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Market Segmentation and Targeting Overview and Example

Candle brand Otherland could create a segment of millennials who were born in the 90s to advertise their 90s-inspired product line to. For example, if you run a bookstore you can create a segment for parents and advertise children’s books to them. For example, people in your dog owner segment may also be in your parents’ segment. Common characteristics in customer segments can guide how a company markets to individual segments and what products or services it promotes to them. Build your customer segments in the editor on the Customers page by adding filter names, operators, and values. You can refine, add, or even remove customer segments over time as your business evolves.

When performing market research, psychographic surveys are used to gather data to understand not just buying behaviors, but the motivation behind those behaviors. Creating customer segments based on these characteristics helps shed light on what consumers really think about your products or services. Demographic customer segmentation is frequently used to divide people into groups based on their personal and lifestyle characteristics.

With segmentation and targeting, you want to understand how your market will respond in a given situation, like what causes people to purchase your products. Understanding segmentation starts with learning about the various ways you can segment your market as well as different types of market segmentation. Companies like American Express, Mercedes Benz, and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers. Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs. women or high income vs. low income. By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies. Market segmentation creates subsets of a market based on demographics, needs, priorities, common interests, and other psychographic or behavioral criteria used to better understand the target audience.

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Customer segmentation made easy

When conducting a survey, you will want to make sure that you sample the right number of people in your customer segment. You can also use interviews, existing customer data, focus groups, and other data collection methods. When you determine the characteristics of people who like and will buy your product, you can effectively divide your customer base into subgroups. This is known as a panel survey, which measures changes in customer attitudes and provides valuable insights to marketers. Market research surveys are frequently used to collect detailed data on customer motivations and behaviors.

Customers served by market segmentation campaigns often perceive a brand's messaging and products as tailored to them. Large, small and Consumer segmentation niche customer segments can be targeted depending on the company's resources and offerings. This approach identifies the profit potential of each customer group, enabling companies to adjust their sales and marketing budgets accordingly. Value-based segmentation evaluates groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them.

Popular Customer Segmentation Courses and Certifications

Pepsi continues to market to a solid and growing base of consumers who want sugar free cola options. The target audience are regular and loyal users of the product who choose it for its refreshment value and to enjoy the good taste, as well as Pepsi consumption being part of their lifestyle habits. The brand focuses on similar demographics for its more diet-conscious Pepsi Max target market, who are interested in a tasty sugar-free cola option. They can also learn how does Pepsi compete with Coca-Cola, how the Pepsi global marketing strategy helps drive sales and revenue, and much more. Let’s take a closer look at who is Pepsi’s target market and how the caffeinated, carbonated, sugary beverage is faring in the cola war of the 21st century. In 2022, the company behind Pepsi, PepsiCo, is one of the top companies in the world in terms of market capitalization, valued at just over $238 billion.

• For example, a company like Mercedes Benz focuses on customers who value luxury and status, while Volkswagen, which literally translates to ‘the people’s car’ in German targets an audience who value affordability and reliability.
• With more than 36,000 restaurants in over 119 countries, McDonald’s uses a subset of geographic customer segmentation to promote menu items to users from various cultures.
• For example, if you run a bookstore you can create a segment for parents and advertise children’s books to them.
• The goal is to concentrate resources efficiently and create targeted marketing strategies.
• This process keeps segments tied to real revenue outcomes instead of abstract models.

Segmenting by value lets you prioritize where to spend your marketing budget. If your CAC is 2x higher in one region, but LTV is flat, it’s worth revisiting. Geography also matters for shipping costs, fulfillment center planning, and even ad spend allocation. When you segment your audience by price sensitivity, it allows you to fine-tune your offers.