There are various approaches or types of market segmentation to match different situations. The best approach to take depends on your business model and the segments you want to create.
There are four major types of market segmentation:
Demographic Segmentation
This is a very common type of market segmentation. Demographic segmentation classifies your prospects based on characteristics such as:
Sex
Age
Nationality
Religion
Marital status
Educational level
Income
It primarily focuses on gathering easily accessible information, which makes it one of the simplest and least expensive types of market segmentation.
For example, shampoo companies that have lines for both men and women can rely heavily on this type of segmentation.
Geographic Segmentation
Geographic segmentation narrows your target audience down based on where they live. Knowing their country, state, or even neighborhood can tell you a lot about them. After all, interests and preferences do shift from one place to another.
You'll also have a sense of what their climate is like, which is extremely useful if you own a clothing line.
Another case of how geographic segmentation can be crucial is when you open a new store in a specific state. If you want to drive traffic there through ads, you'll need to focus on geographic segmentation so that you only reach people in this state.
Behavioral Segmentation
Behavioral segmentation puts your potential customers into groups based on their buying habits and behaviors. It keeps track of things like:
Purchasing patterns
Purchase motive
Consumption
Usage frequency
Website interactions
Knowing this information allows you to develop more targeted approaches that result in direct interaction with your products.
For example, suppose you own a food app and have noticed that some users order food during the week but not on weekends.
You can assume they work during the week and thus have no time to cook. In any case, you now know that sending them discounts on weekends can encourage them to order.
Psychographic Segmentation
Psychographic segmentation seeks deeper aspects than the other types mentioned. It divides consumers into segments based on mental and emotional criteria such as:
Lifestyle
Values
Beliefs
Activities
Personality traits
Opinions
Such characteristics aren't as easy to find out about your customers as in demographic segmentation.
However, using the information revealed by psychographic segmentation can lead to more effective campaigns. Using demographic or geographic segmentation alone isn't always enough.
If you run a vegan bakery and rely solely on demographic or geographic types, you might not make it. You'll need to target a more specific audience, which is where psychographic segmentation comes into play.