Market Segmentation

demographic segmentation

Few marketing concepts are more powerful than segmentation, which is about dividing a market into meaningful pieces. Divide a population by age and gender, for example, and you have a classic demographic segmentation. That’s obviously useful for businesses related to clothes and shoes. You might also want to look at married or single, and maybe married or divorced, and other possible variables. And you could also focus on one gender in one age classification and only those married or not, fixing on several factors at once. The illustration to the right shows the age categories tracked by the U.S. Census.

Divide a population by income and you have a different segmentation, sometimes called economic segmentation, useful for lots of businesses. Auto retailers, restaurants, travel agencies, and sellers of luxury goods, to cite a few examples, might set strategy and tactics based on this segmentation. The government tracks income by family.

The U.S. Economic Census divides businesses into categories based on numbers of employees, as shown in this illustration taken from the U.S. census site:

There’s also geographic segmentation, so you could cut a market into various regions, cities or neighborhoods. You’ve probably seen how large companies divide their markets into regions. And more local businesses often have locations in several cities, so their markets divide by city or store location.

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