What is Market Segmentation?

Surveys can be used to identify specific demographic groups and understand their purchasing behavior, including how much they will pay and how frequently they will buy your product. Marketers use these concepts to develop a consistent flow of marketing campaigns, ads, social media posts, packaging, and other messaging that raise customer awareness. By using a survey, marketers collect data that is specific to their business goals.

The major critique is that demographic variables (e.g., age, income) do not necessarily reflect the lifestyle, motivation, or personality aspects driving brand choice. A brand expanding from Europe to Asia can still discuss “household with children” or “middle-income young adults” in local marketing. Even in cross-cultural contexts, broad demographic categories remain recognized, allowing large global firms to quickly replicate frameworks in new regions. This widespread availability keeps costs low for marketers seeking large-scale, aggregate profiles. This approach generally increases efficiency and customer satisfaction by acknowledging that not all consumers share the same needs or behaviors.

With this knowledge, companies can innovate and tailor products that genuinely resonate with their customers. Your customers have varying interests, behaviors, and preferences, but demographic segmentation can provide clarity and direction. Each generation, from Baby Boomers and Gen X to Millennials and Gen Z, has distinct characteristics, preferences, and behaviors influenced by their time's social, political, and technological advancements. However, rather than focusing specifically on an age bracket, it categorizes individuals based on their generations' shared experiences, values, and cultural moments.

A systematic review of the clinical application of data-driven population segmentation analysis

Comparing your current positioning with past strategies can offer insights into how your brand has evolved. Your previous brand positioning analyses on Boardmix can serve as valuable historical references. This integrated feedback system streamlines communication and makes it easier to refine your brand positioning based on valuable input.

The two clustering algorithms we focus on here – hierarchical clustering and k-means – are based on ‘distances’ between people, grouping people that are close together in a space created by the input variables. No part of the analysis should be isolated from the people making decisions on how segments will be used, and those with in-depth knowledge of the population. “Manual segmentation” is added to emphasize that often an entire population is divided into subgroups for targeting without the use of any algorithm, e.g. by manually setting an age or a geographic cut-off based on prior knowledge or examination of descriptive statistics. TwoStep clustering is a model-based method but also relies on estimated distances between individuals. Similarly, correlations and scatterplots between variables can be examined to understand basic patterns of co-variation.

How to start psychographic segmentation

Demographic segmentation separates your target market into specific, accessible groups of people based on personal attributes like geography, age, education, occupation, and income. But if you have no idea what I'm talking about, then you're not part of the audience Cheetos was targeting with the ad. If you laughed at the absurd idea that MC Hammer came up with the lyrics for "U Can't Touch This" while his Cheetos prevented him from touching the keyboard, this commercial is for you. In 2020, Cheetos bought a Super Bowl ad Population segmentation spot to promote their brand, and they knew it had to resonate with as much of their target market as possible, which was most likely Gen Xers and older Millennials.

On the other hand, brands like Carhartt target blue-collar workers by offering durable clothing suited for manual labor – even if their appeal also extends to skaters and other more fashion-focused consumers. Occupational segmentation gives businesses the capability to fine tune their marketing to the professions of their target audience. By segmenting their audience by income, these brands can effectively position their products and services to meet the expectations of their target market demographics. Ultimately, this segmentation based on family composition allows companies to address the unique needs of the household types they are targeting, creating marketing strategies that appeal to their audience. Despite these evolving dynamics, Procter & Gamble effectively develops its marketing messages and product lines by understanding the diverse needs and preferences of each gender, ensuring they connect with their target audience.

A complete strategy must layer in psychographic details – like values and interests – and behavioral data to understand the customer fully. See the latest trends in AI, Data 360, and personalization, based on insights from nearly 4,500 marketers worldwide. Watch the Dreamforce keynote to learn how teams spark conversations and respond in real time.

• Splitting by income is integral in sectors like luxury goods, financial services, real estate, or automotive, where purchasing power significantly affects brand or product choice.
• Demographic segmentation helps businesses refine their marketing strategies, improve customer engagement, and drive better results.
• However, by combining demographic segmentation with geographic, psychographic, and behavioral data, marketers can develop a much deeper understanding of their customers.
• Purchase-based segmentation uses transaction history to predict future needs and identify upsell opportunities.
• A grocery delivery brand might treat a missed weekly order as the trigger, then tailor the message by household segment.

Improved Deliverability

Monitoring the segments over time helps identify which are growing, shrinking, or otherwise changing in relevance. For another segment, the key barrier might be a social norm of demonstrating fertility by having many children, in which case more sustained work to change social norms is necessary. Segmentation is useful to develop interventions to specifically target and fit each priority segment’s key drivers and barriers. In any program, resources rarely allow for targeting all segments with equal effort at the same time. Naming the segments with descriptive segment names so that their key differences are readily apparent is important and brings them to life. It is important to note that only rarely do real-world data conform to idealized examples, and only visualization and iteration will reveal the best way of generating segments (illustrated in Figure 2, code available as extended data 17).

Benefits of market segmentation

Every operational business will have some form of first-party customer data. Customer surveys are an effective way to better understand your customers' demographic traits. Education level and sexual orientations are two other examples of demographic variables. This income data will then help you price your products accordingly or build product tiers that fit the needs of each income group. Segmenting customers based on their culture and ethnicity ensures that your brand aligns marketing messages with customers' beliefs, values, attitudes, and interests.

Designates United States population and land area (at the census block geography level) into one of 10 categories. This may lead to variations in messaging that they know will connect better with specific audiences, making their campaign results more effective. 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.

Research shows that marketers using segmented campaigns see up to 760% increases in revenue, so the ROI calculation should be overwhelmingly positive if you're doing it right. Include content creation time, tool costs, and strategy development in your cost calculation. This reveals which segments are working well and which need content strategy adjustments. Track these key metrics to measure segmentation effectiveness. You‘ve implemented segmentation, so how do you know if it’s working? Complex targeting can happen through multiple simple segments rather than one convoluted segment.

Our State of Marketing Report research shows that video content continues to drive the highest ROI, with short-form video leading the pack. If someone clicks on three articles about SEO, they're probably interested in more SEO content than one article. HubSpot's email marketing tools make it easy to track topic engagement and automatically segment based on content preferences.

For marketers, X is no longer the default microblogging platform. Bluesky, though much smaller at around 42.5 million total users, has carved out a loyal niche among users who left X over concerns about content moderation and data policies. While Facebook is a top social media channel for product discovery at 39%, roughly 49% of Gen Z uses TikTok specifically for product discovery. Among Gen Z, 41% now turn to social media first when looking for information, compared to just 32% who prioritize Google or traditional search engines. New platforms are stealing market share, search behavior is evolving and an entire generation now defaults to video-first content.

Beauty and personal care brands routinely segment by gender. The brands that update their demographic segments to reflect these shifts will outperform the brands stuck on segments built three years ago. Statista confirms 89% of marketers use demographic segmentation as their primary segmentation type, which means it’s the standard table stake rather than the differentiator. McKinsey research shows brands using strong demographic segmentation see 10-25% higher conversion rates and 20% lower customer acquisition costs than brands running broadcast campaigns. For B2B businesses, demographic segmentation works at the company level instead of the individual level.