The concept of a “one size fits all” business is, frankly, may not be applicable for most of the companies out there.

In fact, you can’t be everything to everyone. The reason for this is simple: different markets have different needs and expectations. What works in one market may not work in another. A business that’s successful in one place may not be successful elsewhere—and if it does manage to succeed in another area or groups of customers, it’ll still be doing it by catering to the needs of that particular market.

 

The world is full of examples of companies that tried to branch out or expand into new markets but failed miserably as a result. You’ve probably heard of some: Blockbuster Video (home movie rentals), Blackberry (smartphones), Kodak (digital cameras), etc. All of these companies were once wildly successful in their respective industries, but when they expanded into new markets and tried to cater to everyone, they ended up failing miserably.

Why? Because they didn’t realize that preferences differ from each market segment. For this reason, the first step is to identify your target market segmentation. It is important to understand consumer behavior and preferences by thinking strategically about how you should meet consumers’ demands making that segment unique. 

Let’s find out the common market segmentations and how it works:

1. Geographic Segmentation

This kind of segmentation divides markets into smaller geographic units in order to pay attention to local variations.

Coca-Cola is one of the companies that are using this type of segmentation. They determined their segment in which they found out that in tropical or hot areas (climatic) of the world, there’s a huge sales increase if they served their products cold. Also, the tastes of their beverages depend on which country their consumers are located in.

Unfortunately, this segmentation has also a disadvantage when you focus only on cultural differences but not on intercultural ones. For example, in patronizing whitening soap, you may assume that this whole area likes fair skin more than the other places, which may be not since people living in the same area could have different preferences.

2. Demographic Segmentation

It refers to the process of dividing the groups of potential customers by focusing on demographic factors such as:

• Age
• Income
• Gender
• Religion
• Status

In a product category, for example, the goods of Coca-Cola Company are considered convenience products. They produced different flavors and kinds of beverages depending on the range of age. They manufactured sweet beverages like Fanta and Minute Maid for people ages 4 to 15 years old. While they made Sprite, diet coke, etc. for the older ones. Segmenting also the family type and income level is crucial for them as it is the basis for introducing the economy pack. Moreover, the bottle type of each product offered depends on the socioeconomic status of the family.

In contrast, when you rely mostly on the demographic profile of the consumers, you may tend to base your assumptions only on a one-dimensional approach. For example, marketing might be less effective in this kind of segment when you will be forced to resort to stereotyping. For instance, all Gen Z may be categorized as a group of consumers who like milk tea or online streaming the most, when in fact, it may not. Also, the profile is too vague. Let us say that educational attainment and income level are not accurate in identifying which music or entertainment industries a customer likes, whether Spotify or Youtube Premium. Hence, demographic segmentation could misinterpret data and assume that people in the same categories have similar needs and wants, which may not completely be true. 

3. Psychographic Segmentation

This segmentation focuses on intrinsic traits of the people such as:

• Lifestyles
• Values
• Attitudes
• Interests
• Opinions

Let’s take the example mentioned above about the Coca-Cola company. It seems that the first conception of customers toward soda is that it’s unhealthy. That’s why, Coca-Cola also differentiates their consumers based mostly on lifestyle if they are health conscious or not. Hence, diet coke is supposedly for consumers who want to intake low-level sugar from soda. 

However, psychographic segmentation could become less attractive for you in marketing since it’s costly and needs deeper research of consumer/s. It’s also harder to market than other schemes. Thus, it may only be communicated to a narrow market. 

4. Behavioral Segmentation

Behavioral segmentation is sometimes interchangeably used with psychographic segmentation. However, unlike demographic and psychographic segmentations, it focuses on specific reactions and responses of consumers towards the product/s. In other words, it is based on the attitude of the buyer and the usage rate benefit of a certain product, for a reason that not all consumers have similar behavior on the purchased goods.

Based on the Coca-Cola Company, loyalty to their brand is the most evident attitude that can be seen in their market. The way they use it, especially on every occasion and celebration mean that these products are for all types of family events.

Conversely, behavioral segmentation has also a con which is the dynamic behavior of customers. It is based on response and feelings towards the product/s. As a consequence, the behavior of people is inconsistent and never remains the same due to personal, political, technological, economical, and social reasons. An example is the fast innovation of mobile phones, from keyboard to touch screen type. Furthermore, marketing efforts should keep track of fast-changing behavior.

Wrap Up

It’s very essential for the business to have market segmentation as it allows you to reach and meet the specific needs and wants of consumers. This will enable you to use and maximize your resources and create strategic decisions more effectively. Also, segmenting the market creates growth opportunities and target marketing communications to better understand consumers. As the Coca-Cola Company did, it is crucial to use all schemes possible in segmentation as it enables the firm to increase marketing efficiency and build stronger brands. 

Now It’s Your Turn!

Now that you have an idea of market segmentation, which segment/s fits your business the most? You can use the following tools above to help you decide.

Please feel free to share your thoughts in the section below. We’d also love to hear your ideas, and if you have any questions, we are here to help!