Reading: Segmentation Criteria and Approaches
Common Approaches to Market Segmentation
Segmentation starts by identifying all the potential buyers for your product: individuals with the need and the means to buy what you offer. In most cases, this represents a large universe of people or organizations that are similar in some ways but different in many other ways. Segmentation is a process that helps marketers narrow their focus on the most promising groups within that universe.
There is no single correct way to segment a market. Defining a target consumer base can be performed using a variety of segmentation methods. Several common methods are discussed below. Marketers may apply a combination of these methods to provide greater insight into their target market and the customers they want to serve. In fact, good marketers generally try out different methods and combinations to figure out what approach is most successful to help them achieve their goals. Because people and their needs change, effective approaches for segmenting a market can also evolve over time.
The following is a list of common market segmentation approaches:
- Geographic: countries, provinces, regions, cities, neighbourhoods, postal codes, etc.
- Demographic: age, gender, family size, income, occupation, education, religion, ethnicity, and nationality.
- Psychographic: lifestyle, personality, attitudes, and social class.
- Behavioral: user status, purchase occasion, loyalty, readiness to buy.
- Decision maker: decision-making role (purchaser, influencer, etc.)
Geographic Segmentation
Geographic criteria—countries, provinces, regions, cities, neighbourhoods–define geographic market segments. Geography represents the oldest basis for segmentation. Regional differences in consumer tastes for products are well known, such as donairs in Halifax, steak in Calgary, or a higher number of laid-back, health-conscious vegetarians in Vancouver. Geographic segmentation suggests that in St. John’s NL you can sell raincoats, and rubber boots; in Toronto’s hot muggy summer, you can sell air conditioners; and in Fort McMurray Alberta, you can sell down winter coats and warm winter boots with January’s temperature averaging -20.7 °C.[1]
Geographic markets are easily identified, and large amounts of data are usually available. Many companies simply do not have the resources to expand beyond local or regional areas, so they must focus on one geographic segment only. There is very little waste in the marketing effort, in that the product and supporting activities such as advertising, physical distribution, and repair can all be directed at the customer. Further, geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location.
The drawbacks of using a geographic basis for segmentation are also worth noting. There is always the possibility that consumer preferences aren’t dictated by location—other fa