Market Segmentation 

Market segmentation is the process of splitting a business’ target market into different groups. Businesses use these groups to make it easier for them to develop products aimed at certain people and to help them target their marketing. Small businesses generally split up their target market based on location, demographics, behaviour, lifestyle, income and age. 

Methods of Market Segmentation 

➔ Location (Geographical) Segmentation 

Splitting up a market by location is also known as geographical segmentation. This is used to split up a target market based on where people live. A business may choose to target customers in its local area, or it may consider what types of products would sell in specific locations. For example, walkers in the Lake District may be more interested in buying hiking boots than people living in Manchester. 

➔ Demographics Segmentation 

Demographic segmentation considers the characteristics of people. These characteristics may include age, gender, race, religion, nationality, disability, ethnicity, sexual orientation and occupation. Businesses consider the demographics of the people to whom they want to aim their products. For example, a make-up business might target females aged 19–35 in the UK for a certain type and style of make-up. Some businesses 

target products at people of certain ages. Examples of such products include toys for children, pension plans for people aged over 60 and cars for people aged 17 or above. 

Behaviour

Socio-economic groups 

Lifestyle (Psychographic) Segmentation 

Lifestyle segmentation considers what sorts of lives the people in a business’ target market lead. This may take into account hobbies, sporting interests and other things customers do in their spare time. For example, a camera equipment retailer may want to target customers who are interested in photography, or a cricket bat manufacturer may want to target people with an interest in cricket. 

Income 

Income segmentation considers how much people earn and how much disposable income they have. This is extremely important for certain products. For example, a business selling high-end luxury cars or expensive jewellery would need to target people with a high level of income. However, a budget brand of baked beans may target customers with a low level of income. 

Benefits of Market Segment 

Satisfy customer needs 

Customers have different needs and requirements that must be satisfied by businesses. Customer needs change constantly so it is important that businesses are able to keep up with and match these needs consistently. An example of a customer need might be a segment of the market requiring low-cost food and drink. A business may set up aiming to meet this need. 

Increase sales and profits 

By targeting specific customer groups, businesses can increase their sales and profits. Segmenting products means that businesses are likely to create products and services that have a higher chance of selling. For a small business, using segmentation to target a smaller group of customers could give them a higher chance of business survival. 

Targeting the right products at the right people 

Targeting the right products at the right people is very important. Getting this right means that businesses are less likely to waste money on marketing and promotion.