5 Types of Market Segmentation & How To Use Them

Emily Smith

Emily Smith


Emily has an eye for all things strategy, spending most of her time spinning data into stories.

Segmentation is an important piece of market research, but can be overwhelming at face value. This method is simply a form of research that reveals insight into potential customers, innovative approaches to a product or service, and tackling customer loyalty. 

When defining a target market for your product, each customer brings their own traits and habits to your customer profile. But how can we divide your customer base up to more precisely market and deliver your product?

Why is Market Segmentation Important?

A growing customer base paves the way for growing companies. Expanding customer bases makes room for developments in your product. Then, it’s up to your company’s marketing and sales team to break down your customer base into smaller segments. Product teams can also break your customer base into user personas - a strategy that’s customer-centric at its core.

When delivering a product to a growing audience, it can be easy for messages to become lost. As customer interest increases, customer preferences become broader and the demands of the market can become more diverse. 

Overall, marketing segmentation reduces the risk of your marketing strategy losing relevance to customers.

Types of Market Segmentation

Your customers have many unique traits. However, they’re all tied together by one thing: your product. There are several ways to break down your customer profile into segments, and each type of segment has a unique purpose.


1. Psychographic Segmentation: A Customer’s Lifestyle 

Psychographics are a type of segmentation that focus on inner or qualitative traits (like buyer's habits, hobbies, and values). Psychographic attributes are the ones that aren’t obvious just by looking at your customer - they require deeper analysis.

By defining a customer persona this way, you’ll be more equipped to tailor your marketing strategies. And, you’ll appeal to their tastes. 

Defining Brand Personality Through Market Segmentation

Psychographic segmentation is used to develop a “brand personality,” or brand personification. In other words, the personality traits that your brand exemplifies. 

For example, let’s say your insights team discovers your customer base purchases a new type of running shoe every year. Your market research team also knows that people who are interested in new running shoes value high energy and independence. 

Then, you can use that finding as a feature in your brand personality. This could help sell other products related to fitness under those same traits. For example, your commercials might be fast-paced and emphasize the strength of the individual. 

There are a few ways to collect demographics...

a) Interviewing existing clients

Depending on your relationship with a customer, you can more or less ask them directly about their consumer habits. Some quantitative feedback questions might sound like:

  • How likely are you to purchase Company X’s sneaker again? 
  • If you like Sneaker X, would you try Hoodie Y from the same company? 

If you’re running out of ideas, you might start looking into some unusual places to collect customer feedback.

When you ask qualitative questions, you can discover meaningful insights about your customers. These questions might sound like:

  • What do you enjoy about running? 
  • Walk me through your running routine.

These questions lead to further insights into a customer’s lifestyle. These questions, especially when asked to larger groups of people, are typically asked by creating a survey. However, online focus groups are becoming increasingly popular customer feedback tools, as well.

b) Observing customer data 

This type of psychographic probe is more low key, and becoming increasingly efficient with the advancement of A.I. technologies. For companies studying consumers, A.I. systems have allowed for a deeper understanding of consumer insights

Some questions to consider:

  • Where are your consumers on the internet? 
  • How can you use their Instagram or Pinterest clicks to better market your products? 

Analyzing your customer’s social media and digital habits will enable you to optimize your product marketing strategy. An increasingly popular example of this method in play is coming with the rise of voice technology.  

Voice search is an essential asset in psychographic segmentation. Customers use devices like Google Home or Amazon’s Alexa to discuss personal preferences, interests, and other potentially sensitive data. Now, consumer data is available for companies to sculpt customer profiles. 

With this access to detailed customer information comes some concerns over data privacy and the ethical corporate use of it. Some risks can include:

  • Data exploitation
  • Identity tracking
  • Voice and facial recognition

Without consent and transparency, this data could easily make consumers less inclined to share their information with brands. If used responsibly, these technologies can create a fully tailored consumer marketplace, speed up efficiency, and increase time to market. 


2. Demographic Segmentation: A Customer’s Profile

Demographics are the breakdown of your customer personas for cursory traits. These traits offer basic information on your customers, and are often considered one of the more broad segmentation types. Examples of demographic segmentation include age, income, family size, race, education, or gender.

Diving into these segments is the first way that companies cut down on time and resources to understand their target audience. Demographics are generally less invasive to collect than other segmentation types.

Other demographics can include:

  • Occupation
  • Marital status
  • Political party status 
  • Living status (if your subject is a homeowner or renter)


3. Behavioral Segmentation: A Customer’s Choices

Behavioral segmentation digs deeper into customer habits than demographic segmentation. This type of segmentation is comprised of behavior patterns, like customer loyalty or engagement level. This is specific to customer interactions with a brand or company. 

Behavioral segmentation is used to gain insights into customer experience, allowing for improvements in customer success. Some questions to consider:

  • How engaged are your customers throughout the buyer’s journey? 
  • What specific trends in timing or occasion do your customers tend to prefer your products? 
  • How much time are your customers spending in the buyer’s process? 

Behavioral segmentation is also used for marketers to determine future customer leads. It’s also used in determining which prospects are more likely to purchase your product.

Similar to psychographics, behavioral segments are primarily collected based on a customer’s digital footprint. New improvements in technology compile metadata from customers in order to better understand their preferences. 


4. Geographic Segmentation: A Customer’s Home

Geographics are the study of your customer based on their physical location. Customers grouped together in similar locations may share similar preferences. This makes them an ideal aspect to consider when determining how to group your consumers. 

Geographic segmentation can include location names like city, state, country, or zip code. However, it can also include geographic regions that aren’t technically defined, such as neighborhoods. 

For example, consider a company that is advertising a subscription-based lawn care service. The company would likely be more successful in targeting a suburban area where residents need extra yard care. The campaign would be less successful in an urban area, where customers might be more interested in a food delivery service.

Studying customer geography can also help target search results in your customers’ region.


5. Firmographic Segmentation: The Customer’s Company

Firmographics are used to describe the attributes of firms or businesses. Put simply, firmographics are to firms and investors as demographics are to people. Companies can use this type of segmentation to determine whether or not a smaller firm is apt for an investment.

With millions of firms across the globe, businesses can use firmographics to identify prospects based on size, scale, and funding. Firms can also be broken down into sections of non-profits, businesses, governmental entities, agencies, small-retail shops and independent contractors.

Investing in a smaller firm or company always comes with a risk. Therefore, investors have to be precise in segmenting venture opps in order to minimize that risk. 

Segmentation variables for firms typically include things related to a smaller company’s potential. For example, before investing in a new application, venture capital firms look for company strengths. These can include things like the vision of the executive team or the product’s target market.


Common Segmentation Mistakes to Avoid

Once you’ve created segments, keep an eye out for common mistakes that marketers and researchers make. 

  • Making your segments too small or specialized
    • Segments that are too small will be more difficult to organize or inaccurate, and they can distract from your objective. Like sample size, an over-segmented group can yield data that is not statistically or directionally significant. 
  • Not allowing your segments to change
    • Stay focused on ROI. If your strategy isn’t working efficiently for your business, it may be time to switch things around. 
  • Ignoring new potential personas  
    • Customer profiles change. Don’t get too attached to your segments, as they will evolve with the market.


Summing Up Market Segmentation 

Whether it be interviewing strategies or creating a survey, it can be difficult to determine what’s next in the following phases of your research. Segmenting is a clear next step in post-session analysis.

When collecting massive amounts of data through segmentation strategies, keep in mind the greater goal your company or marketing plan is trying to achieve. Rather than relying on one or two sole strategies to characterize your customer segments, combine the efforts of multiple strategies. For researchers, this allows for a more complete perspective on target customers.

Marketing segmentation is a next step that allows companies to use the segments they have defined in order to optimize future products or product improvements, and help optimize advertising your product to customers in the future.

So you’ve segmented your customers, but how are you organizing their thoughts?

Read: “How To Develop A Customer Feedback Management Strategy” 

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