How Market Segmentation is Done? Types, Process, Pros & Cons [2024]

What is Market Segmentation?

Market segmentation refers to breaking down a bigger market into more focused and smaller groups of customers with similar wants, requirements, or behaviours. This makes it easier for firms to develop focused marketing strategies and customise their goods and services to satisfy the unique requirements of various client segments.

A Hubspot survey found that 30% of marketers utilise market segmentation strategies to increase email interaction. Compared to non-segmented marketing, segmented email campaigns have better open and click-through rates. 

Every aspiring marketer must know what is market segmentation principles to segment the market effectively. 

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What are the types of market segmentation?

Market segmentation can be divided into five categories.

1. Demographic segmentation separates clients based on age, gender, income, education, and region. It is one of the most prevalent forms of market segmentation since it is simple to evaluate and easily accessible.

2. Psychographic segmentation separates clients according to their values, attitudes, and interests. Understanding client motives and preferences through psychographic segmentation help marketers create a message that appeals to them.

3. Behavioural segmentation separates customers according to purchase patterns and brand loyalty. With behavioural segmentation, you may create marketing efforts that persuade clients to buy something or show more brand loyalty by forecasting their future behaviour.

4. Geographical segmentation separates clients based on where they are located. Businesses that operate in certain locations or have items that are more pertinent to particular geographic areas might benefit from geographic segmentation. Also, it might be helpful for marketing to clients based on their culture or environment.

Note: Firmographic segmentation is another type of market segmentation. It classifies business-to-business clients based on shared company or organisation traits. By offering deeper business insights, this method may aid in directing marketing, advertising, and sales, eventually resulting in more targeted and successful campaign plans. 

The four types of basic market segmentation are connected because they may be combined to expand the number of specialised segments under each category. 

Companies can target particular regions with particular age groups or income levels, for instance, by combining demographic and geographic segmentation. Businesses may target customers displaying particular personality characteristics and behaviours by combining psychographic and behavioural segmentation. 

Businesses may develop a more specialised marketing plan that resonates with their desired consumer profile by combining several market segmentation methods.

Process of Market Segmentation

Market segmentation consists of five steps: 

  • Segmenting prospective consumers
  • Categorising products
  • Building a market-product grid and calculating market sizes
  • Selecting target markets
  • Implementing marketing operations to reach target markets.

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How is it Done?

Determine the target market – Target market identification is the first step in market segmentation, which divides potential consumers into groups based on characteristics like age, income, gender, race, education, or occupation. This aids companies in lowering the risk by identifying the products most likely to take a piece of a target market and the best marketing and distribution methods.

List the connections – The next step after establishing the target market is to understand the characteristics that certain client groups share. This can contain demographic information like age, gender, income, education, and residency. Some prevalent psychographic features include lifestyle, personality, attitudes, values, and beliefs.

Create customer personas – Consumer personas are detailed profiles of the many consumer groups that make up the target market. These profiles should include the consumers’ age, gender, income, education, geography, lifestyle, personality, attitudes, values, and beliefs. Once businesses have a greater grasp of the distinct needs and preferences of each customer segment, they can tailor their marketing strategy accordingly.

Do market research – Doing market research is necessary to understand the demands and preferences of each consumer category properly. Market research can be done leveraging tools like surveys, focus groups, and other market research. This enables firms to develop more specialised marketing strategies by providing them with information about each consumer category’s specific demands and preferences.

Tracking and adjusting – Ultimately, it’s critical to keep an eye on the success of marketing initiatives and make any required adjustments. Metrics like customer interaction, conversion rates, and sales monitoring can help. Businesses may find areas for improvement and alter their strategies to increase their efficacy by tracking the performance of marketing initiatives.

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Advantages & Disadvantages of market segmentation

There are several advantages and disadvantages of market segmentation.


  • A marketer can recognise and assess marketing opportunities.
  • The marketer might alter his products/services and marketing appeals to fit the target market.
  • Segmentation makes it easier to create achievable goals and targets for sales.
  • Management can spot new, lucrative markets that demand particular attention.
  • By using available resources better, rivalry may be handled more skillfully.
  • For each market segment, appropriate service bundles may be created.
  • You no longer need to be general and evasive; instead, you may talk directly to a particular audience in a manner that they can connect to since you know their traits, preferences, and requirements.
  • Market segmentation improves your chances of finding the ideal customer who fits your product line and demography.


  • The cost of manufacturing various items or services for each market segment increases when a company tries to serve numerous of them.
  • Overlapping sectors might result in cannibalisation, where sales of one product within the same firm could consume those of another product.
  • Customers may become confused about which segment they belong to or which product they should purchase as a result of over-segmentation, which creates too many segments.
  • Missed chances might result from ignoring potential clients who don’t fit into specific market segments.
  • More funds for marketing and research will be available when the marketing approach is improved.

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Challenges of market segmentation in 2024

Market segmentation will continue to provide organisations with several challenges in 2024. These are some of the primary hurdles and alternatives:


Market segmentation may be a labour- and resource-intensive large process. Businesses might consider adopting affordable techniques like online surveys or social media analytics to lessen this problem.


Individuals might belong to many segments and frequently have complicated identities. Businesses should strive to develop overlapping segments that represent the complexity of their target audience to overcome this problem.


Segments must be accurate enough to be helpful but not so specific that they lose relevance. Businesses should utilise a combination of quantitative and qualitative data to generate segments that are accurate and relevant to solve this difficulty.

Variable selection

Effective market segmentation requires careful consideration when selecting the variables. Businesses should combine demographic, psychographic, and behavioural variables to get a complete image of their target population.

You can get an insight from this image.


Businesses may undertake efficient market segmentation that helps them precisely reach their target audience by resolving these problems.

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Here is how you can avoid them:

  • Carefully identify the appropriate market segments to avoid missing out on attractive growth opportunities.
  • Make sure that everyone in your business is aware of user segmentation.
  • Use cutting-edge methods of data collection and processing, such as big data, to hone segments and put the focus on consumer behaviour.
  • Examine your marketing plan’s effectiveness to identify your largest marketing opportunity. By doing this, you’ll be able to concentrate on developing the areas that require the most work so that you can start moving forward.
  • To ensure your market segment is not obsolete or redundant, make market segmentation a dynamic process that you perform frequently.

Introducing another term: Refined segmentation

Refined segmentation is a more complex market segmentation method that incorporates modern data analytics and artificial intelligence tools to find more accurate and particular client groupings. 

How can refined segments bring customer behaviour to light?

Refined segments can provide information on consumer behaviour by segmenting the client base into smaller groups based on traits like demographics, behaviour, and product consumption. Marketers may better understand their audience’s behaviour by collecting consumer data across many channels. Tracking a company’s remarks on social media, for instance, may improve consumer data and provide highly specialised, customised marketing communications.

Refined segmentation takes market segmentation to the next level by using more sophisticated tools and techniques to create even more precise and targeted customer segments. 

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Implementing smart market segmentation tactics enables marketers to work with actionable insights and generate value for businesses. Segmentation enables marketers to deliver better customer targeting opportunities leading to an enhanced customer retention rate and, as a result, a thriving business in the long run!

The best way to navigate your steps is to hold the right skills and experience in the domain. With upGrad’s Master of Business Administration program, various specialisations will enable learners to acquire professional skills that leading recruiters are on the lookout for. 

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Q: What are the trends for market segmentation in 2024?

Market segmentation trends for 2024 include improved segments based on consumer behaviour, new data collection and processing methods and the growing usage of artificial intelligence.

Q: What steps are used in market segmentation?

Data on customer demographics, location, psychographics, and behaviour is needed to segment the market. You can gather this data via surveys, focus groups, or other research techniques. Businesses can develop segment-specific marketing efforts after the data has been reviewed.

Q: Can I enrol in an online course on market segmentation?

A lot of market segmentation courses are offered online, so you may study at your speed from the convenience of your home or workplace.

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