Unlocking the Power of Segmentation

With so many ways to segment the market, it can be easy to feel lost amid the plethora of techniques! You might be asking yourself, “Should we segment by age? Geographic location? Lifestyle?” Segmenting in these ways isn’t necessarily wrong, but there might be a stronger approach that will allow you to feel like you have hit the segmentation bullseye.

Before getting to that, let’s look at some of the most common approaches to segmentation.

1. Geographic: This is perhaps the most common way to segment. Many businesses just assume that they are targeting a geographic area. For example, if you ask a restaurant owner in Provo, Utah who his target market is,he might raise his eyebrows and reply, “the people of Provo!” While segmenting this way is definitely an option, let’s look at some more precise options.

2. Demographic: This type of segmentation entails grouping by age, gender, race, income, and occupation, to name a few. The restaurant owner in this example could narrow down his segmentation by splitting his current and potential consumers into groups based off their stage in life, for example: college students or parents with young families.

While this is something of a goofy example, it makes a valuable point. Looking only at demographic and geographic information, Prince Charles and Ozzy Osbourne (the “Prince of Darkness”) have a lot in common! They’re both the same age, sex, and race... hailing from the same country and enjoying a lot of wealth and fame.

Even their marital status and the homes they have aren’t enough to effectively differentiate between these two public figures. Clearly, if we were trying to market to either Prince Charles or Ozzy Osbourne, we would need to consider some additional information to reach our true target.

What kind of information would we need to consider and implement into an effective, personalized segmentation approach? What we need is “psychographic” information.

3. Psychographic: Psychographic segmentation deals with lifestyle, personality, attitudes, and values. The restaurant owner might discover that his customers have a variety of lifestyles and things that matter to them. Some might have busy lifestyles and value convenience over everything. Other consumers might have a strong desire for quality and value their families. The psychographic variable options are endless but understanding them really helps us understand who our consumers are.

4. Behavioral: Another way to segment is by behavior. This segmentation refers to classifying based on product usage and interactions with a company or brand. In our restaurant scenario, the owner might behaviorally segment based off of purchase frequency or loyalty to his business.

While all of these segmentation techniques are useful, there might be a way that is MOST useful. This most useful way of segmentation includes a combination of all variables in order to find who your core segments really are.

It doesn’t make a lot of sense to look at these variables independently; only when we look at them interdependently do we get a better picture of who our consumers are and the segments that exist. For example, wouldn’t it be more useful to say that we have a market segment of college students living in Provo who value fun and convenience? This segment would be geographic, demographic, and psychographic. We could take it even further and say that these college students are looking for places to take a date or bond with friends. By diving deeper and combining different aspects of segmentation, we can hit the segmentation bullseye and effectively position to our target market.