How to Determine Market Segmentation

Like an archer athlete, a successful business can certainly determine the right target market . An archer must already know how much energy must be expended to reach the target. If the target is close, it means that there is no need to pull the arrow too far so that energy is not wasted, but if the target is far away, it certainly requires more energy to reach the target. For that we need what is called market segmentation according to “target”.

Unfortunately in Indonesia, there are still many business people who do not know for sure the market segmentation of their products. All products owned are considered the same, can be for all circles. As a result, the business runs less focused and does not have a main target, so the resources they have are actually wasted. This is what is dangerous in business, because it can kill the business slowly.

In fact, doing research to find market segmentation is very important so that the business can run smoothly. When the market segment has been found, the product marketing process will become easier and smoother. Of course this will affect the product sales process. The right market segmentation will make the product sell faster.

A case in point is if you own a baby clothing company. The market segmentation you choose is of course the mothers. Then the market segmentation was further narrowed down to mothers who are pregnant or having babies. The market segmentation can be further narrowed by choosing mothers who prefer to shop online or not, have daughters or sons, even working mothers or not. The selection of this market segmentation adjusts what kind of product you have.

In this article, you will find out more clearly the definition, types, characteristics and how to easily determine market segmentation for your business.


1. What is Market Segmentation?

Market segmentation is one of the strategies in the business world by grouping products owned according to similarities, similarities, interests and customer needs. Before marketing products for the business you run, it’s a good idea to know the types of market segmentation that currently exist, the following types:

a. Geographic Segmentation

This type of location segmentation is probably the most widely applied in Indonesia. For example, if the main target is Indonesia, the company will usually build a company located in Indonesia, the main goal is to be closer to consumers so that all costs can be reduced cheaper.

These are a few ways you might think about creating a geographic segment:

  • Zip code/post code
  • City
  • Country
  • Population density
  • Distance from a certain location (like your office or store)
  • Climate
  • Time zone
  • Dominate language
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b. Time Segmentation

This time segmentation is rarely used, but usually at certain times it can be applied. For example, photography services will be sold during the graduation season, clothes sellers will be flooded with orders when approaching Eid al-Fitr, and so on.

c. Price Segmentation

By using price segmentation, you can more easily consider the economic strength of our prospective customers, which are certainly different. Some can afford to buy at a high price, some are only able to buy at a low price. If the market segmentation is wide, you can apply prices to each product starting from low, medium, and high prices so that all people can enter.

d. Demographic Segmentation

Demographic Segmentation

Gender, age, and income are the most widely used variables in demographic segmentation. Because it could be that the products being sold are only suitable for men, while for women it is already different. There are other products that are only specifically for adults, so you have to segment this demographic so you don’t get the wrong target.

Some examples of demographic segmentation include:

  • Age
  • Gender
  • Income
  • Occupation
  • Family size
  • Race
  • Religion
  • Marital Status
  • Education
  • Ethnicity

e. Psychographic Segmentation

This segmentation includes consumer behavior in responding to product trends and stimulation. This segmentation data is difficult to determine into groups because it usually has a fairly large anomaly. The results of the data analysis presented are also more descriptive.

These are some examples of psychographic segmentation:

  • Values
  • Goals
  • Needs
  • Pain points
  • Hobbies
  • Personality traits
  • Interests
  • Political party affiliation
  • Sexual orientation

f. Socio-Cultural Segmentation

Cultural segmentation pays more attention to the variables of consumer social and cultural patterns. The analyzed data can be; social class, ethnicity, societal norms within the scope of the market and the life cycle of the community.

2. Characteristics of Effective Market Segmentation

Before you know how to determine market segmentation, you must know the benchmarks for effectiveness in determining market segmentation. The characteristics of effective market segmentation must be;

  1. Measurable ( measurable ) , market segmentation can be measured to a certain degree, all data analysis research results must also be proven with measurable and accurate data.
  2. Affordable ( accessible ) , effective segmentation is to remove the wall between products and consumers. Products are clearly accessible to consumers.
  3. Influential ( Substantial ) , The segmentation process must also affect the business, for example, provide benefits and also affect process changes.
  4. Distinguishable ( differentiable ) , effective market segmentation is the segmentation of each element can be clearly distinguished.
  5. Realistic ( actionable ) , effective segmentation can also realize or realize your business plan.

3. How to Determine Market Segmentation

After you understand what market segmentation is and its types, then it’s time you know how to determine market segmentation for your business. The steps in determining market segmentation in outline are:

  1. Data collection , namely by conducting research in the form of  surveys,  discussions and also other techniques, to obtain variables for each type of segmentation.
  2. Analysis , After all the data is obtained you can process the data and analyze the results of data collection which will be adjusted to the marketing strategy .
  3. Compilation , this stage is where you group the results from the analysis and at this stage the results will be filtered, which products are suitable and which markets are suitable.
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Based on the stages above, the following are more complete stages in determining market segmentation.

a. Define target market

How to determine the target depends on the needs of the business you are running. You should pay attention to these three things:

  1. New Consumer , determine segmentation based on new business so you need to find new consumers.
  2. Focused Consumer , This is usually done to find customers that you already have but to support a sustainable business.
  3. Supported Consumer , This consumer is related to your supporting product  needs .

Based on the three things above, you can refer to the types of segmentation previously discussed such as: demographic, price, time, and products to be sold.

b. Know Consumer Problems and Needs

The next step is to find out all the needs of potential customers, then adjust them to the products you sell. To be able to get the information, you can ask potential customers directly or by conducting a series of product tests.

If you already know consumer problems, you can classify consumer wants, needs and problems. This is useful as a reference in making  a business strategy road map  and also product evaluation.

c. Know Consumer Behavior

Furthermore you can observe and analyze consumer behavior. You can pay attention to how consumers use the product, the conditions before and after using the product, and also the trend patterns associated with the product.

consumer behavior

d. Data Processing and Analysis

Furthermore, you can process all consumer-related data that you have observed. At this stage you will find out the opportunity for the product that you will sell to each segmentation that you have done. Data analysis serves as a reference in determining strategies in preparing products and also marketing.

e. Determine product marketing strategy

Each segment must have a different marketing strategy, especially if the target market is different. So adjust the target market according to the marketing strategy. You can apply any type of marketing strategy by referring to market segmentation. For example, referring to demographic segmentation; What tools  are suitable for female consumers?

f. Market response evaluation

If the market strategy is already running and generating sales, you need to know the response from consumers, especially regarding the shortcomings of the product you have, record all the input that consumers give you and immediately fix it.

Those were some explanations about how to easily determine market segmentation according to its type. In addition, good financial management is also needed to support your business to be more successful. With good financial management, your product marketing budget can be maximized. Use the help of  software for accounting to make financial management easier and more accurate.