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Market segments are divided into geographic, demographic, psychographic, and behavioral categories, each with sub-segments. Geographic segments focus on location, demographic on characteristics like age and income, psychographic on lifestyle, and behavioral on purchasing decisions. Companies use market segments for targeted marketing campaigns.
There are four main categories or types of market segments. The four main categories include geographic, behavioral, demographic, and psychographic. Within each of the segment types also fall numerous sub-categories or sub-segments. Market segments are mainly used to divide customers into categories for marketing purposes.
Geographic market segments focus on where customers are located. Customers who live and work in different states or parts of the country may have different product and service needs. For example, customers living in Florida don’t need snow shovels, but the same company can make beach shovels that it could sell to customers in Florida.
Demographic market segments are some of the most popular ways for businesses to segment their customers. Demographics consist of characteristics such as the age, gender or family size of customers. Additional demographic data may include income, education, and occupation. Religion, race and nationality are other dividing factors in market segmentation.
For example, income can play a role if a business sells high-end luxury goods. A private school preparing for a marketing campaign can compile a list of families in the area with children who have incomes in excess of $200,000 US Dollars (USD) annually. In this scenario, private school is separating options using demographic and geographic market segments.
Psychographic market segments focus on lifestyles. Firms using these types of categories may focus on the socioeconomic class of clients, such as low-income, middle-income, or high-net-worth households. Lifestyle and personality types may focus on same-sex couples or people who enjoy hiking, depending on the type of product or service the company sells.
Behavioral market segments divide customers based on their purchasing decisions. In general, a business would segment customers this way for targeted marketing campaigns. For example, if the company plans to re-engage old customers, the company might rank the customer based on purchase frequency. So anyone who hasn’t bought from the company in the last year could be part of the campaign.
The same company wouldn’t want to send a re-engagement marketing campaign to a customer who just bought from them last week. Customers who bought within less than a year would fall into the behavioral market segment, but in a different sub-category. Buying behavior also works in up-sell scenarios. For example, a customer who purchases audiobooks from the company that sells various information products is likely to purchase more audiobooks.
The company can categorize market segments based on the type of product. Then, when she releases her next audiobook, she could send an announcement to all customers in the audiobook category because they’re likely to buy again.
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