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Types of Market Segments
As discussed in What is Market Segmentation?, buyers can be segmented by several demographic and market factors. By segmenting larger populations, businesses can more easily and accurately identify trends and opportunities. With this more in-depth knowledge, more effective and profitable policies and programs can be developed. Additionally, understanding and monitoring various types of market segments can also be a competitive marketing tool.
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What is a Market Segment?
Market segment defines either the group of product or service providers in the marketplace OR the group of buyers. For example, the mobile phone market is a term that is used to either describe the group of companies who offer devices and services OR the group of people who buy those devices and services. Businesses generally watch both sides of the issue.
Monitoring the activities of the providers serving the segment of buyers can help businesses determine their market share and what they might need to do to gain more of it. Sometimes this is referred to simply as "market" instead of "market segment."
On the flip side of the issue, targeting segments of people who have already purchased identical or similar products and services increases the potential for sales. This is based on the concept that past behavior is a predictor of future behavior.
Some products are add-ons to other products and services. Targeting purchasers of the primary product or service, can connect a business with potential buyers who are already acclimated to purchasing that brand name or product/service category.
Example: Clients for hair design services may also be interested in purchasing hair styling products or additional spa services, providing additional marketing opportunities for the salon. As well, the salon owner would also be watching the entire group of salons in the area to see how they are performing within that market segment of services compared to competitors.
Market Segment Types
Markets can be segmented by one or several of the following factors. While considering too many factors may result in extremely small populations, segmentation by multiple factors can better target only the most viable potential buyers. This eliminates wasting marketing and advertising dollars on prospects with low potential.
As well, better knowledge of the market segment a business serves eliminates comparing one's company to irrelevant competitors and chasing unreachable goals. Example: A small business that bakes cookies would not want to compare itself to Wal-Mart who also sells cookies.
A business can therefore be segmented by any, many or all of the following factors:
- Product or service. Can be a broad category such as mobile phones or more specific such as Android smartphones. On a service level, a broad category might be auto repair, with a more specific category of brake and muffler shops. The more specific the category, the easier it is to compare and match with likely customers.
- Industry. As with products, a general industry term such as agriculture would define everything from huge agribusiness corporations to small family farms. This industry could also be defined by type of farm products produced: dairy, wheat, organic, etc. The more specific it can be defined, the better it can be targeted and monitored in a meaningful way. Click here to learn more about business demographics.
- Age. This could refer to human age of the population, the age or stage of a business, or whether a product is offered as new or used.
- Income level. Income levels can be measured annually, quarterly, daily or over longer time horizons.
- Gender. Only two choices here: male or female.
- Geography. Markets can be segmented globally, nationally, regionally or locally. The service area will determine which is most appropriate. For an Internet business that serves international markets, global statistics would be most relevant.
- Profession. As with most other segments, professions also can be drilled down to more relevant segments. For example, healthcare workers can be segmented by those who are nurses, doctors or hospital administrators. Similarly, attorneys can be categorized by the type of law they practice: taxes, real estate, civil or entertainment.
- Lifestyle and family. People and families have differing product and service needs at various stages in their lives, as well as for different types of households (single, married with children, seniors) and homes (single family homes, apartments).
- Hobbies and interests. Everything from animals to zinnias, hobbies and interests can have dedicated followers, many of whom can be extremely brand loyal.
- Psychographics. Psychographics watches how people behave and their attitudes which can be accurate predictors of buying behavior. Click here to learn more about psychogrpahics and market segmentation.
Disclaimer: Any examples used are for illustrative purposes only and do not suggest affiliation or endorsement. The author/publisher has used best efforts in preparation of this article. No representations or warranties for its contents, either expressed or implied, are offered or allowed and all parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice, strategies and recommendations presented herein may not be suitable for you, your situation or business. Consult with a professional adviser where and when appropriate. The author/publisher shall not be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential, or other damages. So by reading and using this information, you accept this risk.
© 2013 Heidi Thorne