A Business Encyclopedia

Bases of Market Segmentation

Definition: The Market Segmentation means dividing the entire consumer market into the subgroups, such that the customers in each group share the common set of needs and wants and have more or less similar or related characteristics.

Bases of Market Segmentation

The firms can segment the market on the following bases:

Bases of segmentation

  1. Geographical Segmentation: Here, the segmentation is done on the basis of the geographical location of the customers. The geographical segmentation is based on the premise that people living in one area have different purchasing or buying habits than those living in other areas of the country.

    For example, the banking needs of people living in rural and urban areas are different and. Therefore, different banking products and services are designed keeping in mind the different preferences of each customer group. Also, the factors like climatic zone, state, region, constitutes geographic segmentation.

  2. Demographic Segmentation: The demographic segmentation means dividing the customer market on the basis of several variables such as age, sex, gender, occupation, income, education, marital status, family size, community, social status, etc. Such segmentation is based on the premise, that customer’s buying behavior is very much influenced by his demographics, and moreover, these variables can be measured easily as compared to the other factors.
  3. Psychographic Segmentation: The psychographic segmentation relates to the personality, lifestyle, and attitude of the individual. It is believed that the consumer buying behavior can be determined by his personality and lifestyle. The personality refers to the traits, attitudes and habits of an individual and the market is segmented according to the personal traits such as introvert, extrovert, ambitious, aggressiveness, etc.

    The lifestyle means the way a person lives his life and do the expenditures. Here the companies segment the market on the basis of interest, activities, beliefs and opinions of the individuals.

  4. Behavioral Segmentation: Here, the marketer segments the market on the basis of the individual’s knowledge about the product and his attitude towards the usage of the product. Several behavioral variables are occasions, benefits, user status, usage rate, buyer readiness stage, loyalty status and the attitude.

    The buyers can be classified as those who buy the product or services occasionally, or who buy only those products from which they derive some sort of benefits. Also, there are buyers who can be called as ex-users, potential users, first-time users and regular users; the marketers can segment the market on this classification. Often, the market is segmented on the basis of the usage rate of the customers, such as light, medium and heavy users.

Thus, market segmentation helps the companies to divide the prospective customers into small groups who have similar needs and plan the marketing strategies accordingly. This enables a firm to concentrate more on a specific group and earn more profits rather than catering to the needs of the entire market who have different needs and desires.

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