First and foremost, by understanding a market segment, you’ll leverage your messages. Targeting better in the product, sales, and strategy opens up additional revenue. Secondly, marketing segmentation helps boost a current market that has plateaued. It may also provide insights into niche markets that you may not have considered otherwise. Next, businesses benefit from reaching more reliable leads that provide increased conversions and greater sales. Lastly, by presenting your company as unique from your competitors, you develop brand loyalty and strengthen your brand identity.
While a large number of executives believe that market segmentation research is crucial for growth and increasing profits, surveys by Bain & Company indicate that a small percentage of their companies use it effectively. This untapped potential means that business market segmentation is further beneficial to an intelligent marketer who takes hold and uses this information to their advantage.
The five primary categories of segmentation.
Geographical segmentation- Categorization based on the location of an individual such as country, city, continent, or region. In a more narrow spectrum, it would include neighborhood, county, postal code, or street segments. These categories are examples of geographic locations – groups defined by a specific location.
Demographic segmentation- Categorization based on individual attributes such as age, gender, ethnicity, or income. It would include housing type, education level, Italian, or even something like what allergies they have, in a more narrow spectrum. These categories are examples of demographic data – groups defined by specific criteria they fit.
Firmographic segmentation- Categorization based on company attributes such as industry location, business size, internal revenue, or industry type. It would include segments such as specific job titles, memberships, and unions in a more narrow spectrum. These categories are all examples of firmographic data. Demographic segmentation relates to people. Similarly, firmographic segmentation refers to companies and organizations.
Psychographic segmentation- Categorization based on the party’s values, feelings, and thoughts, such as lifestyle, personal interests, values, and opinions. It would include segments such as political beliefs, awareness issues, activities, and special interests in a more narrow spectrum. To further explain, this is where you’d find customer groups such as people who like to read books. Or customer groups who seek healthy living options. Perhaps, a group containing people who believe in the humane treatment of animals. These categories are examples of firmographic data – traits exhibited from psychological criteria.
Behavioral segmentation- Categorization based on customer segmentation by behavior patterns such as product usage, solution or benefit, timing, and decision-making process. In a more narrow spectrum, it would include segments such as how often they visit a website, which features the customer uses, or what time of day/season a potential customer most often buys. These categories are examples of behavioral data – common exhibited patterns in interacting with a particular product or business.