Market segmentation

Market segmentation

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The keys to success for any business, big or small, online or offline are identifying your customers, finding out what they need or want, and then giving it to them at a price they can afford. At first glance, this may seem child-like in its simplicity. However, many businesses fail because they fall short of accomplishing these basic goals. Huge corporations have the financial resources to locate their ideal market segment, but small businesses rarely do.


Market segmentation is dividing your target market into multiple parts so that you can tailor your marketing to address each segment individually. This approach to marketing has been used for many years in print, TV, radio, and now the Internet. Why? Because it works.


Depending on your desired outcome, there are two areas of market segmentation: consumer and business-to-business. Web entrepreneurs need only to concern themselves with their consumer base unless they’re of the few that serve B2B..


Overall, there are four categories of consumer market segmentation: Geographic Segmentation, Demographic Segmentation, Psychographic Segmentation, and Behavioral Segmentation. Let’s take a closer look at these:


The geography of your customer’s residence or business plays a huge role in determining the profitability of your products. Therefore, geographic segmentation is crucial to most businesses. Under this geography umbrella, businesses request multiple metrics, such as which country the consumers reside, which city/state within that country, the population of that city/state, and even the climate of that area.

From within the geographic segmentation of a company, you can sometimes “drill down” to serve isolated sub-markets. Note: refrain from developing a segmentation six-shooter attitude. Sometimes a business loses revenue because their business is too segmented to attract a decent amount of loyal customers. This is where the gap between experience and inexperience make or break a business.

A company called Proctor & Gamble is one of the largest household products. Proctor and Gamble divided their products into three segments: Beauty, Health and Well‐Being, and Household Care. Each of the three segments has two or more sub-segments (drill down, sub-segments, and niche segments mean virtually the same thing). P&G took full advantage of those segments by providing real value to each of the niche sub-segments. P&G did that by

building hugely successful brands for their customers. In doing this, they became an extremely stable company and remains so to this day.


Demographic segmentation divides a company into individual parts by using existing customer information. These segments can include age, gender, income level, occupation, and marital status. Nearly all businesses, especially big businesses, incorporate demographic metrics into their decisions on products, research, and marketing. Age is an important factor in certain businesses. Would you market adult diapers to teenagers? Of course not, the majority of customers who purchase that product are the elderly population (with some exceptions). Segmenting your business via demographics might sound clinical, but it really benefits you and your customers by offering something they need and want. It is just good business.


Psychographic Segmentation divides a business according to customer lifestyles, dreams, desires, and behavior. Surprisingly, even if they lack in other areas, consumers will often follow their hearts when they want something bad enough. This type of consumer is easy to market to, depending on your product. Think about it, some people owe thousands of dollars in back child-support, but have a new luxury car in the driveway. That is psychographics at work, because the overall message from the manufacturer’s marketing is essentially “Do what you want, as long as you are happy, to heck with everyone else.” Of course, that message cannot be delivered on a silver platter to the consumer, only indirectly implied. Luxury car manufacturers are masters of this segmentation.


If you own an online business, then you would surely know that acquiring, cultivating, and selling to your customers on a regular basis requires the use of an email subscriber list. When you have a couple hundred thousand subscribers, then segmentation will help you get more out of your list. You can use almost all of the segment types and create a hybrid segment unique to your business. The best way to do that is to simply ask them. You can send them an email survey listing a set of questions aimed at the relationship between them and your business. Once you analyze the overall data, you can create new segments, and develop a marketing plan for each one.


  1. Define your “perfect customer.” Write a short report that identifies the characteristics of your ideal customer. As the saying goes, “20% of your customers buy 80% of your volume.” That 20% is what you are after. You can do this using market research; you have the option of doing research yourself or paying a third party to do it for you.
    Working capital may not permit you to heavy research at first; but even a simple email survey can give you valuable information.
  2. Narrow your segment prospects to a few ideas only. (i.e. If you sell jewelry, some of your segment ideas might be a) Divorced women under 40 or b) Married men under 40 or c) retired women under 75. This is just hypothetical, but you get the idea.)
  3. Develop tailored content or product for each individual segment idea. Do not mix them with one another AT ALL. Treat them each as a separate business entirely. Remember the main objectives are narrow and specific.
  4. Market to each one using tailored products or ads.
  5. Collect data from your customer base for each of the prospective market segments. Identify leading segments in terms of volume, follow-up sales, upgrades, or whatever proves crucial to your business.
  6. Isolate the winning segment. Rinse and repeat using new segment ideas against your current one.
    Like it or not, today’s businesses use cutting-edge technology to determine a plethora of information about their customers. It is only logical to assume that these technologies will grow more and more sophisticated, thus shortening the distance between you and your customer. Netflix, for example, uses liquid technology to allow members to watch their content on a multitude of different devices. Coupled with Netflix’s ability to determine what programs you will like based on previous program choices, played a big role in their rapid growth as a business. To implement any “smart” technology today, segmentation will be at the forefront.

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