Summary
Highlights
Market segmentation involves dividing potential customers into different groups based on characteristics like gender, income, location, or lifestyles. Businesses then choose the most profitable segment to target and position their products and marketing mix accordingly.
Businesses can offer products based on gender. For instance, a t-shirt business might offer different shapes or sizes, or a moisturizer company might use different packaging colors to target men or women.
Products can also be tailored to different income levels. This could involve offering basic and premium packages, or a car business providing a range of cars to suit various income brackets.
Location-based segmentation involves adapting products or marketing strategies to specific geographic areas. McDonald's in the Philippines, for example, offers rice with meals instead of just chips to cater to local preferences. Businesses also use location to decide where to expand next.
Lifestyle segmentation categorizes customers based on their behaviors and interests. Holiday providers commonly use this, offering all-inclusive, spa, family, nightlife, beach, or sports holidays to cater to different lifestyle choices, enabling more efficient marketing.
The benefits of market segmentation include better meeting customer needs, which can lead to increased brand loyalty, repeat customers, reduced price sensitivity, higher prices, and ultimately, increased profits.
However, market segmentation also has drawbacks, such as higher research and development costs, increased production costs due to wider product ranges, additional marketing costs, and a reduced ability to exploit economies of scale.