The practice of market segmentation continues to become more challenging as marketers gain more access to information about consumers. That information helps marketers understand consumer demographic characteristics, lifestyle characteristics, and more. The growth of the social web has opened the doors to massive amounts of information about consumer interests, preferences, and emotions. Gathering, analyzing, and prioritizing all of that information is a necessity that is continually evolving. If you missed Part 1 of the Using Market Segmentation for Better Brand Messaging series, follow the preceding link to learn what market segmentation is and why it matters to brands. Now, it's time to learn about the types of market segmentation in Part 2.
There are a variety of ways to segment a market, and the most effective market segmentation efforts analyze all of them. Regardless of the type of data you're using to create a segment, your analysis will focus on two areas: value and reach. Attributes related to value are often emotional and target perceived or real needs while attributes related to reach are more tangible and target distribution, media, and demographics.
The various types of market segmentation that are commonly used today are described below. Remember, the goal of segmenting your audience is to find the right balance between measures of demand and marketing costs to ensure a lift in ROI for each segment. Therefore, no single segmentation method is enough to drive the best results.
Primary Types of Market Segmentation
The broad types of market segmentation focus on grouping similar consumers based on personal attributes.
Demographic segmentation is the standard by which companies have segmented consumers for years. Unfortunately, demographic segmentation paints audiences with a broad brush and can result in stereotype-driven audience segments. However, it's still the go-to method companies start market segmentation efforts with. Demographic segmentation includes attributes like age, gender, income, education level, family status, occupation, household type, religion, race, and so on.
Psychographic segmentation is used to analyze lifestyle attributes such as attitudes, values, emotions, beliefs, interests, and perceptions. Market segments are created based on why people make specific decisions in their lives. The social graph, interest graph, and sentiment graph discussed in The Conversation Index report from Bazaarvoice is closely related to psychographic segmentation and is closely tied to the analysis of psychographic attributes.
With the popularity of the social web, behavioral segmentation is the hot topic in marketing circles these days and every company is looking for new ways to track consumers' online behaviors. There is so much data available to analyze consumer behavior that the challenge is no longer getting the data but rather finding the most useful data and making sense of it. Often this data is used for media buys but the majority of companies have yet to mine it for behavioral segmentation purposes.
Secondary Types of Market Segmentation
The secondary types of market segmentation focus on grouping consumers based on brand-, company-, or market-related attributes. Each of these types of segmentation could be included in one of the primary types of market segmentation discussed in the previous section. However, they're analyzed independently frequently enough that they should be discussed separately.
Geographic segmentation can happen as a result of distribution parameters. For example, a product that is only available in certain regions of the United States or that is used differently in various parts of the world would benefit from geographic segmentation. Such segmentation is also very useful in identifying new market opportunities and brand extensions for existing brands.
Marketing messages and initiatives could vary widely from one brand distribution method to the next. For example, a retailer would benefit from different messaging in-store vs. online. One message does not fit all where varied distribution methods are involved.
Choosing the right media to deliver marketing messages is a fundamental part of any marketing plan, but media can also be an attribute that plays a role in segmentation. For example, audience segments could evolve based on the tools people use to consume media -- online, mobile, offline, etc. In other words, media isn't just a communication vehicle anymore. It's become a way of life and therefore, it's become an attribute that should be included in segmentation analysis.
Pricing strategy and segmentation shouldn't operate independently of one another. These days, price segmentation could have a fundamental effect on product development, brand extensions, and brand launches. For example, one way that most automobile manufacturers segment consumer audiences based on the prices they're willing to pay for cars. The auto manufacturers then create cars for each price point. The messaging and marketing tactics used to promote and sell those cars vary based on the sub-segments of the larger price-sensitive consumer groups.
Time segmentation focuses on two things -- when a brand's products are available and when consumers buy those products. For example, seasonal branded items (such as holiday merchandise) are only available at specific times of the year. On the other hand, some branded products are available year-round but sales increase at specific times of the year (or at different times of the year depending on geographic segmentation). For some brands, segmenting the consumer audience using time-related criteria is essential.
As you learned in Part 1 of the Using Market Segmentation for Better Brand Messaging series, no single form of market segmentation is enough for any brand. Instead, a combination of segmentation methods provides a clearer picture of who your customers are and how to market to them in order to increase return on investment. The challenging part is gathering all of that data, and that's the subject of Part 3 of this series. Stay tuned to the AYTM blog so you don't miss it!