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Market sizing involves evaluating the potential number of customers and revenue within a given market using top-down, bottom-up, and other techniques.
Market segmentation is the process of dividing a larger market into smaller subsets of consumers who have similar needs or exhibit similar characteristics. Being an essential aspect of market research, market segmentation allows businesses to understand their target market in depth, thus enabling them to target specific groups of consumers effectively and helping them identify new growth opportunities.
But how does market segmentation in market research brings more value to businesses? Through this article, we will look at the importance of market segmentation in detail, including its role in market research, types, benefits, and how it can be implemented into a strategy.
Market segmentation in market research focuses on dividing a broader market into smaller segments or groups of audiences or consumers with similar behavior or personas. This helps businesses to experiment and target the audience to which they can cater, leading to more effective and efficient marketing efforts.
Market research is the process of gathering, analyzing, and interpreting any information about a product, service, or market and its potential customer base. With the help of market segmentation, businesses can identify the specific needs and characteristics of each group, which allows them to tailor their products or services to meet those needs more effectively.
For example, a business that sells athletic shoes may use demographic segmentation to divide the market based on age, gender, and income. This can help the business to identify differences in consumer behavior and needs based on these characteristics. For instance, they may find that younger consumers are more likely to prioritize fashion over function, while older consumers may prioritize comfort and support. By understanding these differences, the business can develop products and marketing campaigns that are more tailored to the specific needs of each segment.
Market segmentation also allows businesses to understand the size and growth potential of each segment, which can be used to identify new growth opportunities.
Additionally, market segmentation helps businesses identify and target profitable segments of their market. By understanding the specific needs and characteristics of different segments, businesses can identify the most profitable segments and allocate resources accordingly. This can help businesses to maximize their ROI and increase overall profitability.
Overall, the role of market segmentation in market research is to provide businesses with a more detailed understanding of their target market, which can be used to develop more effective products/ services, marketing campaigns, and business strategies.
There are several different types of market segmentation that businesses can use to divide their market. Some of the most common and most used are demographic, geographic, psychographic, and behavioral segmentations.
This type of segmentation divides the market based on characteristics such as age, gender, income, education, and occupation. For example, a business that sells children's toys may segment the market based on age, targeting its marketing efforts towards parents of young children. Similarly, a business that sells luxury watches may segment the market based on income, targeting its marketing efforts towards high-income individuals.
This type of segmentation divides the market based on location, such as region, city, or even neighborhood. For example, a business that sells outdoor gear may segment the market based on geographic location, targeting its marketing efforts towards regions with a high concentration of outdoor enthusiasts. This can also be used to identify new opportunities for growth in different regions or cities.
This type of segmentation divides the market based on lifestyle, values, and personality traits. For example, a business that sells organic food products may segment the market based on consumers' attitudes towards health and the environment, targeting their marketing efforts towards consumers who are particularly health-conscious or environmentally-conscious.
This type of segmentation divides the market based on consumer behavior, such as purchase history, brand loyalty, and usage rate. For example, a business that sells mobile phones may segment the market based on consumer behavior, targeting its marketing efforts towards heavy mobile phone users or consumers with a history of purchasing expensive mobile phones.
These are the main types of market segmentation; however, businesses can also use combinations of these segmentation methods to gain a more detailed understanding of their target market. Additionally, businesses can also use other methods like value-based, benefit based, etc. In fact, by combining different types of segmentations, businesses can gain a more comprehensive understanding of their target market.
Market segmentation offers many benefits to businesses, some of those of listed below:
Implementing a market segmentation strategy involves several steps. Below is a brief of the overall process.
By following these steps, businesses can develop a market segmentation strategy that will help them better understand and target specific groups of consumers, leading to increased sales and profitability.
To conclude, market segmentation is a critical aspect and should not be overlooked. It may sound tricky or lengthy, but it gives first-hand knowledge and data, which can result in great ROI.
CleverX works with some of the leading professionals and experts in different industries, ensuring that raw, authentic, and first-hand data is concluded from each study. Further, it lets the business design custom-tailor the survey that can help it in finding niche-specific audience segments.
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