Market Segmentation Definition

Market segmentation is the practice of dividing the target audience of a business down into different groups based on differing attributes. Segmentation is done so that a business can more accurately personalize marketing to a different group based on their unique characteristics which may not be shared with the entire target audience as a whole.

For example, segments might include age, gender, location, and much more—it’s important to note that market segmentation isn’t necessarily just another term for demographic targeting, as groups might be segmented based on interests, purported needs, status as a previous buyer, and so on.

Market Segmentation Example

In an effort to reduce advertising spend and increase their advertising revenue, a business decides to try out several new advertising campaigns, each designed for a different segment of their overall market audience. Rather than producing a single, more expensive “general” campaign designed to appeal to everyone, the business gives themselves more flexibility to personalize advertising messages while spending less on campaign testing (since the segments are smaller).

The business finds success in doing so, since online marketing makes segmentation much easier. For instance, the business might have targeted different keywords via Google Adwords which were more likely to be searched by a particular segment of their audience. Different landing pages were created and A/B tested for each segment. By breaking down their core audience into segments and marketing to those groups, the business is able to reduce spend and increase ROI.

Why Market Segmentation is Important for Strategic Marketing?

Closing Sales

Market segmentation can be a powerful closing technique. A properly segmented group can feel as though they’re being communicated with more directly and receive more specific answers to their unique needs, desires, or problems.

Customer Experience

For the same reasons as described above, market segmentation can enhance customer experience. Rather than being subject to a generic advertising campaign, a segmented group might receive information far more relevant to them.