Next video:
Loading the player...

Market segmentation is a process used by marketers to group similar consumers together.  This helps them better target their marketing efforts by sending the right messages to the right consumers.

A market segment usually features three aspects: 

  • First is homogeneity – the consumers in the segment have common needs. 
  • Second, each segment is distinctive – this implies the consumers in the group are different, in some way, from consumers in other groups.
  • Third is reaction –  which implies that consumers in the segment will have similar responses to the marketing and advertising they see.

One way to use market segmentation is by demographic. This refers to dividing consumers by aspects including age, gender, income, needs or a combination thereof. 

Market segmentation can also be based on consumer behavior. This involves grouping consumers according to how they feel about a certain product or their knowledge of those products. Consumers who are very interested in gourmet cooking are likely grouped together for firms focused on the sale of exotic spices, rare wines, fine cookware and sophisticated appliances.

Consider a manufacturer of snow blowers. This company would use geography and homeownership as part of their approach to focus marketing and sales strategies. Their target consumers would be suburban and rural homeowners in countries like Canada, Sweden and the northern US, rather than tropical countries like Brazil or Colombia.



Related Articles
  1. Small Business

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  2. Investing

    Three Disney Business Segments Investors Should Watch

    The Walt Disney Company (DIS) reported fourth quarter and full year earnings for fiscal 2014 on November 5th and the house that the mouse built turned in some fairly outstanding result, pointing ...
  3. Investing

    Money Market

    Learn more about this segment of the financial market and how it can cater to your short-term investment needs.
  4. Investing

    The Importance Of Segment Data

    Key financials often fail to provide insight into large cap companies.
  5. Insights

    Consumer Confidence Index

    The Consumer Confidence Index is the result of a monthly survey of 5,000 U.S. households by the Conference Board that measures how optimistic or pessimistic consumers are about the economy's ...
  6. Investing

    Consumer Packaged Goods Sank 2.5% in Q1

    Big brands look to emerging markets as slowed consumer spending eats into corporate profits.
  7. Insights

    What are Consumer Goods?

    Products that are purchased for consumption by the average consumer. Clothing, food, automobiles and jewelry are all examples of consumer goods
  8. Insurance

    How Index Universal Life Insurance Works

    Understanding how Equity Index Universal Life Insurance policies work and if you should buy a policy.
  9. Insights

    Understanding The Consumer Confidence Index

    We look at this closely watched economic indicator to see what it means and how it's calculated.
Hot Definitions
  1. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  2. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  5. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
  6. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
Trading Center