What Is Market Segmentation?

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A "market" is a universe of customers or clients who are interested in a particular product, service, or company. The market is made up of sub-sets that share particular product or service demand characteristics. Market segmentation is the process by which these sub-sets of the market are identified in order to target advertising and marketing campaigns based on shared preferences. A market segment must be distinguishable from the rest of the target market, must exhibit homogeneous product or service needs or desires, and segmentation members must respond to similar advertising and marketing campaigns.

How To Segment a Target Market

In order to understand the many different consumers in any one particular target market, it is necessary to recognize how consumers are different and how they are similar. The focus a target market segmentation effort begins by looking for patterns in consumer attributes. These patterns can often be highlighted by establishing consumer profiles or personas that focus on life style and a constellation of consumer demographics.

Markets may be divided into segments by looking at their demographics, economic status, geographical location, and behavioral attributes. The distinctions made among different generations of Americans are an example of market segmentation by demographics. In order for target marketing to be more effective with these generational groups, further refinement along other attributes are necessary. For example, not all baby boomers respond to the same marketing strategies.

The key to effective target market segmentation is to ensure that the categorical segments meet certain criteria. The market segments must be homogeneous and also heterogeneous. That is to say that the members of the segments must be sufficiently alike as to be considered a homogeneous group, and the segments themselves must be sufficiently distinct as to be considered categorically heterogeneous.


Why Is Market Segmentation Important?

Consumers are interested in products, services, and brands for different reasons. Certainly consumers have in common some of the reasons they are interested in a brand. Within the mind of the consumer, there exist some fine distinctions that may not seem important - unless the concept of differentiation is clear. People of think of differentiation as something that exists in a product, service, or brand. But, differentiation exists in the mind of the consumer. Differentiation is a key that unlocks the reason why a consumer seeks information about a brand, product, or service. Differentiation is also the key that opens the door to a completed purchase.

To create marketing campaigns that are efficient to conduct and maximally effective with respect to outcomes, it is crucial to know what motivates a consumer to make a purchase. But it is also important to understand where a consumer is in the path to purchase. 

The ideas that market researchers, marketers, and advertisers have held about the path to purchase have changed radically as a result of the use of mobile digital devices and online environments. At one time, consumers were thought to progress toward the purchase as though they were falling toward and into a funnel.

A sales person had only to provide an effective nudge at the right time, and the purchase would be accomplished. In the current market, consumers do a considerable amount of research about a product, service, or brand that is independent of any contact with sales representatives. In essence, marketing and advertising content stand-in for sales personnel. This is a primary reason why visual content has become so very important in the purchase journey. It is essential to guide consumers to the reasons why they benefit from a particular product, service, or brand.