Market Segmentation

The purpose of market segmentation is to develop strategies that can help us meet the needs and wants of consumers more directly and profitably.

What is market segmentation?

Market segmentation is the process of identifying distinct groups of consumers where the groups themselves are maximally different from each other (heterogeneous) but the consumers within each group are maximally like each other.

Examples of segmentation solutions include:

  • Demographic segmentation
  • Geographic segmentation
  • Psychographic segmentation
  • Behavioral segmentation
  • A combination of any of the above

The core aim of segmentation is to be the foundation for segment-specific marketing strategies that lead to greater profits for the brand or business that owns the segmentation. This can be achieved by matching unique product and service offerings with specific segment-based needs, thus creating more effective and productive marketing communications.

Creating a market segmentation

Segmentations usually take the form of exploratory and iterative processes over several steps:

  1. 1
    Qualitative research to identify the attributes that will be used to define the groups.
  2. 2
    Quantitative research using a larger sample to create a robust and representative data set.
  3. 3
    Analysis including the creation of several segmentation solutions using advanced clustering techniques like k-means clustering and latent class analysis.
market segmentation concept

Most important is that a segmentation solution is found which not only represents a robust mathematical solution that can be replicated as an algorithm for database tagging, but one which makes intuitive sense, works for the business and, most importantly, presents segments that are valuable and accessible from a targeting perspective.

At the end of the day, segmentation is all about segment-specific marketing strategies that lead to greater profits.

Put simply, segments need to be:

  • Intuitive to understand
  • An appropriate number to be practicable
  • Actionable to improve marketing effectiveness

Let D&M Research create a unique market segmentation to suit your category and brand.

For a detailed guide to the approaches and techniques used in market segmentation, download our printable Market Segmentation Guide.

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