based on behavioral patterns. Here, organizations study consumer behaviors as they interact with a specific product or service and then, place consumers who exhibit similar characteristics in the same group. 

Behavioral segmentation helps you to understand how your product appeals to your target market and fits into the lifestyle of your consumers. With this, you can focus on creating targeted messages that complement the behavioral patterns of different customer categories. 

To effectively divide your target market into smaller groups, you need to consider multiple behavioral segmentation variables including purchasing behavior, benefits sought, the buyer’s journey, and customer engagement. For instance, consumers exhibit different behavioral characteristics as they move from one stage to the other in the buyer journey.

You can collect data for behavioral segmentation by conducting an online survey with Formplus . Also, website cookies, third-party data assets, and the purchase data stored in customer relationship management software can provide insights into consumer behavior.  

Examples of Behavioral Segmentation in Marketing

• Choosing one product over the other because of the product functionality and features. 
• Choosing one product over another due to customer loyalty.
• Choosing one product over another due to the customer’s pain points. 

Tips for Behavioral Segmentation

• Get familiar with your target market.
• Create multiple buyer personas in line with the different uses and features of your product.
• Understand the buyer journey.

Customer Segmentation

Customer segmentation is the act of dividing your customer base into defined groups based on specific criteria. It is an important step that helps you to identify different consumer needs and preferences in your target market, and also satisfy them accordingly. 

This type of market segmentation is useful for B2B and B2C marketing. In B2B marketing, you can place customers in defined segments based on industry, location, and in B2C marketing, you can place customers in segments based on age, gender, and lifestyle. 

Customer segmentation results in multiple benefits for businesses such as helping you decide on the best communication channel for your business. It also helps you to tailor your product to create value for different customer segments, improve customer experience, and boost customer satisfaction. 

You can gather data for customer segmentation using different methods and tools including face-to-face interviews, surveys, observation method s, and focus groups. These tools and methods allow you to gather specific information about your target audience and create customer segments that reflect different market peculiarities. 

Tips for Customer Segmentation

• Outline the goals and objectives of customer segmentation for your business.
• Collect the right information from the right sources. Customer segmentation works best with data and analytics.
• Understand the value of each customer segment. 

Psychographic Segmentation

In psychographic segmentation, customers are placed in categories based on their psychological traits. Here, you pay attention to how a customer's psychological disposition affects his or her purchasing habits, lifestyle, and product preferences. It is widely considered as the most effective type of market segmentation. 

5 key variables drive psychological segmentation in market research and these are Personality, Lifestyle, Social Status, AIO (Activities, Interests, Opinions), and Attitudes. These variables work separately and co-dependently to help you place customers in the right psychological segments. 

Psychological segmentation allows you to know how your product fits into the habits, dreams, and aspirations of your target audience. It helps you to understand how consumers perceive your product and to identify the pain points of your target market. 

In psychological segmentation, organizations draw data from observing how consumers think and what they picture their lives to be in the short, middle, or long-term. Let's consider some examples of psychographic segmentation in marketing. 

Examples of Psychographic Segmentation in Marketing

• Businesses that deal with luxury items such as certain cars, clothing, and jewelry.
• Certain products appeal to individuals who have a specific lifestyle such as vegetarians or pescatarians.
• Some products appeal to individuals who belong to a particular social class. 

Demographic Segmentation

Demographic segmentation is the process of breaking your target market into defined categories based on demographic variables. In this type of market segmentation, the organization pays attention to how consumer preferences are influenced by demographic factors like age, education, religion, and income levels. 

Demographic segmentation provides specific insights into your target and helps you to understand who they are and what they want. This, in turn, makes it possible for you to create targeted ads and specialized marketing campaigns that appeal to different consumer demographics. 

As we stated earlier, numerous demographic variables influence consumer choices in the marketplace including age, gender, and income levels. Many times, these variables are interdependent and come together to determine how a consumer perceives your product or service. 

Demographic segmentation helps you to forge lasting relationships with your target audience and to also create a better customer experience for your users. In addition to this, it provides useful insights that you can leverage to improve your product and service delivery. 

Examples of Demographic Segmentation

• Products are gender-specific; that is, created for members of a particular gender. 
• Products that can only be afforded by individuals who earn a certain level of income. 
• Some products only provide value for people in a particular education class. 

Geographic Segmentation  

Geographic segmentation makes use of different geographic variables to place customers into different market categories. It is one of the easiest ways to discover the diversity of your target market and use this information to your advantage; especially in marketing. 

In geographic segmentation, you look beyond variables that bother on location and physical habitation, and you consider other geographic factors like cultural preferences, population type, and density. This gives you a holistic understanding of how these things nudge consumers towards certain choices. 

Common geographic segmentation variables are climate, religion/cultural practices, and population type. Geographic segmentation is important because it helps you to identify market clusters that present the most viable opportunities for you as a business owner. It also provides data for marketing and strategy campaigns. 

Examples of Geographic Segmentation

• Products that are unique to specific climates like winter clothing and beachwear.
• Urban-rural segmentation.
• Cultural preferences and food inclinations

Tips for Conducting a Successful Market Segmentation 

• Break your target market into specific segments comprising consumers with specific characteristics. Be sure to narrow down to the primary characteristics that differentiate one segment from the other.
• Clearly communicate the value of your product to each market segment. Ensure that you emphasize how your product satisfies the needs of the different market categories.
• Clearly define your market segmentation goals and objectives.
• Identify the most important segmentation variables for your target market. This would help you arrive at the best results for your business.
• Collect valuable data from the right sources. You can administer surveys and questionnaires with Formplus forms to gather the right information.
• Develop a solid market segmentation strategy that identifies your target market and outlines recommendations. 
• Execute a go-to marketing plan that appeals to different market segments and can drive acquisitions at every level. 
• Keep your eyes on the data and analytics. Ensure that your decisions are data-driven. 

Top Form Templates to Collect Data for Market Segmentation  

• Market Survey

Use this market survey to collect useful data from your target market for market segmentation. You can add different form fields that help you to easily collect a variety of information from respondents ranging from geographic information to demographic data. 

• Demographic Survey

This demographic survey is easy to use and it helps you to gather relevant demographic information from respondents. With this form, you would be able to collect necessary information from your customers for demographic segmentation. You can edit this template to suit your needs in the form builder. 

• Product Evaluation Survey

Do you want to find out what your customers think about your new product or service? This Formplus product evaluation survey is all you need to gather the relevant information from your users and improve your product. You can use the multiple form sharing options to share your survey with numerous respondents. 

• Online Feedback Form

This form would help you gather feedback on different product features from your customers to improve your overall service delivery. This form is easy to use and you can modify it to suit your needs in the form builder. 

• Customer Satisfaction Survey

This form would help you understand what consumers think about your product and overall service delivery. With the Formplus online feedback form, you would be able to collect information about customer pain points and know how well your product meets their needs. 

• Brand Personality Survey

This form is an easy way to collect information for psychographic segmentation. This survey is easy to administer and can help you understand how your customers perceive your brand; that is, their thoughts and feelings about your brand. 

• Product Pricing Survey

Use this product pricing form to find out what your customers think about the cost of your goods and services. This form would help you arrive at the best pricing system for your goods and services. 

Importance of Market Segmentation  

Market segmentation helps you to understand your target audience and create a product that better appeals to them. Let’s consider some other reasons you should prioritize market segmentation as an organization.

• Market segmentation allows you to identify niches that offer better prospects for your product or service. By breaking your market into segments, you can spot and compare marketing opportunities. 
• It is an effective way for you to manage limited resources strategically. Market segmentation helps you utilize resources in the most profitable manner for better returns. 
• Market segmentation is an easy way for you to identify your competitors and understand their strengths and weaknesses. This way, you’d be better equipped to face the competition.  
• When you place customers in defined segments, you can implement specific marketing strategies and programs in tune with the demands of each category. 
• Great market segmentation results in an effective advertisement strategy. It will give you a clear idea of who your audience is and what is most likely to pique their interests. 
• Market segmentation plays a crucial role in product improvement and product design. 
• It helps you to create the right customer experience for users and achieve maximum customer satisfaction levels plus increased sales volumes. 

Disadvantages of Market Segmentation

As beneficial as market segmentation is for your business, it also has some disadvantages. Let’s look at a few of them and what they mean for your business. 

• Market segmentation can be time-consuming as it involves organizing a lot of information in order to arrive at the best results. In many cases, you have to develop specific strategies for each segment and this can be quite challenging.
• You would need to invest more in the implementation of multiple marketing strategies for different market categories. For instance, instead of running a single ad campaign for your brand, you may have to run multiple ads to cater to the needs of your customers. 
• Market segmentation can lead to cannibalization. This is a situation where certain segments are over-prioritized to the detriment of other market categories. To avoid this, you need to prioritize each market segment.  
• Although you need to narrow it down to specific market categories, this can also lead to over-segmentation. 

Conclusion  

Without any doubt, market segmentation is an integral process that every organization must implement as it looks to meet the needs of its consumers. While there are different types of market segmentation, it is necessary for you to identify and implement the ones that are relevant to your business and product. 

In doing this, however, be sure to create a balance and avoid certain market segmentation pitfalls as we have highlighted in this article. Finally, gather and utilize the right data sets to help you achieve the most objective market segmentation results. 

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What Is Market Segmentation?

• How It Works
• Determining Your Market Segment
• Limitations
• Market Segmentation FAQs

The Bottom Line

• Marketing Essentials

Market Segmentation: Definition, Example, Types, Benefits

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Market segmentation is a way of aggregating prospective buyers into groups or segments, based on demographics, geography, behavior, or psychographic factors in order to better understand and market to them.

Key Takeaways

• Market segmentation seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group.
• Markets can be segmented in several ways such as geographically, demographically, or behaviorally.
• Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market.
• With risk minimized and clarity about the marketing and delivery of a product heightened, a company can then focus its resources on efforts likely to be the most profitable.
• Market segmentation can also increase a company's demographic reach and may help the company discover products or services they hadn't previously considered.

Investopedia / Matthew Collins

Understanding Market Segmentation

Companies can generally use three criteria to identify different market segments:

• Homogeneity , or common needs within a segment
• Distinction , or being unique from other groups
• Reaction , or a similar response to the market

For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements. Understanding these different market segments enables the athletic footwear company to market its branding appropriately.

Market segmentation is an extension of market research that seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group. The objective of market segmentation is to minimize risk by determining which products have the best chances of gaining a share of a target market  and determining the best way to deliver the products to the market. This allows the company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).

Market segmentation allows a company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).

Types of Market Segmentation

There are four primary types of market segmentation. However, one type can usually be split into an individual segment and an organization segment. Therefore, below are five common types of market segmentation.

Demographic Segmentation

Demographic segmentation is one of the simple, common methods of market segmentation. It involves breaking the market into customer demographics as age, income, gender, race, education, or occupation. This market segmentation strategy assumes that individuals with similar demographics will have similar needs.

Example: The market segmentation strategy for a new video game console may reveal that most users are young males with disposable income.

Firmographic Segmentation

Firmographic segmentation is the same concept as demographic segmentation. However, instead of analyzing individuals, this strategy looks at organizations and looks at a company's number of employees, number of customers, number of offices, or annual revenue .

Example: A corporate software provider may approach a multinational firm with a more diverse, customizable suite while approaching smaller companies with a fixed fee, more simple product.

Geographic Segmentation

Geographic segmentation is technically a subset of demographic segmentation. This approach groups customers by physical location, assuming that people within a given geographical area may have similar needs. This strategy is more useful for larger companies seeking to expand into different branches, offices, or locations.

Example: A clothing retailer may display more raingear in their Pacific Northwest locations compared to their Southwest locations.

Behavioral Segmentation

Behavioral segmentation relies heavily on market data, consumer actions, and decision-making patterns of customers. This approach groups consumers based on how they have previously interacted with markets and products. This approach assumes that consumers prior spending habits are an indicator of what they may buy in the future, though spending habits may change over time or in response to global events.

Example: Millennial consumers traditionally buy more craft beer, while older generations are traditionally more likely to buy national brands.

Psychographic Segmentation

Often the most difficult market segmentation approach, psychographic segmentation strives to classify consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to achieve, as these traits (1) may change easily and (2) may not have readily available objective data. However, this approach may yield strongest market segment results as it groups individuals based on intrinsic motivators as opposed to external data points.

Example: A fitness apparel company may target individuals based on their interest in playing or watching a variety of sports.

Other less notable examples of types of segmentation include volume (i.e. how much a consumer spends), use-related (i.e. how loyal a customer is), or other customer traits (i.e. how innovative or risk-favorable a customer is).

How to Determine Your Market Segment

There's no single universally accepted way to perform market segmentation. To determine your market segments, it's common for companies to ask themselves the following questions along their market segmentation journey.

Phase I: Setting Expectations/Objectives

• What is the purpose or goal of performing market segmentation?
• What does the company hope to find out by performing marketing segmentation?
• Does the company have any expectations on what market segments may exist?

Phase 2: Identify Customer Segments

• What segments are the company's competitors selling to?
• What publicly available information (i.e. U.S. Census Bureau data) is relevant and available to our market?
• What data do we want to collect, and how can we collect it?
• Which of the five types of market segments do we want to segment by?

Phase 3: Evaluate Potential Segments

• What risks are there that our data is not representative of the true market segments?
• Why should we choose to cater to one type of customer over another?
• What is the long-term repercussion of choosing one market segment over another?
• What is the company's ideal customer profile, and which segments best overlap with this "perfect customer"?

Phase 4: Develop Segment Strategy

• How can the company test its assumptions on a sample test market?
• What defines a successful marketing segment strategy?
• How can the company measure whether the strategy is working?

Phase 5: Launch and Monitor

• Who are key stakeholders that can provide feedback after the market segmentation strategy has been unveiled?
• What barriers to execution exist, and how can they can be overcome?
• How should the launch of the marketing campaign be communicated internally?

Benefits of Market Segmentation

Marketing segmentation takes effort and resources to implement. However, successful marketing segmentation campaigns can increase the long-term profitability and health of a company. Several benefits of market segmentation include;

• Increased resource efficiency. Marketing segmentation allows management to focus on certain demographics or customers. Instead of trying to promote products to the entire market, marketing segmentation allows a focused, precise approach that often costs less compared to a broad reach approach.
• Stronger brand image. Marketing segment forces management to consider how it wants to be perceived by a specific group of people. Once the market segment is identified, management must then consider what message to craft. Because this message is directed at a target audience, a company's branding and messaging is more likely to be very intentional. This may also have an indirect effect of causing better customer experiences with the company.
• Greater potential for brand loyalty. Marketing segmentation increases the opportunity for consumers to build long-term relationships with a company. More direct, personal marketing approaches may resonate with customers and foster a sense of inclusion, community, and a sense of belonging. In addition, market segmentation increases the probability that you land the right client that fits your product line and demographic.
• Stronger market differentiation. Market segmentation gives a company the opportunity to pinpoint the exact message they way to convey to the market and to competitors. This can also help create product differentiation by communicating specifically how a company is different from its competitors. Instead of a broad approach to marketing, management crafts a specific image that is more likely to be memorable and specific.
• Better targeted digital advertising. Marketing segmentation enables a company to perform better targeted advertising strategies. This includes marketing plans that direct effort towards specific ages, locations, or habits via social media.

Market segmentation exists outside of business. There has been extensive research using market segmentation strategies to promote overcoming COVID-19 vaccination hesitancy and other health initiatives.

Limitations of Market Segmentation

The benefits above can't be achieved with some potential downsides. Here are some disadvantages to consider when considering implementing market segmentation strategies.

• Higher upfront marketing expenses. Marketing segmentation has the long-term goal of being efficient. However, to capture this efficiency, companies must often spend resources upfront to gain the insight, data, and research into their customer base and the broad markets.
• Increased product line complexity. Marketing segmentation takes a large market and attempts to break it into more specific, manageable pieces. This has the downside risk of creating an overly complex, fractionalized product line that focuses too deeply on catering to specific market segments. Instead of a company having a cohesive product line, a company's marketing mix may become too confusing and inconsistently communicate its overall brand.
• Greater risk of misassumptions. Market segmentation is rooted in the assumption that similar demographics will share common needs. This may not always be the case. By grouping a population together with the belief that they share common traits, a company may risk misidentifying the needs, values, or motivations within individuals of a given population.
• Higher reliance on reliable data. Market segmentation is only as strong as the underlying data that support the claims that are made. This means being mindful of what sources are used to pull in data. This also means being conscious of changing trends and when market segments may have shifted from prior studies.

Examples of Market Segmentation

Market segmentation is evident in the products, marketing, and advertising that people use every day. Auto manufacturers thrive on their ability to identify market segments correctly and create products and advertising campaigns that appeal to those segments.

Cereal producers market actively to three or four market segments at a time, pushing traditional brands that appeal to older consumers and healthy brands to health-conscious consumers, while building brand loyalty among the youngest consumers by tying their products to, say, popular children's movie themes.

A sports-shoe manufacturer might define several market segments that include elite athletes, frequent gym-goers, fashion-conscious women, and middle-aged men who want quality and comfort in their shoes. In all cases, the manufacturer's marketing intelligence about each segment enables it to develop and advertise products with a high appeal more efficiently than trying to appeal to the broader masses.

Market segmentation is a marketing strategy in which select groups of consumers are identified so that certain products or product lines can be presented to them in a way that appeals to their interests.

Why Is Market Segmentation Important?

Market segmentation realizes that not all customers have the same interests, purchasing power, or consumer needs. Instead of catering to all prospective clients broadly, market segmentation is important because it strives to make a company's marketing endeavors more strategic and refined. By developing specific plans for specific products with target audiences in mind, a company can increase its chances of generating sales and being more efficient with resources.

What Are the Types of Market Segmentation?

Types of segmentation include homogeneity, which looks at a segment's common needs, distinction, which looks at how the particular group stands apart from others, and reaction, or how certain groups respond to the market.

What Are Some Market Segmentation Strategies?

Strategies include targeting a group by location, by demographics—such as age or gender—by social class or lifestyle, or behaviorally—such as by use or response.

What Is an Example of Market Segmentation?

Upon analysis of its target audience and desired brand image, Crypto.com entered into an agreement with Matt Damon to promote their platform and cryptocurrency investing. With backdrops of space exploration and historical feats of innovation, Crypto.com's market segmentation targeted younger, bolder, more risk-accepting individuals.

Market segmentation is a process companies use to break their potential customers into different sections. This allows the company to allocate the appropriate resource to each individual segment which allows for more accurate targeting across a variety of marketing campaigns.

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How to Define Your Target Market

4 min. read

Updated April 4, 2024

One of the most powerful tools of small business marketing strategy is defining and addressing your target market—the audience that you think is most likely to buy your product or service. The key to identifying this customer base is market segmentation, or figuring out the demographics of your specific market.

Common sense makes it seem obvious from afar. You can’t (and shouldn’t) try to sell your product to everyone in the world. You’d waste a lot of money and resources very quickly.

But how do you figure out who your target audience is? Who or what should it be? How would you know? Here are five tips to help you figure it out.

1. Don’t try to please everybody

Strategy is focus. Say you’re planning to start a restaurant ; which of these three options is easier?

• Pleasing customers 40 to 75 years old, wealthy, much more concerned with healthy eating than cheap eating, appreciating seafood and poultry, liking a quiet atmosphere.
• Pleasing customers 15 to 30 years old, with limited budgets, who like a loud place with low prices and fast food.
• Pleasing everybody.

I really hope you chose one of the first two, and not the third. This is the essence of target marketing—divide and conquer. Different groups of people have different pain points and different desires. Most of the time, efforts to please everyone end up pleasing no one.

• 2. Learn market segmentation

It’s about segments, like pie segments or orange segments—except that in this case, it’s segments of a total market, or TAM .

In my “divide and conquer” example above in the first point, the specific age ranges, wealth, and atmosphere preferences describe particular market segments.

In the illustration here below, U.S. census data divides the population into demographic segments. Demographics are the old standards like age, gender, and so on.

You’ve seen market segmentations referred to frequently in business articles, interviews, and discussions. People will appeal to certain age groups, genders, income levels, and so forth. Divide and conquer is a simple concept; market segmentation is how you make it practical for your business.

Let’s say you think your target market is age 40 to 75 years old, wealthy, and interested in healthy eating. How do you validate your assumption that that demographic will be your ideal target customers? That’s where market research comes in. Talking to customers and potential customers is one of the best ways to do this kind of research, but there are many approaches.

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• 3. Use segmentation creatively

Don’t limit your target market strategy for market segmentation by age, gender, and economic level.

For example, when I was consulting for Apple Computer, we divided the market into user groups:

• Small business
• Large business

I also liked a shopping center segmentation that divided its market into so-called psychographic market segmentation:

• Kids and cul-de-sacs were affluent upscale suburban families, “a noisy medley of bikes, dogs, carpools, rock music, and sports.”
• Winner’s circle were wealthy suburban executives, “well-educated, mobile executives and professionals with teen-aged families. Big producers, prolific spenders, and global travelers.”
• Gen X and babies were upper-middle income, young, white-collar suburbanites.
• Country squires were wealthy elite ex-urbanites, “where the wealthy have escaped urban stress to live in rustic luxury. Affluence, big bucks in the boondocks.”

I knew a business that segmented its business customers into decision-process types as well:

• Decision by committee
• Decision by functional manager
• Decision by owner

And I call this final example, for lack of a formal definition, strategic intersection.

In the diagram here, the social media services that Have Presence offers are targeted to small business owners who:

• Want outside help with their social media; and
• Value business social media; and
• Have a budget to pay for the service.

Any of these creative segmentations can help you set a target market, and can also be a jumping off point for putting together a user or buyer persona —another useful tool for understanding your target audience and developing better marketing messaging.

• 4. Consider your own unique identity too

Your business probably reflects who you are and what you like to do, as well as what you do best. Marketing to people you like as the target market is an advantage. If you like the feel of small business better than the big corporate giants, then you’re probably better off setting the small business as a target market.

As Palo Alto Software, the host of Bplans, grew up and grew our business plan software, its founder (that would be me) was more comfortable with the do-it-yourself entrepreneur and business owner than the high-end consultants, so we ended up targeting the do-it-yourselfers in business.

So, somebody who loves fine food, tastefully prepared and served, is probably more comfortable with an upscale target market than with price-sensitive young families.

• 5. Define your target market early and revise as needed

Do it well as soon as you can, and keep reviewing and refreshing as you go along. You shouldn’t think of your target market as set in stone. As you learn more about your customers, how you define your target market will probably change.

The right target market increases your chances of success because you can communicate better with a well-defined group, and that holds expenses down and makes results better.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 1. Don’t try to please everybody

Related Articles

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How to Create a Detailed User or Buyer Persona

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Target Market Examples

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How to Conduct an Industry Analysis

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How to Write a Customer Analysis

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How to Write a Market Analysis for a Business Plan

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

How to Do Market Segmentation in Business Plan

By: Author Tony Martins Ajaero

Home » Business Plans

Market segmentation in a business plan is a section where the target market of the business is separated into smaller groups of people, or segments, to identify areas of possible market growth. This section of the business plan helps marketers identify the primary characteristics that define the target market of the business and also ensures that they can direct marketing efforts to their unique needs, interests, and personalities.

Good market segmentation research helps to provide your business with a vivid direction and an idea of which market will be best to target. Note that the market your research shows to target will more or less represent a massive share of potential profitability to the company.

If your market segmentation research is not aligning with the above requirements, then you are doing it wrong. Always remember that bad market segmentation research is a waste of your time, money, and energy.

Types of Market Segmentation in Business Plan

Indeed, there are various approaches you can leverage when segmenting your target market in your business plan. To ensure that you can clearly define your target market, outlined below are four of the most common types of market segmentation.

Demographic Segmentation

This is one of the most common forms of segmentation because it notes that specific products cater to well-noted individual needs relating to at least one demographic element. This segmentation tends to classify consumers based on specific attributes, such as age or income level.

It also provides a view of consumers as real people in the real world by leveraging common data collection methods. Typically, this segmentation is very suitable for business-to-customer (B2C) marketing efforts. Some of the most notable attributes to consider during demographic segmentation include:

• Gender identity
• Sexual orientation
• Income level
• Household size
• Education level
• Geographical location

Psychographic Segmentation

Unlike geographic and demographic segmentation, psychographic segmentation focuses on the deep and built-in traits your target customer possesses. To properly understand your target audience on this level, methods such as focus groups, surveys, interviews, audience testing, and case studies can all prove to be formidable.

According to experts, this segmentation is well suited for B2C and business-to-business (B2B) marketing efforts. Notable psychological characteristics and traits to take into consideration during demographic segmentation include:

• Personal values
• Religious beliefs
• Aspirations
• Political leanings

Geographic Segmentation

This Segmentation tends to target and separate customers based on a predefined geographic border. Have it in mind that differences in interests, values, and preferences differ exponentially throughout cities, states, and countries.

Therefore it is pertinent to recognize these differences when developing your business plan to ensure you can advertise accordingly. Regional demographics can ensure you sell products and services, depending on where your customers live.

• International Marketing

Behavioral Segmentation

Behavioral segmentation strives to separate consumers based on their behaviors especially when it has to do with your products or services, such as when they decide to purchase them and how they use them. Note that by focusing on consumer behavior, behavioral segmentation gives you an insight into how consumers interact with businesses, and this gives you the knowledge you require to improve the effectiveness of your efforts.

Typically, this segmentation is also very suitable for B2C as B2B marketing efforts. Some notable areas of consideration for behavioral segmentation include:

• Usage frequency
• Brand loyalty
• Benefits needed

Steps to Do Market Segmentation in Business Plan

There are basic steps necessary to carry out market segmentation in your business plan. Here are the steps to guide you through;

Define Your Market

This is one of the most important things to take into consideration. For instance, where does your brand fit within the current market landscape? Is there a demand for the product or solution you intend to offer? How big is the market? Note that these are some vital questions to consider when starting this step.

Segment Your Market

This is where the work really begins. This is where you have to consider the exact segmentation method to use. Make sure you don’t confine yourself to one segmentation method. Today, brands are learning to implement more than one segmentation technique. Owing to that, consider taking a combination approach. Play around with each and find the ideal mix for your brand.

Know Your Market

You must ask your potential target market questions that have to do with the segmentation categories you prefer. You can leverage surveys, focus groups, polls, and more to get your answers. Make sure you are asking questions that will warrant very valid answers.

Write Your Customer Segments

You must leverage the responses you received to create a dynamic market segmentation section in your business plan. Also, make sure that you are focusing on the buying power of the segments and not creating any that are too small. Go through the segment one last time to make sure that you are not making any mistakes.

Test Your Strategy

To ensure that you have interpreted the responses very well, you have to test them on your target market. Consider implementing conversion tracking early. It remains one of the best ways to weigh and understand the effectiveness of your strategy. If you are barely relating to your customers with the segments you have established, then you’ll need to have another look at your survey methods and analysis.

Market segmentation is a very important section of a business plan. Note that it shows your stakeholders that you understand your customers by making available a tailored message that aligns with specific facets of their lives.

Aside from being a vital aspect of your plan, it also ensures you know how to get your message across successfully and this will help your brand grow exponentially. By developing the right strategy for your needs and following the steps noted above, you can be sure that your market segmentation strategy will be effective and successful.

Related Posts:

• How to Write a Business Plan Goals & Objectives [Sample Template]
• How to Prepare Yourself for the Business Planning Process
• How to Write a Detailed Company Profile for a Business Plan
• 10 Undisputed Reasons Why Business Plans are a Waste of Time
• 10 Undisputed Reasons Why Business Plans Don’t Get Funded

Guide for Creating Market Segmentation to Improve Marketing

Market segmentation is a marketing strategy in which a company divides prospective customers into groups with common interests and needs. With it, companies will be able to evaluate different categories of consumers. Hence, minimizing the risks and seeking clarity to focus the resources on efforts that most likely to be profitable is viable. In line with this, you get to tackle different segments of the market such as geographic, demographic, psychographic, and behavioral. These will help further classify your target market and reach the most valuable customers. Learn more about marketing segmentation and see the examples provided below.

Market Segmentation Tutorial

Why is market segmentation important.

Effective segmentation is vital for every business because that different conclusion are derived through this strategy. This greatly affects the marketing of a business particularly increasing competitiveness, communications, and customer retention. Moreover, with proper market segmentation, you will be able to achieve higher profitability and run a better company.

Types of Segmentation

There are four types of customer segmentation that a firm should closely look into. These will help businesses segment their market and deliver targeted and valuable messaging to target consumers. Discover why they matter for your business and market segmentation.

• Demographic segmentation

Demographic segmentation is a type of segmentation that answers the question ‘who’. It defines customer groups by looking into identifiable traits of people like age, gender, income, location, ethnicity, etc.

• Psychographic segmentation

Psychographic is useful for categorizing audiences through the common personalities and interests of audiences. Here you need to identify the customer’s hobbies, personality traits, values, life goals, and beliefs. When done properly, greatly impacts marketing segmentation.

• Behavioral segmentation

Behavioral is another type of segmentation that is vital in marketing. This requires gathering data about the customer’s actions. This also relates to the customer’s response to your brand. With it, you can group customers in accordance with their purchasing habits, browsing habits, brand interactions, and more.

• Geographic segmentation

Geographic might be the simplest and easiest type of market segmentation to define groups when it comes to the geographic boundary. You can identify this is by gathering information: country, region, ZIP code, city, urban or rural.

Market Segmentation Examples

Here are some ready-made market templates that you can fill out. These are designed to help you analyze your marketing with less thinking about the format or model. With these market segmentation examples, you can identify all the four main types of segmentation. This includes demographic, psychographic, geographic, and behavioral segmentation. Plus, you can edit and add other types of segmentation according to your preference to analyze further your marketing.

Consumer Market Segmentation in Tree Diagram

This example helps you identify the four types of segmentation. It uses a tree diagram approach so you can easily distinguish each customer segment. In case you want to personalize, you can click the edit button attached to the market segmentation examples provided. You can add your personal touch into this segmentation allowing you to modify the background color, node color, and many more.

Business Market Segmentation in Table

Another way to analyze marketing is by creating a market segmentation in a table. In just a few seconds, you can quickly identify the demographic, psychographic, geographic, and behavioral segmentation of your marketing. Similarly, you can customize this table according to your preference. This lets you modify the font style, adjust the table color, attach icons and images.

Create a Market Segmentation in GitMind

You can develop market segmentation in different ways. You can work on it by analyzing your existing customers. This is where you get feedback, analyzing website analytics, audience interest, etc. Once you have a clear overview of your potential customer and gather all the necessary information, you can now proceed to create a visual representation of your marketing segmentation. To create this graphical illustration, we suggest a free tool that is great for business graphic illustrations. GitMind is a mind mapping and flowchart-making tool that suits educational and business needs for creating graphic representations of ideas, concepts, and data. Below is a simple step on how to make market segmentation using GitMind.

• First, open GitMind using your browser and go to the “Templates” section. From here, choose a template with a tree diagram layout.

• Next, click the “Use Template” button to edit the map and add your content to the diagram.

• Once done, you can customize the marketing segmentation using the “Style” feature and change the look and feel. Or just choose from the theme available. Finally, click the “Export” button and select your desired format of the illustration.

You can minimize the wasted efforts and time when you have clear view of your potential audience. This is possible when market segmentation is done properly. On that note, the above content introduced you to the essentials about segmentation. Also, examples are provided to help you make segmentation in no time.

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• What is A Probability Tree Diagram and Real Life Uses

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Market Segmentation Matrix Template

Target the right consumers with the Market Segmentation Matrix template. Discover the best opportunities for growth.

Trusted by 65M+ users and leading companies

About the Market Segmentation Matrix Template

Market segmentation helps you to better understand your market. This practice divides your target market into subsets based on demographics, geography, needs, interests, psychographics, and behavior. With this information on hand, it’s easier to leverage these divisions of your target market so you can build better product, sales, and marketing strategies.

Keep reading to learn more about market segmentation.

What is the market segmentation matrix?

The market segmentation matrix is an analytical business tool that allows your team to see how various segments have performed with a set of products. Market segmentation divides a market into different parts and helps your business offer the right products to the target market's customers.

The four market segments

The Market Segmentation Matrix template is divided into four quadrants, each of them representing one market segment: geographic, psychographic, behavioral, and demographic.

Because market segmentation analyzes consumers’ traits, behaviors, and overall characteristics, the template is an effective way to build demographic profiles of your customers. This template contains the most commonly-used segments, but you can easily add additional characteristics based on your needs and industry.

How to use the Market Segmentation Template

As mentioned previously, the Market Segmentation Matrix template is made up of four quadrants:

Quadrant 1: Geographic

Add any information regarding the location of your consumers. Zip codes, regions, and countries go into this quadrant. Think about economic zones and entire continents if you target a larger audience.

Quadrant 2: Psychographic

Add your consumer’s personality traits and interests. What are their emotions? What do they need? What are their beliefs?

Build a psychological profile of your consumer, identifying their lifestyles and preferences.

Quadrant 3: Behavioral

Like the psychographic quadrant, analyze how your consumers feel and behave with your product or service. Do they use your product? Are they loyal to your brand? How do they shop online? Map out any behavior they have when in contact with your business.

Quadrant 4: Demographic

Here, you can add demographic details such as age, occupation, education level, and gender identity. These characteristics should be quantifiable, allowing you to collect the primary data behind your consumers.

When creating or building your Market Segmentation template in Miro, invite your teammates to join the board and collaborate with you. Add ideas with sticky notes and upload photos, videos, or any other file type as needed. You may also want to color-code the sticky notes according to segment size or feasibility of pursuing a segmentation strategy with that particular group.

Benefits of using a market segmentation matrix

With the market segmentation matrix, it’s easier to market to customers and prospects. Because the barrier to entry is so low, it’s important to act with precision and avoid wasting resources.

Customers and prospects have high expectations for how, when, where, and why they buy and use products and services—and they have transferred those expectations onto marketing and advertising. These expectations are also constantly in flux, so your organization must stay aware of customer needs, behaviors, and desires.

Your market segmentation matrix lets you keep track of customer and prospect behavior, create marketing experiences that resonate, and boost your bottom line.

Without segmentation, you risk wasting resources by creating a marketing campaign that is too broad or targets the wrong population. By targeting the right people and double-checking to ensure that that population hasn’t shifted, your business will be better off in the long run and gain a competitive advantage.

When to use a market segmentation matrix

Your team should use a market segmentation matrix anytime you work on a new, existing, or planned marketing campaign. It allows you to track customer and prospect behavior and expectations easily, create more targeted marketing experiences, and improve your growth potential.

How do you write a market segmentation plan?

First, set your ultimate marketing objective when creating your market segmentation plan. Are you trying to launch a new product or campaign? Better target your ads? Define your goals, and afterward, run user and market research to know your consumer’s characteristics and behaviors. Add this data to your Market Segmentation template and use this information to tailor your ads and target the right audience or build your product with the right consumer in mind.

How do you identify market segments and targets?

You can identify market segments and targets by conducting market and user research. Analyzing their behavior and patterns is a good starting point. If you need complementary information, some analytics tools are also helpful in identifying consumer profiles and how they interact with your product, service, or brand.

Get started with this template right now.

DevOps Roadmap Template

Works best for:.

Documentation, Product Management, Software Development

DevOps teams are constantly creating code, iterating, and pushing it live. Against this backdrop of continuous development, it can be hard to stay abreast of your projects. Use this DevOps Roadmap template to get a granular view of the product development process and how it fits into your organization's product strategy. The DevOps Roadmap lays out the development and operations initiatives you have planned in the short term, including milestones and dependencies. This easy-to-use format is easily digestible for audiences such as product, development, and IT ops.

Johari Window Model

Leadership, Meetings, Retrospectives

Understanding — it’s the key to trusting others better and yourself better as well. Built on that idea, a Johari Window is a framework designed to enhance team understanding by getting participants to fill in four quadrants, each of which reveals something they might not know about themselves or about others. Use this template to conduct a Johari Window exercise when you’re experiencing organizational growth, to deepen cross-functional or intra-team connections, help employees communicate better, and cultivate empathy.

Six Thinking Hats Template

Ideation, Brainstorming

The Six Thinking Hats by Dr. Edward de Bono was created as an alternative to argument, it is designed to help teams explore and develop ideas collaboratively. Use this template to boost creative thinking and get different perspectives so you and your team can make better-informed decisions.

SWOT Analysis Template

Decision Making, Strategic Planning, Prioritization

When you’re developing a business strategy, it can be hard to figure out what to focus on. A SWOT analysis helps you hone in on key factors. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal factors, like your employees, intellectual property, marketing strategy, and location. Opportunities and threats are usually external factors, like market fluctuations, competition, prices of raw materials, and consumer trends. Conduct a SWOT analysis whenever you want to explore opportunities for new businesses and products, decide the best way to launch a product, unlock your company’s potential, or use your strengths to develop opportunities.

Social Media Calendar Template

Project Planning, Marketing

Most businesses have a social media presence, but many of them aren’t using social media as a competitive differentiator. The Social Media Calendar template allows you to plan, schedule, and craft posts for LinkedIn, Twitter, Facebook, Instagram, and Pinterest, so you can leverage social media as a strategic tool to promote your brand. Use the Social Media Calendar template to plan out your social content a week, month, or quarter in advance. Collaborate with the marketing team, prepare for product launches and major initiatives, and share draft social posts.

To-do List Template

Project Management, Education, Decision Making

A to-do list helps teams manage, organize, and prioritize their upcoming tasks. As a result, they can improve time management and streamline work operations. Using Miro’s to-do list template, teams create interactive, collaborative, and user-friendly task lists.

The State of Prospecting 2024 whitepaper

Download now for the data, tactics and trends shaping successful prospecting in 2024

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An in-depth look at the strategies and trends shaping successful B2B prospecting in 2024.

B2b market segmentation: your step-by-step guide

Posted on: March 8, 2024

Reading Time: 15 minutes

Category: B2B audience

In this blog

What is B2B market segmentation?

Total addressable market (tam), serviceable available market (sam), target market, engaged accounts, opportunities, b2b markets have multiple decision-makers, b2b products and services are often more complex, b2b decision-makers go through a more rational process, the buying cycle is different, b2b target audiences are smaller, personal relationships matter more, the importance of b2b segmentation, firmographic segmentation, technographic segmentation, tiering segmentation, needs-based segmentation, sophistication segmentation, behavioural segmentation, how to segment your b2b market, an extreme market segmentation example, find and segment your ideal customers with sopro, b2b market segmentation: your step-by-step guide.

What is B2B target market segmentation, why must you do it, and what customer segments can you apply to your business?

The three core business principles are having a product that solves a problem, knowing who needs your solution, and differentiating yourself from competitors.

How do you smash those three things? Market segmentation is one of the most crucial weapons in your arsenal. 

Effective segmentation allows you to accurately identify, target, and reach your customers, and then tailor your messaging to resonate with different audience segments.

In this guide, we’ll show you the various options to understand the differences in your customer base and how you can build your customer segmentation strategy.

B2B market segmentation focuses on finding unique audience segments by revealing common characteristics. Businesses can better connect with potential customers by understanding similar traits, needs, and behaviours. It allows you to prioritise resources, tailor messaging, develop products, and amend sales processes.

Without B2B market segmentation, you risk treating everyone as the same. Great if your targets are as different as a replicating Matrix agent, but not so good if they are real people.

If you don’t bother to segment, your marketing probably won’t connect well with anyone. A wise marketeer once said, “What is marketing if not segmentation?”

But there isn’t a one-size-fits-all approach to dividing your audience. Let’s dig a little deeper into the aspects of market segmentation.

The market segmentation funnel

Oh yay! Who doesn’t love a marketing funnel? This should help you visualise the narrowing of your audience as you segment, from everyone that could buy in theory, to specific groups within that.

Right at the top, you have your total addressable market. This represents the total revenue opportunity for a product or service if 100% market share is achieved. It’s the broadest view of the market and doesn’t consider any segments.

This segment narrows your TAM to the businesses you can actually target or serve. SAM considers relevant constraints such as geography or regulations to define the part of TAM your business can access.

Your target market is used to address niches within your total addressable market. At this point, you’ve recognised the audience you can sell to, and identifying your target markets is where that B2B segmentation begins. This is the stage where you narrow your focus, and your marketing strategy starts to take shape.

A niche is a highly specialised segment of a larger market. Niches have a specific requirement or demographic distinct from the broader market. Businesses can find niches where competition is less intense, and customer needs are more specific.

Content can be specifically produced to support different client interests and preferences – this will help with those conversion rates.

Segmentation by buyer stage

Segmenting accounts by where they sit in the sales funnel can help businesses tailor content that can nurture leads and help close more deals.

Focus on educational content that positions you as an expert, addresses their pain points and introduces your solutions. The goal is to build trust and establish authority.

Shift to more personalised content. Alongside tailored proposals and demos, things like case studies and battle cards can demonstrate the value of your solution for their specific needs. At this point, your content should aim to reach all decision-makers in the buying process.

To extend that customer lifetime value and loyalty, it’s important to keep nurturing the relationship. Provide onboarding materials and ongoing support to ensure they get maximum value from their purchase, encouraging satisfaction and loyalty.

The difference between B2C and B2B segmentation

So, what’s the difference between customer segmentation for B2B and B2C businesses? It all comes down to the difference in motivations, processes and considerations between B2B and B2C buyers. 

In a B2C setting, your target customers are individuals or families. In B2B businesses, you will likely have multiple decision-makers signing off on a purchase decision. Our research found that there are now an average of four buyers in the decision-making process, with 11% of companies having more than ten people!

Businesses often have a complex mesh of products and systems. The difficulty embedding or extracting products from this tangled web changes the buying process.

A family will discuss where to go on their next holiday. They are unlikely to go through a formal due diligence process, with little Johnny assigned as the family’s compliance officer. The complexity of the products and the responsibility to spend the budget wisely mean formal processes often exist.

B2C purchases tend to be short-term, with a few notable exceptions. B2B purchases tend to be long-term or at least have the possibility to repeat. The difficulty of embedding and extracting means change is not always welcomed.

B2C companies are likely to have thousands upon thousands of customers. In the B2B sphere, a small number of clients will likely make up the majority of revenue.

B2B sales often involve face-to-face interactions such as handshakes, dinners, business cards, and expenses. Deciding which prospects and clients should get the full personal service is one of the outcomes of B2B customer segmentation.

It goes without saying that by segmenting your B2B target market, you’re more likely to reach those who need your product or service. In fact, 80% of companies that use market segmentation have reported that they see an uplift in sales.

But just in case you need a little more convincing, here’s a breakdown of why B2B market segmentation is so valuable :

• Helps you to develop customer insights

Rule one of business: know your customers. By recognising niche segments, your business can refine strategies to make them fit your market. It can help with marketing, sales and even research and development.

• Improve marketing results

A more focused marketing strategy will allow you to speak to the right people, tailor your content and add a layer of personalisation to your outreach. Did you know? 74% of marketers experience higher engagement when harnessing the power of personalisation . 

• Win higher quality leads

If one of the benefits of customer segmentation is more effective marketing, one of the effects of that is higher quality leads.

Using lead scoring , you can watch as your increasingly targeted marketing brings in more relevant prospects. You can also track lead rates, number of pitches, time taken to close deals (lead to sale), and closed won deals to gain further insights into audience segments.

Better leads? Higher conversions! By segmenting target markets, companies have doubled their conversion rates .

• Improve customer retention

With refined segmentation comes elevated marketing efforts and higher-quality leads! With any luck, this will drive up your customer retention rates (and, therefore, their lifetime value).

• Brand loyalty and referrals

A strong marketing segmentation strategy focuses on customers more likely to advocate for your brand. More satisfied customers lead to glowing reviews, and you can harness the power of those recommendations and build a referral marketing strategy .

B2B customer segmentation methods

It should be clear by now that there are many types of market segmentation methods, but some are more commonly used.

Categorise them in a way that benefits both your sales and marketing teams and then curate a customer experience that is seamless, personalised and, importantly, boosts conversion rates.

Firmographics is the starting point to help you achieve heightened levels of personalisation. However, it has less to do with the individual demographics and is focused more on the information you can find about a specific company. 

Typical types of firmographic data you can expect to collect include company size, industry type, operating locations, revenue, and growth trends. Firmographics tend to overlap with demographics – together, they provide valuable insights into the organisation and decision-making units.

Typically, this will include information such as company size, number of employees, industry overviews, funding streams and revenue. 

Where to find firmographic information

The quickest way to find a lot of this information is by checking out their website or social media (LinkedIn is a quick win) – a lot of information will be available first-hand. 

You can also survey companies and find more information in those first prospecting steps. It’s important to ask the right questions about revenue and market share. 

And don’t forget! You can work with the experts to help you delve deeper into the nitty gritty. We consider ourselves the data experts with a whole team on hand to help – and that’s why we know that buying bought lists isn’t your best bet either.

Technographic segmentation involves dividing B2B markets based on the technology profiles of companies. 

By analysing technographic data, you can gain insights into the tools, software, and platforms utilised by their target audience. This enables you to create highly targeted and personalised campaigns that resonate with the needs and preferences of different segments within the B2B market. 

Ultimately, technographic segmentation helps you optimise your marketing efforts by ensuring you deliver the right messages to the right prospects, increasing the likelihood of engagement and conversion.

Where to find technographic information

Beyond sending out surveys, which commonly yield a low response rate, it requires some tech knowledge. You can scrape their website to find out what tools or software a company uses – but this is a little harder to do in this age of the Internet. 

Alternatively, work with a third party who can provide data-compliant information and give you a broad view of the inner workings of a business *cough**cough* Sopro!

Tier-based B2B market segmentation involves categorising prospective customers based on their potential value to the business. 

This method considers factors such as average customer lifetime value, acquisition channel efficiency, and lead quality. Businesses can allocate resources effectively by assigning tiers to leads, focusing on high-value prospects and tailoring marketing efforts accordingly. 

This approach is often utilised in account-based marketing (ABM ), where marketing and sales teams collaborate to target a select number of accounts with personalised strategies. 

Using segmentation strategies such as this enables businesses to prioritise their efforts. In turn, seeing a return on investment and enhance overall efficiency in lead generation and conversion activities.

How do you do segment by tiers?

One of the easiest ways to segment your market by tiers is to work the magic of lead scoring . 

Lead scoring assigns value to prospects according to their move from expressing initial interest to revealing purchase intent. It tracks their journey through the sales funnel and assesses their likelihood of converting to a sale. It’s also a good idea to include customer lifetime value in your calculations.

Needs-based segmentation involves grouping customers based on their specific needs and attitudes towards a product or service.

Unlike firmographics, this method focuses on subjective factors, allowing businesses to tailor their marketing strategies to address distinct buying motivations. By understanding different customer segments’ pain points and requirements, companies can develop targeted campaigns. It can help resonate with groups such as ‘productivity focused’ or ‘budget conscious’. 

Needs-based segmentation enables businesses to create personalised customer journeys with relatable messaging, fostering brand loyalty and increasing the likelihood of conversions. Another positive outcome of identifying these trends is that it will help you evolve your product or service.

How do you identify the needs of your market?

Although it is challenging to accurately identify prospect needs, conducting interviews with existing customers can provide valuable insights. 

However, collecting data from demographic segmentation and understanding buying behaviours will go a long way here. Data that can help with understanding needs include:  

• Size of the market
• Buying patterns
• Spending power
• State of the market currently
• Analysing competitors

This refers to categorising businesses based on their level of understanding, expertise and familiarity with the products, services, and industry in which they operate. 

This segmentation approach acknowledges that B2B customers vary widely in their knowledge and experience, ranging from novices to industry experts. By identifying and understanding these differences, you can tailor your marketing, sales, and support strategies to effectively engage and serve each segment.

For instance, highly sophisticated B2B customers may require detailed technical specifications, advanced features, and specialised solutions. 

In contrast, less sophisticated customers may need more guidance. This is an indicator to provide them with educational resources and simplified product offerings. It will go a long way in helping navigate the purchasing process and understand the value proposition.

Understanding the level of sophistication

It’s important not to assume anything about a business. For example, just because they’re a start-up doesn’t mean they have no idea about the benefits of using a CRM. This is where lead nurturing and relationship-building come into play. 

Make your prospects feel heard, seen and valued to understand how they operate – and how you can benefit them.

Tracking buyer intent is one of our specialities here at Sopro and is an insightful tool that should not be overlooked!

It includes keeping tabs on the channels prospects visit you through, what content they interact with and how they interact with your product.

Behavioural segments provide clear insights into what buyers want. Firmographic data can be added to these insights from website analytics, CRM data, or first-hand research. Your strategy is then based on a mix of who the prospect is, what they want, and how they behave.

Tracking intent in this way helps your teams identify when a buyer is actively engaged in your industry. This can include anything from the research stage to nearing a purchasing decision. You can then reach them at the right time and place with the right message. 

Understanding buyer intent

To get a full picture of the power of intent and using behaviour signals, take a look at our in-depth buyer intent guide .

Step 1: Define Your TAM and target market

• Start by identifying the market you aim to target, setting the stage for deeper segmentation. By calculating your TAM, you can estimate your market’s growth potential. This can be calculated through top-down, bottom-up or through value-theory.

Step 2: Identify Segmentation Criteria

• Choose relevant B2B segmentation bases that align with your business goals and market realities. Above all, they must be measurable, substantial, accessible, differentiable and actionable.

Step 3: Conduct Market Research

• Employ surveys, industry reports, customer data, and interviews to gather essential insights. Market Research is invaluable, can provide insights into customer needs, helps you stay competitive, and is integral to measuring success.

Step 4: Segment Your Market

• Use the gathered criteria to divide the market into distinct segments. It is essential to elevate personalised outreach, which will make a real difference in lead and conversion rates.

Step 5: Develop Profiles for Each Segment

• Craft detailed personas for each identified segment, focusing on Ideal Customer Profiles (ICPs) to guide content creation and marketing strategies. Having a strong idea of who you’re targeting will benefit outreach for both your sales and marketing teams.

Step 6: Tailor Your Marketing Strategies

• Create marketing strategies that cater to each segment’s specific needs and characteristics, using ICPs and personas as foundational elements. This will help you to reach your audience in the right place and with the right message.

Step 7: Monitor and Adjust

• Continuously assess the performance of each segment and the overall market dynamics. Be prepared to update your segmentation and strategies as needed to stay aligned with market changes.

To illustrate how central segmentation can be, pop on your headphones, head over to the world of B2C, and fire up Spotify. How did they become the market leader when all of their competitors offer the same music?

Spotify takes segmentation to the extreme, a key part of product development as well as marketing. It started with a giant exercise in “people who liked this also like…”, developed into expert-curated playlists, machine learning algorithms that categorise music into 5,000 distinct genres, and finally AI that curates hundreds of personalised playlists for each user daily.

Segmenting your prospective customers is a big job. However, it’s a crucial part of getting the right message in front of the right people.

So leaving your sales outreach to the experts is a logical choice if you’re spending more time segmenting than selling.

With Sopro, finding and connecting with your ideal customers is a breeze. Our fully managed service uses smart technology and up-to-the-minute data to find and engage your perfect prospects. So you can sit back and watch those high-quality leads roll in.

More touchpoints, more engagement, more time to sell. See how our prospecting service works.

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What is Audience Segmentation? Model, Tips and Examples

May 1, 2024

9 min. read

A solid audience segmentation strategy is like building a thriving farm. You need to ensure that each type of plant receives the specific care and attention it needs to flourish. The same holds true for your customers; you must meet them where they are and cater to their needs, wants, and interests.

Customers come to you through various channels for myriad reasons. They each have their own priorities, buying triggers, and decision-making processes. When you segment audiences, you’re better able to connect with them on their level, break through their internal ad blockers, and outshine your competitors.

Read on to learn more about what audience segmentation is, why it matters, and how to segment your audiences for the best results.

What is Audience Segmentation?

Why is audience segmentation important, types of audience segmentation, how to use audience segments, tips for effective audience segmentation, audience segmentation and meltwater.

Audience Segmentation Definition: The process of dividing a target audience into smaller, more specific groups based on certain characteristics or behaviors.

Audience segmentation helps you identify the shared connections between various customers. For example, you might find customer niches related to:

• Geographic location
• Lifestyle preferences
• Personality traits

By surfacing these connections, marketers can align with the unique motivations that drive customers’ buying decisions .

In a crowded digital landscape where standing out is crucial, audience segmentation can be the game-changer that sets your brand apart from the competition. So, how does audience segmentation enhance your inbound marketing efforts ? Quite simply, segmenting allows you to tailor your marketing messages to different types of customers. This helps you personalize communications , ultimately leading to higher engagement and conversions.

Rather than spew a mass message to everyone, you can speak directly to specific audience segments in ways that appeal to them. You can move beyond generic mass marketing strategies and hone in on what truly resonates with your audience. 

When done correctly, audience segmentation can:

• Improve marketing relevance
• Increase marketing ROI
• Optimize marketing spend
• Expand your competitive advantage
• Enhance customer satisfaction

Ultimately, audience segmentation empowers businesses to make more informed decisions that drive growth and success in today's competitive marketplace.

Tip: Check out our blog to learn more about the top audience segmentation tools .

Companies can segment audiences in different ways. Typically, segments will fall under three categories: Demographic , Geographic , and Psychographic .

Demographic audience segmentation

Demographics are one of the oldest and most common audience segmentation examples. This involves grouping your customers based on demographic characteristics, like age, income, gender, and education level, among others.

For example, a cosmetic brand may target younger women with skincare products aimed at preventing acne, while focusing on anti-aging solutions for older women.

Or, luxury brands might target customers with a high income and education level.

Identifying the specific demographics most interested in their products or services helps businesses optimize their marketing efforts and maximize ROI.

Geographic audience segmentation

Targeting customers based on where they live is another type of marketing audience segmentation. It takes into account the local “flavors” to make messaging resonate.

Examples of geographic segmentation include:

• Saying “soda” vs. “pop,” depending on where your audience is located
• Country-specific product offerings that aren’t available on a global scale
• Local community events
• Weather-related marketing that accounts for local or regional weather patterns
• Cultural marketing that understands holidays and customs celebrated in a specific area

Geographic audience segmentation offers valuable insights into the diverse needs and preferences of customers across different locations.

Psychographic audience segmentation

Psychographic audience segmentation goes beyond surface-level details to understand the motivations, behaviors, and psychological characteristics of customers. It aims to uncover consumers’ attitudes, interests, values, and lifestyles, all of which can influence purchases and decisions.

Examples of psychographic segmentation in marketing include:

• Food brands targeting health-conscious consumers by touting natural ingredients
• Lifestyle brands focusing on customers who like hiking, the beach, or international travel
• Brands that hone in on values and beliefs, such as customers who are family-oriented, eco-conscious, or religious
• Tailoring marketing to a specific hobby, such as woodworking or a certain sport
• Tracking behavior patterns, such as coupon usage or responding to specific ad campaigns

In today's competitive market landscape, understanding your audience at a psychological level is essential for creating impactful marketing strategies. Creating psychographic profiles helps brands differentiate themselves from competitors and develop a nuanced approach to marketing.

Understanding the purpose of marketing audience segments is the first step. The next step is knowing how to apply those segments to gain successful marketing outcomes. Let’s explore some best practices to identify, implement, and measure your success.

Use technology to identify audience segments

There’s more than one way to identify audience segments. You might combine two or more criteria to create a segment to market to. One way to do this is to use technology that will show you the customers who fall in a given category.

Technology like CRM systems , ERPs, and customer intelligence platforms like Meltwater are great places to start. You can review your own sales data and empower it with third-party intelligence to learn more about who your customers are. 

Considering looking specifically at:

• Purchasing behaviors
• Browsing data
• Engagement level
• Platform(s) used, such as email, social media, mobile browsing, etc.

Once you find your niche groups of customers, you can start tailoring campaigns and messages that will resonate with them.

Want to learn more about how Meltwater can supercharge your audience segmentation efforts? Simply fill out the form below and an expert will be in touch!

Align segments with marketing objectives

Choosing specific marketing objectives works in tandem with identifying your audience segments. You might have a message to promote and need to find the right audience to hear it. Or, you might identify a niche audience and want to reach them with relevant products and services. 

Either way, you need to solidify this alignment early on in the process. Thorough audience segmentation analysis will help you develop clearly defined goals and allow you to personalize your messaging to your audience.

Create relevant promotions and offers

Next, develop customized offers, promotions, and incentives that appeal to the specific needs, preferences, and buying behaviors of each audience segment. This is the heart of audience segmentation, as it allows you to customize your approach based on who you’re talking to.

Don’t be afraid to test different offers and messages to identify what resonates most with each segment and adjust your strategies accordingly.

Choose the right channels to reach each segment

Once you know who you’re talking to, what you’d like to say, and what your customers should do next, you can choose the best channels to reach them. Optimize your marketing content and channels to reach each audience segment where they are most active and receptive. This might be social media, email, search engines, or other digital platforms, for example.

Think about how your audience prefers to receive content and how they engage with it. For example, some audience segments might like demo videos while others prefer to read content.

Use data and analytics to measure outcomes

Strong audience segmentation begins and ends with data. Continuously collect and analyze data on the performance and engagement of each audience segment. For example, you might measure email open rates, click-throughs, and conversions to see if your campaign hit the mark.

You can use this data to refine your future marketing campaigns and create repeatable processes for segmentation.

Target audience segmentation is like a science experiment. You’ll need to record your observations and carefully refine your approach as you discover more about what works and what doesn’t. Follow these tips to make your audience segmentation model a valuable piece of your long-term marketing strategy.

Personalize your content and messaging for each segment

Marketing to an audience segment isn’t enough to guarantee success. Your marketing campaign must align with that segment in every way possible.

Consider the imagery and language you use, as well as the timing of your campaign. For example, showcasing a glistening swimming pool to people experiencing a rainy hurricane season might work well for a travel agency aiming to attract vacationers. But it might not resonate for a patio furniture company trying to make a sale.

Maintain records of your audience segments

As you develop and refine your segments, keep track of who you’re marketing to and the results you achieve. This can help you flesh out customer personas that you can use throughout your marketing efforts and help you avoid reinventing the wheel with each campaign.

You’ll be more informed about who buys from you and why, leading to more impactful marketing in every future campaign.

Continue exploring new audience segments

Consumer preferences evolve. Competitors enter and leave the market. New needs arise. Business is an ever-changing landscape, which means audience segmentation can’t be a one-and-done objective. 

Continue finding new ways to segment your audience and reach them like never before. A/B test your segments and campaigns so you can trust you’re achieving the best outcomes possible.

And perhaps most importantly, stay updated on the latest trends, technologies, and changes in your industry so you can adapt and evolve your audience segmentation and marketing strategies accordingly.

Meltwater’s consumer intelligence solution empowers your audience segmentation strategy with data-driven insights. Powered by AI, Meltwater helps you identify potential customers and the hidden connections between them, including demographic, geographic, and psychographic details. Learn more about what makes them tick, what they buy, and what they like beyond your brand so you can form more meaningful connections. 

Meltwater customer Hyundai used our platform to learn what customers are looking for in electric vehicles. The brand uncovered the values, preferences, and opinions of key segments, allowing better messaging to specific markets.

World Wildlife Fund also uses Meltwater to learn more about the diverse conservation needs around the world. As a result, the non-profit has increased its Twitter following by 1,200% , identified five categories of influencers to help promote its messaging, and developed key messages and calls to action based on audience segments.

Learn more when you request a demo by filling out the form below.

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Market Segmentation for Manufacturing Businesses

Table of Contents

Navigating manufacturing isn’t just about keeping up with the latest technologies or production methods. It’s about understanding who you’re making these products for. Enter market segmentation : the strategy that slices the market into manageable, bite-sized pieces based on shared needs or characteristics. 

Think of market segmentation as your GPS in the vast manufacturing landscape. It doesn’t just guide you; it ensures you’re heading in the right direction—towards more engagement, better satisfaction, and, ultimately, stronger sales .

Ready to dive deeper? Read on to learn more about mastering the art of market segmentation in manufacturing and how to craft marketing strategies that speak directly to each segment.

Harnessing the Benefits of Market Segmentation for Manufacturers

Market segmentation is more than a strategy; it’s a catalyst for growth and innovation in manufacturing. By focusing on manufacturing market segmentation, you’re not just selling products but creating solutions for distinct groups with specific challenges and desires . That’s how you stand out and connect with your audience.

Here’s how market segmentation revolutionizes the manufacturing industry:In the competitive manufacturing arena, understanding and applying market segmentation is akin to discovering a strategic blueprint for growth and customer engagement. It transforms generic outreach into a precision-targeted approach, delivering unparalleled benefits :

Tailored Marketing Efforts

By segmenting the market, you can craft highly personalized marketing campaigns. This specificity ensures messages resonate deeply with each audience, significantly improving the effectiveness of advertising efforts and boosting conversion rates.

Elevated Customer Experiences

Segmentation goes beyond marketing—it’s about understanding the heartbeat of each customer group. This insight allows manufacturers to exceed expectations, creating products and services that genuinely meet each segment’s nuanced demands, fostering loyalty and satisfaction.

Sharper Competitive Edge

Market segmentation offers clarity and stands out in a sea of competitors. By targeting distinct segments precisely, manufacturers can differentiate their offerings, making them the go-to choice for customers seeking solutions that address their specific needs and challenges.

Informed Product Development

The intelligence gathered from segmentation feeds directly into product innovation and development. This means products are not just made; they are sculpted with the insights and preferences of targeted segments, leading to higher demand, better customer feedback, and increased market share.

Optimized Resource Allocation

Effective segmentation ensures that every dollar spent on product development and marketing yields the highest possible return. As you focus your efforts on the most lucrative and responsive segments, you can allocate resources more efficiently, enhance overall ROI, and pave the way for sustainable growth.

Data-Driven Decision Making

Armed with detailed data about different market segments , you can make more informed decisions across all business areas. This data-driven approach helps anticipate market trends, changes in customer behavior, and potential new segments to target, ensuring your company remains agile and ahead of the curve.

By embracing the full spectrum of benefits offered by market segmentation, you can not only navigate the market’s complexities with greater ease but also carve out a path to innovation, customer satisfaction, and sustained success.

Tackling the Twists and Turns of Market Segmentation

Embarking on the market segmentation journey unlocks a world of possibilities, but it’s not without its twists and turns. While the potential rewards are vast, navigating the challenges is crucial for turning those possibilities into realities. Let’s delve into these challenges and how to overcome them, ensuring your segmentation strategy isn’t just a plan but a pathway to success.

Zeroing in on the Right Segments

It all starts with pinpointing the segments that truly matter. This is the bedrock of your strategy. But it’s not just about drawing lines around groups of customers; it’s about diving deep to understand which segments are distinguishable, reachable, and substantial enough to matter. It’s part science, part art, and entirely essential.

Keeping Pace with Changing Markets

If there’s one constant in the market, it’s change. Customers evolve, trends shift and needs transform. Staying relevant means your segmentation can’t be set in stone. It requires a nimble approach, ready to adapt and evolve. This continuous cycle of analysis and adjustment keeps your strategy fresh and focused.

Striking the Perfect Balance

The golden mean between broad appeal and niche targeting is elusive but attainable. Swing too broad, and your message loses its punch; too niche, and you might miss out on broader opportunities. The key is to find that sweet spot where your offerings resonate deeply without narrowing your potential market too much. It’s about being specific enough to be meaningful but flexible enough to scale.

Avoiding the Pitfall of Over-Segmentation

There’s a risk of slicing your market too finely in the quest to be all things to all people. Over-segmentation can spread your efforts thin, making it harder to make a significant impact in any one area. Remember, segmentation is a tool to concentrate your force, not dissipate it. It’s about finding the most effective way to allocate resources for the biggest impact.

In the vibrant and ever-changing world of manufacturing, leveraging market segmentation is the key to unlocking new levels of success. The journey is complex, but by facing these challenges head-on, you can craft strategies that resonate deeply with your target audience and propel your business forward with innovation and growth . It’s about balancing, staying agile, and always keeping the customer at the heart of everything you do. With a thoughtful approach to market segmentation, the opportunities are limitless.

Explorium.ai offers a powerful solution to the challenges of market segmentation through its advanced data enrichment and custom data signal capabilities, tailored to meet specific industry needs.

By leveraging Explorium’s tools, businesses can navigate the complexities of identifying and targeting vital segments. This allows for adaptation to market changes and achieving the right balance in segmentation strategies.

This approach enhances decision-making and ensures strategies resonate effectively with target audiences. Explore the potential of Explorium.ai to transform your segmentation efforts and learn more about their methodology in Data Enrichment – A Complete Introduction .

Crafting Your Blueprint: A Guide to Defining Market Segments

Embarking on the journey of market segmentation can feel like navigating a data labyrinth . But with a clear blueprint, you can uncover the segments that will supercharge your marketing strategies. Let’s dive into the segments you should consider and how to piece them together.

• Demographic Segmentation: Start with the basics—age, gender, income, occupation, and education level. These details might seem simple, but they’re goldmines for tailoring your marketing efforts.
• Geographic Segmentation: Where your customers are can tell you a lot about what they need. Geography shapes consumer needs and preferences, whether by country, region, city, or even climate.
• Psychographic Segmentation: Dive into your market’s psyche—values, interests, lifestyle data , and attitudes. This is where you get to the heart of what motivates your customers.
• Behavioral Segmentation: Look at how customers interact with your brand. Purchase history, product usage, and response to previous marketing efforts reveal patterns that help predict future behavior and preferences.
• Firmographic Segmentation: If you’re in B2B, firmographics are your bread and butter. Segment businesses by industry, size, revenue, or number of employees to tailor your approach to their unique organizational needs.

Here’s the kicker: combining these segments allows you to paint a detailed picture of your market. It’s not just about identifying who they are but understanding their world—what drives them, their challenges, and how your product or service fits into their narrative.

For those ready to dive deeper into the specifics of segmentation, particularly in the business realm, exploring firmographic segmentation can offer advanced insights and strategies. It’s your next step in mastering the art of market segmentation, enriching your marketing toolkit , and setting your strategies ablaze with precision and effectiveness. 

Real-World Wins: Market Segmentation Success Stories

Welcome to the world of informed, data-driven marketing—where every message hits home, and every strategy is a step ahead. Diving into market segmentation theory is one thing, but seeing it in action? That’s where the magic happens. 

Let’s uncover how some of the world’s most successful companies use market segmentation to stay ahead. These stories aren’t just inspiring—they’re a playbook for your segmentation success.

Nike’s Demographic Triumph

Nike knows one size does not fit all. By segmenting their market demographically, they’ve crafted specific product lines for different age groups, genders, and athletic needs. This approach lets them speak directly to each segment’s desires, driving loyalty and sky-high sales.

Starbucks’ Geographic Mastery

Starbucks turns geographic segmentation into an art form. It tailors its store layouts and menu offerings to fit local tastes and cultures, making every visit personalized. This strategy turns a global chain into a local favorite, proving the power of understanding your market’s geography.

Spotify’s Behavioral Personalization

Spotify uses behavioral segmentation to offer personalized music recommendations. By analyzing listening habits, it creates a custom experience for each user, making its service indispensable. Spotify’s strategy shows how understanding customer behavior can create an unbeatable value proposition.

HubSpot’s Firmographic Focus

In the B2B realm, HubSpot segments its market based on firmographics like company size and industry. This allows them to provide targeted content and solutions that resonate with each business’s specific challenges and goals, illustrating the power of fine-tuned B2B segmentation.

These examples illuminate the transformative power of market segmentation. By understanding and applying segmentation principles, these companies have not only honed their marketing strategies but also deepened their relationships with customers, fostering loyalty and driving growth. Let their success inspire you as you embark on your segmentation journey. With the right approach, the possibilities are limitless.

Charting the Path Forward: Ignite Your Market Segmentation Strategy with Explorium

As we’ve journeyed through the landscape of market segmentation for manufacturing businesses, it’s clear that this isn’t just a strategy—it’s a transformational tool. It carves out paths to deeper customer understanding, more resonant marketing messages, and innovative product development tailored to the unique needs of each segment.

Now, it’s your turn to harness the power of market segmentation. Whether you’re refining your approach or embarking on this journey for the first time, Explorium guides you every step of the way. With our cutting-edge platform, you can dive into the granular details of your market, uncover hidden segments, and unlock actionable insights that propel your business forward.

• Discover: Use Explorium to identify and analyze the segments that matter most to your manufacturing business.
• Strategize: Craft precision-targeted marketing strategies that resonate deeply with each customer group, leveraging Explorium’s data-driven insights.
• Innovate: Inform your product development with a deep understanding of customer needs, preferences, and behaviors, ensuring your offerings hit the mark every time.

The journey to market segmentation mastery begins with a single step. Take that step with Explorium and transform how you connect with your market. Visit our manufacturing guides to start reshaping your marketing strategy today. Let’s unlock the full potential of your manufacturing business together—segment, target, and conquer!

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How to create a marketing plan [free template].

What is a Marketing Plan?

What is a marketing plan template, use workamajig’s free marketing plan templates, how to write a marketing plan that works, build & execute your marketing plan with workamajig, browse more blogs.

As the famous Benjamin Franklin quote says, “If you fail to plan, you are planning to fail.” This rings especially true in highly competitive industries, and even more so with the rise of social media and the vast array of options for selling products and services.

It can be easy to get lost among all the options available, which means you need a framework for quickly and successfully launching and supporting your brand, product, or service in the market.

This is where a marketing plan comes in.

A marketing plan outlines a company’s overall marketing strategy, including the research and data that support it. Key information that comprise a marketing plan include:

• Company information : highlighting its relevance to the strategy in place
• Company, market, and competitor research: isolating and informing high-value marketing opportunities
• Concrete marketing plans: outlining goals, activities, and resources for enabling success

Marketing plans are typically laid out over a year but can change depending on the team’s objectives—the more frequently you need to create one, the more valuable it becomes to do it efficiently. This is where a marketing plan template comes in handy.

A marketing plan template is a tool used to build a comprehensive marketing strategy. It mainly eliminates the manual work of identifying and structuring the key information we outlined above. This allows you to focus on the actual task of building your marketing strategy, from setting goals and conducting research to identifying activities and resources essential to your campaigns. Our template is designed to cover these essentials while also leaving room for you to tailor content and sections to your specific needs.

Why Are These Important?

Alignment and efficiency are the overarching themes when creating a marketing plan and building an easy marketing plan template. For starters, a marketing plan helps establish a clear set of goals and objectives, which allows teams to optimize their efforts toward the same outcome. It also qualifies as an effective risk management tool when done right by clearly outlining stakeholders and their responsibilities for minimal overlap, as well as budget allocations and projections to ensure that planned activities are equipped to succeed.

When you create a marketing template, you achieve even more efficiency. This allows for more seamless creation of new marketing plans to fit new requirements and continuous learning from using and evaluating an established format.

The difference between a marketing plan and an effective one is subtle yet critical to your success. A basic marketing plan template should be:

•   Simple: by following a straightforward approach, using terms and a structure that’s easy to digest, both for the one creating it as well as those reading it,
• Interesting: with expertly designed layouts or formats that synergize well with the outline/structure and
• Versatile: allowing you to freely and easily add, remove, or rearrange sections and information to make sense of your strategy.

Below, we’ve created two free marketing plan templates that are designed around the above principles.

The Google Slides template is designed for more flexible layouts and more images.

The Google Docs template offers a more straightforward approach.

To begin using either template, click the matching link above and select File > Make a copy.

While you’re free to start populating the template however you like, there are ways to optimize this activity further. Below, we’ve reorganized the various sections in our template so you can populate them in an order that makes sense; these are grouped into five phases: Introduction, Research, two Strategy phases, and Polish. By following this section like a step-by-step guide, you would prioritize sections that inform other parts of the document so that you can complete each part almost in one go.

Introduction

First, fill in your Title Page before navigating to the Company Overview. This is like the ‘About Us’ section of a website and will help stakeholders learn about your business by filling in the following:

• Your Company Name
• Where your company is located (Headquarters)
• Your market category and a summary of the products or services you provide (Category, Products & Services)
• Your Mission Statement

It’s important to create a mission statement if you don’t have one yet—this gives both you and your audience a vivid impression of what your company is about and what it’s trying to achieve, which would be an important piece to understanding why your whole marketing plan can be expected to work. Your goal here is to write a mission statement that is clear and easy to understand.

An option to include information about your team or other specific individuals within the company is included. This would make sense if a specific group of individuals in your company is involved; the alternative implies that the plan may involve efforts from across the entire organization.

After wrapping up your introductory sections, it’s time to collect data to inform your marketing strategy. In this phase, we’ll be looking at your company, your customers, and your competitors and using that to identify your ideal client.

Start with the SWOT Analysis. This stands for Strengths, Weaknesses, Opportunities, and Threats. Here is a quick rundown and some guide questions for identifying each section:

• Strengths refer to internal advantages that your company might have over your competition. For example, do you have a strong brand reputation? Do you have a tried-and-tested pipeline and track record for launching successful marketing campaigns? Do you have a sizable budget? How about highly skilled employees?
• Weaknesses outline the opposite—these are factors that might put you at a disadvantage against competitors. These are often related to either a limited budget or a lack of skills or experience.
• Opportunities serve to highlight external factors that you might be able to use to your advantage. Consider this: are there relevant changes to market trends or consumer behavior? Have new market segments emerged? Are there new business models you can utilize in your strategy?
• Threats, on the other hand, are external factors that could negatively affect your business. Look into the following: Have new competitors emerged, or have existing competitors experienced substantial growth or change? Has the economy taken a turn for the worse? Are your customers’ preferences seemingly changing? Are there notable changes in technology or the environment to worry about?

Next, move to Customer Analysis. This is the process of evaluating and understanding different aspects of your consumer base, including their preferences and habits. This is fundamental to your overall strategy, as customer satisfaction almost always directly correlates to greater returns. A customer analysis is mainly broken down into demographics, which relate to their biological, educational, professional, and marital information, and psychographics, which relate to their behaviors, thought processes, and preferences. This also includes exploring various external factors that might influence their purchasing decisions, such as events and the offerings of competitors.

Once that’s finished, navigate to your Competitor Analysis section. This is the process of analyzing competitors who offer similar products or services or operate within the same industry or market as your company. This includes inspecting their overall strategy, including branding, operations, and promotion, identifying strengths and what resonates with their market or yours, and looking into areas where they might be lacking. This helps inform opportunities for your plan to stand out and succeed.

Finally, you can jump back to the Buyer Persona. A buyer persona is a detailed description of your target audience or customer built on the market research you conducted above; this includes existing data on your customers—this would include demographic information, motivations, and behavior, among other details. This helps businesses build a deeper understanding of their audience and is used to anchor marketing, sales, communication, and product development strategies to satisfy a given persona’s needs and preferences. Creating an effective buyer persona now will help build strategy for meaningful engagement.

Strategy-Building (Part 1)

Completing the previous sections should result in a clear picture of your position in the market. You can now use that to build the marketing plan's meat thoroughly. For starters, you will want to find the Goals section—our guide on SMART goals has everything we believe you will need to fill in this part of the plan.

Next, we will be tackling the Marketing Mix in two parts.

Product. In this section, discuss the products and/or services you intend to release or market as part of this strategy. This means outlining various features, design elements, or variants that will be available to customers.

Pricing. This is where you’ll be outlining amounts—how much will each of the products you included previously cost? When determining these, it’s critical that you consider your buyer persona, as well as competitor pricing and any promotions or discounts that might be part of your strategy. This will further increase your products’ perceived value among customers, especially your target market. Tables are a great formatting tool here; you can also link to an external spreadsheet, where you have more room to create a detailed pricing scheme.

Place. This section discusses how you would make products or services available to customers. It includes the method by which sales are generated (e.g., retail, online, direct), as well as strategies for storing, housing, and distributing inventory. Your main consideration here is making sure that your products and services are as convenient and efficient to access as possible in order to sufficiently meet customer demand.

The second part of the marketing mix covers both the Promotion and Marketing Channels sections. This is done so you can cross-reference between the two sections, ensuring that they are updated to synergize with one another.

The Promotion section primarily focuses on how you will help customers understand the value of your products and services, including tools and techniques for providing support across the customer journey (before, during, and after a sale.) A critical consideration here is ensuring the methods align with your goals while respecting your brand identity.

Marketing Channels then focus on the what or where of your promotion plan, which is typically broken down into traditional, digital, retail, and event marketing channels. Building this section relies heaviest on your buyer persona and the specific products and services you’re looking to promote—understanding where you can best reach your existing market or attract new eyes is important here.

Working on these sections first allows you to transition seamlessly to your Unique Value Proposition. Use this section to talk about how or why your products/services are a better choice than the competition. Your customer and competitor analysis would feed a lot of information here.

Strategy-Building (Part 2)

The second phase of your strategy will move between the template's Performance Management and Budget sections.

Under Performance Management , it’s time to identify your Key Metrics. Also known as key performance indicators (KPI) are quantifiable measures that determine your campaign or strategy’s progress or success. To assist with this, look back at your Goals section to see what factors can be represented by numbers and data—for some of these, you may need to derive them from computations of other factors. Common key metrics include total conversions, conversion rate, click-through rate, and social media engagements.

At this point, you can freely work on two sections simultaneously: Monitoring & Evaluation Methods and  Projected Expenses.

Monitoring & Evaluation Methods answers the question of how you will collect the metrics listed. Include relevant tools and data collection methods to be used here.

Projected Expenses refer to an itemized list of unique costs required to execute the strategy. This includes hardware and software needs, resources needed to run online or in-person events and promotions, travel and other logistics, and even compensation for in-house or outsourced manpower. A table is a great way to format information here.

Once all of that is ready, you can begin working on Projected Returns . In this section, you want to outline how this strategy is expected to generate value beyond just the immediate sale of whatever products or services are being offered and how much each of these sources is expected to contribute. From here, you can define your expected return on investment (ROI) by subtracting the total earnings from the costs in your Projected Expenses section.

You will notice that only one section remains—jump back to the early part of the template to work on your Executive Summary. This section combines all of the sections into a big-picture pitch. Your highest priorities here are summarizing your Goals, Marketing Mix, Unique Value Proposition, and Projected Returns sections.

Now that you’ve filled in all template sections double-check everything for errors or omissions.

A marketing plan serves as the blueprint for your success over time. A marketing plan template ensures that you can quickly and expertly craft a strategy while allowing for continuous improvement.

With Workamajig, the premier agency management software , you have an all-in-one solution for planning, organizing, and delegating these efforts and easily transitioning between the phases of every project. Easily adjust your schedule or modify task requirements and assignees to ensure efficiency, and use native reporting tools to measure your progress and identify and address roadblocks along the way.

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