Market Segment

Market segment refers to the classification of customers for marketing purposes depending on several factors like their preferences, shopping habits, needs, etc. Segmentation targets improved marketing and delivery of goods or services with the help of research. Grouping of customers is done by lumping customers into groups with similar characteristics.

Market segmentation helps brands to gain a better understanding of the market. It reveals crucial information regarding the positioning and targeting of products and services. Segmentation allows the company to outperform its competitors through research and development. Market segment analysis helps in improving the delivery of goods and services along with an increase in profits. 

• A market segment is a group of individual consumers classified based on similar tastes and preferences. Companies and marketers group them to fetch information required to develop a business's product and services to increase their profit.
• Segmentation can aid the business in analyzing various factors such as the strength of competitors, consumer preferences, future requirements, the future scope of an opportunity, and finding solutions to existing problems.
• Behavioral, demographic, geographic, product-related, and psychographic segmentation are some of the major types of market segments. However, each business is unique, and therefore the classifications may differ.

Market segment strategy focuses on a potential customer base to derive details such as their needs, preferences, and expectations for developing plans for further improvement of its products and services. Businesses do this because they understand that they cannot appeal to all customers in the market, at least not in the same way. Customers come from varied backgrounds with different interests and preferences. The best possible way to capture an audience for their product or services is to identify fragments of the market they can serve best and attain profit in the meantime.

Market segment analysis by dividing the market into homogeneous subgroups can help companies create plans for competitive advantages. They can thus develop marketing strategies and pricing mechanisms to maximize profit. The knowledge derived from these actions can aid in further market research. Companies can thus plan for future products years ahead with such analysis. Not being limited to the above, data derived can be used to map out customer requirements and cater to their needs with precision. Thus, market segmentation lays the foundation for target marketing and product positioning to gain the upper hand in identifying buyer needs better than the company's competitors.

#1 - Demographic Segmentation

Demographic segmentation involves grouping individuals based on age, gender, education, occupation, income, marital status, family size, religion, race, and nationality. It is easy to segregate customer marketing widely using these as they are relatively easy to measure and are inexpensive. In addition, demographic segmentation can be used with other types to better analyze the consumers.

#2 - Geographic Segmentation

Geographic segmentation is based on location. This type of segregation involves taking climate, topography, vegetation, natural resources, population density, etc. These groups can be further classified intp various sub-segments. This can help the brands develop location-based advertisements tailored to a smaller area or for local businesses to form their marketing strategy.

#3 - Psychographic Segmentation

The market segment focuses on individuals' personality traits, values, ideologies, motives, choices, and lifestyles in psychographic segmentation. Businesses can use the data either by itself or combined with other segmentation criteria for a deeper analysis.

#4 - Behavioral Segmentation

Here, the market segment target focus is on the behavioral aspects of an individual's purchase decisions. For example, the volume of products purchased, the price range of the services requested, their order frequencies, etc., are a few such factors. In addition, with the advent of online shopping, it has become easier to analyze the consumer's preferences like app usage, website actions, usage rates, search habits, etc.

#5 - Product-Related Segmentation

Product-related segmentation concentrates on the products and services that have to be marketed to the target group. Brands and businesses analyze the needs and requirements for specific purposes to conclude the target group for marketing. 

The following examples can give readers a basic understanding of segmentation.

#1 - Behavioral Segmentation 

Social media companies usually opt for this segmentation. When the TikTok application became popular among all age groups, particularly teenagers, Instagram introduced a similar feature called reels to gain more traction, especially in those countries where governments banned the former application. Accordingly, Instagram analyzed the prevailing trend and considered the short span of attention people possess, and it took advantage of the opportunity.

#2 - Demographic Segmentation

Suppose there is a travel company and a market for destination weddings waiting to be explored. In this case, the target segment for the same will be majorly belonging to 22-35 years of age as they will be employed with substantial income and willing to get married.

#3 - Geographic Segmentation

Suppose a car company wants to manufacture a new line of products. Geographical segmentation can be a crucial factor here. For example, suppose the market they want to explore is rocky terrain, the ideal choice would be a "Jeep" as they offer a compact mode of transportation compared to other variety of road transport.

#4 - Product-Related Segmentation

A clothing company will look into this aspect while manufacturing clothes. For example, kids require soft materials that are not harmful, while a person working in a hazardous occupation needs special clothing. If the company wants to cater to people in such fields, that is their market segment.

#5 - Psychographic Segmentations

Clothing companies can be taken as examples here, too. Suppose a company wants to introduce a clothing line. Firstly, they can investigate different groups of individuals. If they are affluent business class people, their clothing requires high standards and comfort. Their clothes should also look affluent and suit their lifestyle and preferences. Whereas, if the target group is common individuals who like to travel with comfortable yet stylish pieces of clothing under subsidized rates, the company will select employed and young people.

The benefits of a market segment are listed down below:

• Businesses can better understand their target consumers' needs, wants, and requirements. 
• Enables businesses to let out "tailor fit" solutions to the target group by carefully analyzing the problem.
• Market segment analysis reveals critical information about the existing services and products, the missing factors in their competitors, or the positive factors that need to be incorporated to succeed. Analysis of competitors' strengths and weakness opens doors for new business opportunities.
• Companies can derive market segment strategy through data available from existing research. Thus, segmenting gives the route map for a more systematic approach to reaching their business goals.
• It helps businesses focus on creating a brand identity through thorough analysis and implementation of feedback by making informed business decisions.

This has been a guide to Market Segment and its Definition. Here we explain the market segment types, examples, and its benefits. You can learn more about accounting from the articles below –

• Target Markets
• Direct Marketing
• Segment Margin