Market segmentation is the strategy used by the company where it divides the market into small segments and then manufacture or alter its product according to the market segment after which the company markets or sells its product to selected market segments. There are 4 types of market segmentation, let’s look at these four types of market segments in detail –
- Demographic Segmentation –Demographic segmentation refers to that segmentation where the company divides the market on the basis of age, income, gender and other such demographic characteristic of the consumer. An example of demographic segmentation would be a cloth manufacturer dividing its products range according to gender and their age, so cloth for females would be different and for males it would be different. Within this broad classification of males and females the cloth manufacturer can further divide the segment so within females there will be a different range of cloth for young women, which will be trendy and fashionable, while cloth for old women will be classy and traditional and so on.
- Behavioral Segmentation – Behavioral segmentation as the name suggests, in the type of market segmentation company divides the market according to the behavior and shopping patterns of the consumer.Hence for extravagant behavior usually found in young generation marketing strategy would be different and for conservative behavior which is usually found in mature and old people marketing strategy would be different. A company doing behavioral segmentation would market or sell expensive products to young customers while a company looking to sell economical products would target mature and old customers.So for example in case of coffee middle and old age prefer to drink at home or do not like to spend too much on coffee whereas young people prefer to go to expensive options like café coffee day, similarly in case of movies young people like to go to multiplexes while old people prefer to watch movies at home. Another base of behavior segmentation would be on the basis of occasions so for example during Diwali Hindus would spend lavishly while during Eid Muslim community would spend extravagantly whereas during Christmas Christians would spend lavishly, during independence day or days of national importance demand for country’s flag rises.
- Geographical Segmentation –Under this type of market segmentation companies divide the market according to place in which they reside in, so companies making raincoats will not market its product in desert areas rather they will sell their products where there is plenty of rainfall. Similarly, in tourist places there will be more scope for hotels and restaurants as compared to industrial towns. Geographical segmentation is helpful in those countries where there is diverse weather as well as culture; also for multinational companies venturing into different markets across the world geographical segmentation is very handy.
- Psychographic Segmentation – Psychographic segmentation as the name suggests does market segmentation on the basis of the psychology of the consumer. For example in case of cars companies usually make three variants of same model one is base model which has the basic features, second is middle one which has some additional features in addition to base model and third is the topmost model which has all the features like integrated music system, airbags, automatic climate control and so on. In the case of consumers the psychology of consumer who is having sufficient buying power is to go for the topmost model as the consumer wants to have all the features in the car even if all the features are not useful for the consumer.
As one can see from the above that market segmentation is not one dimensional concept rather it is multi-dimensional as it involves many variables on the basis of which market segmentation can be done.