Marketing Plans

How to Segment Markets

Identifying target market segments is part art, part science. Having an understanding of these five ways to segment markets will make the job a little easier.

You know that you need to segment markets prior to writing a good marketing plan, right?

How to Segment Markets

But carving up your customer base into market segments can be a little daunting if you've never done it before.

The key is to understand these five ways to segment markets:

  • Demographic Segmentation - Segment customers based on measurable statistics such as age, income, occupation, etc.
  • Psychographic Segmentation - Segment customers based on lifestyle preferences such as music lovers, city or urban dwellers, etc.
  • Use-based Segmentation - Segment customers based on frequency of usage such as recreational drinking, traveling, etc.
  • Benefit Segmentation - Segment customers based on their desire to obtain certain product benefits (e.g. luxury, thriftiness, comfort from food, etc.)
  • Geographic Segmentation - Segment customers based on their location, i.e. home address, business address, etc.

Which method of market segmentation you use depends on the specifics of your own business.

Here are examples of target segments that can be created using the market segmentation types:

  • Women business owners between the ages of 25 and 60 earning more than $25,000 annually form a demographic segment.
  • People who drive compact cars due to their fuel efficiency form a benefit segment.

Be careful not to confuse a geographic market segment with a place. The market is the people who live in the sunbelt area, not the sunbelt area. This is a common mistake made by business owners that causes them to lose a marketing focus on their customers.

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What target markets are you thinking about chasing after? How did you go about segmenting markets in order to arrive at your target market segments? We welcome your comments, questions, tips and advice.

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