When diving into the world of marketing, one of the fundamental concepts you’ll encounter is market segmentation. But what exactly does this mean? Essentially, segmentation bases are the different factors or variables that marketers use to divide a broad market into smaller, more manageable groups of consumers. These variables can be anything from where people live to their buying behaviors and personal interests.

When diving into the world of marketing, one of the fundamental concepts you’ll encounter is market segmentation. But what exactly does this mean? Essentially, segmentation bases are the different factors or variables that marketers use to divide a broad market into smaller, more manageable groups of consumers. These variables can be anything from where people live to their buying behaviors and personal interests.

Definition of a segmentation base

Segmentation bases are the dimensions that can be used to segment a market. Several definitions of segmentation bases are available, such as:

• “A segmentation basis is defined as a set of variables or characteristics used to assign potential customers to homogeneous groups.” (Wedel & Kamakura, 2000)

• “Segmentation variables are customer characteristics that relate to some important difference in customer response to marketing effort.” (Webster, 1984)

Both of these definitions highlight that the purpose of segmentation is to differentiate between consumers by using certain variables or descriptions. However, there is a slight variation between them; the first suggests that homogeneous groupings are sufficient, whereas the second requires the groupings responses differently to marketing offering.

Therefore, for our purposes as marketing students, a segmentation base/variable can be defined as:

• A definable characteristic, identity or behavior of an individual consumer that can be utilized to classify consumers into related groups.

What are the main ways of segmenting a market?

The Four Main Approaches to Segmentation

There are four primary ways to segment a market: geographic, demographic, psychographic, and behavioral segmentation. Each approach looks at different aspects of consumers to create distinct segments.

Geographic Segmentation

Geographic segmentation involves dividing the market based on where consumers live. This method assumes that a person’s location can significantly influence their behavior, preferences, and purchasing decisions. For example, people living in colder climates might have different clothing needs compared to those in warmer regions. Similarly, the local terrain—whether an area is hilly or flat—can affect the types of products consumers prefer, such as cars or sports equipment.

Common factors used in geographic segmentation include climate, terrain, whether an area is urban, suburban, or rural, city size, population density, and specific regions or cities. This approach is particularly beneficial for businesses looking to target local markets or expand into new geographic areas. It also allows marketers to tailor their advertising strategies to fit the unique characteristics of each location, making their campaigns more effective and cost-efficient.

However, geographic segmentation isn’t without its challenges. It relies heavily on the assumption that people in the same area behave similarly, which isn’t always true. Additionally, it provides limited insight into the deeper motivations and preferences of consumers, making it a somewhat simplistic approach compared to others.

Demographic Segmentation

Demographic segmentation is one of the most straightforward and commonly used methods. It involves categorizing consumers based on measurable statistics such as age, gender, income, education, occupation, family size, marital status, religion, and ethnic background. These factors are easy to obtain from sources like government census data, making demographic segmentation a popular choice, especially for small to medium-sized businesses.

For instance, understanding that a segment consists mainly of young adults aged 18-25 can help marketers tailor their products and advertising to suit the preferences and behaviors typical of that age group. Similarly, knowing the income levels of different segments can assist in pricing strategies, ensuring that products are affordable for the intended audience.

While demographic segmentation is useful, it operates on the assumption that people within the same demographic group share similar behaviors and preferences. This isn’t always accurate, as individuals are influenced by a myriad of factors beyond just their demographic characteristics. Therefore, while demographics provide a solid foundation for segmentation, they are often combined with other approaches to gain a more comprehensive understanding of consumer behavior.

Psychographic Segmentation

Moving beyond basic demographics, psychographic segmentation delves into the psychological aspects of consumers. This approach looks at personality traits, lifestyles, activities, interests, opinions, values, and mindsets. The goal is to understand what motivates consumers, what they care about, and how they spend their time and money.

For example, two people might be the same age and income level, but one might prioritize sustainability and environmental consciousness, while the other might focus on convenience and technology. By understanding these underlying motivations, marketers can create more personalized and effective marketing messages that resonate deeply with each segment.

Psychographic segmentation provides a richer, more nuanced view of consumers compared to geographic or demographic methods. However, it also presents challenges in terms of data collection and analysis. Accurately capturing and interpreting psychographic data often requires more sophisticated research methods and a deeper understanding of consumer psychology.

Behavioral Segmentation

Lastly, behavioral segmentation focuses on how consumers interact with products and brands. This approach examines factors such as purchase behavior, brand loyalty, usage rate, benefits sought, and buyer readiness stage. Unlike the other segmentation methods, which are more static, behavioral segmentation considers the dynamic aspects of consumer behavior.

For example, a consumer who frequently buys organic products demonstrates a different purchasing pattern compared to someone who occasionally buys for convenience. By analyzing these behaviors, marketers can tailor their strategies to encourage more frequent purchases, enhance brand loyalty, or introduce new products that meet specific consumer needs.

Behavioral segmentation is particularly powerful because it directly ties consumer actions to marketing strategies. It allows businesses to predict future behaviors based on past interactions, making it easier to anticipate market trends and adjust accordingly. However, it requires detailed and accurate data collection, often necessitating the use of loyalty programs, purchase tracking, and advanced analytics.

Choosing the Right Segmentation Bases

Selecting the appropriate segmentation bases depends on various factors, including the nature of the business, the industry, and the specific goals of the marketing strategy. Often, marketers will use a combination of geographic, demographic, psychographic, and behavioral segmentation to gain a well-rounded understanding of their market.

For instance, a high-end sportswear brand might use geographic segmentation to target urban areas with high disposable incomes, demographic segmentation to focus on young, active individuals, psychographic segmentation to appeal to those who value fitness and fashion, and behavioral segmentation to identify loyal customers who frequently purchase athletic gear.

Note: This topic discusses segmentation bases for consumer markets, there is a separate topic area relating to business market segmentation bases/variables.

FAQs on Choices of Segmentation Bases

What is a segmentation base in market segmentation?

A segmentation base is a specific characteristic, identity, or behavior of an individual consumer that marketers use to classify consumers into related groups or segments. These bases help in identifying distinct groups within a broader market, making it easier to tailor marketing strategies to meet the specific needs of each segment.

What are the four main approaches to market segmentation?

The four primary approaches to market segmentation are:

1. Geographic Segmentation: Dividing the market based on location.
2. Demographic Segmentation: Categorizing consumers based on measurable statistics like age, gender, income, etc.
3. Psychographic Segmentation: Segmenting based on psychological traits, lifestyles, and values.
4. Behavioral Segmentation: Grouping consumers based on their interactions with products and brands, such as purchase behavior and brand loyalty.

How does geographic segmentation influence consumer behavior?

Geographic segmentation assumes that a consumer’s location significantly impacts their behavior, preferences, and purchasing decisions. For example, individuals living in colder climates may prioritize purchasing warm clothing and heating appliances, while those in warmer regions might focus on cooling products and summer apparel. Additionally, factors like terrain can influence the types of products consumers prefer, such as specific vehicles for hilly areas versus flat regions.

Why is demographic segmentation considered a straightforward method?

Demographic segmentation is considered straightforward because it relies on easily measurable and readily available statistics such as age, gender, income, education, and occupation. These factors are often collected through government census data or internal company records, making it simple and cost-effective for businesses to segment their markets based on demographics.

What are the benefits of using psychographic segmentation?

Psychographic segmentation offers a deeper understanding of consumers by exploring their personalities, lifestyles, interests, opinions, and values. This approach allows marketers to create more personalized and effective marketing messages that resonate on an emotional level, fostering stronger connections and brand loyalty among different consumer segments.

Can you provide an example of behavioral segmentation in action?

Imagine a supermarket chain that uses behavioral segmentation by analyzing customers’ purchase frequency and preferences. They might identify a segment of “heavy users” who frequently buy organic products. The supermarket can then target this segment with loyalty rewards, personalized discounts on organic items, and tailored marketing campaigns promoting their organic product range to encourage continued patronage.

Why might a business choose to use multiple segmentation approaches simultaneously?

Using multiple segmentation approaches simultaneously allows businesses to gain a more comprehensive and nuanced understanding of their market. For instance, combining geographic, demographic, psychographic, and behavioral segmentation can help marketers identify overlapping characteristics and deeper insights, leading to more effective and tailored marketing strategies that address various aspects of consumer behavior and preferences.

What to review?

For a greater understanding of segmentation bases, you should also review:

• The Choice of Segmentation Bases
• Examples of Segmentation Bases
• For/Against of the different bases
• Why firms uses different approaches