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There are four primary categories or types of market segments. The four primary categories include geographic, behavioral, demographic and psychographic. Within each of the types of the segments fall numerous sub-categories or sub-segments as well. Market segments are primarily used in dividing customers into categories for marketing purposes.
Geographic market segments focus on the location of the customers. Customers that live and work in different states or areas of the country may have different needs when it comes to products and services. For example, customers living in Florida do not have a need for snow shovels, but the same company may produce beach shovels it could sell to Florida customers.
Demographic market segments are some of the most popular ways for companies to segment its customers. Demographics consist of characteristics such as the age, sex or family size of the customers. Additional demographic data may include income, education and occupation. Religion, race and nationality are other dividing factors in market segmentation.
For example, income may play a role if a company is selling high-end luxury goods. A private school that is getting ready for a marketing campaign may pull a list of households in the area with children that have incomes that exceed $200,000 US Dollars (USD) per year. In this scenario, the private school is separating options using demographic and geographic market segments.
Psychographic market segments focus on lifestyles. Companies using these types of categories may focus on the socioeconomic class of the customers, such as low-income, middle-income or high net worth households. Lifestyle and personality types may focus on homosexual couples or people that like to hike, depending on the type of product or service the company is selling.
Behavioral market segments divide customers based on their purchasing decisions. Generally, a company would segment customers like this for targeted marketing campaigns. For example, if the company plans on re-engaging old customers, the company may categorize the customer by buying frequency. So anyone that has not bought from the company in the last year may be part of the campaign.
The same company would not want to send a re-engagement marketing campaign to a customer that just bought from them last week. The customers that purchased in a time frame that is less than a year would fall in the behavioral market segment, but under a sub-category that is different. Purchasing behavior works also in up-sell scenarios. For example, a customer that buys audio books from the company that sells different information products is likely to buy other audio books.
The company may categorize market segments by the type of product. Then when it releases its next audio book, it may send an announcement to all of the customers in the audio book category because they are likely to buy again.
@Ceptorbi: It's all about money. Companies want to make as much as possible, so they focus their advertising budgets on people likely to want what they're selling.
In addition to using market segments to determine their advertising audiences, the television industry uses them to determine their viewing audience. Some shows, for example, are targeted to audiences of a certain demographic like age or gender.
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