A firm cannot devise a market strategy without market segmentation. If firms don’t do segmentation, they do not know whom they have to sell and what they have to sell. Segmentation is an effective method to increase the focus of a firm on market segments.
So exactly what is market segmentation?
Market segmentation is sizing a market which involves dividing a broad target market into subsets of consumers, businesses, or countries that have, or are perceived to have, common needs, interests, and priorities, and then designing and implementing strategies to target them.
Types of Market Segmentation
Ø Geographic segmentation
Ø Demographic segmentation
Ø Behavioural segmentation
Ø Psychographic segmentation
Ø Occasional segmentation
Ø Cultural segmentation
Among these segmentations demographic segmentation is the important type of segmentation. The major advantage with demographic segmentation is the information which company needs is readily available.
Demographic segmentation is market segmentation according to age, gender, sex, family, income, education, religion, culture, occupation, profession and ethnicity. It is division of market on the basis of demographics.
Demographic segmentation is extremely important to all marketing departments since the data is easily available and does drastically affect buying patterns of the Consumer. Demographics are a great way to differentiate between customer bases. When companies have their customers grouped by demographics, they can target their strategies to reach customers specifically, as people from certain demographic groups often react the same way to marketing.
The following four variables are examples of demographic factors used in market segmentation:
Age: Generally consumer needs and wants changes with their age. The marketing mix should be adapted depending on which age segments are being targeted. This is one of the most effective ways of demographic segmentation. At the age of 1 to 2, firm shall try to offer stuff like nappies for new born, baby cream, anti-colic, baby clothes etc. With the passage of time, these may change to toys then bikes, balls, sport, jeans, school, then college, then University, car, insurance, employment, then retirement, pension.
Ethnic Segments: The multi-cultural society’s potential customers may all be located in the same geographic location but their needs and wants and ways to satisfy these needs and wants are different. Ethnic marketing is the process of designing product campaigns and advertising to appeal to certain racially, ethnically or culturally-related consumer groups. It is a type of market segmentation that attempts to target specific groups with more focused and appropriately presented messages. This type of marketing can be used for positive or negative business purposes
Gender: Gender segmentation is the process of dividing of potential markets based on gender (male or female).Dividing a market into different groups based on sex, has long been common for many products including cosmetics, clothing and magazines.
Life-cycle stage: Dividing a market into different groups based on which stage in the life-cycle, presented in the table below, reflects the fact that people change the goods and services they want and need over their lifetime.
There is a huge scope of demographic segmentation and is not limited to age, ethnicity, gender and Life Cycle stages only. Other bases for this type of segmentation are like Income groups, sexual orientations, family size, education and many others.