types of market segmentation
Research Intelligence

4 Types of Market Segmentation (Plus a Few Extras You Might Miss)

by Molly Winik , Senior Digital Research & eCommerce Specialist 7 Min.
October 28, 2021 | Updated June 22, 2022

So you’ve started segmenting your market. You’ve researched your audience and maybe even divided them into defined groups for a more targeted marketing strategy.

But creating customer segments is only half the battle. Here’s how to take your segmentation strategy to the next level. 

When it comes to market research, experimentation is key. And yes, this means challenging parameters you’ve already defined, zooming in on every audience, and ensuring that you reach potential customers where it’s most effective. Oh, and if none of this is making sense, bookmark this page and get the basics of market segmentation first.

This article dives into the four main types of market segmentation–plus some commonly overlooked ones–and when to use them.  

4 types of market segmentation

The 4 main types of market segmentation

Even if you’ve already divided your market based on certain parameters or similar characteristics, it’s worthwhile to take a step back and remember that in the digital world, an audience analysis strategy often benefits from a combination of tactics. 

Depending on your goal, you pick a primary segmentation method and add others for more granularity. When you use more than one type, you’ll quickly see the benefits of market segmentation.

1. Demographic segmentation – who is buying?

Typically, segmentation starts with demographic audience analysis – it’s usually what we first think of when defining our customer personas. This type of market segmentation sticks to the basics:

  • Age
  • Gender 
  • Ethnicity 
  • Income level 
  • Marital status
  • Family size 
  • Education level 
screenshot of audience analysis similarweb

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Demographic segmentation is very useful when you have a range of products or different product lines, like men’s clothing vs. women’s clothing. Streaming sites offer different content to different age groups; car manufacturers offer two-seaters to singles and six-seaters to large families, and so on.

With demographic segmentation, you can understand expectations, cultural norms, and important social context that impact consumer behavior – a great benefit for B2C companies in particular. You’ll have greater chances of success (ie. getting your customer to purchase your offering) when whatever you’re putting in front of your audience resonates with them.  

2. Psychographic segmentation – why are they buying?

It’s a tough question to answer. But as a digital marketer, you need to get down to the motivation of your target audience.  Some factors that influence why your customers buy what they buy include: 

  • Lifestyle
  • Values
  • Beliefs
  • Interests and Hobbies
  • Political orientation
  • Goals

Of course, you’ll only need to focus on the ones that are relevant for your industry. Take publishers and media for example. Depending on the focus of their coverage, (politics, culture, science, gossip, etc.) their messaging will appeal to very different audiences with very different needs. 

So, how do modern companies connect with the many different customer needs of their many different audiences? Some add diversity support declarations to their websites, for example, while others make it known that women comprise the majority of their executive boards. These businesses have learned that such issues can influence the decision-making process of specific audiences.

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3. Geographic segmentation – where are they buying from?

This straightforward form of segmentation is surprisingly beneficial. Geographic audience analysis can reveal striking differences in traffic and engagement metrics from different areas around the world. For example, streamers in the United States spend approximately one more minute watching their favorite show than those in the U.K. Who’d have thought?

Geographical segmentation isn’t only about countries though. You can also segment according to more niche markets such as:

  • Language region
  • City vs. country
  • Postal code 
  • Radius

Pin down the geographic parameters most relevant to your business. A local service provider, for example, might segment according to proximity, such as prospects within a 5-kilometer radius, 5-20 kilometer range, and so on. An enterprise focused on global marketing might prefer to segment the market according to language, as this most strongly affects its specific diction, tone, and content strategy.   

similarweb cross country category analysis

Similarweb Digital Research Intelligence

4. Behavioral segmentation – how are they buying?

Meet the most dynamic of all market segmentation techniques: behavioral segmentation is an ongoing process of collecting and analyzing behavioral data. In other words, over time, the data you collect will reveal more about your consumers, such as: 

  • Purchasing habits
  • Browsing behavior
  • Interaction with your brand
  • Interaction with your competitors
  • Buying history
  • Brand loyalty 

This method includes monitoring behavioral metrics and recording significant touchpoints. An eCommerce site or retailer, for example, may make segments based on the channel or device people use to reach its site, whereas a gaming site might segment according to the frequency of purchases or which competing gaming sites users visit. Start by studying different marketing channels to see which ones are overpromising as compared to the rest. How your audience reaches your site says a lot about who they are.

similarweb marketing channel performance

Similarweb Digital Research Intelligence

Five more market segmentation techniques

The possibilities for segmentation are limitless. If none of the above feel right for you, here are a few other approaches to try individually or in combination. 

5 more ways to segment your market

1. Firmographic segmentation

If you’re a B2B company, you’re less interested in your prospects’ individual, personal characteristics. Your buyer is a company, and you need to understand the character of that business rather than the individuals who comprise it. 

That said, firmographic segmentation goes hand in hand with company research. It analyzes the industry, company size, location, and history of your potential customers. For more targeted marketing, you can then add the individual’s position and level of seniority in the company.  

2. Transactional segmentation

When it comes to online shopping and eCommerce sites, transactional segmentation keeps all the receipts.  It considers payment method, purchase value, use of coupons and special offers, and transactions based on categories or top-selling products. It’s a type of segmentation that can optimize pricing strategies and measure customer retention

Shopper Tip: Use Similarweb Shopper Intelligence to research average listing price for competitors’ products across Amazon and online marketplaces to sharpen your pricing strategy.

similarweb shopper intelligence

Similarweb Shopper Intelligence

3. Technographic segmentation

Need something? There’s an app for that. This type of segmentation takes on technological aspects and is very relevant when offering apps across different device stores. Technographic segmentation includes how easily a potential customer adapts to new technologies or how familiar they are with pre-existing ones. Some questions you’ll ask yourself about your customer base include, do they seek out and embrace innovation, or are they skeptical? 

4. Seasonal segmentation

Some industries are strongly impacted by the seasons and divide their target markets accordingly. We’re not just talking about weather or holidays though. Consider cultural, sports, or political events that stir human interest and alter buying behavior. Any of these could benefit from a seasonal keyword strategy. 

5.Value segmentation

Among the many types of market segmentation, this may be the only one that puts your business at the center of analysis. The idea is to create different groups according to the value a customer brings to the company or the potential revenue you might generate from them. 

Master the 7 steps of market segmentation

Beware of these common segmentation temptations

Before you take a swing at segmenting your market, here are a few traps to avoid:

1. Don’t rush.

Make sure that you’ve completed each step in market segmentation before moving on to the next one.

2. Don’t forget to optimize. 

Creating your market segmentation strategy requires considerable initial effort, but don’t stop there. It’s tempting to stick with the same segmentation for good, but markets are dynamic, so keep your finger on the pulse and keep optimizing. You need to identify upcoming trends and emerging markets, detect shifts in behavior and preferences, and, most of all, keep an eye out for up-and-coming competition. Measure performance and apply changes if required.

3. Don’t limit yourself to small segments.

Be careful not to create segments that are too small. The temptation to add factors and metrics for better targeting can lead to splitting your audience into endless, tiny categories. Instead, aim for actionable insights that impact your company on a large scale.

4. Don’t ignore the data. 

The backbone of effective market segmentation is your research and analytics strategy. No matter which of the different types of market segmentation you go with and how you combine them, data quality is essential. It all starts with analyzing your audience. You’ll discover natural groupings in your audience, and with a bit of market research, you can find out if these match the industry standards. 

Now that you’ve got the principles, try Similarweb Digital Research Intelligence for free and master market segmentation today.

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FAQ

What are the 5 ways of market segmentation?

Five ways to segment markets include demographic, psychographic, behavioral, geographic, and firmographic segmentation.
What are the 3 target market strategies?
The three strategies for selecting target markets are pursuing entire markets with one marketing mix, concentrating on one segment, or pursuing multiple market segments with multiple marketing mixes.
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