Business - Market Segmentation

What is Market Segmentation?

The process of dividing a market into groups of consumers with similar needs or characteristics, so a business can target them more effectively.

Why do businesses use Market Segmentation?

To better meet customer needs, improve marketing efficiency, identify new opportunities, and gain a competitive advantage.

What are the main types of market segmentation?

• Demographic

• Geographic

• Psychographic

• Behavioural

What is demographic segmentation?

Dividing the market based on personal characteristics like age, gender, income, education, occupation, or family size.

Give an example of demographic segmentation.

Luxury car brands target high-income consumers; toy companies target children aged 3–10.

What is geographic segmentation?

Dividing the market based on location — such as country, region, city, or climate.

Example of geographic segmentation?

McDonald’s offers different menu items in different countries (e.g., McSpicy Paneer in India).

What is psychographic segmentation?

Dividing the market based on lifestyle, attitudes, values, interests, and personality traits.

Example of psychographic segmentation?

Gym brands targeting people who value health and fitness or environmentally friendly consumers choosing sustainable products.

What is behavioural segmentation?

Dividing the market based on consumer behaviour, such as brand loyalty, usage rate, or benefits sought.

Example of behavioural segmentation?

Airlines offering loyalty programs for frequent flyers or shampoo brands for dry vs. oily hair.

What are the benefits of market segmentation?

• Better targeting of customers

• Higher customer satisfaction

• Increased sales and market share

• More effective marketing campaigns

• Easier to identify new opportunities

What are the limitations of market segmentation?

• Expensive and time-consuming

• May require complex research

• Risk of missing other potential customers

• Market segments can change over time

What is a niche market?

A small, specialised segment of a larger market that focuses on a specific need or group of consumers.

What is a mass market?

A large market with broadly similar consumer needs, where products are aimed at the majority of consumers rather than a specific segment.

How does segmentation help in product differentiation?

It allows businesses to tailor products, branding, and marketing messages to appeal to specific segments, making their offering stand out.

What is target marketing?

Choosing which market segment(s) to focus on after segmentation.

What is market positioning?

How a product is perceived in the minds of consumers relative to competitors — often influenced by segmentation and targeting.