Market segmentation is a process of dividing the market according to similarities that exist among the various subgroups within the market. The similarities may be common characteristics, or common needs and desires. In other words market segmentation is the process of dividing the market according to similarities that exist among the various subgroups within the market.
The most common elements used to separate consumer markets are demographic factors, psychographics characteristics, geographic location, and perceived product benefits.
Demographic segmentation involves dividing the market on the basis of statistical differences in personal characteristics, such as age, gender, race, income, life stage, occupation, and education level.
Psychographic segmentation is based on traits, attitudes, interests, or lifestyles of potential customer groups. Companies marketing new products, for instance, seek to identify customer groups that are positively disposed to new ideas. Firms marketing environmentally friendly products would single out segments with environmental concerns.
Geographic segmentation entails dividing the market on the basis of where people live. Divisions may be in terms of neighborhoods, cities, counties, states, regions, or even countries. Considerations related to geographic grouping may include the makeup of the areas, that is, urban, suburban, or rural; size of the area; climate; or population.
Product-benefit segmentation is based on the perceived value or advantage consumers receive from a good or service over alternatives.
