Market Segmentation – Definition, Types, and Benefits

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Market Segmentation - Definition, Types, and Benefits

Market segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior.

So, The world has billions of buyers with their sets of needs and behavior.

Also, Segmentation aims to match a group of purchasers with the same set of needs and buyers’ behavior.

Such a group is known as a segment.

So, The process of defining and subdividing a large homogenous market into a clearly identifiable segment having similar needs want, or demand characteristics is called segmentation.

Hence, Its objective is to design a marketing mix that precisely matches the expectation of customers in the targeted segment.

What’s in it for me-

Market Segment Definition 

We have two definitions of a Market Segment that is given below :

Market segmentation is the subdividing of customers into a homogeneous subset of customers where any subset may conceivably select as a market target to be reached with a distinct marketing mix.” – Philip Kotler

“Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several submarkets of segment each of which tends to be homogeneous is full of significant aspects.”  – William Stanton

So, Market segmentation divides a market into well-defined slices.

A market segment consists of a group of customers who share a similar set of needs and wants.

Also, The market task is to identify which set of segments should be the target.

So, We use two broad broad groups of variables to segment the consumer market.

Also, Some researchers define segments by focusing on descriptive characteristics like geographic, demographic, and psychographic.

While other researchers look segment but behavior characteristics like consumer response to benefits, usage occasion, or brands.

For Instance, It does not matter which type of segment you are using important thing is adjusting the market program to recognize customer differences.

Types of Marketing Segmentation

market segmentation - types of marekt segmentation
  1. Demographic Segmentation 
  2. Geographic Segmentation 
  3. Psychographic Segmentation 
  4. Behavioral Segmentation 

1. Demographic Segmentation

Demographic Segmentation

So, It is associated with market needs, wants. Another important thing is that it is easy to measure.

Age and Life Cycle Stage 

Consumers need change with age. So, the Toothpaste brand launches different products for different age groups like it has products for children, adults, and old people.

Hence, Market of pampers divide into prenatal (0-5) months.baby (6-12) ,toddler (13-23) month,and preschooler (24 month +)

So, We can see an example of a honda which run adds shows sexy college student do party near the car at the beach.

Life Stage 

Many life stages that are not pre-define life such as getting through a divorce, going to involve in the second marriage want to care for their old parents, take a new home.

So, On the data shows that  average US couple spend almost 27000 $

Also, On of the data shows that newlyweds couples in the US spend 70 billion $ in the house in the first six months.


So, Women are more communal minded, girls are love to do talk and are curious about their environment. Men first read about the product while women bring it by relating it to a personal level.

So, Major areas of gender differentiation are clothing, hairstyle, cosmetics, Avon.


Hence, Each generation is influenced by their time. also, It may be movie, politics, song, and any unique incident of that time.

2. Geographic Segmentation 

It divides the segmentation into geographic units like nations, countries, cities, or neighborhoods.

So, The company operates in a few units.in this way, it can operate its marketing program.

Grass root success was responsible for Nike initial success.

Retail Firms such as Starbucks, Costco, trader, Joc’s get their success by targeting the local market.

Geographic Segmentation Examples

  • ZIP code
  • City
  • Country
  • Radius around a certain location
  • Climate
  • Urban or rural

We can understand it by taking an example if any company of luxury car wants to sell the car and the company decided to establish its plant in the local area where the condition of the road is not good .and people don’t spend their money on a luxury item then it would be a bad decision.

Choosing a geographic location for the business is a very serious decision that is taken by a proper concern from the expert.

3. Psychographic Segmentation 


Hence, Psychographic is the science of using psychology and demographics to better understand consumers.

So, People who are the in same demographic group and have different psychographic profiles. 

Also, Psychographic segmentation buyers are divide into groups based on psychological /personality traits, lifestyle, or values.

So, Consumers are inspired by one of three primary motivations: ideal achievement, and self-expression.

Example of Psychographic Segmentation 

  • Personality traits
  • Social Class 
  • Personality 
  • Belief 
  • Values
  • Attitudes
  • Interests
  • Lifestyles
  • Psychological influences
  • Subconscious and conscious beliefs
  • Motivations
  • Priorities

4. Behavior Segmentation 


So, Behavior segmentation divides consumers into a group according to their observed behavior. Also, Many believe that behavior variables are superior to demographic and geographic for building market segment and some analysts have suggested that behavior segmentation is killing off demographic. Typical behavior variables and their descriptors include :

Purchase /Usage occasion: Regular occasion, Special occasion, Festive occasion, Gift giving

Benefit Sought: Economy, Quality, Service, Level, Convenience, Access,

User status: First Time User, Regular User, Non User

Usage rate/Purchase frequency: Light user, Moderate user, Heavy user

Loyalty status: Loyalty switcher , Non-loyal , Lapsed

Buyer readiness: Unaware, Aware, Intention, To Buy

Benefits and Limitations of Market Segmentation 


  1. The organization gets to know its customer better 
  2. Provides guidelines for resources for resource allocation.
  3. It helps to focus on the strategy of the organization 


  1. Target multiple segments increase marketing costs if a company has one market segment then it has low cost but as the segment increases budget also increases.
  2. Segmentation can lead to proliferation(large no.) of products. So the problem that creates is that it becomes hard to manage that.
  3. Narrowly segmenting a market can hamper the development of broad brand equity .when we manage small areas broader hamper badly.
  4. Also, Sometimes don’t achieve the desired goal.

Four Factors That Effect Market Segmentation 

  1. Clear identification of the segment. It gets unclear which would our market segment. Selecting our segment is a tough job
  2. Measurability of its effective size
  3. So, Its accessibility through promotional efforts and 
  4. Also, Its appropriateness to the policies and resources of the company.


Marketing  Segmentation is the way of segment customers on the basis of demographic, psychographic, geography, behavior. While doing it marketers find it difficult to segment customers, because it is possible that we select the customer from a demographic of the same need and wants but have a different psychology.


1. How market segmentation increase sales?

It helps many ways to increase sales it target customer on the basis of their past habit as well as bring the repeated customer.

2. Why market segmentation is important in business?

It helps the business to segment customers. So, By this, business can choose which segment of market it want to serve.

3. Can market segmentation be applied in insurance business?

Yes of course. Also, Market segmentation helps insurance business to segment the customer of the same need and wants

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