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Market segmentation: what it is and what it’s for

Cristina Morlino - November 22, 2021
market research marketing segmentation segmentazione

Market segmentation: what it is and what it’s for

What is market segmentation?

What is market segmentation? Market segmentation is a process by which consumers are categorized into different groups based on their needs and wants. Recognizing the differences between the customers and creating different segments is critical to successful marketing as it allows to offer targeted products and services. 

Through market segmentation, it is possible to divide demand into clusters of potential clients, so that individuals belonging to the same cluster are as similar as possible to each other and different from individuals belonging to other clusters. Once the different segments have been defined, one or more target segments will be chosen. A target segment consists of the group of consumers to whom you should direct your offer.

Thanks to segmentation, it is in fact possible to go beyond an undifferentiated marketing strategy, opting for tailored sales.

Target - PXR Italy
Target - PXR Italy

But how do you do market segmentation?

Typically, two main techniques are used in conjunction to divide consumers into different segments: factor analysis and cluster analysis.

  • Factor analysis makes it possible to define the pillars of segmentation itself, i.e. the factors on the basis of which to define the different segments;
  • Cluster analysis, on the other hand, allows for the effective grouping of subjects within segments.

There are several criteria that can be used to operate market segmentation. The main ones are:

  • Socio-demographic criteria. In this case, segmentation is done by considering variables such as age, occupation, income, and education
  • Situations of purchase, use and consumption. The choice criteria that guide consumers in purchasing one product over another, such as loyalty to a certain brand, are relevant.
  • Psychographic segmentation. This refers to the overall lifestyles of consumers and their personality differences.
Consumer - PXR Italy
Consumer - PXR Italy

What is the ultimate goal of market segmentation?

Market segmentation involves identifying classes of consumers that differ from each other in what they expect from a company's goods and services. The main benefit of segmentation, which corresponds to the ultimate goal of this process, is the opportunity to identify the most effective positioning for a product or service.

As an example, consider the yogurt market. Not everyone who buys yoghurt is looking for the same characteristics in the products; there are those who prefer the taste and those who put nutritional values and health benefits first. Once you have identified the expectations of your target segment, you will design a precise marketing strategy. Müller focuses on those consumers who seek sensory pleasure, positioning itself as a yoghurt created for those who want to enjoy the taste. Activia, on the other hand, focuses on the benefits of yogurt consumption.

Yogurt - PXR Italy
Yogurt - PXR Italy

Segmentation can be useful not only in sales of products and services, but also in personalizing advertising communications. This is critical to a successful marketing strategy. According to HubSpot, a personalized call-to-action can result in 42% more engagement than a generic call-to-action.

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