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What is segmentation?

Segmentation is a way to think about an audience with shared characteristics. In business terms, the objective of market segmentation is to minimize risk by determining which products have the best chances for gaining a share of a target market as well as the best way to deliver said products to the market.

Types of market segmentation

There are four main methods used to segment a population or target market:

  • Behavioral segmentation is done by organizations on the basis of buying patterns of customers like usage frequency, brand loyalty, benefits needed, special occasions, etc.

  • Demographic segmentation is market segmentation according to age, race, religion, gender, family size, ethnicity, income, and education.

  • Geographic segmentation is based on predefined geographic borders, such as cities, states and countries.

  • Psychographic segmentation is a method used to group prospective, current or previous customers by their shared personality traits, beliefs, values, attitudes, interests, and lifestyles and other factors.


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Examples of segmentation

A great example of a company successfully utilizing segmentation is Nielsen Holdings, one of the world’s most well-known corporations in information, data and measurement. By tracking the products consumers buy at the supermarket, Nielsen is able to generate behavioral segments based on buying patterns. This allows them to build a picture of your consumer traits and target you with specific marketing strategies related to products you are interested in or according to your business needs.

Customer segmentation, or customer segments are another example of how businesses can use segmentation.


Related Term


Related Term

Business-to-Business (B2B)

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