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What is Market Segmentation?

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Sometimes it is useful to think of the population of consumers as being made up of different sub-groups. Dealing with all consumers as just one big homogeneous whole can make marketing to them difficult, but when they are divided into smaller groups it makes things a lot more manageable. Market segmentation is an important idea for anyone who wishes to understand or make a profit in today’s market place.

So what is Market Segmentation?

Market segmentation involves dividing people into different sub-groups. The basis of these sub-groups is that those who belong to them share similar requirements in regards to what they are likely to purchase. These sub-groups are determined using different demographics depending on the type of information that is being sought. There are many possible sub-groups to choose from; for example, teenagers, brides, home owners, professionals, geeks, and so on.

Of course we could all potentially belong to many different sub-groups, and it would not be possible for a business to focus on them all. The good news is that they don’t have to. The type of market segmentation that takes place will very much depend on the reason why the information is needed in the first place. Once a business has identified the groups they are interested in they can then just focus on these.

The Usefulness of Market Segmentation

The most common reason for dividing the population into sub-groups is to better understand these groups. When we understand a group better it means that it should be easier to tailor a marketing campaign that is targeted specifically to them. An example of this would be a new fast food chain that would like to increase their share of the teenage market. They could focus on this particular demographic and investigate what it is that makes these young people tick. If this fast food chain just conducted research on the population as a whole they could easily miss out on the teenage view, but by focusing particularly on this group it provides the most appropriate information.

Market segmentation can also be useful in other ways as well. Selling isn’t the only goal of advertisement campaigns; another important goal is branding. When a business develops a brand then this can lead to customer loyalty that will bring future rewards. If you market one product you might make a single sale to a person, but if you market your brand it could mean that they buy many products in the future. By studying the different demographic groups it is possible to tailor a branding campaign that will be attractive to this group. A very good example of this is Apple Computers who have built up an impressive brand that appeals to a certain segment of the market; those who like innovative products and don’t mind spending a bit of money.

Market segmentation is very useful for economists and those who wish to market services or products. The ability to find groups and target them in advertising campaigns is often crucial to a business’s success.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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