{"id":90116,"date":"2022-02-07T03:00:17","date_gmt":"2022-02-07T03:00:17","guid":{"rendered":"https:\/\/www.similarweb.com\/corp\/?p=90116"},"modified":"2025-10-29T14:56:46","modified_gmt":"2025-10-29T14:56:46","slug":"market-segmentation","status":"publish","type":"post","link":"https:\/\/www.similarweb.com\/blog\/research\/market-research\/market-segmentation\/","title":{"rendered":"What Is Market Segmentation? Tips, Types, and Benefits Explained"},"content":{"rendered":"

Market segmentation facilitates better personalization. It makes it easier for brands to connect with people in a meaningful way that impacts results and forges stronger bonds between consumers and companies<\/strong> alike.<\/p>\n

Once you know how it\u2019s done and what tools to use, you can immediately start to leverage it in your business.<\/p>\n

What is market segmentation?<\/h2>\n

Market segmentation is a process of division. It takes people within a market and separates them into groups based on shared characteristics, interests, or behaviors. With it, companies can create stronger marketing campaigns to drive higher conversions and revenue.<\/p>\n

The shared characteristics of the segments could be based on demographic data, such as location, age, occupation, and gender. It can also be based on needs, product usage, priorities, purchase history, company attributes, interests, funnel stage, and more.<\/p>\n

\"What<\/p>\n

Fun Fact:<\/b> While market segmentation tools have advanced significantly, the concept<\/a> of market segmentation is over 100 years old. Back in the 1920s, it was used by manufacturers who started to produce different vehicle models\u2013each designed to meet the needs of various psychographic and demographic market segments, such as income, interests, lifestyle, and location.<\/p>\n

Different types of market segmentation<\/h2>\n

There are four core types of market segmentation<\/a>: demographic, firmographic, psychographic, and behavioral. The best segmentation type will depend on your business and its audience. Below, you\u2019ll find a quick explainer for each.<\/p>\n

\"Market<\/p>\n

1. Demographic segmentation<\/h3>\n

What it is: <\/b>Demographic segmentation<\/a> breaks a market or audience down into smaller groups based on characteristics that can be easily identified by various data points. This could include income, occupation, location, gender, marital status, age, education, nationality, religion, etc.<\/p>\n

How it\u2019s used: <\/b>Organizations use demographic segmentation on the assumption that those with shared characteristics will have similar needs and respond to similar messages. By dividing up a market into smaller segments, companies can develop targeted marketing campaigns and use tactics like advertising personalization to target a group based on its demographic qualities.<\/p>\n

Market segmentation example:<\/b> Geographic segmentation<\/a> is a popular type of demographic segmentation. Here, you divide a group up based on geographical location. Depending on the type of business and its reach, you may wish to target people in specific cities, states, or countries. Geographical location impacts language and timezone and has additional implications on purchasing habits, pricing, and cultural considerations.<\/p>\n

\"Example<\/p>\n

In this example, I\u2019m using Similarweb Web Intelligence to review geographical segmentation for Sprout Social. I see the top 15 countries for my highest-traffic markets globally. I can view respective growth, average visit duration<\/a>, how many pages per visit<\/a>, and bounce rate<\/a>. Of course, this is just the starting point for market segmentation. But in terms of showing me my most valued markets and their respective standings at a glance, it\u2019s a quick and easy way to capture this data.<\/p>\n

2. Behavioral segmentation<\/h3>\n

What it is: <\/b>Behavioral segmentation splits people into groups based on their interactions. These can be online spending habits, product usage, check-out status, customer service, co-branded goods, discounted products, free trial take-up, benefits sought, lifestyle, patterns in decision-making, etc.<\/p>\n

How it\u2019s used: <\/b>Organizations use behavioral segmentation to develop targeted marketing campaigns that focus on the specific habits that groups of users have displayed. By honing in on people\u2019s preferences and actions, organizations can offer personalized ads, relevant offers, and tailored messaging that appeal to the target audience.<\/p>\n

Market segmentation example: <\/b>Benefit segmentation is a widely-used type of behavioral segmentation. Here, a target audience can be split into categories of perceived benefits. Let\u2019s take a skincare brand as an example. Some of the different benefits could be:<\/p>\n

    \n
  1. Anti-aging<\/li>\n
  2. Dry skin<\/li>\n
  3. Oily skin<\/li>\n
  4. Acne-prone skin<\/li>\n
  5. Blemishes or pigmentation<\/li>\n
  6. Sensitive skin<\/li>\n<\/ol>\n

    Here, we group consumers into categories by \u2018benefit\u2019 based on their individual skin type. This type of market segmentation gives a business the ability to target specific groups with related products, content, offers, and more.<\/p>\n

    Read More: Your Guide to Behavioral Segmentation With Examples and Practical Tips<\/a><\/p>\n

    3. Firmographic segmentation<\/h3>\n

    What it is: <\/b>Firmographic segmentation is a type of market segmentation that examines organizations. It includes data points, such as company size, number of employees, locations, size of customer base, industry, revenue, etc.<\/p>\n

    How it\u2019s used: <\/b>This type of market segmentation is widely used for B2B marketing purposes as it analyzes organizations instead of individuals. It takes groups of businesses and sorts them based on shared or similar attributes, which helps create more effective targeted campaigns.<\/p>\n

    Market segmentation example: <\/b>In the B2B technology space, a company providing IT support would do firmographic segmentation to separate enterprise accounts from the SMB market. This way, it can approach larger organizations with a tailored package for complex support and smaller businesses with a more cost-effective, fixed-fee service for a more basic level of support.<\/p>\n

    4. Psychographic segmentation<\/h3>\n

    What it is: <\/b>Psychographic segmentation is perceived to be one of the most challenging types of market segmentation. It splits a market up according to personality traits, consumer interests, values, lifestyle, opinions, etc.<\/p>\n

    How it\u2019s used: <\/b>This type of market segmentation is used by marketers who need to select specific groups based on their interests, likes, and opinions. Social media has enabled organizations to leverage psychographic segmentation more effectively, as people signal their interests openly on these platforms.<\/p>\n

    Market segmentation example: <\/b>A great example of psychographic segmentation in action comes in the form of a simple market research survey<\/a>. If you\u2019ve ever received a survey from a brand you shop with that asks about your hobbies or interests \u2013 this is how most types of psychographic segmentation start out.<\/p>\n

    \"Psychographic<\/p>\n

    Here\u2019s an example of a market segmentation survey in action. Most people are accustomed to seeing these types of forms and will be asked to complete them by companies they already do business with or through platforms like Yougov<\/a>.<\/p>\n

    Benefits of market segmentation<\/h2>\n

    At its very core, segmenting a market will help you generate more demand for your business. It can shape your strategy and play out in more personalized messaging that increases the appeal of a product or service to a target audience<\/a>. This naturally leads to better engagement rate<\/a> and higher conversions while adding to the bottom line – something any business will benefit from.<\/p>\n

    \"market<\/p>\n

    Let\u2019s take a look at some of the top benefits market segmentation offers.<\/p>\n

    Discover new opportunities for growth<\/h3>\n

    Market segmentation research helps organizations decipher new ways to grow. Use it to find and convert new customers, uncover new marketing channels<\/a> to use, find and flesh out new markets to enter, and entice customers to buy from you again.<\/p>\n

    Lower cost of acquisition<\/h3>\n

    Market segmentation can also reduce customer acquisition costs. With it, you can slice and dice a market into bitesize chunks, then pick and choose priorities according to your budget or preference. Knowing where and how to reach customers reduces the time and money needed to acquire them.<\/p>\n

    Let’s say you’re a multinational firm spending money consistently on PPC and TV advertising. Your strategy takes a mass market approach, and results are steadily increasing. After doing market segmentation, you find that your ideal customer profile<\/a> spends more time on social channels, specifically LinkedIn and Twitter, and their newspaper of choice is the New York Times. You would then be able to use this data to reach more people in your target market far more effectively and at a much lower cost to your business.\u00a0<\/em><\/p>\n

    Create tailored offerings<\/h3>\n

    Personalized offers are no longer nice to have; modern-day consumers expect and respond to targeted ads based on their purchase history, needs, habits, and other important factors. Market segmentation gives you data to fuel these activities and create bespoke offers that hit the mark with your prospects.<\/p>\n

    Foster loyalty<\/h3>\n

    You can build stronger relationships with clients by communicating in a way that resonates and has an impact. With closer connections to customers, they feel understood, valued, and important to your business, making them less likely to leave or take up rival offers on a whim.<\/p>\n

    A <\/i>survey by Salesforce.com<\/i><\/a> revealed 70% of consumers believe a company\u2019s ability to understand their individual needs impacts their loyalty.<\/i><\/p>\n

    Helpful for new product development<\/h3>\n

    You can and should design products and features around your customers’ needs. Market segmentation studies give you an x-ray vision into the pain points, wants, and needs of a target market<\/a>. Needs-based segmentation is ripe for finding whitespaces in a market and serves as a great platform for innovation when launching new products<\/a>.<\/p>\n

    Achieve better post-launch product evaluations<\/h3>\n

    Market segmentation can also come into play once a product or service is launched. Organizations can use it to understand potential shortfalls of a product vs. consumer needs and expectations.<\/p>\n

    Improve customer experience<\/h3>\n

    Market segmentation outcomes shouldn\u2019t be limited to marketing and management. When you take time to collect data and share it throughout an organization, you can leverage it to deliver a better experience.<\/p>\n

    In a study conducted by Evergage, over 88% of marketers said their biggest goal with personalization is to improve customer experience<\/a>.\u00a0<\/strong><\/p>\n

    Here\u2019s a quick example.<\/p>\n

    A telecom provider or streaming service could segment its existing customers based on their product usage data. Should a customer call in to speak with your team, they know exactly what products or add-ons to offer based on this information. It leads to a better experience, and customers feel valued and understood. These stats would also be pivotal for service teams looking after clients who wish to cancel, as they can immediately step in with an enticing offer that\u2019s relevant and of genuine value.<\/b><\/em><\/p>\n

    Attract the right customers<\/h3>\n

    Market segmentation enables you to deliver more personalized, powerful marketing campaigns. With this, you can target prospects who are an ideal match for your products or services. Combine this with well-defined target personas for each segment of your market, and you\u2019ll reap the rewards.<\/p>\n

    Improve your marketing strategy<\/h3>\n

    Segmentation adds substance to your marketing strategy, giving you vital intel about who to target, where to find them, and how to speak with them effectively. Having access to digital intelligence platforms with granular data is essential for any <\/b>successful digital marketing strategy<\/b><\/a>.\u00a0<\/b><\/p>\n

    Fine-tune your messaging<\/h3>\n

    Most brands have well-developed audience personas, each with their own preferences and pain points to address \u2013\u00a0doing market segmentation gives you ultra-granular data. Allowing you to create impactful messaging for specific groups based on their unique and multivariate characteristics.<\/p>\n

    Let\u2019s say you\u2019re an e-tailer focused on selling laptops and computing equipment to a broad market. The messaging you use to students or younger members of your audience who are looking for bargain basement offers won\u2019t necessarily appeal to the portion of your target market who want high-spec equipment. So, it\u2019s important to use market segmentation to determine what messages are best for each persona you target.\u00a0<\/i><\/p>\n

    Increase response rates and conversions<\/h3>\n

    Tailored messaging that reaches people at the right time and says the right things can help you boost response rate and, thus, conversions. Whether through retargeting, social, or email outreach, you will get higher conversions and better responses to your marketing efforts.<\/p>\n

    Develop customer personas<\/h3>\n

    The more market segmentation you can do, the more accurate your audience personas will be. Using a blend of segmentation types, and often will help you develop ideal customer profiles that are true to life and relevant to today\u2019s market.<\/p>\n

    Support decision-making in other business areas<\/h3>\n

    By analyzing the preferences of different segments, you can accommodate the audience better in other areas, such as pricing, distribution, content, and design.<\/p>\n

    Considerations before starting market segmentation<\/h2>\n

    \"Winston<\/p>\n

    There are four core phases to address before you start any market segmentation activities. It\u2019s important not to skip over these \u2013 doing so will ensure you\u2019ve considered and developed a thorough plan that will save you time and enrich your results.<\/p>\n