What Is Market Segmentation? Concepts, Types and Process

Whenever a business runs a marketing campaign aimed at a particular market, it always carries out market segment. So what is market segmentation, why do businesses need to do it, and what happens if they skip it? Let's look at MONA Media find out in the article below.

What is market segmentation?

Market segmentation (market segmentation). It means dividing a market into groups with distinct characteristics that are uniform within each group. Grouping customers by their traits and needs makes it easier for a business to research them and serve them well.

A business cannot meet every individual customer's needs, so it can only set policies for groups of customers. Even with the same your target market different businesses may segment the market in different ways, depending on their strategy.

There are many ways to segment a market, but the type most businesses use is based on customer characteristics. Segmenting by income: high-income customers and middle- or low-income customers. Some businesses also separate VIP customers, regular customers, new customers and so on. potential customers.

Understanding market segmentation in depth makes it easier for a business to build its marketing strategy Take a small, newly founded business with a marketing team that is still in training and a tight budget. It should work with an experienced professional firm like MONA to get accurate advice.

We do market research work every day and every hour across many different industries . That is why our team understands the economic situation well and can give sensible advice to your business. With experience from more than 6,000+ projects projects, and solid results for many client partners, we are confident we are the right choice for your business.

-> See also: Segment your customers more easily with Maslow's hierarchy of needs

Benefits of market segmentation for your business

Customers rarely have the same product needs, so a business cannot serve people one by one. Segmenting the market saves the business effort, time and budget.

Customers in one market segment share many traits and needs, so marketing strategies roll out faster and work better. Because the group you research is narrower, you get more accurate information and data about your customers..

Identifying the right market segment makes online marketing run more smoothly. Example of an SEO method.

Traffic of a business in the immigration consulting sector

In addition, departments also find it easier to manage and follow up with their own customers. Each department should focus on one specific customer group so those customers are satisfied with the service the business provides.

In addition, when segmenting the market as part of a marketing strategy, the business also sees its own strengths and weaknesses,. It would also and can set the right strategy for each segment to get the best results, compete with rivals and find potential customers. 

When you segment customers well, building and carrying out your strategy gets easier. Without an accurate customer segment, your marketing strategy goes off course, the business grows slowly, revenue does not improve and money is wasted. 

Why do market segments and target customers matter?

Market segments and target customers are two key concepts for deciding and steering a company's business strategy. Here is why both matter so much:

• Focus your resources: Market segmentation helps a business identify specific customer groups. By focusing on a few narrower groups, it can use its resources and capabilities more effectively to meet their needs. This strengthens its competitiveness and creates more value for customers.
• Tailor products and services: Understanding your target customers lets you adjust products and services to fit their needs and wants. By researching and analyzing those customers, a business can develop better products and services and give customers a better experience.
• Build long-term relationships: By focusing on specific customer groups, a business can build lasting relationships and engage with customers more. This builds trust and loyalty, which leads to sustainable profit and growth.
• Compete effectively: Knowing what a market segment is also gives a business a clear view of its competitors in the same field and the customers they are targeting. From there it can find its own competitive advantages and develop suitable ways to reach customers and win the market.

Types of market segments, with examples

There are 4 types of market segment: Geographic (area, region), social factors, customer behavior and psychological factors. Let's go through each type in detail with MONA below:

Geographic segmentation

Based on regional characteristics, a business carries out market segment (market segmentation) by geography, such as mountains, plains, rural areas or cities. A business expanding to international markets can segment by region or continent. People living in the same area usually share similar traits, so researching a market by location is easier and more convenient.

Example: A fashion brand running a marketing strategy will study geographic segments to find the places with the most potential. People in the north dress differently from people in the south, partly because of the weather.

With each region's traits in mind, a business can build and run more effective strategies. Competition among businesses in the same area is very high, so a business needs to research carefully and plan sensibly.

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We are proud of an SEO team that has successfully carried out thousands of SEO projects for more than 12,000 clients and partners in many industries, in Vietnam and abroad. MONA is confident it can help you increase revenue up to 300 times through SEO alone, and keep that SEO performance strong over the long term.

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Demographic segmentation

Based on customer characteristics such as age, gender, education, occupation, income, culture or religion. This is the segmentation method that gives the best results and is used by many businesses, because the data it produces is reliable.

Example: A food company can analyze the market by consumer age to develop products for children, middle-aged people or seniors. This helps the company meet customer needs better and sell more, which raises revenue.

Behavioral segmentation

Consumer behavior also has a big effect on a business's marketing strategy. Besides the traditional way of shopping in person at a store, online shopping is now popular with many people.

So businesses should develop their products on websites or e-commerce platforms. They should study how customers use the internet to promote products, and collect user data through surveys and customer feedback.

You can measure and capture the number of potential customers interested in your industry. For some industries considered "hard" to advertise, a website is the way to bring your products and services closer to users.

-> See also: Research steps customer behavior useful for businesses

Psychographic segmentation

Customers' buying decisions depend largely on their personality and daily spending habits. They tend to buy right away when a product meets their criteria or matches their tastes.

Example: Customers who like eco-friendly products are willing to pay more for them. For other goods, they may hesitate or even decide not to buy.

Customers also tend to like discounted products or products that come with a free extra item. One study found that promoted products sell better than regular ones.

So understanding user psychology helps a business develop better product lines and hit consumer psychology directly, which lifts sales quickly. Effective marketing strategies make a business more competitive and grow its market share.

How to identify the right market segment

Market segmentation is a must for every business when it carries out a marketing strategy. So what is the best way to segment a market and reach your goals? Follow these methods:

1. Market research

First, to decide which factors to segment the market by, a business needs to run surveys and market research that goal. You can survey customers directly, survey the market through online questionnaires, or study existing data.

2. Data analysis

After collecting the data you need, the business's marketing strategy team analyzes it and draws conclusions. From this data the business analyzes and evaluates social trends and its own ability to serve the market.

At MONA, we always do data analysis and market research thoroughly before starting website optimization.

Take the logistics market. After analysis, we found 3 "heavyweight" competitors in logistics at the time, with many keywords ranking at the top of search engines. MONA's expert team researched based on 2 customer groups, followed by many more steps, to reach the result of 90% OF KEYWORDS IN THE TOP 3-5, AND 250+ NEW CUSTOMERS.

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3. Understand the market and describe its characteristics

To understand the market better, businesses run preliminary surveys, opinion polls and so on. They ask questions about the chosen segments, using quantitative or qualitative methods for respondents to answer.

Each segment has its own customer characteristics and personality. So once you have identified the potential market segments, describe each one in detail to know exactly what makes it distinct.

4. Carry out the market segmentation

After grouping customers by shared traits and attitudes, the business can segment the market into the 4 types of market segment. It can also use the following standards to describe each segment:

• Homogeneity: Customers in the same segment share some similarities.
• Heterogeneity: Different segments have different traits and characteristics. Do not split off segments that share the same characteristics, as that wastes time and money.
• Measurability: To measure and evaluate a segment, you need real and accurate data.
• Usefulness: The segments you create must make the marketing strategy more effective.
• Diversity: The business can carry out marketing strategies for the market segment.
• Responsiveness: Market segmentation helps a business understand its customers better, so customers respond better to the marketing strategy.

5. Test the marketing strategy

Testing and assessing how attractive each market segmentis, helps the business understand its goals and choose the right market segment. Next, use conversion tracking to measure how effective it is. If results are low, review the research methods or the segmentation you used.

Evaluating segments accurately determines the goal the segment aims at. This is also one of the most important steps in the whole process, because an effective segment shapes later marketing strategies and product positioning.

6. Brand positioning

Brand positioning is the process of defining the position and image a brand wants to build in the minds of its target customers. This strategy creates a point of difference and unique value for the brand, which builds recognition, preference and trust among customers.

At this stage, the business needs marketing strategies that leave its mark on customers so they always remember you. Factors such as pricing, point of sale, product strengths and credibility decide how well the brand is positioned in customers' eyes.

Market segmentation strategies

After segmenting the market, the next step is to choose between a concentrated strategy and a multi-segment strategy. In detail:

Concentrated strategy

Concentrated strategy is used when a business chooses one segment to research and develop. It puts all its time and budget into promoting its products in that segment.

By concentrating on one segment, the business can cut advertising and staffing costs. However, focusing on a single segment is also risky if your Marketing does not work. The business could lose its entire investment or suffer losses from missing its goals.

Multi-segment strategy

In contrast to the concentrated strategy, the multi-segment strategy runs promotion plans across different market segments. It is safer, because you may fail in one segment but succeed in another.

But the business has to spend more resources, time and money on research and on running plans across segments. In return it earns from more sources and is under less pressure from possible risks.

What criteria should a market segment meet?

To segment a market fully and in detail, a business must make sure the segments meet the following criteria:

Differentiation

A market segment needs its own traits that set it apart from other segments. This ensures it attracts the interest and choice of potential customers.

Actionability

A market segment must be defined clearly and specifically, so you can plan strategies and actions for the customers in it.

Measurability

A market segment must be measurable and trackable. This lets you evaluate how well marketing campaigns work and adjust the strategy based on results.

Accessibility

A market segment must be easy to reach, so marketing can be carried out effectively within it. This ensures the business can engage with the segment and take advantage of its opportunities.

Substantiality

A market segment must be large enough to be profitable and support sustainable growth. This ensures that focusing on the segment brings long-term business value.

Examples of market segments

Biti's market segmentation

Biti’s is a well-known footwear brand in Vietnam. Its market segment Biti’s is the fashion and sports footwear market for young consumers. Biti's makes and distributes footwear from sports shoes to loafers and sandals.

In the fashion footwear segment, Biti's makes good-looking, stylish shoes that keep up with fashion trends. The main customers in this segment are young people and who care about fashion. Biti's offers a wide range of colors, styles and materials, from sports shoes to sneakers and high heels.

Beyond that, Biti’s is also present in the sports footwear segment. The brand offers high-quality shoes suited to sports and leisure. Biti's has notable partners in the sports industry, supplying official footwear to football teams, badminton players and other sports partners. The brand is known for its varied products and stylish designs, which meet consumers' need to build a personal style and express themselves.

Novaland's market segmentation

Novaland is known as one of the largest real estate groups in Vietnam. Novaland works mainly in the real estate market, developing and selling residential and commercial properties. The company serves different segments of the real estate industry, including:

• Affordable apartments: Novaland offers affordable apartment projects for middle-income customers. These apartments are usually built in convenient locations near essential amenities such as schools, hospitals and markets, and are priced for urban home buyers.
• High-end apartments: For high-income customers who want to live in a luxurious space, Novaland offers high-end apartment projects. These apartments are usually designed to a high standard, with premium amenities such as swimming pools, gyms, play areas and 24/7 security, and are built in prime locations with good transport and close to shopping and entertainment centers.
• Villas and townhouses: Novaland also has townhouse and villa projects for customers who want a private, upscale living space. Its villa and townhouse areas are usually built in attractive locations close to nature, with premium amenities such as parks, golf courses, sports areas and 24/7 security.
• Mixed-use projects: Novaland also develops mixed-use projects that combine apartments, shopping centers and other services. These projects give customers a complete and convenient living experience, with shopping, entertainment and work all in one place.

Coca-Cola's market segmentation

Coca Cola is one of the leading beverage companies in the world, with a very broad market segment. Here are Coca-Cola's main market segments:

• Carbonated drinks: Coca-Cola is famous for its carbonated drinks, including original Coca-Cola, Coca-Cola Light, Coca-Cola Zero and other special editions. This is Coca-Cola's main segment, aimed at customers who want a fizzy soft drink with a strong cola flavor that suits most consumers' taste.
• Non-carbonated soft drinks: Coca-Cola also makes and markets many non-carbonated drinks such as Fanta, Sprite, Schweppes and Minute Maid fruit drinks. These are for people who want a soft drink without the fizz, or who want a natural fruit flavor.
• Energy drinks: Coca-Cola also has an energy drink segment with well-known products such as Monster and Powerade. These drinks are designed to boost energy and help recovery after sport, and attract customers who care about sport and health.
• Bottled and canned water: Coca-Cola sells bottled and canned drinking water to meet customers' needs. These come in many sizes and packs, from small bottles that are easy to carry to large cans for families or parties.

What does it take to segment a market effectively?

To segment a market more effectively, a business should have the following:

• A team with professional expertise and experience in building and developing marketing.
• Research and identify the right target market from the very first steps of the strategy.
• Know your own strengths and weaknessesand how well you can meet market demand.

Based on what this article has covered, you now have a clearer picture of how to segment a market and why it matters. Applying these methods to identify segments well helps a business get better results from its marketing strategy.

Common mistakes in market segmentation

• Not enough market research: The first common mistake is not researching the market and target customers before segmenting. Without a clear understanding of customers' needs, wants and characteristics, it is hard to identify and serve the right market segment.
• Defining segments inaccurately: Defining a market segment inaccurately or too broadly. This causes a loss of focus and makes it impossible to create good solutions for each specific segment.
• Not tailoring products or services: If you do not tailor products or services to each market segment, it is hard to meet customers' real needs and requirements. A common mistake is using one general marketing strategy for every segment with no differentiation.
• No strategy for reaching the market: Without a clear plan to reach and market to each target segment, it is hard to attract customers and win their interest.
• Not responding to market changes: Failing to respond quickly and flexibly to changes in the market and customer needs can mean losing target customers and struggling to compete.

Frequently asked questions about market segmentation

1- Is identifying a market segment important?

Identifying a market segment is very important in business. When a company understands the segment it is aiming at, it can focus its resources and effort on meeting that specific customer group's needs as well as possible.

2- Which market segment should you focus on?

When deciding which market segment to focus on, consider factors such as target customers, field or industry, market demand, level of competition and how sustainable the segment is.

3- How do you identify the right customer segment?

• Set your goals: Before carrying out any plan, a business needs to define its goals precisely. This helps build the right strategy and take the right steps.
• Market research: Market research helps a business understand customer needs and the products already on the market.
• Analyze your existing customer data: Review the customer data you already have to find key information such as age, gender, location, interests and buying behavior.
• Build customer groups: Based on the market research and data analysis, define customer groups by traits such as age, interests, gender and so on.
• Identify potential customer segments: From the customer groups you defined, pick out the segments with the potential to grow and expand your business.
• Build a marketing strategy: This is a key step in reaching customers. Build consistent strategies for pricing, communication, branding and so on, so customers can easily recognize your brand.
• Track performance and evaluate: Follow your marketing results closely so you can adjust the strategy to attract more customers and raise sales.

As you can see, market segment is used for many business goals. We hope the information MONA shared above has helped you understand what market segmentation is and how to identify the right market and the right target customers, so your business gets the best results. We wish your business every success!