Market Segmentation Analysis

Market Segmentation Analysis

What is Market Segmentation Analysis and Targeting | Examples

The best businesses are those that understand exactly what consumers want and then market accordingly. According to 81% of executives, segmentation is crucial for profit and is the best way to understand your customers. By doing a market segmentation analysis, you can deeply observe the market demand, improve your business strategy, and increase revenue.

In this article, we’ll go into detail on what a market segmentation analysis is, with relevant examples for more clarity on the process.

What is Market Segmentation Analysis?

The purpose of a segment analysis is to divide the consumer market into small groups based on their common characteristics. These segments are then analyzed for their preferences when it comes to choosing one product/service over another in the market. 

With the results, you’ll be able to tailor your products and services according to your target segments. The improved target precision will help you offer services that are more relevant to your target consumers, driving your business growth.

How to do Market Segment Analysis?

The following are the steps for an effective market segment analysis:

  • Do segmentation market research to collect data on consumers and identify their common traits and preferences. 
  • Based on the detected preferences, divide the consumers into separate segments. Next, observe which segment offers the best opportunities that align with your business.
  • Devise a marketing strategy that targets your selected segments. This can be done in the form of customized products, promotions, etc.
  • Observe the effect of the marketing strategy on your sales and refine your segmentations and strategies accordingly.
  • Review and update your marketing strategy with regular market segmentation analyses to make sure your strategy remains relevant to market demands.

Let’s understand this process with an easy market segmentation analysis example. Imagine your skincare business is planning to launch a new line of products. Through a market segmentation analysis, you’ll divide your audience into two main groups: young adults with acne-prone skin and middle-aged people worried about the effects of aging. Based on what each group wants in their skin products, you’ll develop two separate product lines catering to acne and aging concerns. As a result, you’ll boost customer satisfaction and observe a significant increase in sales.

Types of Market Segmentation

Customer segments are divided based on the following factors:

  • Demographic: This segmentation is based on age, gender, race, etc. For example, a luxury watch business may primarily target 35-to 50-year-old individuals with a high income who value prestige and quality over everything else.
  • Psychographic: This segmentation divides consumers on the basis of their lifestyle, values, and interests. For example, a fitness brand may choose to target health-conscious individuals who prefer environmentally friendly and sustainable products.
  • Geographic: In this type, segmentation is done based on geographical factors like location, climate, region, etc. For example, an air conditioner business will target areas of warmer climates.
  • Behavioral: Behavioral segmentation is based on customers’ browsing and purchasing habits. For example, a coffee shop could change its marketing for regular morning customers and occasional afternoon customers. 

What is the Difference Between Market Segmentation and Customer Segmentation?

While market segmentation and customer segmentation are both related concepts in marketing, they don’t categorize the same groups of people. 

Marketing segmentation involves dividing a larger market into smaller groups so it’s easier to understand each category’s needs separately. For example, someone launching a new line of SUVs conducts a market segmentation analysis. They cater their product to two main groups of potential customers: families seeking spacious cars and luxury enthusiasts looking for high-end SUVs.

On the other hand, customer segmentation makes divisions according to the needs and preferences of their existing customers. By understanding the history and brand loyalty of each customer, businesses can give them personalized offers and deals. 

For example, if the same SUV manufacturer conducts a customer segmentation within the luxury enthusiasts group, they may find that a lot of them are environmentally conscious and prefer their ride to be low on carbon emission. 


Market segmentation analysis and targeting are essential tools for any business that wants to thrive in today’s competitive market. There’s a lot to gain from understanding your customers and their preferences.

Tailoring your products according to their wishes and demands can help you get the upper hand on your competitors and increase your customer base. So, if you want to elevate your brand and ensure constant business growth, incorporating regular market segmentation analyses into your business strategy is a must.