The Importance of Market Segmentation

by Devra Gartenstein - Updated June 28, 2018
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Unless you sell a highly specialized product, like a medical device that treats a specific rare ailment, your target market will usually be a collection of smaller markets. The people interested in your products and services won't all be interested for the same reasons. Market segmentation is the practice of dividing up your company's audience into different groups with varying needs and interests. Market segmentation is important because it helps you understand the subgroups that make up your audience so you can tailor your products and your marketing.

Importance of Market Segmentation for Product Development

The process of using marketing segmentation starts before your products even enter the market as you develop qualities and features to meet the needs of the customers. Your offerings may start with a skill or interest of yours, such as creating clothing for plus-size women. But after you define this broad focus, the needs of your target market will, in turn, define the products and services you develop. You may segment your primary market into subgroups, such as older and younger plus-size women, plus-size working women and athletic plus-size women. The better you understand the needs and interests of each of these groups, the better you'll be able to create products they'll specifically want to buy.

Importance of Market Segmentation for Marketing and Advertising

As you develop a clear understanding of who your customers are and what they specifically want, you'll be able to specifically target marketing and advertising towards them. For example, if you manufacture nutritional supplements, you may make products targeted towards men, children, pregnant women and older women. It will take a different strategy to reach each of these diverse groups. For example, to advertise children's vitamins, you can run commercials on children's television shows or in parenting magazines. To reach pregnant women who are in the market for vitamins, target your marketing and advertising to venues and media that reach health-conscious younger women. Understanding each of the market segments is an important tool for using advertising funds effectively and casting a smaller, but more successful net.

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Psychographics Vs. Demographics

The segments that make up your target markets can be classified both psychographically and demographically. Psychographic characteristics are personality traits and classifications based on taste, such as people who enjoy gaming or social media. Demographic traits define members of your market segments by characteristics they don't necessarily choose, such as age, gender or income level. Understanding each of these target markets is an important aspect of effectively using market segmentation strategies.

About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.

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