methods of market segmentation: geographic, demographic and psychographic

3.1 The Nature of Marketing – Market Segmentation

What is Marketing?

• Marketing is the process of creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society.
• Marketing objectives (e.g., increase brand awareness, grow sales, improve market share) must support the overall corporate objectives of growth, profitability and sustainability.
• Modern marketing also contributes to the triple‑bottom‑line – economic, social and environmental performance – and therefore links directly to Corporate Social Responsibility (CSR) goals.
• Key chain: Corporate objectives → Marketing objectives → Target‑market definition (segmentation) → Marketing mix (4 Ps) → Desired outcomes (share, growth, profit).

Market Types & Product/Industrial Distinctions

• Consumer (B2C) markets – individuals or households buying for personal use.
• Industrial (B2B) markets – organisations buying for production, resale or operational purposes.
• Products may be consumer‑oriented (e.g., smartphones) or industrial‑oriented (e.g., CNC machines).

Mass Marketing vs. Niche (Segment) Marketing

• Mass marketing – a single, undifferentiated marketing mix aimed at the whole market.
• Niche (segment) marketing – a differentiated mix aimed at one or more clearly defined segments.
• Segmentation is the tool that makes niche marketing possible; it enables firms to move away from a “one‑size‑fits‑all” approach.

Customer Relationship Management (CRM)

• CRM is the systematic management of a company’s interactions with current and potential customers.
• Effective segmentation supplies the data foundation for CRM – it tells the business who the customers are, what they want and how best to communicate with them.

Learning Objective

Identify, evaluate and apply the five principal methods of market segmentation – geographic, demographic, psychographic, behavioural and benefit – and understand how they link to market research, the marketing mix, market‑share and growth analysis, and strategic choices such as mass vs. niche marketing.

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3.2 Market Research – Data for Segmentation

Purpose of Market Research

Market research supplies the information needed to:

• Determine the size and growth rate of the overall market and of individual segments.
• Identify competitors and analyse their strengths and weaknesses.
• Understand consumer characteristics, needs, attitudes and purchasing behaviour.
• Test product concepts, pricing ideas and promotional messages before launch.

Primary vs. Secondary Research

Type	Definition	Typical Methods
Primary	Data collected first‑hand for a specific purpose.	Surveys, questionnaires, focus groups, interviews, observation, online analytics.
Secondary	Existing data collected for other purposes.	Census reports, government statistics, industry publications, company records, market‑research reports.

Sampling, Reliability and Validity

• Sampling – the sample must be representative of the target population to avoid bias.
• Reliability – the degree to which a measurement yields consistent results over time.
• Validity – the extent to which the measurement actually captures the concept it intends to measure.

Quantitative vs. Qualitative Data

Aspect	Quantitative	Qualitative
Nature of data	Numerical, structured (e.g., sales figures, rating scales).	Non‑numerical, descriptive (e.g., opinions, motivations).
Typical tools	Surveys with closed questions, experiments, secondary statistics.	Focus groups, in‑depth interviews, observation, open‑ended survey items.
Analysis	Statistical techniques – mean, median, variance, regression.	Thematic coding, content analysis, narrative interpretation.
Output	Charts, tables, percentages, confidence intervals.	Quotes, personas, insight summaries.

Interpreting Tables & Charts

• Read the title and axis labels first – they define what is being measured.
• Check the scale (linear vs. logarithmic) and any footnotes that explain data sources.
• Identify trends (upward, downward, seasonal) and compare segments side‑by‑side.
• Use the data to calculate market share (segment sales ÷ total market sales × 100 %) and market‑growth rate ((sales this period – sales previous period) ÷ sales previous period × 100 %).

Data Sources for Segmentation

Source	Typical Use
Census & government statistics	Geographic & demographic variables.
Geographic Information Systems (GIS)	Mapping regional, climate and density data.
Customer surveys & questionnaires	Psychographic attitudes, values, lifestyle; behavioural frequency.
Focus groups & in‑depth interviews	Qualitative insight into motivations and benefit preferences.
Social‑media analytics	Real‑time behavioural and psychographic trends.
Company sales records	Behavioural (purchase frequency, loyalty) and benefit (price‑sensitivity, quality‑seeking) segmentation.

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3.3 The Marketing Mix (4 Ps) – Adapting to Segments

How each “P” can be tailored to the five segmentation bases

Marketing Mix Element	Geographic	Demographic	Psychographic	Behavioural	Benefit
Product	Climate‑appropriate features (e.g., insulated jackets for cold regions).	Size, colour or style for age/gender (e.g., children’s toys, men’s grooming kits).	Designs that reflect values (e.g., eco‑friendly packaging for environmentally‑concerned consumers).	Features that suit usage patterns (e.g., easy‑open caps for frequent purchasers).	Core benefits highlighted (e.g., high‑durability for “long‑lasting” buyers).
Price	Regional purchasing‑power considerations (lower price points in low‑income areas).	Income‑based tiers – premium vs. budget lines.	Value‑based pricing for status‑seekers (luxury branding) or for bargain‑hunters (discount offers).	Volume discounts for high‑frequency buyers; loyalty‑card pricing.	Price linked to the benefit sought (e.g., “price‑performance” for cost‑conscious customers).
Promotion	Local media channels (regional TV, outdoor billboards).	Media that match demographic habits (TikTok for teens, newspapers for retirees).	Message tone that resonates with lifestyles (adventure‑oriented storytelling for thrill‑seekers).	Triggers based on purchase occasion (seasonal offers, “back‑to‑school” campaigns).	Benefit‑focused claims (e.g., “90 % less fat” for health‑benefit seekers).
Place (Distribution)	Store locations in high‑density urban centres vs. rural depots.	Channel choice based on life‑stage (online for busy professionals, supermarkets for families).	Specialist retailers that align with interests (sports‑equipment shops for fitness enthusiasts).	Convenient formats for frequent buyers (e‑commerce with rapid delivery).	Selective distribution where the benefit is exclusive (premium boutiques for luxury benefits).

Illustrative Example – “FitLife” Sports‑wear Brand

• Geographic segment: Northern Europe – cold climate → thermal fabrics, heavier jackets.
• Demographic segment: 18‑25‑year‑old university students – trendy designs, mid‑range price.
• Psychographic segment: “Eco‑active” consumers – recycled materials, sustainability messaging.
• Behavioural segment: High‑frequency gym‑goers (≥3 visits/week) – durable, quick‑dry fabrics.
• Benefit segment: Customers seeking “performance‑plus comfort”.
• Resulting mix:
  • Product: breathable, recycled‑polyester leggings with reinforced seams.
  • Price: student discount + premium “green‑performance” line.
  • Promotion: Instagram influencer campaign focusing on sustainability and workout performance.
  • Place: online store + pop‑up stalls at university campuses and gym chains.

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Methods of Market Segmentation

Geographic Segmentation

Divides the market according to physical location and related environmental factors.

• Region (e.g., Europe, Asia‑Pacific)
• Country or state
• City size – metropolitan, suburban, rural
• Climate – tropical, temperate, arid
• Population density

Example: A fast‑food chain offers a spicier menu in hot climates and milder flavours in cooler regions.

Demographic Segmentation

Based on measurable population characteristics.

• Age – children, teenagers, adults, seniors
• Gender – male, female, non‑binary
• Income – low, middle, high
• Education – secondary, tertiary, postgraduate
• Family size / life‑stage – single, married, with children
• Occupation – students, professionals, retirees

Example: Luxury watches target high‑income professionals, whereas entry‑level smartwatches aim at younger, price‑sensitive buyers.

Psychographic Segmentation

Groups consumers by psychological traits, lifestyle and values.

• Personality – adventurous, conservative, innovative
• Values & attitudes – environmental concern, status‑seeking, health‑oriented
• Interests & hobbies – fitness, technology, fashion
• Lifestyle – urban professional, family‑oriented, retiree

Example: A cosmetics brand that promotes cruelty‑free, vegan products appeals to ethically‑motivated consumers.

Behavioural Segmentation

Based on how customers interact with a product or service.

• Purchase frequency – occasional, regular, heavy users.
• Loyalty status – brand‑switchers, loyalists, advocates.
• Usage occasion – everyday, seasonal, special‑event.
• Benefit sought – convenience, quality, status.

Example: An airline offers a “frequent‑flyer” tier with extra perks for high‑frequency travellers.

Benefit Segmentation

Focuses on the specific advantage or solution that consumers expect from a product.

• Functional benefits – durability, speed, ease of use.
• Emotional benefits – prestige, security, excitement.
• Self‑expressive benefits – identity, lifestyle expression.

Example: Toothpaste marketed for “whitening” versus toothpaste marketed for “sensitivity relief”.

Comparison of Segmentation Methods

Aspect	Geographic	Demographic	Psychographic	Behavioural	Benefit
Primary basis	Location & climate	Statistical characteristics	Psychology & lifestyle	Purchase behaviour & usage	Desired product advantage
Typical data sources	Census, GIS, sales territories	Government statistics, surveys	Market‑research reports, focus groups, social‑media analytics	Company sales records, loyalty programmes, web‑analytics	Customer surveys, product reviews, competitor claim analysis
Common uses	Distribution planning, regional advertising	Product sizing, price setting	Brand positioning, tone of communication	Promotions tied to usage occasions, loyalty schemes	Message focus on the benefit most valued by the segment
Strengths	Easy to measure; clear boundaries	Highly quantifiable; widely available data	Provides deep insight into motivations; builds strong loyalty	Direct link to purchasing decisions; easy to track over time	Aligns product development with what customers truly want
Limitations	May ignore individual preferences within a region	Ignores attitudes, values and lifestyle differences	Data collection can be costly and more subjective	Can over‑segment if behaviour varies frequently	Benefit definitions can be ambiguous and overlap
Pros & Cons (summary)	Pros: Simple, objective, good for logistics. Cons: Overlooks personal tastes.	Pros: Readily available statistics, easy to compare. Cons: No insight into motivations.	Pros: Captures values and lifestyles, supports strong branding. Cons: Expensive to research, more subjective.	Pros: Directly linked to sales behaviour. Cons: May change quickly, requiring continual updates.	Pros: Highlights the core reason for purchase. Cons: Benefits can be interpreted differently by consumers.

Linking Segmentation to Market Share & Growth

• Market share for a segment = (Sales of the firm in that segment ÷ Total sales of the whole market in that segment) × 100 %.
• Market‑growth rate = ((Segment sales this period – Segment sales previous period) ÷ Segment sales previous period) × 100 %.
• These calculations help decide whether a segment is attractive (large or fast‑growing) and whether the firm should adopt a mass‑marketing or niche‑marketing approach.

Applying Segmentation in Practice

1. Define the overall market (B2C or B2B) you wish to serve.
2. State the purpose of the research – size, growth, competition, consumer characteristics.
3. Collect relevant data – primary (surveys, focus groups) and secondary (census, industry reports).
4. Analyse quantitative data (tables, charts) for size and growth; analyse qualitative data for motivations, values and benefits.
5. Identify distinct, measurable segments using geographic, demographic, psychographic, behavioural and/or benefit criteria.
6. Evaluate each segment’s attractiveness (size, growth potential, competition, profitability, alignment with CSR objectives).
7. Select the most viable segment(s) – decide between mass, segmented or niche targeting.
8. Develop a differentiated marketing mix (product, price, promotion, place) that aligns with the chosen segment(s).
9. Implement CRM systems to maintain relationships, monitor segment performance and feed new data back into the research cycle.

By integrating clear market‑research objectives, robust data analysis, the five segmentation bases, and a flexible 4 Ps strategy, businesses can move from generic mass‑marketing to a focused, profitable niche approach while supporting corporate objectives and CSR commitments.