how to write market segmentation in business plan

The No-Nonsense Guide to Market Segmentation (With Tips and Examples)

Marketing to the wrong segment can feel like barking up the wrong tree, or more specifically, barking up tens of thousands of wrong trees.

Nearly everybody in sales has, at one point or another, heard someone reasoning that simply adding more people to the funnel will improve their sales numbers while preserving their conversion rate. If you’re a sales rep making 30 calls a day, you might reasonably extrapolate that making 60 calls a day would double your closed deals. Unfortunately, it’s not that straightforward.

Building a sales process can be complicated. What one audience might find valuable might just be noise for another.

That’s where effective customer segmentation can bring in some serious value for your business. Different demographics respond differently to marketing campaigns, and finding the right target market for your products or services can help you tailor your marketing strategies to be the most impactful they can be.

This guide to marketing segmentation will help you find your target audience and choose the best market segmentation strategies.

Table of Contents

What is market segmentation, what are the benefits of market segmentation, the 10 most common types of market segmentation.

• Market segmentation strategies
• How to do your own market segmentation

Frequently asked questions about market segmentation

Market segmentation in a nutshell.

Market segmentation is the process of qualifying companies (or people) into groups that respond similarly to specific marketing strategies. This is the first critical step in creating a marketing and sales process tailored to differentiate your business in the market and resonate across multiple demographics.

Market segmentation divides customers into segments based on shared characteristics, behaviors, or other attributes so you can create marketing strategies that appeal to entire groups. Your marketing segmentation strategy will be mainly influenced by what your product is and which types of companies are already buying it.

The history of market segmentation

The expression “market segmentation” was first coined by Wendell R. Smith in his 1956 publication Product Differentiation and Market Segmentation as Alternative Marketing Strategies . Smith wrote that modern marketing appeals to selective rather than primary buying motives.

In other words, consumers are actively contrasting products against one another rather than simply purchasing a product to satisfy an immediate need. This realization was the inception of the modern market segmentation we practice today.

Before 1956, there wasn’t a huge market variety, and general stores tended to carry only one or two brands’ versions of the same product. As time went on, more and more emerging brands began offering similar products and thus needed to differentiate themselves with branding and by targeting different markets.

It wasn’t enough to just manufacture ketchup, you had to identify your brand as America’s ketchup , or kids’ ketchup , or fancy ketchup .

Market segmentation provides several benefits to small teams and enterprises alike, including:

• Bang for your buck: With tailor-made, demographic-specific messages and advertising, companies can more effectively communicate with their audiences, begin boosting their conversion rates, and actually spend less on broad advertising.
• Better conversion rate: The more information you have about your various audiences, the more specificity you can add to your outreach, which will help your prospects convert more easily.
• Customer retention: By marketing towards customers who have already gone through their own buyer’s journey, segmentation makes it easier to keep them engaged and pitch them with occasional upgrades. And with the segment data you’ve captured, you know how to talk to them.
• Expanding your efforts: Segmentation can be a great way to pursue new markets that have something in common with your current markets.  

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Market segmentation helps savvy marketers categorize their target customers based on shared characteristics to keep their efforts focused and effective. Below are the 10 most common types of market segmentation: 

1. Demographic segmentation

Demographic market segmentation is the most commonly used form of market segmentation and entails categorizing your market based on age, gender, income, profession, race, religion, education, location, family situation, etc.

Demographic segmentation examples:

• Switch to the cartoon channel and check out those commercials. Do Nerf guns and neon-colored slime appeal to someone your age? Yeah us too, bad example .
• Commercials for vacation homes may target people across ages, genders, locations, and other demographics, but they all appeal to customers with disposable income who are interested in travel.

2. Psychographic segmentation

More specific characteristics are categorized under the umbrella of psychographic segmentation. Less tangible than demographic segmentation, this classification method includes details like lifestyle, personality, beliefs, values, and social class.

This evaluation is important because two individuals can possess identical demographic information but make purchasing decisions completely differently, and thus require different marketing.

Psychographic segmentation examples:

• Health and wellness advertisements might not go a long way with someone who prefers to spend their money on video games and energy drinks, even if they work in the same industry and live in the same apartment building.
• Advertisements for large social gatherings (events, clubs, bars) might not appeal to introverts who would much rather snuggle up with a book than be surrounded by other people.

3. Behavioral segmentation

At its core, behavioral segmentation is the act of categorizing prospects based on their actions, usually within your marketing funnel. For instance, prospects who visited a landing page for an upcoming event might benefit from receiving a personalized invitation.

Segmenting your market based on behaviors is typically done by marketers within their marketing automation software , but any company with a mailing list has already performed behavioral segmentation simply by tracking prospects who have signed up to receive emails.

Behavioral segmentation examples:

• Sending emails to website visitors who have left items in their cart. “But wait…come back!”
• A retargeting campaign that only displays ads to people who have previously purchased an item.

4. Geographic segmentation

Geographic market segmentation takes into account prospects’ locations to help determine marketing strategies. Although SaaS sales are relatively unaffected, a salesperson of gigantic coats knows to avoid pitching to Arizona residents.

Geographic segmentation variables and examples:

• Climate: Swimwear brands shouldn’t be targeting Alaska residents in January.
• Cultural preferences (based on location): For obvious reasons, the McDonald’s in Germany sells beer.
• Population type: A bicycle company may segment its audience differently depending on the population type—rural (mountain bikes; thicker tires; more durable), urban (road bikes; thin tires; lightweight), etc.
• Density: A giant strip mall may require a high density of foot traffic to thrive.

5. Price segmentation

Price segmentation alters the price of similar products and services sold to different consumer groups. If you ever forced your kids to pretend to be under a certain age to qualify for the “kids eat free” special, then you understand the power and utility of price segmentation.

However, price segmentation can get much more granular. It can be used to identify customers who may be willing to pay more for a particular product or service that they perceive to be more valuable.

Done correctly, price segmentation can capture the maximum amount of revenue for each transaction.

Price segmentation examples:

• Broad: Senior discount, veteran discount, coupons, etc.
• Granular: Computer processors are priced differently when sold to a company as a part (like inside an iMac) than when sold to a consumer as a standalone product.
• Even more granular: A marketing consultancy may base its prices entirely on the value it can generate for each of its client’s unique situations.

6. Firmographic segmentation

Instead of categorizing consumers based on age, location, income, etc, firmographic segmentation categorizes companies based on industry, annual revenue, job function, company size, location, status, performance, etc.

For B2B marketers, utilizing firmographic segmentation is non-negotiable to a high-performing marketing strategy.

Just as the demographic segmentation variables can help you form a buyer persona at the consumer level, firmographic segmentation can help you develop a buyer persona at the company level.

Firmographic segmentation examples:

• Running different ads for different industries—real estate, finance, legal firms, etc.
• A B2B sales team only targeting companies with revenues over $100m.

7. Generational segmentation

Generational segmentation is almost comparable to the “age” variable in demographic segmentation. However, generational market segmentation goes beyond age by considering the difference in preferences, habits, lifestyles, and attitudes of a particular generation.

It’s self-evident that the generations are vastly different. Someone born in the 1960s will likely have experienced a different culture than someone born in the 2000s.

Generational segmentation examples

• Utilizing more memes on Facebook to target a larger percentage of Millennials.
• Altering your content publishing schedule to mornings to target a larger percentage of Baby Boomers.

8. Life stage segmentation

Life stage segmentation is the process of dividing your market based on the life stage of your target audience. Someone who is married with 5 kids may respond well to an emotional advertisement about convertibles during their midlife crisis.

Life stage segmentation examples

• Ads about life insurance may not appeal to sophomores in college, but they may appeal to someone who just started a family.
• Someone who just entered the workforce for the first time may be more interested in a new apartment than someone who is retired.

9. Seasonal segmentation

Seasonal segmentation targets people based on their purchasing habits during certain periods of the year. It can include actual seasons (spring, summer, fall, winter), events (Coachella, Super Bowl), and holidays (Christmas, Mother’s Day).

Seasonal segmentation examples

• A local you-pick berry farm may want to target their ads based on the fruit in season.
• A flower shop that specializes in same-day delivery may want to ramp up its ad spend around Mother’s Day targeting forgetful children.

10. Technographic segmentation

Much like firmographic market segmentation, technographic segmentation only applies to B2B audiences. It’s used to target companies based on the types of technology they’re using. Whether it’s a customer relationship management (CRM) platform, a website CMS, or a niche-specific software tool, utilizing technographic segmentation can help enhance sales and marketing efforts.

Technographic segmentation examples

• A company that develops WordPress plugins would have no business targeting companies that use a different CMS, like Wix.
• It would make sense for a SaaS company to target businesses using an app it just integrated with.

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Market segmentation strategies (and their pros and cons)

Every market segmentation strategy is different but most of them follow one of two fundamental outlines:

1. Concentration strategy

Concentration strategy is when a company determines that its efforts are best focused solely on a single market segment. This strategy is particularly great for small, growing businesses that have demonstrated a viable use case within a specific market. Focusing on one segment will allow the company to invest more time, energy, and resources into one specific market, which minimizes advertising spend and potentially mitigates wasting efforts across multiple segments.

Concentration strategy is like putting all your cards on the table—if it doesn’t work out, it can end badly. If the market segment hasn’t been properly vetted and turns out to be a bust, all of your marketing efforts could be wasted. Be sure to do some careful planning and execute thorough market testing before committing your business to a single market segment.

• Pros: High conversion percentages, repeatable marketing practices, less marketing spend
• Cons: “All-or-nothing,” growth potential is limited to segment size

2. Multi-segment strategy

Multi-segment marketing, or differentiated marketing, is when a company’s marketing strategies are designed to advertise one product to more than one market segment.

Although apparently “safer” than concentration strategy, multi-segment marketing is a much larger tax on a company’s marketing spend, as it requires completely different campaigns for each market segment.

However, if a particular segment is extremely receptive and converts well, it’s easy to tailor your strategy to market more directly to that segment.

• Pros: Safer, appeals to more consumers, diverse marketing, high growth potential
• Cons: Lower conversion percentages, greater marketing spend

How to do your own market segmentation in phases

Ready to complete market segmentation for your company? Here are three phases to follow during the process that will help you ensure you’re analyzing your markets effectively:

Phase 1: Gather the data

First things first, it’s time to gather data so that you can use it to form your market segments. There are many ways to go about it—some people like to buy pre-made lead lists and others prefer to do their own research . 

Two helpful methods of researching prospects are webforms and surveys. You can place high-quality data behind webforms that requires site visitors to submit their name, email address, and other information to access the content. Surveys can get specific information from potential buyers in exchange for tangible rewards, like a gift card or special offer.

If you’re doing your own research, you can frame your searches along the following categories:

• Researching by company size: Size can mean a number of things, but is most often measured by the number of employees, number of customers, or overall sales revenue a company claims. Some companies have greater transparency on their websites, which makes reaching out to the correct person much easier.
• Researching by industry: It’s unlikely that your product is applicable across all industries, which is why industry segmentation exists. Industry segmentation will help you ensure that you’re not wasting your time by targeting a company with no need for your product.
• Researching by location: If you’re offering a location-specific product or service, like landscaping services within the local community, your geographic market segmentation is probably pretty airtight: You probably use handy tools like lead maps , and engage in local marketing wherever possible. For other industries, like IT staffing, your reach might be international. Whatever your product, location is a crucial thing to know about a company, because it will help you decide which sales tactics to use and when to send your emails if you’re communicating across time zones, at the least.
• Researching by needs: This method of segmentation entails qualifying companies based on whether they need your products or services. While this definition is straightforward, the process behind making this determination may not be, depending on what you’re offering. If you sell landscaping services, you can use Google Maps to look up a company’s HQ. If their office is in a tower in New York City, they probably don’t need any landscaping.

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Phase 2: Sort the data into segments

There are many ways to go about sorting data. Most involve expensive analysts, marketers, and lots and lots of time. Although the DIY route is faster, it is no substitute for a comprehensive market segmentation strategy.

Assuming time and money are an obstacle, you can approximate your own market segmentation by compiling your data into one single source and running filters on it to manually group your prospects and companies together by segments.

Remember, ask yourself the following:

• Is this segment measurable?
• Is this segment large enough to earn a profit?
• Is this segment stable, and not going to vanish after a short time?
• Is this segment reachable with my marketing strategies?
• Is this segment homogenous, and will they respond similarly to my marketing strategies?

Phase 3: Plug in your marketing channels

Now that your segments have been firmly established, it’s time to connect the dots and breathe life into your marketing. This means establishing a plan for each of your marketing tools and channels and coming up with real ways to reach your segments with them.

You’ll be attributing different marketing and sales tactics to each stage of your pipeline and determining what sticks. The good news is that your market segments are clearly defined and you’ll be able to speak to them clearly.

The real challenge is continuously improving your efforts with trial and error to get the best possible conversion rates.

There’s a good, old-fashioned way to map this out quickly and easily:

• Draw your pipeline stages horizontally across a sheet of paper.
• Above each pipeline stage, jot your marketing channels, like Linkedin, emails, or webinars, with blank space in between them.
• Below each marketing channel, write exactly how you will use this tool at this pipeline stage, like “email prospects a link to a recorded webinar.”

Repeat this exercise for each market segment to help establish a concise and repeatable process for marketing to your various audiences. You can fully flesh out your segmented marketing strategy by configuring your sales software and email automation around the outline you’ve created, and then make tweaks as needed.

To this end, some CRMs have reporting and performance tracking as well as custom reporting to help you figure out what’s working and what needs to change.

Still have questions about market segmentation? Check out the FAQs below for answers to some common questions:

What are some common challenges faced when implementing market segmentation? 

Here are a few of the challenges you may encounter when implementing your market segmentation strategy:

• Creating segments that are too broad: Your product or service may appeal to several different market segments, but trying to appeal to too many can lead to ineffective marketing and high ad spending.
• Creating segments that are too narrow: The opposite problem can also arise. Small segments might be difficult to quantify and distract from other segments with greater buying power.
• Not being flexible: Just because a particular segment is currently buying from you doesn’t mean they always will. Be willing to reevaluate your market segments over time to maximize your marketing spending and revenue.

What are the key factors to consider when selecting a target market segment? 

Five key factors to consider when selecting market segments for your marketing strategies are:

• Whether the segment is measurable
• Whether the segment is large enough to generate a profit for your business
• If the segment is stable and won’t vanish after a short time
• If the segment is reachable by your marketing strategies
• Whether the segment is homogenous and will respond similarly to your marketing strategies

How can you effectively redefine your target market?

If you’ve determined that your target market no longer fits, you can always identify new markets . Here are a few tips for doing so: 

• Identify trends and patterns: Do companies that make a certain amount of annual revenue seem to be shying away from your offerings? If you want to reach those customers, identify any patterns in which products or services they choose instead and strategize for how to provide the value they’re looking for.
• Listen to customer feedback: Your current (or former) customers are valuable sources of feedback. Consider what they’re saying about your product or service and whether you’re meeting their needs. You may be able to identify new opportunities.
• Diversify your marketing channels: Using multiple channels to reach your target market can be a highly effective way to increase exposure for your brand. Consider diving into new channels like content marketing, email marketing, SEO, and online advertising to drive engagement with your target audience.

Additional resources:

• Sales tactics encyclopedia: 19 strategies for prospecting, qualifying, and closing
• The complete guide to researching sales prospects: 13 tools to help you understand your buyers
• The ultimate guide to cold calling
• 16 B2B cold email templates that sales experts swear by
• How to build a sales process: The complete guide
• Buying a lead list: The pros, the cons, and the things that might land you in jail

Now you’ve got your demographics clearly segmented, your strategy figured out, and your sales processes mapped tightly to your market segments.

Because of this, you should have a clear understanding of how to talk to your prospects, and how to differentiate your outreach efforts based on the market segment.

The challenges that lie ahead are rooted in constantly adjusting your marketing—testing your messages, your tactics, and measuring your audiences’ responses.

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How to Write Up and Develop a Market Segmentation Plan

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How to Determine a Customer Base

How to approach new clients, how to conduct a high-level swot for business.

• How to Access Your Target Market
• Examples of Quantitative Marketing Objectives

A written market segmentation plan that has measurable targets attached to specific customer groups can help a business maximize profits. The more a business' owners understands the market, the better their chances of forming a strategy that reaches the most productive customer groups without wasting resources.

Divide and Conquer

Customer segmentation involves grouping customers together based on criteria relevant to your business. You can divide them up by any measure you choose, such as demographically or geographically, and clients can fit into more than one category. The goal is to separate out those segments that your business can serve most profitably, ideally in a way that makes them less prone to switching vendors based on a price decrease or marketing pitch from a competitor.

Market Analysis

The first part of a segmentation plan is market analysis. The plan should describe the industry and its major customer groups -- particularly the ones that your business is targeting. Identify the needs of both current and potential customers. Also note the size of the market and what percentage of it you can reasonably get. A big-picture trend analysis is also helpful. You want to finish this process knowing both why people buy what you are selling now and why that may change in the future.

Information Is Key

The more information you get about your market, the better a segmentation plan is going to be. In addition to commercially available sources, you may find it useful to gather your own data, perhaps by asking existing customers to fill out surveys or by gathering information from trade shows or conferences. It’s worth asking customers how they use your products or services to find out if they are using things in unintended ways that may provide additional means of generating sales, or if they are unaware of what you consider to be a key differentiator that gives you a comparative advantage over the competition.

Kick Customers Out

Don’t forget to also consider whether you’re currently serving customers that perhaps you shouldn’t be. If you’re spending a lot of money marketing your products to a group that isn’t responding and the return on investment is disappointing, it’s time to either come up with a more effective strategy for dealing with that group or abandon that segment to concentrate on more lucrative portions of the customer base.

Write it Up

Once you’ve decided which segments to target, it’s time to write up the findings. Be as specific as possible about your targeted segments, with a detailed action plan and measurable goals. If you continue to monitor the situation once the plan is in effect, you should know quickly whether everything is on the right track or changes need to be made and resources reallocated.

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Market Segmentation: Types, Examples + [Free Templates]

by Formplus | Last updated: Aug 4, 2020

Related Posts

Geographic segmentation: examples, advantages + [free templates], psychographic segmentation: definition, examples + [variables], demographic segmentation: examples, advantages + [variables], customer segmentation: types, strategy, + [analysis], behavioral segmentation: definition, types + [examples].

Multiple experiences and characteristics come together to determine how consumers make purchasing decisions and interact with your product or service. To understand how these factors influence consumer choices, you often need to carry out market segmentation. 

Market segmentation helps you to identify shared characteristics that define different customer segments. In this article, we will explain how market segmentation works, and show you how to collect data for market segmentation using Formplus. 

What is Market Segmentation?  

Market segmentation means splitting your customers into smaller, defined categories based on specific variables and characteristics. In other words, it is the process of dividing your customer base into segments as determined by numerous factors ranging from demographic variables to psychographic information. 

As a business, you most likely have a vague idea of who your product is meant for. Unfortunately, working with this vague idea means that you would invest a lot of time and resources in generic processes that may not yield the best results for you. 

Market segmentation helps you to define your target audience within specific contexts, and this gives you a better idea of your customers’ interests and preferences. Although this process can be demanding, it helps you to optimize your resources in the long run and create more personalized content for your users. 

Types of Market Segmentation

Behavioral segmentation.

This is a type of market segmentation that places customers in categories based on behavioral patterns. Here, organizations study consumer behaviors as they interact with a specific product or service and then, place consumers who exhibit similar characteristics in the same group. 

Behavioral segmentation helps you to understand how your product appeals to your target market and fits into the lifestyle of your consumers. With this, you can focus on creating targeted messages that complement the behavioral patterns of different customer categories. 

To effectively divide your target market into smaller groups, you need to consider multiple behavioral segmentation variables including purchasing behavior, benefits sought, the buyer’s journey, and customer engagement. For instance, consumers exhibit different behavioral characteristics as they move from one stage to the other in the buyer journey.

You can collect data for behavioral segmentation by conducting an online survey with Formplus . Also, website cookies, third-party data assets, and the purchase data stored in customer relationship management software can provide insights into consumer behavior.  

Examples of Behavioral Segmentation in Marketing

• Choosing one product over the other because of the product functionality and features. 
• Choosing one product over another due to customer loyalty.
• Choosing one product over another due to the customer’s pain points. 

Tips for Behavioral Segmentation

• Get familiar with your target market.
• Create multiple buyer personas in line with the different uses and features of your product.
• Understand the buyer journey.

Customer Segmentation

Customer segmentation is the act of dividing your customer base into defined groups based on specific criteria. It is an important step that helps you to identify different consumer needs and preferences in your target market, and also satisfy them accordingly. 

This type of market segmentation is useful for B2B and B2C marketing. In B2B marketing, you can place customers in defined segments based on industry, location, and in B2C marketing, you can place customers in segments based on age, gender, and lifestyle. 

Customer segmentation results in multiple benefits for businesses such as helping you decide on the best communication channel for your business. It also helps you to tailor your product to create value for different customer segments, improve customer experience, and boost customer satisfaction. 

You can gather data for customer segmentation using different methods and tools including face-to-face interviews, surveys, observation method s, and focus groups. These tools and methods allow you to gather specific information about your target audience and create customer segments that reflect different market peculiarities. 

Tips for Customer Segmentation

• Outline the goals and objectives of customer segmentation for your business.
• Collect the right information from the right sources. Customer segmentation works best with data and analytics.
• Understand the value of each customer segment. 

Psychographic Segmentation

In psychographic segmentation, customers are placed in categories based on their psychological traits. Here, you pay attention to how a customer's psychological disposition affects his or her purchasing habits, lifestyle, and product preferences. It is widely considered as the most effective type of market segmentation. 

5 key variables drive psychological segmentation in market research and these are Personality, Lifestyle, Social Status, AIO (Activities, Interests, Opinions), and Attitudes. These variables work separately and co-dependently to help you place customers in the right psychological segments. 

Psychological segmentation allows you to know how your product fits into the habits, dreams, and aspirations of your target audience. It helps you to understand how consumers perceive your product and to identify the pain points of your target market. 

In psychological segmentation, organizations draw data from observing how consumers think and what they picture their lives to be in the short, middle, or long-term. Let's consider some examples of psychographic segmentation in marketing. 

Examples of Psychographic Segmentation in Marketing

• Businesses that deal with luxury items such as certain cars, clothing, and jewelry.
• Certain products appeal to individuals who have a specific lifestyle such as vegetarians or pescatarians.
• Some products appeal to individuals who belong to a particular social class. 

Demographic Segmentation

Demographic segmentation is the process of breaking your target market into defined categories based on demographic variables. In this type of market segmentation, the organization pays attention to how consumer preferences are influenced by demographic factors like age, education, religion, and income levels. 

Demographic segmentation provides specific insights into your target and helps you to understand who they are and what they want. This, in turn, makes it possible for you to create targeted ads and specialized marketing campaigns that appeal to different consumer demographics. 

As we stated earlier, numerous demographic variables influence consumer choices in the marketplace including age, gender, and income levels. Many times, these variables are interdependent and come together to determine how a consumer perceives your product or service. 

Demographic segmentation helps you to forge lasting relationships with your target audience and to also create a better customer experience for your users. In addition to this, it provides useful insights that you can leverage to improve your product and service delivery. 

Examples of Demographic Segmentation

• Products are gender-specific; that is, created for members of a particular gender. 
• Products that can only be afforded by individuals who earn a certain level of income. 
• Some products only provide value for people in a particular education class. 

Geographic Segmentation  

Geographic segmentation makes use of different geographic variables to place customers into different market categories. It is one of the easiest ways to discover the diversity of your target market and use this information to your advantage; especially in marketing. 

In geographic segmentation, you look beyond variables that bother on location and physical habitation, and you consider other geographic factors like cultural preferences, population type, and density. This gives you a holistic understanding of how these things nudge consumers towards certain choices. 

Common geographic segmentation variables are climate, religion/cultural practices, and population type. Geographic segmentation is important because it helps you to identify market clusters that present the most viable opportunities for you as a business owner. It also provides data for marketing and strategy campaigns. 

Examples of Geographic Segmentation

• Products that are unique to specific climates like winter clothing and beachwear.
• Urban-rural segmentation.
• Cultural preferences and food inclinations

Tips for Conducting a Successful Market Segmentation 

• Break your target market into specific segments comprising consumers with specific characteristics. Be sure to narrow down to the primary characteristics that differentiate one segment from the other.
• Clearly communicate the value of your product to each market segment. Ensure that you emphasize how your product satisfies the needs of the different market categories.
• Clearly define your market segmentation goals and objectives.
• Identify the most important segmentation variables for your target market. This would help you arrive at the best results for your business.
• Collect valuable data from the right sources. You can administer surveys and questionnaires with Formplus forms to gather the right information.
• Develop a solid market segmentation strategy that identifies your target market and outlines recommendations. 
• Execute a go-to marketing plan that appeals to different market segments and can drive acquisitions at every level. 
• Keep your eyes on the data and analytics. Ensure that your decisions are data-driven. 

Top Form Templates to Collect Data for Market Segmentation  

• Market Survey

Use this market survey to collect useful data from your target market for market segmentation. You can add different form fields that help you to easily collect a variety of information from respondents ranging from geographic information to demographic data. 

• Demographic Survey

This demographic survey is easy to use and it helps you to gather relevant demographic information from respondents. With this form, you would be able to collect necessary information from your customers for demographic segmentation. You can edit this template to suit your needs in the form builder. 

• Product Evaluation Survey

Do you want to find out what your customers think about your new product or service? This Formplus product evaluation survey is all you need to gather the relevant information from your users and improve your product. You can use the multiple form sharing options to share your survey with numerous respondents. 

• Online Feedback Form

This form would help you gather feedback on different product features from your customers to improve your overall service delivery. This form is easy to use and you can modify it to suit your needs in the form builder. 

• Customer Satisfaction Survey

This form would help you understand what consumers think about your product and overall service delivery. With the Formplus online feedback form, you would be able to collect information about customer pain points and know how well your product meets their needs. 

• Brand Personality Survey

This form is an easy way to collect information for psychographic segmentation. This survey is easy to administer and can help you understand how your customers perceive your brand; that is, their thoughts and feelings about your brand. 

• Product Pricing Survey

Use this product pricing form to find out what your customers think about the cost of your goods and services. This form would help you arrive at the best pricing system for your goods and services. 

Importance of Market Segmentation  

Market segmentation helps you to understand your target audience and create a product that better appeals to them. Let’s consider some other reasons you should prioritize market segmentation as an organization.

• Market segmentation allows you to identify niches that offer better prospects for your product or service. By breaking your market into segments, you can spot and compare marketing opportunities. 
• It is an effective way for you to manage limited resources strategically. Market segmentation helps you utilize resources in the most profitable manner for better returns. 
• Market segmentation is an easy way for you to identify your competitors and understand their strengths and weaknesses. This way, you’d be better equipped to face the competition.  
• When you place customers in defined segments, you can implement specific marketing strategies and programs in tune with the demands of each category. 
• Great market segmentation results in an effective advertisement strategy. It will give you a clear idea of who your audience is and what is most likely to pique their interests. 
• Market segmentation plays a crucial role in product improvement and product design. 
• It helps you to create the right customer experience for users and achieve maximum customer satisfaction levels plus increased sales volumes. 

Disadvantages of Market Segmentation

As beneficial as market segmentation is for your business, it also has some disadvantages. Let’s look at a few of them and what they mean for your business. 

• Market segmentation can be time-consuming as it involves organizing a lot of information in order to arrive at the best results. In many cases, you have to develop specific strategies for each segment and this can be quite challenging.
• You would need to invest more in the implementation of multiple marketing strategies for different market categories. For instance, instead of running a single ad campaign for your brand, you may have to run multiple ads to cater to the needs of your customers. 
• Market segmentation can lead to cannibalization. This is a situation where certain segments are over-prioritized to the detriment of other market categories. To avoid this, you need to prioritize each market segment.  
• Although you need to narrow it down to specific market categories, this can also lead to over-segmentation. 

Conclusion  

Without any doubt, market segmentation is an integral process that every organization must implement as it looks to meet the needs of its consumers. While there are different types of market segmentation, it is necessary for you to identify and implement the ones that are relevant to your business and product. 

In doing this, however, be sure to create a balance and avoid certain market segmentation pitfalls as we have highlighted in this article. Finally, gather and utilize the right data sets to help you achieve the most objective market segmentation results. 

7 Steps in Market Segmentation: How to Get it Right Every Time

Knowing the right steps in market segmentation saves time and helps you reach vital insights faster.

The process of market segmentation involves three phases:

• Implementation

This article will help you create segments that make sense for your business, complement your research strategy, and drive insights that have the power to impact your bottom line.

How to do market segmentation: challenges and opportunities

Choosing the right criteria for market segmentation is not as simple as it seems. Segmentation builds on data, and you need robust data analytics to keep your segments precise. You’ll see why shortly.

How do you segment your market? By dividing your potential customers into smaller, more specific groups, or customer segments. It involves intensive research and a deep understanding of the total addressable market and your target audience . Splitting the market into sub-groups makes it more approachable and helps you create more targeted and curated marketing materials for different audiences.

How can markets be segmented? While still relevant, markets aren’t just defined by audience geography or demographics . You may want to add behavioral segmentation to identify target markets more accurately or consider psychographic criteria to determine your audience’s interests and values. You’ll need to correlate the segmentation types to create targeted campaigns.

Don’t forget some prospects belong to more than one segment. By creating these audience sub-groups, you could find opportunities to combine different types of segmentation .

Market segmentation may start small with personalized email sequences or segment-specific banners. But, eventually, it will affect your business on a larger scale. Oh, and there are plenty more reasons to learn the steps in market segmentation.

Take a look ⬇️ ⬇️ ⬇️

7 steps in market segmentation

Success in a digital environment often depends on the quality of your insights. Your strategy is only as good as the data it uses. Let’s see what information you need to segment the market and how to put it to use.

Step 1 – Define your market

Start by defining your market and collect information about your customer base through market research . Dig into the data of your closest competitors to understand their market position and where you can win back traffic share . Take it further by benchmarking against industry standards and conducting a SWOT analysis to fully understand your strengths, weaknesses, opportunities, and threats.

SWOT Analysis Templates

Get started with your competitive analysis

Step 2 – Analyze existing customers

The process of market segmentation involves a structured audience analysis . The more comprehensive your data, the better you can identify groups and address their needs, so we recommend using various research techniques and types .

Learn about demographics, behavior, preferences, and trends. Again, benchmark against the competition. You may stumble upon market segments or niches you didn’t consider.

Step 3 – Create buyer persona(s)

If you already have a buyer persona , skip this step. But it’s always good to double-check and review. Markets are dynamic, and you need to be aware of changes. Forming several buyer personas can help you clearly define and address different segments.

Step 4 – Compare and identify gaps, groups, and opportunities

Comparing the data from the first three steps helps you identify gaps in the market. You can define an audience you previously didn’t cover or discover groups with common interests or behaviors that you can target collectively. Map the audience to identify market segmentation opportunities. Here are possible questions to ask:

• What group of prospects stands out or is particularly active or profitable?
• Which customer characteristics or qualities do they have in common?
• What type of customer is not converting? What characterizes them?
• Do different types of customers take a different consumer journey ?
• Which group of customers is your competition reaching that you aren’t? What do they have in common?
• How strong is my brand loyalty ?

Step 5 – Define and name segments

Based on what the different groups have in common, define your market segments. Set data-based criteria that let you allocate prospects to segments and track performance. Make sure each target segment is clearly defined so anyone on your team knows exactly what niche you are referring to.

Step 6 – Research segments separately

That’s it. You’ve segmented your market and can start creating funnels, campaigns, and messages accordingly. Before you jump into any creative activity, use your market research tool again, but this time for each segment individually. Follow these steps:

• Do a separate conversion analysis to discover divergence and where your funnel may leak.
• Evaluate engagement metrics for each segment to help refine your segmented marketing strategy based on audience preference or specific needs. One group might be more active on certain marketing channels than others.
• Conduct competitive analysis for each segment. Not all competitors are equally strong in each target group. This will help you focus on segments with the highest potential or discover strategies that might work well for other companies.
• Use a benchmarking tool to get a granular view of your site’s performance across different marketing channels, over time, and within your market. You can see if your performance differs per segment or is relatively stable. The better the results, the stronger that market segment is.

Step 7 – Test and optimize

Monitor the results of your new segmentation strategy. Test different approaches and keep evaluating for continuous improvement.

What are the pros and cons of market segmentation?

• Tailor marketing and advertising efforts.
• Better understand a target market and identify opportunities.
• Tailor products and services to meet the specific needs of a target market .
• Improve customer experience by delivering tailored offers.
• Reduce marketing costs by targeting specific markets.
• Better assess the competitive environment.
• Can be costly and time-consuming to properly segment a market (unless you use Similarweb)
• It can be difficult to accurately predict market trends and changes.
• A challenge to accurately segment a market, unless using real-time analytics (like Similarweb)

Discover your market

Market segmentation will only yield significant results if coupled with data-driven insights. Even in a niche market , you can still segment your audience to create more personalized marketing efforts and enhanced user experience.

Similarweb gives you the tools you need for the in-depth research and market analysis behind every successful strategy.

What are the 4 main types of market segmentation?

Demographic, psychographic, behavioral, and geographic segmentation are the four main market segmentation types.

What are the steps of market segmentation?

The steps of market segmentation can be consolidated into three phases: research, analysis, and implementation.

Is market segmentation useful?

Yes. Market segmentation allows businesses to identify and target customers based on their specific needs and interests. It enables organizations to tailor products and services to appeal to different customer segments and increase their chances of success. It also helps businesses save money by focusing their resources on the most lucrative segments.

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Market Segmentation

What is market segmentation?

The benefits of market segmentation, the basics of segmentation in marketing, types of market segmentation, how to get started with segmentation, market segmentation strategy, market segmentation use case examples, ensuring effective segments, common segmentation errors, qualtrics solutions for market segmentation, see how qualtrics strategic brand works, market segmentation: definition, types, benefits, & best practices.

21 min read Market segmentation helps you send the right message, every time, by efficiently targeting specific groups of consumers. Here’s how it works.

By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies . Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs. women or high income vs. low income.

Read on to understand why segmentation is important for growth and the types of market segmentation to use to maximize the benefits for your business.

Free eBook: How to drive profits with customer segmentation

Companies who properly segment their market enjoy significant advantages. According to a study by Bain & Company , 81% of executives found that segmentation was crucial for growing profits. Bain also found that organizations with great market segmentation strategies enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.

Other benefits include:

• Stronger marketing messages : You no longer have to be generic and vague – you can speak directly to a specific group of people in ways they can relate to, because you understand their characteristics, wants, and needs.
• Targeted digital advertising : Market segmentation helps you understand and define your audience’s characteristics, so you can direct your online marketing efforts to specific ages, locations, buying habits, interests etc.
• Developing effective marketing strategies : Knowing your target audience gives you a head start about what methods, tactics and solutions they will be most responsive to.
• Better response rates and lower acquisition costs : will result from creating your marketing communications both in ad messaging and advanced targeting on digital platforms like Facebook and Google using your segmentation.
• Attracting the right customers : targeted, clear, and direct messaging attracts the people you want to buy from you.
• Increasing brand loyalty : when customers feel understood, uniquely well served, and trusting, they are more likely to stick with your brand .
• Differentiating your brand from the competition : More specific, personal messaging makes your brand stand out .
• Identifying niche markets : segmentation can uncover not only underserved markets, but also new ways of serving existing markets – opportunities which can be used to grow your brand.
• Staying on message : As segmentation is so linear, it’s easy to stay on track with your marketing strategies, and not get distracted into less effective areas.
• Driving growth : You can encourage customers to buy from you again , or trade up from a lower-priced product or service.
• Enhanced profits : Different customers have different disposable incomes; prices can be set according to how much they are willing to spend . Knowing this can ensure you don’t oversell (or undersell) yourself.
• Product development : You’ll be able to design new products and services with the needs of your customers top of mind, and develop different products that cater to your different customer base areas.

Companies like American Express , Mercedes Benz , and Best Buy have all used segmentation strategies to increase sales, build better products, and engage better with their prospects and customers.

Understanding segmentation starts with learning about the various ways you can segment your market as well as different types of market segmentation. There are four primary categories of segmentation, illustrated below.

With segmentation and targeting, you want to understand how your market will respond in a given situation, like what causes people to purchase your products. In many cases, a predictive model may be incorporated into the study so that you can group individuals within identified segments based on specific answers to survey questions .

Demographic segmentation

Demographic segmentation sorts a market by elements such as age, education, household income, marital status, family size, race, gender, occupation, and nationality. The demographic approach is one of the simplest and most commonly used types of market segmentation because the products and services we buy, how we use those products, and how much we are willing to spend on them is most often based on demographic factors. It’s also seen as a simple method of predicting future behavior, because target audiences with similar characteristics often behave in similar ways.

How to start demographic segmentation

Demographic segmentation is often the easiest because the information is the most readily available. You can send surveys directly to customers to determine their demographic data, or use readily available third party data such as government census data to gather further information.

Geographic segmentation

Geographic segmentation can be a subset of demographic segmentation, although it can also be a unique type of market segmentation in its own right. As its name suggests, it creates different target customer groups based on geographical boundaries. Because potential customers have needs, preferences, and interests that differ according to their geographies, understanding the climates and geographic regions of customer groups can help determine where to sell and advertise, as well as where to expand your business.

How to start geographic segmentation

Geographic segmentation data again can be solicited from customers through surveys or available third party market research data, or can be sourced from operational data such as IP addresses for website visitors.

Firmographic segmentation

Firmographic segmentation is similar to demographic segmentation, except that demographics look at individuals while firmographics look at organizations. Firmographic segmentation would consider things like company size, number of employees and would illustrate how addressing a small business would differ from addressing an enterprise corporation.

How to start firmographic segmentation

Firmographic segmentation data can be found in public listings for companies and information that the business makes available, as well as trade publications. Again, surveying existing and potential customers can help to build out this data.

Behavioral segmentation

Behavioral Segmentation divides markets by behaviors and decision-making patterns such as purchase, consumption, lifestyle, and usage. For instance, younger buyers may tend to purchase bottled body wash, while older consumer groups may lean towards soap bars. Segmenting markets based on purchase behaviors enables marketers to develop a more targeted approach, because you can focus on what you know they are looking for, and are therefore more likely to buy.

How to start behavioral segmentation

Of all the types of market segmentation, behavioral segmentation is likely best started with the information you have on an existing customer base. Though it can be bolstered by third party market research data, the information you already have on customer purchase and usage behavior will be the best predictor of future behavior.

Psychographic segmentation

Psychographic segmentation considers the psychological aspects of consumer behavior by dividing markets according to lifestyle, personality traits, values, opinions, and interests of consumers. Large markets like the fitness market use psychographic segmentation when they sort their customers into categories of people who care about healthy living and exercise.

How to start psychographic segmentation

Pychographic segmentation relies on data provided by the consumers themselves. Though market research might provide insights on what particular segments are most likely to believe or prefer, psychographic segmentation is best completed with information direct from the source. You can use survey questions with a qualitative focus to help draw out insights in the customers’ own voice.

On-demand webinar: How to drive product design and profits with customer segmentation

There are five primary steps to all marketing segmentation strategies:

• Define your target market : Is there a need for your products and services? Is the market large or small? Where does your brand sit in the current marketplace compared to your competitors?
• Segment your market : Decide which of the five criteria you want to use to segment your market: demographic, firmographic, psychographic, geographic, or behavioral. You don’t need to stick to just one – in fact, most brands use a combination – so experiment with each one to figure out which combination works best for your needs.
• Understand your market : You do this by conducting preliminary research surveys, focus groups, polls , etc. Ask questions that relate to the segments you have chosen, and use a combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open text responses) questions.
• Create your customer segments : Analyze the responses from your research to highlight which customer segments are most relevant to your brand.
• Test your marketing strategy : Once you have interpreted your responses, test your findings by creating targeted marketing, advertising campaigns and more for your target market, using conversion tracking to see how effective it is. And keep testing. If uptake is disappointing, relook at your segments or your research methods and make appropriate changes.

Why should market segmentation be considered a strategy? A strategy is a considered plan that takes you from point A to point B in an effective and useful way. The market segmentation process is similar, as there will be times you need to revisit your market segments, such as:

In times of rapid change: A great example is how the Covid-19 pandemic forced a lot of businesses to rethink how they sell to customers. Businesses with physical stores looked at online ordering, while restaurant owners considered using food delivery services.

If your customers change, your market segmentation should as well, so you can understand clearly what your new customers need and want from you.

On a yearly basis: Market segments can change year over year as customers are affected by external factors that could alter their behavior and responses.

For example, natural disasters caused by global warming may impact whether a family chooses to stay living in an area prone to more of these events. On a larger scale, if your target customer segment moves away from one of your sales regions, you may want to consider re-focussing your sales activities in more populated areas.

At periodic times during the year: If you’ve explored your market and created market segments at one time of the year, the same market segments may have different characteristics in a different season. Seasonal segmentation may be necessary for better targeting.

For example, winter has several holidays, with Christmas being a huge influence on families. This holiday impacts your market segments’ buying habits, how they’ll behave (spending more than normal at this time than any other) and where they will travel (back home for the holidays). Knowing this information can help you predict and prepare for this period.

When considering updating your market segmentation strategy, consider these three areas:

• Acknowledge what has changed: Find out what has happened between one time period and another, and what have been the driving forces for that change. By understanding the reasons why your market is different, you can make key decisions on whether you want to change your approach or stay the course.
• Don’t wait to start planning: Businesses are always adapting to long-te r m trends , so refreshing market segmentation research puts you in a proactive place to tackle these changes head-on. Once you have your market segments, a good idea is to consider the long-term complications or risks associated with each segment, and forward-plan some time to discuss problem-solving if those issues arise.
• Go from “what” to “why” : Why did those driving forces come about? Why are there risks with your target market? At Qualtrics, we partner with companies to understand the different aspects of target markets that drive or slow success. You’ll have the internal data to understand what’s happening; we help unleash insight into why with advanced modeling techniques. This helps you get smart market segmentation that is predictive and actionable, making it easier for future research and long-term segment reporting.

Where can you use market segmentation in your business? We’ve collected some use case scenarios to help you see how market segmentation can be built out across several departments and activities:

Market and opportunity assessments

When your business wants to enter into a new market or look for growth opportunities, market segmentation can help you understand the sales potential. It can assist in breaking down your research, by aligning your findings to your target audience groups.

For example, When you’ve identified the threats and opportunities within a new market, you can apply your customer segment knowledge to the information to understand how target customers might respond to new ideas, products, or services.

Segmentation and targeting

If you have your entire market separated into different customer segments,  then you have defined them by set criteria, like demographics, needs, priorities, common interests, or behavioral preferences .

With this information, you can target your products and services toward these market segments, making marketing messages and collateral that will resonate with that particular segment’s criteria.

Customer needs research

When you know a lot about your customers, you can understand where your business is connecting well with them and where there can be improvements.

Market segmentation can help with customer needs research (also known as habits and practices research) to deliver information about customer needs, preferences, and product or service usage. This helps you identify and understand gaps in your offerings that can be scheduled for development or follow-up.

Product development

If the product or service you’ve developed doesn’t solve a stated problem of your target audience or isn’t useful, then that product will have difficulty selling. When you know what each of your market segments cares about an/d how they live their lives, it’s easier to know what products will enrich or enhance their day-to-day activities.

Use market segmentation to understand your customers clearly , so that you can save time and money developing products and services that your customers will want to purchase.

Campaign optimization

Marketing and content teams will value having detailed information for each customer segment, as this allows them to personalize their campaigns and strategies at scale. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective.

When their marketing campaigns are combined with strong calls to action targeted to the specific segment, they will be a powerful tool that drives your target market segments towards your sales channels.

After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:

• Measurable : Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much your segment will spend on your product. For example, one of your segments may be made up of people who are more likely to shop during a promotion or sale.
• Accessible : Understanding your customers and being able to reach them are two different things. Your segments’ characteristics and behaviors should help you identify the best way to meet them. For example, you may find that a key segment is resistant to technology and relies on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read email, but responds well to printed ads.
• Substantial : The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but realistically can’t afford them. Make sure an identified segment is not just interested in you, but can be expected to purchase from you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford your goods, and successful entrepreneurs who want to show off their wealth.
• Actionable : The market segment must produce the differential response when exposed to the market offering. This means that each of your segments must be different and unique from each other. Let’s say that your segmentation reveals that people who love their pets and people who care about the environment have the same purchasing habits. Rather than having two separate segments, you should consider grouping both together in a single segment.

Market segmentation is not an exact science. As you go through the process, you may realize that segmenting based on behaviors doesn’t give you actionable segments, but behavioral segmentation does. You’ll want to iterate on your findings to ensure you’ve found the best fit for the needs of your marketing, sales and product organizations.

We’ve outlined the do’s , so here are some of the dont’s :

• Avoid making your segments too small or specialized : Small segments may not be quantifiable or accurate, and can be distracting rather than insightful
• Don’t just focus on the segment rather than the money : Your strategy may have identified a large segment, but unless it has the buying power and wants or needs your product, it won’t deliver a return on investment
• Don’t be inflexible : Customers and circumstances change, so don’t let your segments become too entrenched – be prepared to let them evolve.

Market segmentation doesn’t need to be complicated to be effective. We would advise, though, to  get automated from the beginning . Forget spreadsheets – choose  market segmentation software  to measure and streamline your marketing strategy; as you grow, the technology will scale with you.

Innovative features such as Experience iD allow you to build your own customer segments and start personalizing experiences at scale based on the rich insights into your critical customer groups.

If you want to get a feel for your market segmentation upfront, before taking a step towards a streamlined and integrated system, trust us to take you through the research with our Market Segmentation Research service .

Related resources

Market fragmentation 9 min read, behavioral segmentation 20 min read, psychographic segmentation 11 min read, geographic segmentation 14 min read, demographic segmentation 14 min read.

Brand Perception

Brand Sentiment 18 min read

Brand intelligence 12 min read, request demo.

Ready to learn more about Qualtrics?

Market segmentation — definition, types, and examples

If you’re a marketer or business owner, you know that segmentation is an effective way to expand your market and reach new customers.

But even if you understand market segmentation, sometimes you need a little inspiration to start doing it yourself. In this article, we’ll explore the key segment types with real-world examples to jump-start your company’s foray into market segments and help you improve your overall marketing efforts.

This post will cover:

What is market segmentation?

Types of market segmentation, demographic segmentation, examples of demographic segmentation, psychographic segmentation, examples of psychographic segmentation.

• Geographic segmentation
• Examples of geographic segmentation
• Behavioral segmentation
• Examples of behavioral segmentation
• Firmographic segmentation
• Examples of firmographic segmentation

Benefits of market segmentation

Frequently asked questions (faq).

Market segmentation is the practice of grouping customers together based on shared characteristics — including demographic information or common interests and needs. It’s a strategy for dividing a large, broader target audience into specific groups to create tailored and personalized marketing campaigns.

A market segment refers to the individuals who are grouped together based on their shared characteristics. The idea is that these people have similarities as consumers and respond similarly to marketing efforts. So companies need to communicate to them in a particular way, rather than just messaging their audience as a homogenous whole.

Businesses segment their market in different ways. Market segments should be based on extensive research of their potential customers’ demographics, lifestyles, needs, personalities, and more.

There are various types of segmentation that help businesses market to their target audience groups. We’ll go over the five main types of market segmentation and provide examples of each one.

Demographic segmentation is grouping customers based on data points like age, gender, marital status, occupation, and more. It’s essentially the “who” segment of your market. This is the most common type of segmentation because it’s easily identifiable. Demographic segmentation can help you understand the individuals that make up your audience and how to target your marketing efforts to them.

Demographic segmentation is typically sorted by characteristics like:

• Level of education
• Family size or status
• Professional occupation or role in a company

Demographic segmentation provides objective information on who is interested in your product or service. While it’s best to use other methods of segmentation as well, demographics provide an excellent starting point for marketers to group their audience.

Here are a couple examples of how demographic segmentation can be used:

Brooks Running Shoes and Dick’s Sporting Goods partnering on empowerment . Brooks and Dick’s are great real-life examples of using demographic segmentation to capture customer interest. The companies partnered to celebrate National Girls and Women in Sports Day with their “Empower Her” collection. It included a variety of women’s shoes and clothing, including products with phrases like “Dream Chaser” and “Respect Her Run.”

HelloFresh targeting female social media users . Lots of different people use meal delivery subscriptions, and marketing efforts often focus on making dinner prep easier for busy young professionals or families. But HelloFresh wanted to specifically target its primary market segment. Knowing its audience was 80% women and primarily between the ages of 30 and 50, HelloFresh created a female-oriented influencer campaign that produced buzz on foodie social media.

Demographic segmentation provides excellent initial information, but to understand the customer thought process, you need to use other segmentation methods too.

Psychographic segmentation is the “why” segment of your market. In this segmentation, you analyze how your audience thinks and create a strategy targeted toward customers’ attitudes and beliefs. These groups will likely have similar psychological characteristics, personal values, aspirations, and political opinions.

Companies generally divide psychographic segments based on:

• Personality
• Hobbies and interests
• Lifestyle choices
• Social or political views
• Values and beliefs

Psychographic segmentation is more difficult to segment because it’s more subjective. Social media analytics can be a helpful tool, but you should also plan to conduct interviews and surveys and hold focus groups to gather all the information you can about your audience.

Here’s an example of psychographic segmentation:

Marvel Studios marketing toward movie fanatics . Marvel creates engaging social media posts that generate excitement and anticipation for its upcoming films. The studio posts countdowns to the days leading up to the movie and includes clips likely to pique its audience’s interest. Marvel can market to people based on their interests in comic books, superheroes, film, and more.

This segmentation is what makes customers who they are. But who they are can be influenced by other factors, such as where they are.

Geographic market segmentation

Geographic market segmentation is the “where” segment of your market. In this type, customers are segmented based on their geographic location. These people will live in the same city or state — perhaps even in the same zip code — and are likely to have similar attitudes, needs, and cultural preferences based on their geography.

Companies generally separate geographic segments by:

• Climate region
• Population density
• Rural, urban, or suburban setting

Examples of geographic market segmentation

Geographic segmentation works best for companies that are trying to focus their efforts on a particular area. It could involve simple changes, such as adapting product offerings or the language used in marketing to fit the main language of a region or slang that would typically be used in one area.

Some examples of geographic market segmentation include:

McDonald’s adjusting items for individual countries . McDonald’s started out as an American restaurant company, but as it grew to become a global mega-brand and expanded its locations all around the world, it adjusted some of its menu items to match the cuisine of different countries. For example, rather than just the typical burger and fries, there’s the Veggie Maharaja Mac in India, the McSpaghetti in the Philippines, and poutine in Canada.

Climate impacting fashion. One general example of geographic segmentation could be based on weather. If your company sells clothing, your marketing may vary by region. In colder regions you may want to highlight coats and beanies, while in a warmer area tank tops and shorts will be more suitable.

Physical environment has a huge impact on why customers purchase the way they do. It’s also important to analyze how they interact and respond to your brand.

Behavioral market segmentation

Behavioral market segmentation is the “how” segment of your market. This approach examines customer behavior and how people engage with your brand. From this type of segmentation, you can better understand how they may respond to changes in prices, new promotions, and more.

Audiences can be grouped by:

• Spending habits
• Browsing habits
• Interactions with your brand
• Loyalty to your brand
• Product feedback

Examples of behavioral market segmentation

Behavioral segmentation, like the other types, helps you gain a deeper understanding of who your client base is. This category, however, goes beyond noting stereotypical characteristics of the customer and reveals their interactions and spending tendencies.

Some examples of behavioral segmentation are:

Guinness advertising non-alcoholic beer. Guinness is a global brand with a loyal following of beer drinkers, but industry research shows there are millions of people who choose not to consume alcohol. To market to this growing group during the popular Six Nations Rugby Cup, Guinness produced clever ads for its new product “Guinness Clear” with slogans like “Make it a night you’ll remember.”

Amazon honing in on buying habits. Amazon displays recent customer purchases to show shoppers other products they may be interested in. For example, if someone purchased a soccer ball, they may get advertisements on their social media platforms for shin guards, cleats, and other soccer equipment.

Behavioral market segmentation gives businesses a close look into how customers interact with brands and spend their money.

Firmographic market segmentation

Firmographic segmentation is the B2B version of demographic segmentation. It’s the study and classification of B2B customers using information from similar company characteristics. This segmentation type is popular for firms to find businesses that would benefit the most from their product.

Companies generally separate the firmographic segment based on:

• Turnover and profit numbers
• Industry type
• Business size
• Number of employees
• Ownership (public, private, or government)
• Organizational trends (for example, more companies going remote)
• Average sales cycle

Examples of firmographic market segmentation

Most of the market segments detailed in this article focus on B2C marketing, but firmographic segmentation is helpful for B2B companies to create engaging campaigns.

Upwork advertising in New York City. Upwork is a popular platform for companies to hire freelancers. Since New York is one of the largest population centers and business hubs in the world, Upwork created a marketing campaign with digital billboards and other ads prominently placed around the city to attract the attention of businesses that might need freelancers.

There are many reasons why segmentation can create more personalized experiences for each customer. By doing research and keeping up with industry trends, your business can expand its market and improve marketing ROI.

Market segmentation provides a number of benefits for businesses. Not only does it help your teams better understand your audience and create the right messaging to attract customers and grow your reach, but it produces a stronger brand image, more efficient use of resources, a higher rate of success, and a better customer experience.

With market segmentation, you can:

• Identify high-value customers and the similarities and differences between different groups of customers.
• Create more personalized communications and more targeted marketing efforts.
• Reach new markets by showcasing your unique product or service and adjusting your messaging.
• Build better brand awareness and stand out by understanding individual customer needs and creating personalized experiences.
• Cut down on wasted marketing dollars by creating more impactful and efficient campaigns.
• Improve your products by meeting specific market expectations based on what customers want.
• Make it easier to learn about your audience and create more cost-effective campaigns in the future.
• Gain better marketing ROI by using existing data to improve the customer experience.

What is meant by market segmentation?

Market segmentation is the practice of grouping customers together based on certain characteristics they may share.

What are the types of market segmentation?

There are four main types of market segmentation — demographic, psychographic, geographic, and behavioral. But there are other types that your business can take advantage of as well, such as firmographic for B2B marketing.

What are the advantages of market segmentation?

Market segmentation helps you establish who your target market is and customize your message for individuals. It allows your business to expand across new markets and improve products to keep up with changing customer needs.

How do you identify market segments?

By becoming an expert on your business, doing extensive industry research, and categorizing people by identifiable characteristics, you can use the information to group potential customers that might be interested in your products or services.

What makes a good market segment?

A good market segment should be easily identifiable and different from other segments. The sample sizes of these segments should be large and able to be assessed for feedback.

Evaluate your marketing software for market segmentation capabilities

Your business can reach new markets by using market segmentation. When you’re ready to get started, evaluate your current marketing software to see how it handles segmentation. If there are gaps, look into a new solution.

Acting on insights requires an audience. Create and activate engaged audiences on any channel or device with Adobe Audience Manager .

Audience Manager turns insights into action so your teams can create memorable customer experiences and extend your reach further than before. As a data management solution, Audience Manager collects and merges information from practically any source — building intelligent audience segments that give you a complete view of your customers.

Watch the two-minute product tour to learn more.

https://business.adobe.com/blog/basics/market-segmentation

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https://business.adobe.com/blog/basics/get-a-quick-refresher-on-market-segmentation

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Market Segmentation: You’re Doing It Wrong

I’m amazed at how many savvy business people don’t know how to properly implement market segmenting before developing a marketing plan . I’m even more surprised that most just assume “everyone” will buy their products or sign up for their services.

In fact, a study done by Harvard Business claimed that in the US, 85% of 30,000 new product launches failed because of poor market segmentation .

Marketing segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and application for the relevant goods and services.

Marketing campaigns are then designed and implemented to target these specific customer segments.

Why Should You Care About Market Segmentation?

One of the main reasons to use market segmentation is to gain a competitive advantage by understanding the needs of a specific customer base. Many mass marketing techniques that are used assume all customers are the same.

This isn’t ideal .

It’s not that results aren’t attainable through mass marketing, it’s just not as an efficient process as market segmentation. Correctly using market segmentation allows you to better know your customer base, and align your marketing efforts and messaging strategy.

Strategic Planning: Common Segment Descriptors

Descriptors are customer characteristics, used during the strategic planning phase, that are significant enough to divide your market. You won’t use all of these descriptors for every campaign, but you should know them.

• Psychographic : Grouping your customers into cultural clusters, social status, lifestyle and personality type.
• Decision Makers : Grouping your customers based on who decides to purchase your product within the company structure.
• Behavioral : Grouping customers by product usage. For example; light, medium or heavy users. This stage also factors in brand loyalty and the type of user.
• Geographic : Grouping customers by a specific area, such regions of the country or state and urban or rural.
• Distribution : Grouping customers based on where they go to purchase your product, such as online, store or through a catalog.
• Demographic : Grouping customers by age, income level, gender, family size, religion, race, nationality, language, etc.

Market Segmenting Best Practices: 4 Simple Rules

Market segmentation doesn’t have to be as difficult as most business professionals make it. The process just takes time and research. It is important to prepare and do your research upfront to truly determine your segments and then align with marketing efforts.

Four Simple Rules for Market Segmentation

• 1. Don’t define your segments too broadly. This will give you a greater opening to a competitor who targets more narrowly.
• 2. Organize your business by market segments. Many begin by establishing market-focused teams or groups which later get organized into a market-focused business model.
• 3. Manage your segments globally. Sometimes regional organization can set you up to be blind-sided later by a more dynamic global economy.
• 4. Complete your analysis and research (strategic market segment portfolio), then be bold about attacking those segments.

Good vs. Bad Market Segmentation Research

So at this point, you are probably asking yourself; what am I doing wrong? What is good market segmentation? Good market segmentation research should provide your company with a clear direction to move forward with and an idea of which markets will be best to target. The market your research shows to target should represent a high share of potential profitability to the company. It should also be easy to identify among the population of research.

If your market segmentation research is not meeting the above requirements, then that is what you’re doing wrong. You’ll need to re-gather your research team and clearly define their goals and the information they should be gathering from their market segmentation research.

Bad market segmentation research is a waste of your time, money and energy . Therefore, it is worth investing in a team or educating yourself, so you can clearly define your segments, and properly market to them. These segments should be ones your competitors don’t even know exist. This end goal will dramatically improve your marketing efforts – in tern – boosting your market share and profits.

Implementing a Better Market Segmentation Plan

There are 4 main stages that need to be considered when implementing or revising your market segmentation plan:

1. Objective Setting

• Set segmentation objectives and goals
• Identify segmentation variables and develop hypothesis

2. Identify Customer Segments

• Research design
• Data collection
• Analyze data and identify segments
• Validate all results

3. Develop Segmentation Strategy

• Select target segment
• Identify segmentation implications & recommendations

4. Execute Go-To-Market Plan (launch plan)

• Identify key stakeholders
• Develop communications & operational launch plan
• Execute and monitor

As you can see by the above breakdown, within each stage there are sub-steps that need to be thought about before moving on to the next stage.

Most marketers fall short during the first two stages. The research and data collection, though often rushed, is the most important stage of the implementation process of market segmentation.

Market Segmentation Example

After you work through implementing your marketing segmentation plan, it would be typical to see something like the below diagram to demonstrate to your team and all parties involved.

Final Thoughts

“Beautiful product development in an ugly market segment simply makes no sense.” – Dan Adams

Most people do not understand their customer groups well enough to do full-blown market segmentation and that’s OK. Knowing and admitting that is half the battle. As you grow, you will learn more about each customer group and then further be able to make “spotlight” assessments on what segments look the most attractive for your business.

Keep in mind, you do not need to be an expert, but you do need to be able to admit that you may be doing things wrong and try to improve on those areas. Typically, for most businesses, market segmentation and research is one of those areas.

This is just the beginning of an effective campaign. Once you’ve created segments, it’s time to move on and create a buyer persona . From there, you can look at targeting your potential customers in social media , and nurturing those leads into sales !

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How to Write a Market Analysis for a Business Plan

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

Market Segmentation Study Guide

A Step-by-step Guide to Segmenting a Market

• 1.0.0.1 Which Segmentation steps to complete?
• 1.0.1 Step One – Define the market
• 1.0.2.1 Main segmentation base
• 1.0.2.2 Segmentation variable
• 1.0.2.3 Example/s
• 1.0.3.1 Evaluation Criteria
• 1.0.3.2 Our assessment
• 1.0.4 Step Four – Construct segment profiles
• 1.0.5 Step Five – Evaluate the attractiveness of each segment
• 1.0.6 Step Six – Select target market/s

How to segment a market

Market segmentation, the selection of appropriate target markets, and the design of an appropriate and competitive positioning is critical to success in most marketplaces. This article walks through a step-by-step guide of the initial steps, from the defining the overall market where we are competing to the selection of a attractive target market.

Please follow the step-by-step guide below. Please note that there are additional helpful topics available on the Market Segmentation Study Guide, which have been linked throughout this article, alternatively you could use a search bar all the top-level menu to find relevant information.

Which Segmentation steps to complete?

Depending upon your segmentation task you may need just to complete steps one to three below, or you may need steps one to six – so check what is required first.

Steps 1 to 3 cover the process of market segmentation only – where we decide on a market and then segment it into different groups of consumers with common needs or behaviors.

The further steps of 4 to 6 cover the steps of how to choose an attractive and viable target market.

(Please note: There are actually nine steps of the full segmentation, targeting and positioning process, which are discussed in the article on the full STP process .

Step One – Define the market

The first step in creating market segments is to clearly define the market of interest. As discussed in the markets, sub-markets and product-markets section, it is important not to define a market too broadly.

For instance, let’s assume that you are looking to segment the market for a firm that operates a chain of book stores. It would be too top-level and too awkward to define the market as all retailing consumers, as it is unlikely to lead to any meaningful segmentation.

As shown in the following diagram, we need to split out the overall broad market (retailing) into its various sub-markets (such as, supermarkets, specialty stores and so on).

We can also further define some of these sub-markets (if they are still too broad) as is shown for specialty stores below.

And finally, we need to determine the market’s geographic boundaries. It this case a list of possibilities has been provided in the figure.

Let’s pick the UK; so our defined product/market is book retailers in the UK.

Primarily they define their market as takeaway and dine-in quality coffee retailing, rather than at home coffee and other forms of out-of-home food.

Therefore, a clear definition of the market makes it much simpler to understand the market, to conduct segmentation, and ultimately to develop an appropriate marketing mix offering.

Step Two – Create market segments

Now that we have defined the product/market clearly (which we will refer to as ‘the market’ from this point on), we need to determine what types (segments) of different consumers form that overall market.

To do this, we need to review the list of segmentation bases/variables and choose two or three of those variables that we think (or know from market research) affect the purchasing behavior of book consumers.

Note: When segmenting a business market, please see segmentation bases for business markets instead of the above link.

For this market, let’s pick a couple of segmentation variables, as shown in the following table. These particular segmentation variables have been chosen as they are likely to influence the purchasing behavior of books and, therefore, should lead to the identification of interesting segments.

Please note that we have used two top-level segmentation bases – of demographic and behavioral – and have selected a broad age group variable (from the demographic base), as well as shopping enjoyment/style (from the behavioral base).

Now we have chosen the segmentation variables, we can use a segmentation tree structure to help map out the segments, as shown below. Other examples for segmentation trees can be found in how is market segmentation actually undertaken.

And please note there is a free Excel template available on this website to allow you to construct a segmentation tree and segment profiles easily from any market research survey data or customer base data that you have access to.

As you can see, five different segments have been created by applying these segmentation variables. In the first stage, a broad demographic split has been used (to create children, young adults and older adults segment). The two adult segments then have a behavior variable applied to them (whether they enjoy shopping or just like to get in and out quickly).

Remember that are many ways to segment the same market. Provided that the segmentation variables have some logic to them, most outcomes should be quite acceptable.

Therefore, our five market segments in this example are:

• Young adults (18-40 years), who enjoy the shopping experience
• Young adults (18-40 years), who are functional/convenience shoppers
• Older adults (40+ years), who enjoy the shopping experience
• Older adults (40+ years), who are functional/convenience shoppers

Please see the article on market segmentation examples , as well as the list of market segment ideas .

By going through this exercise, we also gain a greater understanding of the marketplace overall and the different types of needs that may exist across different consumer groups. Therefore, market segmentation is usually a helpful analytical exercise for marketers to undertake, as it generates knowledge and potential market insights.

Step Three – Evaluate the proposed market segments for viability

Now that we have developed some market segments we may be required to evaluate them to ensure that they are usable and logical. This would happen in a real-life firm, but it may not form part of your particular task if this is a student activity.

To do this, you need to quickly assess the segments against a checklist of factors. This is discussed in more detail in c riteria for effective segmentation . Basically, all that is required is to list the evaluation criteria and to provide a supporting comment, as is demonstrated in the following table.

If, on occasion, the segments that you have created don’t appear to meet the evaluation criteria, then simply revisit step two and change the segmentation variables that you have selected.

Step Four – Construct segment profiles

You may be required to describe the segments (develop a segment profile). The following is a checklist of factors that you might consider. For some of these items below you may not know actually – in that case either make a logical assumption or do not include the factor in the segment profile. Remember that the task here is to describe and understand the segments a little more.

An example of how to complete this table is shown in segment profiles .

Step Five – Evaluate the attractiveness of each segment

If you are required to select one target market from you list of market segments, then you need to use some form of objective assessment. Again, this topic is covered in detail in how are target markets selected , but as a quick guide you should use some of the following factors in assessing the attractiveness of each market segment.

Financial Issues

• Segment size
• Segment growth rate
• Profit margins

Structural Attractiveness

• Competitors
• Distribution channels

Strategic Direction

• Fit with firm’s strategy
• Fit with firm’s goals

Marketing Expertise

Step Six – Select target market/s

Using the assessment information you have just constructed, you can select the most appropriate target market for the firm. While there are many factors to consider, you should at least take into account: the firm’s strategy, the attractiveness of the segment, the competitive rivalry of the segment, and the firm’s ability to successfully compete.

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• Marketing Essentials

Market Segmentation: Definition, Example, Types, Benefits

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is Market Segmentation?

Market segmentation is a way of aggregating prospective buyers into groups or segments, based on demographics, geography, behavior, or psychographic factors in order to better understand and market to them.

Key Takeaways

• Market segmentation seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group.
• Markets can be segmented in several ways such as geographically, demographically, or behaviorally.
• Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market.
• With risk minimized and clarity about the marketing and delivery of a product heightened, a company can then focus its resources on efforts likely to be the most profitable.
• Market segmentation can also increase a company's demographic reach and may help the company discover products or services they hadn't previously considered.

Investopedia / Matthew Collins

Understanding Market Segmentation

Companies can generally use three criteria to identify different market segments:

• Homogeneity , or common needs within a segment
• Distinction , or being unique from other groups
• Reaction , or a similar response to the market

For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements. Understanding these different market segments enables the athletic footwear company to market its branding appropriately.

Market segmentation is an extension of market research that seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group. The objective of market segmentation is to minimize risk by determining which products have the best chances of gaining a share of a target market  and determining the best way to deliver the products to the market. This allows the company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).

Market segmentation allows a company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).

Types of Market Segmentation

There are four primary types of market segmentation. However, one type can usually be split into an individual segment and an organization segment. Therefore, below are five common types of market segmentation.

Demographic Segmentation

Demographic segmentation is one of the simple, common methods of market segmentation. It involves breaking the market into customer demographics as age, income, gender, race, education, or occupation. This market segmentation strategy assumes that individuals with similar demographics will have similar needs.

Example: The market segmentation strategy for a new video game console may reveal that most users are young males with disposable income.

Firmographic Segmentation

Firmographic segmentation is the same concept as demographic segmentation. However, instead of analyzing individuals, this strategy looks at organizations and looks at a company's number of employees, number of customers, number of offices, or annual revenue .

Example: A corporate software provider may approach a multinational firm with a more diverse, customizable suite while approaching smaller companies with a fixed fee, more simple product.

Geographic Segmentation

Geographic segmentation is technically a subset of demographic segmentation. This approach groups customers by physical location, assuming that people within a given geographical area may have similar needs. This strategy is more useful for larger companies seeking to expand into different branches, offices, or locations.

Example: A clothing retailer may display more raingear in their Pacific Northwest locations compared to their Southwest locations.

Behavioral Segmentation

Behavioral segmentation relies heavily on market data, consumer actions, and decision-making patterns of customers. This approach groups consumers based on how they have previously interacted with markets and products. This approach assumes that consumers prior spending habits are an indicator of what they may buy in the future, though spending habits may change over time or in response to global events.

Example: Millennial consumers traditionally buy more craft beer, while older generations are traditionally more likely to buy national brands.

Psychographic Segmentation

Often the most difficult market segmentation approach, psychographic segmentation strives to classify consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to achieve, as these traits (1) may change easily and (2) may not have readily available objective data. However, this approach may yield strongest market segment results as it groups individuals based on intrinsic motivators as opposed to external data points.

Example: A fitness apparel company may target individuals based on their interest in playing or watching a variety of sports.

Other less notable examples of types of segmentation include volume (i.e. how much a consumer spends), use-related (i.e. how loyal a customer is), or other customer traits (i.e. how innovative or risk-favorable a customer is).

How to Determine Your Market Segment

There's no single universally accepted way to perform market segmentation. To determine your market segments, it's common for companies to ask themselves the following questions along their market segmentation journey.

Phase I: Setting Expectations/Objectives

• What is the purpose or goal of performing market segmentation?
• What does the company hope to find out by performing marketing segmentation?
• Does the company have any expectations on what market segments may exist?

Phase 2: Identify Customer Segments

• What segments are the company's competitors selling to?
• What publicly available information (i.e. U.S. Census Bureau data) is relevant and available to our market?
• What data do we want to collect, and how can we collect it?
• Which of the five types of market segments do we want to segment by?

Phase 3: Evaluate Potential Segments

• What risks are there that our data is not representative of the true market segments?
• Why should we choose to cater to one type of customer over another?
• What is the long-term repercussion of choosing one market segment over another?
• What is the company's ideal customer profile, and which segments best overlap with this "perfect customer"?

Phase 4: Develop Segment Strategy

• How can the company test its assumptions on a sample test market?
• What defines a successful marketing segment strategy?
• How can the company measure whether the strategy is working?

Phase 5: Launch and Monitor

• Who are key stakeholders that can provide feedback after the market segmentation strategy has been unveiled?
• What barriers to execution exist, and how can they can be overcome?
• How should the launch of the marketing campaign be communicated internally?

Benefits of Market Segmentation

Marketing segmentation takes effort and resources to implement. However, successful marketing segmentation campaigns can increase the long-term profitability and health of a company. Several benefits of market segmentation include;

• Increased resource efficiency. Marketing segmentation allows management to focus on certain demographics or customers. Instead of trying to promote products to the entire market, marketing segmentation allows a focused, precise approach that often costs less compared to a broad reach approach.
• Stronger brand image. Marketing segment forces management to consider how it wants to be perceived by a specific group of people. Once the market segment is identified, management must then consider what message to craft. Because this message is directed at a target audience, a company's branding and messaging is more likely to be very intentional. This may also have an indirect effect of causing better customer experiences with the company.
• Greater potential for brand loyalty. Marketing segmentation increases the opportunity for consumers to build long-term relationships with a company. More direct, personal marketing approaches may resonate with customers and foster a sense of inclusion, community, and a sense of belonging. In addition, market segmentation increases the probability that you land the right client that fits your product line and demographic.
• Stronger market differentiation. Market segmentation gives a company the opportunity to pinpoint the exact message they way to convey to the market and to competitors. This can also help create product differentiation by communicating specifically how a company is different from its competitors. Instead of a broad approach to marketing, management crafts a specific image that is more likely to be memorable and specific.
• Better targeted digital advertising. Marketing segmentation enables a company to perform better targeted advertising strategies. This includes marketing plans that direct effort towards specific ages, locations, or habits via social media.

Market segmentation exists outside of business. There has been extensive research using market segmentation strategies to promote overcoming COVID-19 vaccination hesitancy and other health initiatives.

Limitations of Market Segmentation

The benefits above can't be achieved with some potential downsides. Here are some disadvantages to consider when considering implementing market segmentation strategies.

• Higher upfront marketing expenses. Marketing segmentation has the long-term goal of being efficient. However, to capture this efficiency, companies must often spend resources upfront to gain the insight, data, and research into their customer base and the broad markets.
• Increased product line complexity. Marketing segmentation takes a large market and attempts to break it into more specific, manageable pieces. This has the downside risk of creating an overly complex, fractionalized product line that focuses too deeply on catering to specific market segments. Instead of a company having a cohesive product line, a company's marketing mix may become too confusing and inconsistently communicate its overall brand.
• Greater risk of misassumptions. Market segmentation is rooted in the assumption that similar demographics will share common needs. This may not always be the case. By grouping a population together with the belief that they share common traits, a company may risk misidentifying the needs, values, or motivations within individuals of a given population.
• Higher reliance on reliable data. Market segmentation is only as strong as the underlying data that support the claims that are made. This means being mindful of what sources are used to pull in data. This also means being conscious of changing trends and when market segments may have shifted from prior studies.

Examples of Market Segmentation

Market segmentation is evident in the products, marketing, and advertising that people use every day. Auto manufacturers thrive on their ability to identify market segments correctly and create products and advertising campaigns that appeal to those segments.

Cereal producers market actively to three or four market segments at a time, pushing traditional brands that appeal to older consumers and healthy brands to health-conscious consumers, while building brand loyalty among the youngest consumers by tying their products to, say, popular children's movie themes.

A sports-shoe manufacturer might define several market segments that include elite athletes, frequent gym-goers, fashion-conscious women, and middle-aged men who want quality and comfort in their shoes. In all cases, the manufacturer's marketing intelligence about each segment enables it to develop and advertise products with a high appeal more efficiently than trying to appeal to the broader masses.

Market segmentation is a marketing strategy in which select groups of consumers are identified so that certain products or product lines can be presented to them in a way that appeals to their interests.

Why Is Market Segmentation Important?

Market segmentation realizes that not all customers have the same interests, purchasing power, or consumer needs. Instead of catering to all prospective clients broadly, market segmentation is important because it strives to make a company's marketing endeavors more strategic and refined. By developing specific plans for specific products with target audiences in mind, a company can increase its chances of generating sales and being more efficient with resources.

What Are the Types of Market Segmentation?

Types of segmentation include homogeneity, which looks at a segment's common needs, distinction, which looks at how the particular group stands apart from others, and reaction, or how certain groups respond to the market.

What Are Some Market Segmentation Strategies?

Strategies include targeting a group by location, by demographics—such as age or gender—by social class or lifestyle, or behaviorally—such as by use or response.

What Is an Example of Market Segmentation?

Upon analysis of its target audience and desired brand image, Crypto.com entered into an agreement with Matt Damon to promote their platform and cryptocurrency investing. With backdrops of space exploration and historical feats of innovation, Crypto.com's market segmentation targeted younger, bolder, more risk-accepting individuals.

The Bottom Line

Market segmentation is a process companies use to break their potential customers into different sections. This allows the company to allocate the appropriate resource to each individual segment which allows for more accurate targeting across a variety of marketing campaigns.

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Segmentation, Targeting, & Positioning (STP Marketing): The Marketer's Guide

Published: December 06, 2023

As a content strategist, I like to ask my clients a lot of questions, starting with, "Who’s your target audience?"

But do you know what answer I always dread hearing? "Everyone"

While it’s nice to believe that everyone would be interested in purchasing your product or service, this definition (or lack thereof) creates way more work for you and also does a disservice to your actual target market. This is where segmentation, targeting, and positioning come into play.

We developed this guide to help you understand how and why you should invest time into STP for better, more effective marketing. Let’s dive in.

What is segmentation, targeting, and positioning (STP Marketing)?

Segmentation, targeting, and positioning (often referred to as segmentation-targeting-positioning or STP marketing) is a consumer-centric approach to marketing communications. The STP model helps deliver more relevant, personalized messages to target audiences.

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At its core, STP marketing helps you to better target your marketing messages and better serve your customer base.

Here's an example: I once created a marketing strategy for a fitness apparel brand. Rather than appeal to all fitness enthusiasts across the board, the brand wanted to target a specific segment within their target market: female yoga fans in their 30s and 40s. 

Ultimately, our marketing campaign was much more efficient and cost-effective since we knew our audience, where to reach them, and what messages would resonate.

Conducting an STP Marketing Analysis

STP allows you to take a large, anonymous audience and define how your different products (or different components of the same product) relate to specific consumer segments within that larger audience — thus understanding how to position your product(s) and messaging to grab the attention of each segment.

Let’s unpack each part of the segmentation-targeting-positioning model.

1. Segmentation

Segmentation refers to the process of dividing your audience into smaller groups based on certain characteristics. This process allows you to group your individual audience members into similar groups so you can better communicate your products, features, and benefits that may be most relevant to them.

You can segment your audience based on one or more of these criteria:

• Demographics , which typically answer the question of who your buyer is (e.g. age, gender, education, location, and profession)
• Psychographics , which answer the question of why your buyer buys (e.g. priorities, personality traits, and beliefs and values)
• Lifestyle traits , such as hobbies, entertainment preferences, and non-work activities
• Behavior , such as brand loyalty, channel preferences, and other shopping habits

Segmentation may sound a little familiar to another process we often discuss here on the HubSpot blog — creating buyer personas .

While the two are very similar,  buyer personas help you create a handful of customer profiles that represent your broader audience. Segmentation allows you to split your audience into countless groups, each of which you can uniquely target.

For example, let’s say Paws & Tails is a Chicago pet-sitting company that offers pet-sitting, dog walking, and boarding services. Given the vast number of pet owners in the city, they need to segment their audience into smaller groups to better understand how to position their services.

Based on their research and current customer base, they split their audience into three main segments:

• Segment A is made up of high-income pet owners who work often and need daytime dog walking and pet pop-in visits.
• Segment B is made up of middle-class individuals and families who travel and need overnight boarding or pet-sitting services.
• Segment C is made up of older pet owners and retirees who need help caring for their pets.

2. Targeting

With your audience segments in hand, it’s time to move on to the targeting phase. First, however, you must decide which segments are worth targeting with your marketing. To decipher this, I like to ask myself the following questions about each segment:

• Is this segment composed of enough potential customers to justify targeting? Would it yield enough profits if the segment were to convert?
• Is it measurably different from the other segments?
• Is it accessible by all members of Marketing and Sales?
• Is your company equipped and able to serve the segment? Are there any physical, legal, social, or technological barriers that could prevent that?

Choosing what segments to target is a strategic decision. Thankfully, certain strategic planning models — the PESTLE analysis is a personal favorite — can help you better understand the viability of each segment.

It takes a lot of work to successfully target a segment of your audience. But from my experience, whether you’ve identified two segments or ten, don’t feel the need to target more than one segment at once. In fact, I've found that targeting one at a time can help you better position your marketing for each specific segment.

Following our example from before, Paws & Tails conducts research to better understand its Chicago audience. Paws & Tails finds that Segment A makes up 60% of its market size, Segment B makes up 30%, and Segment C makes up 10%. Moreover, Segment A has a higher average income and is willing to pay more for pet-sitting and walking services. Because of this, they choose to focus on Segment A.

3. Positioning

At this point, you should understand the demographics, psychographics, motivations, and pain points of the segments you’ve chosen to target, which can provide a place to start when it comes to positioning your product or service.

First, take a step back and examine your product or service through the perspective of your chosen segment. If you were in their shoes, why would you choose your product over a competitor’s? What features or benefits are most relevant to you, based on the motivations and pain points you’ve identified?

This information is important to defining your brand positioning and understanding how it stacks up next to your competitors. One way to understand where you, well, stand is by building a positioning map , which is “the visual plotting of specific brands against axes, where each axis represents an attribute that is known to drive brand selection.”

The segment you choose to target should dictate what two attributes you plot on your positioning map. For example, let’s say Paws & Tails decides Segment A selects pet-sitting brands based on two attributes: service area and reliability.

By understanding 1) what the target segment deems most important for brand selection and 2) where its competitors succeed (and fall short), Paws & Tails is able to identify an open market opportunity and position its marketing to best fit the needs and goals of its audience.

Using Segmentation, Targeting, and Positioning in Marketing

The STP model is a priceless addition to any marketing strategy, regardless of your industry, product, or audience. It prioritizes efficient and effective marketing and ensures you’re delivering only the most relevant, targeted messaging across the board.

It also plays an important role in developing other strategies, such as your buyer personas, customer lifecycle stages, and core brand proposition.

By leading with a consumer-centric approach like STP, you can be sure that every inch of your marketing is relevant to your audience — thus, increasing the likelihood that they convert, purchase, and become lifelong customers.

Examples of Great Market Segmentation and Positioning

Brands are segmenting, targeting, and positioning their audiences and marketing constantly, oftentimes without us (consumers) even noticing. Ever seen a brand or product and thought “Huh, that’s perfect for me” or “Wow, right place at the right time”? Yeah … you’ve been subject to the STP model.

Let’s review a few examples of great marketing segmentation and positioning.

1. Panera Bread

Panera has successfully cornered the “health-conscious” and “ climate-conscious ” segment of the fast casual dining industry. Is Panera’s food so different from other fast casual options? Not entirely.

But by branding themselves with the perspective that “we believe that good food, food you can feel good about, can bring out the best in all of us”, Panera remains top-of-mind as a place to get high-quality food, fast.

2. AllBirds

How did AllBirds position itself to set itself apart from the competition? By elevating its eco-consciousness and placing that front and center in its marketing. According to the AllBirds website, the brand “crafts with planet-friendly natural materials, like merino wool and eucalyptus trees, because they're our best chance for a sustainable future.”

At first glance, AllBirds shoes don’t look too terribly different from other running or walking shoes. However, its audience segment that cares about sustainability and earth-conscious products knows the difference.

No longer can businesses simply segment their audiences by “men” and “women” — the individuals within each broad gender group vary too much, and razor brand Billie took note of this.

In an effort to extinguish the “pink tax,” Billie markets cost-friendly razors and associated products. Moreover, they work to normalize body hair and other forgotten or shamed parts of women’s bodies.

Through this positioning, Billie is able to set their products apart from competitors and create a strong, positive community around their brand.

The world of online dating is a busy, strange place. From Tinder to FarmersOnly.com, there seems to be a place for everyone to meet, well, anyone. Hinge came on the scene only a handful of years ago, yet it has skyrocketed to the top of the list of the most popular and reliable dating app.

Time and time again, I’ve heard that Hinge is a favorite because it works — meaning it helps people meet people and make real relationships. You wouldn’t think a dating app would position themselves to eventually be unnecessary, but that’s exactly what Hinge has done. In fact, its mission statement is to “[build] an app that’s designed to be deleted.”

By putting the needs and desires of its audience front and center, Hinge has created a more trustworthy, in-demand online dating experience and set itself apart from its competitors.

The Case for Using STP Marketing

The segmentation-targeting-positioning model is designed to help you better target your marketing messages and better serve your customer base. It’s a win-win for you and your customers!

This article was originally published October 29, 2020 and has been updated for comprehensiveness.

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How to Write Up & Develop a Market Segmentation Plan

by Steve Milano

Published on 1 Jan 2021

Segmenting a market refers to targeting a product to a specific target customer or industry, such as selling footwear to women or accounting software to hospitals. Market segmentation helps new companies develop a niche, or existing companies expand or diversify. Any marketing segmentation plan begins with detailed marketplace research.

List the specific consumers or industries you want to research as targets for your product or service. Target consumers by demographics such as sex, age, income or parental status. Target industries by listing and ranking those most likely to use your product or service, or those that are already using similar products and services.

Research the purchasing habits of your target customers by identifying the needs they are trying to solve or benefits they are seeking from products and services like yours. List the companies currently selling to these consumers or businesses, the prices in the marketplace and where consumers are purchasing these products or services. Gather trade association research that provides information on marketplace sales history, trends and projections.

Determine which segments of the marketplace might provide you with the most profitability. Compare them by evaluating your ability to create or modify your product or service to meet each market segment. Include a review of your cost of production, distribution channels you would use and pricing strategies. For example, if you are an apparel maker, you might consider making children’s clothing, or clothing for boys or girls only. You would investigate the logistics of all three scenarios. Make your determination as to which market segment you should pursue based on your marketplace research and evaluation of your internal capabilities.

Write a recommendation report starting with an executive summary that identifies the market segment you recommend entering and how your product and ability to deliver it to that market segment make it your best chance for success. Include a description of your target customers, why you think they are likely to want your product, and your projected sales and profits. Exclude detailed research findings and support in the executive summary, keeping it to half a page or less. Provide support in the rest of your document.

Create a report that includes the following sections: product description, benefits, target customers, competition, separate brand, pricing, promotional and distribution strategies, and budget projections. List the market segments you do not recommend your company enter and discuss why you don’t believe they are right for your company. Include a recommendation section that reiterates information from your executive summary, including steps for following your recommendations.

How to Write and Conduct a Market Analysis

3 min. read

Updated January 3, 2024

A market is the total sum of prospective buyers, individuals, or organizations that are willing and able to purchase a business’s potential offering. A market analysis is a detailed assessment of the market you intend to enter. It provides insight into the size and value of the market, potential customer segments, and their buying patterns.

In this section, we’ll be covering what information to include in your business plan after completing your research. If you’re struggling with the research itself, you should check out our market research resources for step-by-step guidance.

• How to write your market analysis

The information featured in your market analysis should focus on firmly defining who your customers are. Here are the two steps you need to take:

Define your target market

Finding your target market requires segmentation based on demographic and psychographic information until you reach the ideal customer. You need to address who they are and how you identified them.

Target market examples

A target market analysis is a key part of any business plan. Let’s walk you through some examples.

Determine your market size

Identifying your potential customers isn’t enough. You also need to prove that the size of the market can support your business. To do this, it’s helpful to define what’s available, serviceable, and can be obtained.

Optional information to include

The main purpose of the market analysis is to show who your customers are. While defining your target market may be enough, it can be helpful to include some of the following supporting details.

Show that you know your industry

Before starting a business, you should know the state of your industry and where it’s headed. This includes industry metrics you’ve collected, any barriers to entry, emerging trends, or common success factors.

Write a customer analysis

Conducting a customer analysis provides additional depth to your target audience. You’ll know them better and go beyond just segmentation.

Use a customer persona to describe your customers

It can be difficult for you, your employees, and potential investors to visualize who your customers are based solely on data. Creating a customer persona can bring them to life and support your target market choice.

• Why conduct a market analysis?

Conducting any sort of in-depth research can be a time-intensive process. However, the benefits far outweigh the investment—so much so that it’s recommended that you revisit your market analysis at least once a year in order to stay on top of emerging trends or changes in the market.

As part of your business plan, it demonstrates that you have a firm understanding of your customers. Here are the other benefits gained by completing a market analysis:

Reduce risk

If you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service. It also helps you explore if your idea will work or not. If you determine that the market size can’t sustain your business, there are too many barriers, high starting costs, intense competition, or some other factor that would lead to a higher chance of failure—you can pivot and avoid wasting your hard-earned time and money.

Better position your business

Researching the market landscape will help you strategically position your business. This may be done through pricing, specific features, production/distribution, or any other method to differentiate your business and make it more attractive to your target audience.

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Verify product/market fit

Part of positioning your business is determining if there is a sustainable market for your business. This starts with segmenting and identifying your ideal customers. It then involves a process of gathering feedback, gauging interest, and finding any sort of demonstrable traction. To learn more about finding product market fit, check out the market research section of our Starting a Business Guide.

Inform investors

Research is not only valuable for informing you as a business owner but in convincing investors and lenders that your idea is worth funding. In many ways, the fact that you spent time pulling together viable information is just as important as the information itself. It shows that you care about finding success as a business owner and are willing to put in the work, even at this early stage.

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Guide for Creating Market Segmentation to Improve Marketing

Market segmentation is a marketing strategy in which a company divides prospective customers into groups with common interests and needs. With it, companies will be able to evaluate different categories of consumers. Hence, minimizing the risks and seeking clarity to focus the resources on efforts that most likely to be profitable is viable. In line with this, you get to tackle different segments of the market such as geographic, demographic, psychographic, and behavioral. These will help further classify your target market and reach the most valuable customers. Learn more about marketing segmentation and see the examples provided below.

Market Segmentation Tutorial

Why is market segmentation important.

Effective segmentation is vital for every business because that different conclusion are derived through this strategy. This greatly affects the marketing of a business particularly increasing competitiveness, communications, and customer retention. Moreover, with proper market segmentation, you will be able to achieve higher profitability and run a better company.

Types of Segmentation

There are four types of customer segmentation that a firm should closely look into. These will help businesses segment their market and deliver targeted and valuable messaging to target consumers. Discover why they matter for your business and market segmentation.

• Demographic segmentation

Demographic segmentation is a type of segmentation that answers the question ‘who’. It defines customer groups by looking into identifiable traits of people like age, gender, income, location, ethnicity, etc.

• Psychographic segmentation

Psychographic is useful for categorizing audiences through the common personalities and interests of audiences. Here you need to identify the customer’s hobbies, personality traits, values, life goals, and beliefs. When done properly, greatly impacts marketing segmentation.

• Behavioral segmentation

Behavioral is another type of segmentation that is vital in marketing. This requires gathering data about the customer’s actions. This also relates to the customer’s response to your brand. With it, you can group customers in accordance with their purchasing habits, browsing habits, brand interactions, and more.

• Geographic segmentation

Geographic might be the simplest and easiest type of market segmentation to define groups when it comes to the geographic boundary. You can identify this is by gathering information: country, region, ZIP code, city, urban or rural.

Market Segmentation Examples

Here are some ready-made market templates that you can fill out. These are designed to help you analyze your marketing with less thinking about the format or model. With these market segmentation examples, you can identify all the four main types of segmentation. This includes demographic, psychographic, geographic, and behavioral segmentation. Plus, you can edit and add other types of segmentation according to your preference to analyze further your marketing.

Consumer Market Segmentation in Tree Diagram

This example helps you identify the four types of segmentation. It uses a tree diagram approach so you can easily distinguish each customer segment. In case you want to personalize, you can click the edit button attached to the market segmentation examples provided. You can add your personal touch into this segmentation allowing you to modify the background color, node color, and many more.

Business Market Segmentation in Table

Another way to analyze marketing is by creating a market segmentation in a table. In just a few seconds, you can quickly identify the demographic, psychographic, geographic, and behavioral segmentation of your marketing. Similarly, you can customize this table according to your preference. This lets you modify the font style, adjust the table color, attach icons and images.

Create a Market Segmentation in GitMind

You can develop market segmentation in different ways. You can work on it by analyzing your existing customers. This is where you get feedback, analyzing website analytics, audience interest, etc. Once you have a clear overview of your potential customer and gather all the necessary information, you can now proceed to create a visual representation of your marketing segmentation. To create this graphical illustration, we suggest a free tool that is great for business graphic illustrations. GitMind is a mind mapping and flowchart-making tool that suits educational and business needs for creating graphic representations of ideas, concepts, and data. Below is a simple step on how to make market segmentation using GitMind.

• First, open GitMind using your browser and go to the “Templates” section. From here, choose a template with a tree diagram layout.

• Next, click the “Use Template” button to edit the map and add your content to the diagram.

• Once done, you can customize the marketing segmentation using the “Style” feature and change the look and feel. Or just choose from the theme available. Finally, click the “Export” button and select your desired format of the illustration.

You can minimize the wasted efforts and time when you have clear view of your potential audience. This is possible when market segmentation is done properly. On that note, the above content introduced you to the essentials about segmentation. Also, examples are provided to help you make segmentation in no time.

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Market Segmentation Plan Template

What is a Market Segmentation Plan?

Market segmentation plans are comprehensive strategies that help businesses identify target consumer groups and develop products and services that best meet their needs. This type of plan is used to analyse consumer behaviour and needs, creating consumer profiles that can be used to create and present products in a way that appeals to the consumer's wants and needs. By understanding the consumer, companies can better market their products and services and increase product uptake.

What's included in this Market Segmentation Plan template?

• 3 focus areas
• 6 objectives

Each focus area has its own objectives, projects, and KPIs to ensure that the strategy is comprehensive and effective.

Who is the Market Segmentation Plan template for?

The Market Segmentation Plan template is designed to help marketing teams structure and execute their market segmentation strategies. This template provides a road map to help teams to plan and implement tactics to better understand target consumers, segment them according to their needs, and develop products that appeal to those needs. This template is suitable for any business needing to analyse consumer behaviour and segment target markets.

1. Define clear examples of your focus areas

Focus areas are the major topics of a Market Segmentation Plan. These are the areas that define the overall strategy and goals, and each focus area should have a set of objectives and key performance indicators (KPIs) that are measurable.  Examples of strategic focus areas that could fall under a Market Segmentation Plan could be: Identify :t_Market, Develop Engaging Content, and Monitor Performance.

2. Think about the objectives that could fall under that focus area

Objectives are the main goals that need to be achieved in order to reach the desired outcomes of the Market Segmentation Plan. Each objective should have a related action that can be taken as well as a measurable KPI to track progress and success. Objectives should be specific, measurable, achievable, relevant and time-bound (SMART). Examples of some objectives for the focus area of Identify Target Market could be: Segment Consumers, and Analyze Consumer Needs.

3. Set measurable targets (KPIs) to tackle the objective

Key performance indicators (KPIs) are measurable targets that can be used to track progress and success of a Market Segmentation Plan. KPIs should be linked to objectives and should be measurable, such as number of consumer segments, average engagement rate or conversion rate. KPIs should be set with initial and target values, and a unit of measurement.

4. Implement related projects to achieve the KPIs

Projects, or actions, are the steps taken to achieve the objectives of the Market Segmentation Plan. Projects should be linked to objectives and should be designed to achieve the set KPIs. Examples of projects could include developing segmentation criteria, researching consumer profiles, developing content pieces and tracking consumer engagement.

5. Utilize Cascade Strategy Execution Platform to see faster results from your strategy

The Cascade Strategy Execution Platform is an innovative tool designed to help businesses plan, implement and track their strategies. Cascade's intuitive dashboard and reporting features provide a comprehensive view of your Market Segmentation Plan, allowing teams to see faster results from their strategy.

Market Segmentation Matrix Template

Target the right consumers with the Market Segmentation Matrix template. Discover the best opportunities for growth.

Trusted by 65M+ users and leading companies

About the Market Segmentation Matrix Template

Market segmentation helps you to better understand your market. This practice divides your target market into subsets based on demographics, geography, needs, interests, psychographics, and behavior. With this information on hand, it’s easier to leverage these divisions of your target market so you can build better product, sales, and marketing strategies.

Keep reading to learn more about market segmentation.

What is the market segmentation matrix?

The market segmentation matrix is an analytical business tool that allows your team to see how various segments have performed with a set of products. Market segmentation divides a market into different parts and helps your business offer the right products to the target market's customers.

The four market segments

The Market Segmentation Matrix template is divided into four quadrants, each of them representing one market segment: geographic, psychographic, behavioral, and demographic.

Because market segmentation analyzes consumers’ traits, behaviors, and overall characteristics, the template is an effective way to build demographic profiles of your customers. This template contains the most commonly-used segments, but you can easily add additional characteristics based on your needs and industry.

How to use the Market Segmentation Template

As mentioned previously, the Market Segmentation Matrix template is made up of four quadrants:

Quadrant 1: Geographic

Add any information regarding the location of your consumers. Zip codes, regions, and countries go into this quadrant. Think about economic zones and entire continents if you target a larger audience.

Quadrant 2: Psychographic

Add your consumer’s personality traits and interests. What are their emotions? What do they need? What are their beliefs?

Build a psychological profile of your consumer, identifying their lifestyles and preferences.

Quadrant 3: Behavioral

Like the psychographic quadrant, analyze how your consumers feel and behave with your product or service. Do they use your product? Are they loyal to your brand? How do they shop online? Map out any behavior they have when in contact with your business.

Quadrant 4: Demographic

Here, you can add demographic details such as age, occupation, education level, and gender identity. These characteristics should be quantifiable, allowing you to collect the primary data behind your consumers.

When creating or building your Market Segmentation template in Miro, invite your teammates to join the board and collaborate with you. Add ideas with sticky notes and upload photos, videos, or any other file type as needed. You may also want to color-code the sticky notes according to segment size or feasibility of pursuing a segmentation strategy with that particular group.

Benefits of using a market segmentation matrix

With the market segmentation matrix, it’s easier to market to customers and prospects. Because the barrier to entry is so low, it’s important to act with precision and avoid wasting resources.

Customers and prospects have high expectations for how, when, where, and why they buy and use products and services—and they have transferred those expectations onto marketing and advertising. These expectations are also constantly in flux, so your organization must stay aware of customer needs, behaviors, and desires.

Your market segmentation matrix lets you keep track of customer and prospect behavior, create marketing experiences that resonate, and boost your bottom line.

Without segmentation, you risk wasting resources by creating a marketing campaign that is too broad or targets the wrong population. By targeting the right people and double-checking to ensure that that population hasn’t shifted, your business will be better off in the long run and gain a competitive advantage.

When to use a market segmentation matrix

Your team should use a market segmentation matrix anytime you work on a new, existing, or planned marketing campaign. It allows you to track customer and prospect behavior and expectations easily, create more targeted marketing experiences, and improve your growth potential.

How do you write a market segmentation plan?

First, set your ultimate marketing objective when creating your market segmentation plan. Are you trying to launch a new product or campaign? Better target your ads? Define your goals, and afterward, run user and market research to know your consumer’s characteristics and behaviors. Add this data to your Market Segmentation template and use this information to tailor your ads and target the right audience or build your product with the right consumer in mind.

How do you identify market segments and targets?

You can identify market segments and targets by conducting market and user research. Analyzing their behavior and patterns is a good starting point. If you need complementary information, some analytics tools are also helpful in identifying consumer profiles and how they interact with your product, service, or brand.

Get started with this template right now.

T-Chart Template

Works best for:.

Ideation, Operations, Strategic Planning

T-Charts can help you compare and contrast two different ideas, group information into different categories, and prove a change through “before” and “after” analysis. T-Charts are visual organizational tools that enable you to compare ideas, so you can evaluate pros and cons, facts and opinions, strengths and weaknesses, or big-picture views versus specific details. Designers and content creators can use T-Charts to turn possibilities into actionable ideas. T-Charts are useful for discussing differences and similarities with your team or clients and can help you to reach a decision together.

Pros and Cons List Template

Decision Making, Documentation, Strategic Planning

A pros and cons list is a simple but powerful decision-making tool used to help understand both sides of an argument. Pros are listed as arguments in favor of making a particular decision or action. Cons are listed arguments against it. By creating a list that details both sides of the argument, it becomes easier to visualize the potential impact of your decision. To make your pros and cons list even more objective, it can help to weight each pro and con against the others. You can then present your decision with confidence, making a strong argument for why it’s the right one.

Buyer Persona Template

Marketing, Desk Research, User Experience

You have an ideal customer: The group (or few groups) of people who will buy and love your product or service. But to reach that ideal customer, your entire team or company has to align on who that is. Buyer personas give you a simple but creative way to get that done. These semi-fictional representations of your current and potential customers can help you shape your product offering, weed out the “bad apples,” and tailor your marketing strategies for serious success.

Risk Assessment Template

Leadership, Project Management, Decision Making

Every business faces risk. The more you factor it into your decisions early on, the better prepared you’ll be to avoid, absorb, or mitigate the risks you encounter. Use Miro’s risk assessment template to collaborate on a clear-eyed risk assessment that ensures you’ll never be caught unawares.

Storyboard Template

Design Thinking

While storyboard is typically associated with planning out scenes for a movie or TV show, it’s been widely adopted throughout the business world. A storyboard is a sequence of illustrations that are used to develop a story. You can use the Storyboarding template anytime you’d like to really put yourself in a customer or user’s position and understand how they think, feel, and act. This tactic can be especially useful when you know there’s a problem or inefficiency with an existing process. You can storyboard existing processes or workflows and plan how you would like them to look in the future.

Editorial Calendar Template

Marketing, Strategic Planning, Project Planning

If your company is like most, content is a big thing. You create more of it (and a lot faster) than you create almost anything else. It includes blogs, newsletters, social media posts, ads, and more—and it requires ideating, writing, editing, and publishing. That’s why every content team needs an editorial calendar. The template will let you easily create a calendar that empowers your team to plan strategically, keep things organized (by content type, writer, channel, and delivery date), and finalize/post all content on schedule.

10 Customer Segments Examples and Their Benefits

• May 9, 2024

Now that companies can segment buyers, the days of mass marketing are behind us. Customer segmentation offers various benefits for marketing, content creation, sales, analytics teams and more. Without customer segmentation, your personalised marketing efforts may fall flat. 

According to the Twilio 2023 state of personalisation report , 69% of business leaders have increased their investment in personalisation. There’s a key reason for this — customer retention and loyalty directly benefit from personalisation. In fact, 62% of businesses have cited improved customer retention due to personalisation efforts. The numbers don’t lie. 

Keep reading to learn how customer segments can help you fine-tune your personalised marketing campaigns. This article will give you a better understanding of customer segmentation and real-world customer segment examples. You’ll leave with the knowledge to empower your marketing strategies with effective customer segmentation. 

What are customer segments?

Customer segments are distinct groups of people or organisations with similar characteristics, needs and behaviours. Like different species of plants in a garden, each customer segment has specific needs and care requirements. Customer segments are useful for tailoring personalised marketing campaigns for specific groups.

Personalised marketing has been shown to have significant benefits — with 56% of consumers saying that a personalised experience would make them become repeat buyers . 

Successful marketing teams typically focus on these types of customer segmentation:

• Geographic segmentation: groups buyers based on their physical location — country, city, region or climate — and language.
• Purchase history segmentation: categorises buyers based on their purchasing habits — how often they make purchases — and allows brands to distinguish between frequent, occasional and one-time buyers. 
• Product-based segmentation: groups buyers according to the products they prefer or end up purchasing. 
• Customer lifecycle segmentation: segments buyers based on where they are in the customer journey. Examples include new, repeat and lapsed buyers. This segmentation category is also useful for understanding the behaviour of loyal buyers and those at risk of churning. 
• Technographic segmentation: focuses on buyers’ technology preferences, including device type, browser type, and operating system. 
• Channel preference segmentation: helps us understand why buyers prefer to purchase via specific channels — whether online channels, physical stores or a combination of both. 
• Value-based segmentation: categorises buyers based on their average purchase value and sensitivity to pricing, for example. This type of segmentation can provide insights into the behaviours of price-conscious buyers and those willing to pay premium prices. 

Customer segmentation vs. market segmentation

Customer segmentation and market segmentation are related concepts, but they refer to different aspects of the segmentation process in marketing. 

Market segmentation is the broader process of dividing the overall market into homogeneous groups. Market segmentation helps marketers identify different groups based on their characteristics or needs. These market segments make it easier for businesses to connect with new buyers by offering relevant products or new features. 

On the other hand, customer segmentation is used to help you dig deep into the behaviour and preferences of your current customer base. Marketers use customer segmentation insights to create buyer personas. Buyer personas are essential for ensuring your personalised marketing efforts are relevant to the target audience. 

10 customer segments examples

Now that you better understand different customer segmentation categories, we’ll provide real-world examples of how customer segmentation can be applied. You’ll be able to draw a direct connection between the segmentation category or categories each example falls under.

One thing to note is that you’ll want to consider privacy and compliance when you are considering collecting and analysing types of data such as gender, age, income level, profession or personal interests. Instead, you can focus on these privacy-friendly, ethical customer segmentation types:

1. Geographic location (category: geographic segmentation)

The North Face is an outdoor apparel and equipment company that relies on geographic segmentation to tailor its products toward buyers in specific regions and climates. 

For instance, they’ll send targeted advertisements for insulated jackets and snow gear to buyers in colder climates. For folks in seasonal climates, The North Face may send personalised ads for snow gear in winter and ads for hiking or swimming gear in summer. 

The North Face could also use geographic segmentation to determine buyers’ needs based on location. They can use this information to send targeted ads to specific customer segments during peak ski months to maximise profits.

2. Preferred language (category: geographic segmentation)

Your marketing approach will likely differ based on where your customers are and the language they speak. So, with that in mind, language may be another crucial variable you can introduce when identifying your target customers. 

Language-based segmentation becomes even more important when one of your main business objectives is to expand into new markets and target international customers — especially now that global reach is made possible through digital channels. 

Coca-Cola’s “Share a Coke” is a multi-national campaign with personalised cans and bottles featuring popular names from countries around the globe. It’s just one example of targeting customers based on language.

3. Repeat users and loyal customers (category: customer lifecycle segmentation)

Sephora, a large beauty supply company, is well-known for its Beauty Insider loyalty program. 

It segments customers based on their purchase history and preferences and rewards their loyalty with gifts, discounts, exclusive offers and free samples. And since customers receive personalised product recommendations and other perks, it incentivises them to remain members of the Beauty Insider program — adding a boost to customer loyalty.

By creating a memorable customer experience for this segment of their customer base, staying on top of beauty trends and listening to feedback, Sephora is able to keep buyers coming back.

4. New customers (category: customer lifecycle segmentation)

Subscription services use customer lifecycle segmentation to offer special promotions and trials for new customers. 

HBO Max is a great example of a real company that excels at this strategy: 

They offer 40% savings on an annual ad-free plan, which targets new customers who may be apprehensive about the added monthly cost of a recurring subscription.

This marketing strategy prioritises fostering long-term customer relationships with new buyers to avoid high churn rates. 

5. Cart abandonment (category: purchase history segmentation)

With a rate of 85% among US-based mobile users, cart abandonment is a huge issue for ecommerce businesses. One way to deal with this is to segment inactive customers and cart abandoners — those who showed interest by adding products to their cart but haven’t converted yet — and send targeted emails to remind them about their abandoned carts.

E-commerce companies like Ipsy, for example, track users who have added items to their cart but haven’t followed through on the purchase. The company’s messaging often contains incentives — like free shipping or a limited-time discount — to encourage passive users to return to their carts. 

Research has found that cart abandonment emails with a coupon code have a high 44.37% average open rate. 

6. Website activity (category: technographic segmentation)

It’s also possible to segment customers based on website activity. Now, keep in mind that this is a relatively broad approach; it covers every interaction that may occur while the customer is browsing your website. As such, it leaves room for many different types of segmentation. 

For instance, you can segment your audience based on the pages they visited, the elements they interacted with — like CTAs and forms — how long they stayed on each page and whether they added products to their cart. 

Matomo’s Event Tracking can provide additional context to each website visit and tell you more about the specific interactions that occur, making it particularly useful for segmenting customers based on how they spend their time on your website. 

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Amazon segments its customers based on browsing behaviour — recently viewed products and categories, among other things — which, in turn, allows them to improve the customer’s experience and drive sales.

7. Traffic source (category: channel segmentation) 

You can also segment your audience based on traffic sources. For example, you can determine if your website visitors arrived through Google and other search engines, email newsletters, social media platforms or referrals. 

In other words, you’ll create specific audience segments based on the original source. Matomo’s Acquisition feature can provide insights into five different types of traffic sources — search engines, social media, external websites, direct traffic and campaigns —  to help you understand how users enter your website.

You may find that most visitors arrive at your website through social media ads or predominantly discover your brand through search engines. Either way, by learning where they’re coming from, you’ll be able to determine which conversion paths you should prioritise and optimise further. 

8. Device type (category: technographic segmentation)

Device type is customer segmentation based on the devices that potential customers may use to access your website and view your content. 

It’s worth noting that, on a global level, most people (96%) use mobile devices — primarily smartphones — for internet access. So, there’s a high chance that most of your website visitors are coming from mobile devices, too. 

However, it’s best not to assume anything. Matomo can detect the operating system and the type of device — desktop, mobile device, tablet, console or TV, for example. 

By introducing the device type variable into your customer segmentation efforts, you’ll be able to determine if there’s a preference for mobile or desktop devices. In return, you’ll have a better idea of how to optimise your website — and whether you should consider developing an app to meet the needs of mobile users.

9. Browser type (category: technographic segmentation)

Besides devices, another type of segmentation that belongs to the technographic category and can provide valuable insights is browser-related. In this case, you’re tracking the internet browser your customers use. 

Many browser types are available — including Google Chrome, Microsoft Edge, Safari, Firefox and Brave — and each may display your website and other content differently. 

So, keeping track of your customers’ preferred choices is important. Otherwise, you won’t be able to fully understand their online experience — or ensure that these browsers are displaying your content properly. 

10. Ecommerce activity (category: purchase history, value based, channel or product based segmentation) 

Similar to website activity, looking at ecommerce activity can tell your sales teams more about which pages the customer has seen and how they have interacted with them. 

With Matomo’s Ecommerce Tracking , you’ll be able to keep an eye on customers’ on-site behaviours, conversion rates, cart abandonment, purchased products and transaction data — including total revenue and average order value.

Considering that the focus is on sales channels — such as your online store — this approach to customer segmentation can help you improve the sales experience and increase profitability. 

Start implementing these customer segments examples

With ever-evolving demographics and rapid technological advancements, customer segmentation is increasingly complex. The tips and real-world examples in this article break down and simplify customer segmentation so that you can adapt to your customer base. 

Customer segmentation lays the groundwork for your personalised marketing campaigns to take off. By understanding your users better, you can effectively tailor each campaign to different segments. 

If you’re ready to see how Matomo can elevate your personalised marketing campaigns, try it for free for 21 days . No credit card required.

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How To Write a Lawn Care Business Plan 

Are you considering opening a lawn care business? With low startup costs and ongoing demand, this home care niche has the potential to generate healthy profits quickly. 

However, there are a lot of elements you need to nail down before getting started. That’s where your lawn care business plan comes in. A good plan will help you avoid common business startup mistakes like overspending or failing to understand the market.  

Planning also helps you clarify exactly what you need to build a successful lawn care company. 

If you’re not sure how to write a business plan for a lawn care business, read on. This article covers all the information you’ll need to include. You’ll also get some valuable tips to help you prepare to write one.  

First, it helps to understand why you need a business plan. A solid idea of its purpose will get you in the right frame of mind for drafting yours. 

The Purpose of a Lawn Care Business Plan  

A business plan outlines the foundational aspects of starting and running a successful lawn care company. From figuring out your services to creating growth strategies, it’s your roadmap that takes you from the idea stage to profitability. 

With a well-structured business plan, you can count on: 

• Faster growth:  Your plan outlines your ideal customers and how you’ll promote your services to them so you can start bringing in business and building your reputation from day one. 
• Better cash flow management: Approximately one in four businesses fail in their first year. The number one reason? Cash-flow problems . Your business plan will help you better manage your cash flow. 
• Progress tracking: You can use the goals you identify in your plan to track progress. Knowing your goals each quarter or other timeframe helps you stay focused. 
• A stronger brand: As you establish your mission, vision, and values, you define the “why” behind your lawn care business. This helps to carve out a clear brand identity that resonates with your market. 
• Access to financing: If you apply for a small business loan, the bank will review your business plan to understand your earning potential. A thorough, well-researched plan can increase your chances of getting a loan. 

Ultimately, your business plan isn’t just a nice-to-have document. It’s something you’ll need to start a lawn care company. 

RELATED ARTICLE: How to Start a Lawn Care Business  

Initial Steps To Starting a Lawn Care Business Plan  

Ready to get started? The first steps involve information gathering. It’s time to research, ideate, and make decisions. 

Decide on Your Type of Lawn Care Business.  

Who will you provide lawn services for? Residential or commercial customers? Will you provide specialized services, such as sustainable lawn care or lawn pest management? 

Professional lawn care services can include the basics like weed control and grass cutting. You can also offer a full suite of services, from fertilization and edging to seeding and leaf removal. 

Figure out what you want to offer. This will determine the size of your team, the equipment you’ll need to buy or lease, and your income potential. 

Scope Out the Competition.  

Who are your main competitors? What services do they offer? Note things like their pricing, branding, and online reviews. Then, do an analysis to determine what works and what doesn’t in your market.  

Research Your Market.  

How many potential customers are there in your service area? What are their pain points—cost, convenience, a need for specific services? 

Identify demographic information such as age group, income bracket, and location. You’ll use this information to develop your ideal customers. It can also inform major decisions like your pricing strategy and marketing channels. 

Look for Differentiation Opportunities.  

Use the information from your competitor and customer analysis to identify gaps in your market. Are there problems customers complain about in reviews? Is there a shortage of a specific type of lawn care? 

What angle can your business use to out-compete other companies in your region? Here are some ideas: 

• Exceptional customer service 
• Professional branding 
• Lower prices 
• Add-on services, such as landscaping design, mosquito control, or tree removal 

Differentiation will help your lawn care company stand out. That can lead to more business and a more recognizable brand. 

FROM ONE OF OUR PARTNERS: 13 Lawn Care and Landscaping Industry Trends  

Lawn Care Business Plan Development  

The next stage of writing a plan is establishing the nuts and bolts of your business. These are covered by the standard sections of a business plan, which are: 

• Executive summary 
• Mission and vision statements 
• Business structure 
• Service overview 
• Pricing strategy 

You’ll also add your marketing strategies and financial information before presenting your plan to lending institutions. Let’s dive into what you need to flesh out each section. 

Craft a Compelling Executive Summary.  

The executive summary details the following: 

• Company history:  What’s the background of you or anyone else involved in starting your lawn care company? Share any related experience and the reason you decided to start the company. 
• Values:  Is your business trustworthy? Highly skilled? Family-owned? Prompt and courteous? Choose three or four core values. 
• Mission and vision:  Write a statement detailing your mission, i.e., your objectives and how you hope to achieve those objectives. Include your vision, which details your long-term aspirations. 

Give an Overview of Your Business.  

Write out your business name, what you offer, and your market.  

Here’s an example: Ted’s Lawn and Plant Care offers residential lawn care and landscaping services to the town of Middlebury. We’re a small team of lawn care experts who are passionate about helping our customers achieve healthy, beautiful lawns. 

Also, list your ownership structure. Do you have a sole proprietorship, partnership, LLC, or corporation?  

Detail your existing assets as they apply to starting your business. These include lawn care equipment, vehicles, office equipment, and software. 

Detail Your Services.  

List your specific services. Here are some of the most popular lawn care services: 

• Grass cutting 
• Edging 
• Fertilization, seeding, and weed control 
• Mulching and aeration 
• Leaf removal and yard cleanup 
• Irrigation 
• Mosquito control 
• Tree and ornamental plant care 

Determine Your Pricing Strategy.  

Once you’ve listed your service menu, decide how much you’ll charge for each service. Review your competitors’ prices to better understand what competitive pricing will be in your market.  

Will you charge lower prices to attract new customers? Or will you offer more value and charge a premium? 

For example, if your lawn care business offers more expertise, factor that skill and experience into your pricing. 

Profitability also matters when figuring out your pricing strategy. What price do you need to make a profit from your services?  

Calculate labor, materials, and other expenses to find out how much each service costs your business. Then, determine a reasonable price to ensure you’re generating enough revenue. This is your expected profit margin . 

Financial Planning for a Lawn Care Business Plan  

One of the most important parts of your business plan is your financial plan. This section is where you explain how you’ll make money and avoid financial pitfalls. Lenders will want to see that you’ve run the numbers and have a solid base to build your business on.  

Many startups benefit from working with a CPA on this section to ensure accuracy. However, it does help to have the following information ready for their review.  

Project Revenue Growth.  

Using your pricing strategy and sales goals, determine how much revenue you’ll make in the first quarter, six months, and year. Your projected revenue is crucial for determining your budget. 

Budget for Equipment and Staff.  

Establish how much you need to pay staff and invest in your initial equipment. Consider different ways to save money, such as leasing equipment instead of buying and starting with a small team. You need a good budget to avoid running into cash flow issues. 

Insure Your Business.  

Risk is a part of doing business. You can reduce risk with business insurance. Look into what types of insurance you need, such as general liability and auto insurance for your company vehicles. You may need a separate commercial policy even if you plan to use your personal car or truck, you may need a separate commercial policy . 

Having the right insurance doesn’t just save your business from financial catastrophe. It also shows your customers your company is professional. 

Consider Diversifying Your Income Streams.  

Lawn care businesses can earn income in different ways. You can provide lawn care services. But you can also use your assets to make money in other ways.  

For example, if you invest in high-quality equipment, you can lease that equipment to other small businesses. You can offer landscape design consulting or installation services if you have landscaping expertise. 

Diversifying will help your business bring in revenue even when one side of your business slows down. 

FROM ONE OF OUR PARTNERS: 5 Spring Season Landscape Maintenance Services to Offer  

Lawn Care Business Plan Marketing and Growth Strategies  

A well-structured business plan also includes sections on marketing and sales. How will your business promote your services? What sales tactics will you use to grow? Investors want to see that you have a strategic plan to promote yourself as part of long-term success. 

Here are the steps to complete this section of your lawn care business plan: 

Use Digital Marketing Channels To Engage Your Audience.  

Set up a website to establish your position online. It should be uncluttered and easy to navigate since most of your other channels will point back here. 

You should also build a presence on the social media channels your target audience uses. Content and frequent interaction will be driving factors for social success. 

For example, you might create a Facebook page for your business. If you have the budget, you could create how-to content on YouTube to drive traffic to your site and engage your audience. 

Decide How To Promote Your Business Locally.  

If you have service vans or trucks, you can promote your business by having a professional paint your logo and phone number on the vehicles. You may also want to consider vehicle wraps . They turn your transportation into a rolling billboard.  

Consider mailing out promotional flyers to your target audience. You can also place your business card in local establishments with a board or table to promote local businesses, such as libraries, cafes, and bookstores. 

Prioritize Customer Satisfaction To Drive Repeat Business.  

Decide how you’ll train your team to deliver top-notch customer service. Develop processes around cleaning up after services, communicating with customers, and getting feedback from them. 

The goal is to ensure your business offers exceptional service to encourage repeat business and referrals. 

Develop a System for Encouraging Online Reviews.  

In the lawn care industry, online reviews are one of your most powerful marketing tools. A recent survey found that 91% of consumers say online reviews impact their perception of local brands. 

Build a system for managing reviews. This can include sending an email or SMS after services requesting a review.  

However, if you’re going to ask for them, you must monitor them. Thank people for the positive ones and address any negatives to find a suitable solution. 

FROM ONE OF OUR PARTNERS: 6 Tips and Tricks to Effectively Manage a Landscaping Business  

Top Tips for Writing a Lawn Care Business Plan  

An effective business plan is jam-packed with detail, analysis, and research. That’s why writing a lawn care business plan can feel a little daunting. 

But if you break down the different sections into the individual steps outlined above, you’ll create a well-structured document that supports your success. Here are three tips that can help you get the ball rolling: 

• Find lawn care businesses you admire. Use these companies for inspiration. Check out their branding. See what they’re up to on social media. And read their reviews. You’ll learn a lot of information to help you craft your mission, vision, and values. 
• Evaluate your current assets. Take stock of what you have. Lawn mowers. Hedge trimmers. Leaf blowers. Make a list of everything so you know what you’re working with. 
• Decide what software you’ll use. Scheduling tools, accounting software, invoicing— the right software can help you save money from the start. Figure out what you’ll need and start comparing options. 

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