4 Types of Market Segmentation

If you looked at my Pandora radio playlist, you’d see a pretty eclectic mix of music. My stations include The Police, Bon Jovi, Pink Floyd, Sugarland, Nickel Creek and Crosby Stills & Nash. Like most people, I never paid attention to the occasional ads that interrupt my music stream, but something caught my attention this week. Some days, I heard ads from water parks and Chevrolet, and other days I heard from Mercedes Benz. And it occurred to me that each playlist was streaming ads appropriate for the expected listening audience. In marketing terms, Pandora had segmented their listeners into market segments, based on the typical demographics and interests of Bon Jovi versus Crosby Stills & Nash fans.

The goal of market segmentation is to separate the general market into categories, which can then be targeted and marketed to most effectively. There are four general types of market segmentation:

1.    Geographic segmentation separates a market into different geographical boundaries which can impact the marketing mix of product, price, promotion and channel to market. For instance, you may not sell many down comforters in Arizona, but the market in Michigan is pretty good. Ever been to Hawaii? The price of goods is substantially higher than the continental United States. And the way you promote and sell a product in southern California will be quite different from Vermont.

2.    Demographic segmentation separates a market by demographic indicators including gender, age, household type, education level and income. Simply put, the type of products we buy, how much we spend, and how we buy them are largely determined by demographic factors.

3.    Psychographic segmentation separates a market by lifestyle as well as values and beliefs. There are large target markets which fit psychographic segmentation, such as outdoor recreation and fitness.

4.    Behavioral segmentation separates a market by shopping and buying behaviors. Are you an online shopper or do you prefer to handle products in the store? How often do you shop? Do you research a purchase carefully before making a decision, or do you tend to buy on impulse? All of these factors determine how consumers are segmented and marketed to.

If you’re a critical thinker like me, you may be wondering about those people who fall in between, or are made up of a combination of, those segments. My experience on Pandora is a great example. Am I the Chevy or Mercedes demographic? Although market segmentation isn’t a perfect science, it will certainly get you closer to understanding your target audience and increasing your marketing return on investment.

 

 

 

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