25.Jul.2018

Kevin Lyons
Research Supervisor

The 4 Fundamental Marketing Segments

Segment smarter, not harder

Simply put, marketing segmentation is dividing a broad consumer market into smaller sub-groups based on shared characteristics, allowing your organization to break up large, difficult goals into more manageable ones.

For example, suppose your organization seeks to be better known by the general public. The general public is large and unfocused, making that goal of educating it difficult to achieve. Dividing the whole market into segments of people who are particularly important for your organization allows you to reach people more effectively.

Through market segmentation, your organization can also identify differences in the wants and needs for your products and services. For any segment, you can construct your service or message more precisely to their needs and interests and use more accurate methods of delivering your service or message.

Defining your organization’s market segments is a difficult but important challenge for non-profit marketers. The 4 basic marketing segments are a great jumping off point for any marketer wishing to utilize this.

  1. Demographic – Market segmentation based on demographics such as age, gender, race/ethnicity, income level, or education level is the most widely-used approach to identifying target markets. Demographic segmentation assumes that consumers with similar demographic profiles will exhibit similar purchasing patterns, motivations, interests and lifestyles and that these characteristics will translate into similar product/brand preferences. Its widespread use can be attributed, at least in part, to the relative ease in acquiring this type of information. If not already included within your organization’s database, it can easily be acquired through a third-party provider such as Experian.
  2. Geographic – Segmenting a market based upon physical location or region (e.g. country, state, region, city, suburb, postal code) or by type of community (e.g., rural, suburban, urban) is also a popular approach. Geographic segmentation assumes that consumers that live in different geographic regions typically display varying needs, wants, and cultural characteristics that can be specifically targeted for more efficient and better marketing. Geographic information is also relatively accessible, if not already something that your organization is tracking.
  3. Psychographic – For many organizations, an understanding of the lifestyle characteristics of their market is essential. Lifestyle clusters within a population frequently transcends (or at least complements) its demographic characteristics. Psychographic segmentation is conducted by studying the activities, interests, and opinions of customers. It considers how people spend their leisure time, and which external influences they are most responsive to and influenced by. Psychographics is a very widely used basis for segmentation because it enables marketers to identify tightly defined market segments and better understand consumer motivations for product or brand choice. However, psychographic data is more difficult to obtain than demographic or geographic data. A well-designed market research engagement is frequently needed to collect this type of information. Alternatively, an off-the-shelf segmentation system, such as Claritas’ PRIZM or Experian’s MOSIAC, can provide useful lifestyle information.
  4. Behavioral – Consumer behavior refers to the patterns of purchase, consumption, or use of goods and services that characterize consumers. A few examples of behavioral segments are needs-based, benefit-sought, usage occasion, purchase frequency, customer loyalty, and buyer readiness. Some of these segments can be created through data contained within a transactional database (e.g., purchase frequency) but many of them require data that is more difficult to obtain. Just like psychographic data, a well-designed market research engagement is frequently needed to collect this type of information.

It should be noted that segments do not have to fit neatly into just one of the categories listed above. For example, geodemographic segmentation – which is based on the principle that people with similar demographic profiles and lifestyles tend to live near each other – is extremely popular among marketers. Future posts about segmentation will discuss the methodology and statistical techniques needed to create sophisticated multivariate data-driven market segments.

Looking for more insights on how to start thinking about a marketing research project? Check out Kevin’s article on defining good research objectives.