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Understanding Market Segmentation For Start-Ups

Understanding Market Segmentation For Start-Ups

Market Segmentation

Consumers are the centerpiece of any business, regardless of whether it’s a start-up or a well-established firm. The generation of profit and a steady revenue is directly dependent on your ability to target the right audience and offer services and products that will appeal to them and satisfy their interests and requirements.

However, this practice might be challenging for many businesses, so they decide not to go through the trouble of segmenting their target market and instead try to reach everyone with the same offerings.

This is why many new products and start-up companies fail, and a massive chunk of the blame can be directed toward ineffective market segmentation.

Therefore, we have put forth this article to introduce you to market segmentation, its basic concepts, significance, and various types so that you, as an aspiring entrepreneur, can run your start-up business as smoothly as possible as it continues to grow into a well-established brand.

What Is Market Segmentation?

proper market segmentation

Market segmentation refers to the practice of classifying the overall target market into smaller, more defined, and approachable groups or segments of customers with similar needs, behaviors, requirements, interests, and tendencies to respond similarly to marketing stimuli. A target market is a broad term that describes the individuals who will buy and use your merchandise.

Market segmentation, when appropriately applied, allows companies to establish a target for their marketing efforts and customize their goods, sales, and marketing campaigns and strategies to meet the preferences of specific groups of clients who are most likely to purchase them.

You’ll need various skills to carry out proper market segmentation. For this purpose, you can register for Aston University’s online MSc Finance and Management program. Here, you’ll be able to gain an understanding of essential management principles and techniques that are broadly applicable in a range of professions and environments, including market segmentation.

What Is The Significance Of Market Segmentation?

Market segmentation enables you to effectively target your content to the right people in the right way. Once you have a firm grasp on what demographic your target audience falls under, it’s much easier to understand what they are after.

This helps companies tailor personalized marketing materials, which clients typically respond better to, compared to targeting the mass market with a broad, impersonal, and generic marketing strategy.

Focusing your efforts on a smaller niche segment of your audience is a highly effective, affordable, and efficient way of reaching potential customers and generating revenues. This can also increase the likelihood of people encountering and engaging with your content, resulting in more efficient and well-planned campaigns, market expansion, and improved return on investment (ROI).

According to reports, 81% of executives believe market segmentation is critical for growing profits. If an organization or company ignores market segmentation and its target audience, it is more than likely that its business will ultimately fail. However, if they incorporate proper segmentation in their marketing strategy, they can boost their brand awareness and recall, customer retention, and communications.

Types Of Market Segmentation

Types Of Market Segmentation

While a plethora of subcategories and traits can be used to pinpoint different markets, there are only five types of market segmentation, one of which usually can be split into an individual segment and an organization segment. Details regarding all five of them are given below:

1. Demographic segmentation

Demographic segmentation is the most basic and particularly common form of demographic management that focuses entirely on who the customer is. It sorts a target market into distinct segments based on various demographic variables, such as age, gender, education, marital status, income, family size, ethnicity, religion, occupation, and nationality.

With this kind of segmentation, information is easily accessible and low-cost to obtain. There are numerous alternatives to gathering demographic data, such as asking the customers directly, obtaining data from their social media, or using census data. Integrating demographic segmentation with other types of segmentation can help you narrow down your target audience even more.

2. Geographic segmentation

This type of market segmentation allows you to break down your entire audience into geographical segments based on their locations, e.g., neighborhoods, counties, towns, zip codes, cities, states, or countries.

You can also identify potential clients based on various characteristics of the region they live in, such as its climate, population, language, lifestyle, and whether it’s rural, urban or suburban. Knowing customers’ locations can help you gain a better understanding of their needs and enable you to target them with location-specific ads.

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3. Behavioral segmentation

Behavioral segmentation is a subcategory of segmentation that classifies markets based on consumers’ market data, occasions, loyalties, purchase patterns, and decision-making patterns such as consumption, product usage, purchase, and lifestyle.

This segmentation approach assumes that a consumer’s prior spending patterns indicate what they may purchase in the future. This enables you to develop a more targeted strategy because you now know what they are more likely to buy. However, it’s important to remember that spending habits may change in response to certain events or over time.

4. Firmographic segmentation

This type of market segmentation is similar to demographic segmentation in many ways. Nevertheless, instead of analyzing individuals, firmographics segmentation focuses on attributes of an organization, company, or firm. It divides markets based on company size, industry, number of employees, annual revenue, location, and performance.

Firmographic segmentation provides information for marketers who wish to understand the strengths of various companies within their target market. They analyze their financial performance and growth trends to see if a specific market segment is growing or undergoing a decline. Firmographic data can be gathered from public sources, including annual reports, trade journals, press releases, and company websites.

5. Psychographic segmentation

Typically considered the most challenging segmentation approach, psychographic segmentation takes the psychological aspects of consumers’ behavior into account and splits markets according to their personality traits, lifestyle, opinions, values, attitudes, and interests.

This strategy can yield the strongest market segment results, especially when paired with demographics, as it can identify the motivations behind why people make certain choices.


Armed with thorough knowledge of market segmentation, your start-up business can more effectively target your products and services toward the right group of customers, positioning your company for growth and success.

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