Segmentation is the process of dividing consumers into groups based on identity, purchasing behavior, or need in order for businesses to better understand and tailor their marketing toward each group.
While every business wants to capture a wide consumer base to generate the most profit, targeting too large of a group can have adverse effects.
Instead, many businesses segment their consumers into smaller, more manageable groups based on identity (i.e., gender, age, income level, etc.), brand history (i.e., previously purchased products, website engagement, etc.), geography (i.e., consumers in the Northeast U.S.), or interests (i.e., people who watch sports might be interested in sports apparel).
By segmenting consumers into groups, the business is able to better understand what kinds of products, purchasing channels, and brand engagement the consumers want. From there, the business can adjust their marketing efforts to better match each segment’s needs.
Since a business can’t market to all consumers, segmentation can also help a business eliminate groups that aren’t within their target, which can be just as helpful as identifying which groups are.