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Everything you need to know about the 4 types of market segmentation

Posted by Perceptive Customer Insights Team - 27 August, 2018

Looking for a new way to segment your target audience? This is everything you need to know about the 4 types of market segmentation: demographic, geographic, psychographic and behavioural.

 

Everything you need to know about the 4 types of market segmentation

 

Read more: Understanding your Audience, the complete guide to market research.

 


 

Demographic

Demographic segmentation separates your audience by who they are, depending on whether you are in a B2B or a B2C context.

For example, typical B2C demographic traits include:

  • Age
  • Gender
  • Occupation
  • Income
  • Family status
  • Education

Meanwhile, a B2B audience might include the above, as well as:

  • Company size
  • Industry type
  • Role (within company)
  • Time in position

Demographic is one of the most common segmentation types used in market research (alongside geographic). It is simple to use and understand, is readily accessible through common data gathering methods, and it can eliminate irrelevant audience segments quickly and easily.

 

Example

A high-end jewellery store segments their audience by high household income. This focus ensures they don’t waste valuable resources on targeting an audience that wouldn’t be interested in their products.

Meanwhile, a software-as-a-service company that sells software to research firms segments their target audience by role hierarchy. This gives them the opportunity to create marketing campaigns that resonate with relevant decision makers in their audience.

 


 

Geographic

Geographic segmentation splits your audience depending on where they are located.

For example:

  • Continent
  • Country
  • Region
  • City
  • Borough/District

Segmenting in this way is best used when a customer’s location influences their purchase decision. This is going to be true for nearly any business, which is why geographical segmentation is one of the most popular forms of segmentation used.

The fact that nearly every business will have some kind of geographical information on their customers (obtained through address submissions for newsletters, coupons, apps, in-house services, etc) also makes this one of the easiest to implement as well.

 

Example

A large business with international holdings segments by geography to get a clearer picture on its audience volumes in the United States versus the United Kingdom.

Discovering the popularity of the business’ products in the UK, the company decides to develop a .co.uk website address and produce content specifically for its UK audience.

 


 

Psychographic

Psychographic segmentation separates your audience by their personality.

For example:

  • Interests
  • Attitudes
  • Values
  • Lifestyle

This can be especially useful for businesses which sell a product or service that will make an impact on people with specific world views or ideas.

NB psychographic segmentations can include a lot of different factors. The above list is not exhaustive by any means; ensure that you cover as many “softer” psychological characteristics in your initial market research to ensure you don’t miss any important perspectives.

 

Example

A retailer segments their data by the value of “budget-consciousness”, separating those among their audience who consider themselves particularly frugal from those who are less concerned about how much they spend.

Noting a distinct dip in the number of budget-conscious customers, the research consultants suggest that the retailer may want to either develop a new line of everyday essentials, or better position their existing products to appeal to this budget-conscious group.

 


 

Behavioural

Behavioural segmentation divides your audience by their previous behaviour in relation to your brand.

For example:

  • Awareness of the business
  • Previous purchases
  • Purchase patterns
  • Usage level
  • Product knowledge
  • Product/service rating

 

Example

A local restaurant segments its audience data by purchase patterns, specifically when the purchase was made. This allows it to investigate its lunch-time audience compared to its dinner-time audience.

By comparing the difference in the type of meals purchased between each of these times, the restaurant is able to create a new lunch and dinner menu that better suits its individual groups of customers.

 

Leveraging each of these segment types is integral for getting the granular data you need to better understand and target your audience. By gathering each type and segmenting your audience with them in conjunction, you can achieve granular, specific and robust research insights.

 


 

For more information on market segmentation, download our all-in-one guide to understanding your audience.

 

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Topics: Customer Insights


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