The term market segment refers to people who are grouped together for marketing purposes. Market segments are part of a larger market, often lumping individuals together based on one or more similar characteristics. Corporations and their marketing teams use various criteria to develop a target market for their products and services. Marketing professionals approach each segment differently, but only after they fully understand the needs, lifestyles, demographics, and personality of the target consumer.
Key Takeaways
A market segment is a group of people who share one or more similar characteristics.
Corporations and marketing teams use various criteria to develop target markets for their products and services.
The criteria for a market segment include hom*ogeneity among the segment's main needs, uniqueness, and a common reaction to marketing tactics.
The reaction from market segments to marketing plans or strategies is typically very predictable.
Common market segment traits include interests, lifestyle, age, and gender.
A market segment is a category of customers who have similar likes and dislikes in an otherwise hom*ogeneous market. These customers can be individuals, families, businesses, organizations, or a blend of multiple types.
Market segments are known to respond somewhat predictably to a marketing strategy, plan, or promotion. This is why marketers use segmentation when deciding on a target market. As its name suggests, market segmentation is the process of separating a market into sub-groups, in which its members share common characteristics.
To meet the most basic criteria of a market segment, three characteristics must be present:
there must be hom*ogeneity among the common needs of the segment
there needs to be a distinction that makes the segment unique from other groups
the presence of a common reaction or a similar and somewhat predictable response to marketing is required
Common characteristics of a market segment include interests, lifestyle, age, gender, etc. Common examples of market segmentation include geographic, demographic, psychographic, and behavioral.
Companies that understand market segments can prove themselves to be effective marketers while earning a greater return on their investments.
Examples of Market Segments and Market Segmentation
The banking industry provides a very good example of how a company markets to specific market segments. All commercial banks service a wide range of people, many of whom have relatable life situations and monetary goals. If a bank wants to market to baby boomers, it conducts research and may find that retirement planning is the most important aspect of their financial needs. The bank can then market tax-deferred accounts to this consumer segment.
If the same bank wants to effectively market products and services to millennials, Roth IRAs and 401(k)s may not be the best option. Instead, the bank may conduct in-depth market research and discover most millennials are planning to have a family. The bank uses that data to market college-friendly savings and investment accounts to this consumer segment.
Sometimes a company already has a product but may not yet have its target consumer segment. In this scenario, it is up to the business to define its market and cater its offering to its target group. Restaurants are a good example. If a restaurant is near a college, it can market its food in such a way as to entice college students to enjoy happy hour rather than trying to attract high-value business customers.
How Are Market Segments Used?
Commonly used in marketing strategies, market segments help companies optimize their products and services to suit the needs of a given segment. Market segments are often used to identify a target market.
How Do You Identify Market Segments?
Broadly speaking, identifying a market segment requires the following three criteria. To start, the main needs of a sub-group must be hom*ogenous. Second, the segment must share distinct characteristics. Finally, the segment produces a similar response to marketing techniques. Prospective buyers are grouped into various segments, often based on how much value they place on a product or service.
What Is an Example of a Market Segment?
Consider a company that markets health and beauty products to both men and women. These products, such as razors or skin care, are typically more expensive for women than they are for men. The product packaging also differs—products targeted to women having pinks and floral accents that align with gender stereotypes. On the other hand, the company's male-targeted products are characterized by more rugged blacks and greys.
Market segmentation is a process that consists of sectioning the target market into smaller groups that share similar characteristics, such as age, income, personality traits, behavior, interests, needs, or location. Knowing your market segmentation will help you target your product, sales, and marketing methods.
The criteria for a market segment include hom*ogeneity among the segment's main needs, uniqueness, and a common reaction to marketing tactics. The reaction from market segments to marketing plans or strategies is typically very predictable. Common market segment traits include interests, lifestyle, age, and gender.
Market segmentation is the process of dividing a larger market into smaller groups or segments based on certain criteria such as demographic, psychographic, behavioral, or geographic factors.
Market segmentation and targeting refer to the process of identifying a company's potential customers, choosing the customers to pursue, and creating value for the targeted customers. It is achieved through the segmentation, targeting, and positioning (STP) process.
A company that sells toys is better advised to buy ad space during a children's show than a late-night talk show. And property management companies will seek to target single renters rather than married couples looking to purchase their first home.
There are four key types of market segmentation that you should be aware of, which include demographic, geographic, psychographic, and behavioral segmentations. It's important to understand what these four segmentations are if you want your company to garner lasting success.
Market segmentation allows companies to learn about their customers. They gain a better understanding of customer's needs and wants and therefore can tailor campaigns to customer segments most likely to purchase products.
Market segmentation allows you to target your content to the right people in the right way, rather than targeting your entire audience with a generic message. This helps you increase the chances of people engaging with your ad or content, resulting in more efficient campaigns and improved return on investment (ROI).
Key Takeaways. A market is where buyers and sellers can meet to facilitate the exchange or transaction of goods and services. Markets can be physical, like a retail outlet, or virtual, like an e-retailer. Examples include illegal markets, auction markets, and financial markets.
The first step is to define the boundaries of the market, such as a specific geographic area, an age group, or income level. Develop a clear picture of the products or services you offer and the type of consumers who might want to buy them. If you're highly specific, you can build better segments.
Identify the geographic region where your market is located. Identify specific boundaries within which you will do business. Demographic. Potential customers are identified by criteria such as age, race, religion, gender, income level, family size, occupation, education level and marital status.
A target market is a group of potential customers that you identify to sell products or services to. Each group can be divided into smaller segments. Segments are typically grouped by age, location, income and lifestyle.
Market segmentation allows you to target your content to the right people in the right way, rather than targeting your entire audience with a generic message. This helps you increase the chances of people engaging with your ad or content, resulting in more efficient campaigns and improved return on investment (ROI).
Market Size: Research demographic statistics to find the population number of your segment. For example, if the market segment is U.S. college students, the market size is 20 million as research shows there are 20 million college students in the U.S.
These consumers, irrespective of their geographic location, have different beverage preferences and consumption habits. To cater to such a diverse clientele, Coca-Cola's segmentation strategy revolves around four critical pillars: geographic, demographic, behavioral, and psychographic segmentation.
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