Question

Q 7 What is market segmentation? Discuss various ways that markets can be segmented and how would they be used in global markets. Why is segmentation important in business?

Answer 1

Various ways that markets can be segmented are -

	Demographic (B2C)	Firmographic (B2B)	Psychographic (B2B/B2C)	Behavioral (B2B/B2C)
Definition	Classification based on individual attributes	Classification based on company or organization attributes	Classification based on attitudes, aspirations, values, and other criteria	Classification based on behaviors like product usage, technology laggards, etc.
Examples	Geography Gender Education Level Income Level	Industry Location Number of Employees Revenue	Lifestyle Personality Traits Values Opinions	Usage Rate Benefit Types Occasion Purchase Decision
Decision Criteria	You are a smaller business or you are running your first project	You are a smaller business or you are running your first project	You want to target customers based on values or lifestyle	You want to target customers based on purchase behaviors
Difficulty	Simpler	Simpler	Advanced	Advanced

TYPES OF MARKET SEGMENTATION -

GEOGRAPHIC SEGMENTATION

While typically a subset of demographics, geographic segmentation is typically the easiest. Geographic segmentation creates different target customer groups based on geographical boundaries. Because potential customers have needs, preferences, and interests that differ according to their geographies, understanding the climates and geographic regions of customer groups can help determine where to sell and advertise, as well as where to expand your business.

DEMOGRAPHIC SEGMENTATION

Demographic segmentation sorts a market by demographic elements such as age, education, income, family size, race, gender, occupation, nationality, and more. Demographic segmentation is one of the simplest and most commonly used forms of segmentation because the products and services we buy, how we use those products, and how much we are willing to spend on them is most often based on demographic factors.

FIRMOGRAPHIC SEGMENTATION

Firmographic segmentation is similar to demographic segmentation. The difference is that demographics look at individuals while firmographics look at organizations. Firmographic segmentation would take into consideration things like company size, number of employees and would illustrate how addressing a small business would differ from addressing an enterprise corporation.

BEHAVIORAL SEGMENTATION

Behavioral segmentation divides markets by behaviors and decision-making patterns such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to purchase body wash, while older consumer groups may lean towards soap bars. Segmenting markets based off purchase behaviors enables marketers to develop a more targeted approach.

PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation takes into account the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers. Large markets like the fitness market use psychographic segmentation when they sort their customers into categories of people who care about healthy living and exercise.

Global market and market segment -

  Companies like American Express, Mercedes Benz, and Best Buy have all used segmentation to increase sales, build better products, and engage better with their prospects and customers.