Understanding Market Segments: Types, and Benefits

Understanding Market Segments Types, and Benefits

Nikereact.orgDuring the Covid-19 pandemic, many people have lost their jobs. They have to rack their brains and find a way to get back to earning a living. One of the methods they use is entrepreneurship and selling goods or offering services.

may be one of the many entrepreneurial societies. Of course, you need knowledge before going into entrepreneurship so that the business you run can benefit. One way is to study market segments.

Then, what is the market segment? Let’s look at the following reviews so that  understands this!

Definition of Market Segment

Understanding Market Segments Types, and Benefits

In entrepreneurship, market segments are one of the few things that must be learned and understood so that someone can be successful and profit from the entrepreneurs they run. Actually, what is meant by the market segment itself?

If we discuss market segments based on terminology, we can see the meaning of the two words by using the Big Indonesian Dictionary (KBBI). The word segment in general can be interpreted as a part, group, or area.

Meanwhile, the word market in the economic scope has the meaning as a force of supply and demand, or a place for sellers who want to exchange goods or services for money, and buyers who want to exchange money for goods or services.

Thus,  can draw the conclusion that market segments are parts or groups in the market. This section or group has been determined through segmentation activities, based on the characteristics, needs, and nature of the market.

The term market segment was first used in 1956. Wendell R. Smith, a lecturer and economist from the United States, formulated the term in his journal entitled “Product Differentiation and Market Segmentation as Alternative Marketing Strategies”.

Before the term market segment was put forward, competition in the market was not too tight. Products circulating in the market are generally still dominated by 1 or 2 brands. People have not found many products to consume in their daily life.

However, after Wendell R. Smith published his writings, many companies flocked to study market segments, and make products that were different from other companies. They also adapt their products to the market segments they are targeting, so that their products do not have to compete with other companies.

Market Segment Type

Currently, every company, be it a small company or a large company, has its own market segment. The market segment has been determined since the company was formed. Even so, the market segments they apply may change at any time.

This is because companies also need to adapt or adapt to the needs of the market and consumers. If they can’t understand changing market segments, there is a possibility that the company will lose profits, and even have the potential to go bankrupt.

Therefore, it is important for them to study the types of market segments that exist in society. At least, there are 10 market segments that can study. More specifically, these 4 segments are the most common market segments, while the other 6 market segments are used less often, but can still be relevant according to the situation and conditions.

Most Common Types of Market Segments

The four most common types of market segments used by companies include demographic market segments, psychographic market segments, behavioral market segments, and also geographic market segments. Come on, see the explanation below.

1. Demographic Market Segment

Demographic division of market segments, as the name implies, is segmenting the target market with their demographics. Demographics themselves include things like age, gender, income, occupation, education, to race, and religion.

For example, newspaper products are usually aimed at adults, rather than children. This is because adults can understand the news and need the information presented by the newspaper, compared to young children.

2. Psychographic Market Segment

This market segment is a more specific and detailed type of segmentation than the demographic market segment. The company does segmentation based on human psychography, which includes their nature, opinions, interests, and lifestyle.

For example, a fast food company will target the market to people who generally don’t want to be bothered with cooking and prefer something instant. Their market is not people who enjoy the cooking process.

3. Behavioral Market Segment

Sounds similar to the psychographics market segment. The difference, in the behavioral market segment, companies will analyze the prospects of a market from their behavior when carrying out activities in the market. Then, companies will direct consumers into their market segments.

may have seen advertisements on social media or websites you visit. These ads are tailored to your behavior on the internet. This is based on searches carried out on the website, to giving likes on social media.

4. Geographical Market Segment

As  can see from its name, geographic market segmentation means segmenting based on geographic variables. These variables include altitude, temperature, weather, climate, population, culture, and other variables needed by the company.

An example is the sale of shipping products, which are usually targeted at people living by the sea. People who live in urban areas or mountainous areas generally do not need these products. They will look for other products according to the needs of the location they live.

Uncommon Types of Market Segments

In addition to the 4 types of market segments that have been described previously, there are a number of other market segments that companies can use to segment. Although not more common than the 4 market segments above, companies can use this market segment if they want to do more in-depth research on consumers.

There are 6 uncommon market segments, namely the price market segment, firmographic market segment, generational market segment, life phase market segment, seasonal market segment, and technographic market segment.

1. Price Market Segment

This market segment targets different prices for each consumer category. The consumer category in question will return again based on the previously explained market segment. Companies wish they could be more specific about who buys and uses their products.

For  who are currently still in school, they may have bought a product and received a discount when they showed their student card. This indicates,  will be listed as one of the target markets that a company expects to buy their products.

2. Firmographic Market Segment

Firmographic market segment is a market segmentation term for other firms or companies. If companies usually target a consumer for their market, this time the company will conduct research on a company, starting from the size of the company, number of employees, and salary expenses, to target their product offerings.

Currently, many companies are collaborating with other companies as suppliers of their products. Such as medical equipment companies that supply medical equipment for clinics and hospitals, or sports companies sponsoring sports teams.

3. Generational Market Segment

This market segment is a deepening of the demographic market segment, precisely in terms of age criteria. Companies will analyze the habits, lifestyles, and product preferences of a generation of age and adapt them to the products they offer.

Examples can be found in a number of television shows. Generally, programs broadcast by television are targeted at the 1980s generation and above. This is because, a number of studies show that the age of television viewers is around 30 years and over, while very few people in their 20s watch television.

4. Life Phase Market Segment

Similar to the generational market segment, this market segment studies and segment their consumers through the life phase they are facing. This includes the infant phase, the toddler phase, the childhood phase, the adolescent phase, the young adult phase, the adult phase, and the elderly phase. This life phase can also be adjusted by the company, because of the many theories regarding the phase of life itself.

If you find an advertisement regarding formula milk,  will already know that this product is targeted at the infant phase or toddler phase. The reason is clear, because when you have entered the childhood phase, a person no longer needs to consume formula milk.

5. Seasonal Market Segments

In the seasonal market segment, the company does not only target the market according to the literal seasons such as summer, autumn, and other seasons. They also target their consumers against other seasons of activity.

Like in the World Cup season for example, where many companies are promoting their products with the theme of football. It’s different when the Christmas holiday season, where many products related or Christmas-themed are released to the market.

6. Technographic Market Segment

As the name implies, this market segment is related to technology. Generally, the technographic market segment is used by a company to target the company’s market that is considered to benefit from using their technology.

For example, a website in the blogging and writing sector will offer services and other features to help companies engaged in content writing so that their writings can be more easily searched and found by search engines.

Market Segment Benefits

As already emphasized, market segments are an important part of entrepreneurship. One cannot make a profit if they do not know the market segment of their company. Instead, the company will only lose money if this continues.

Even small companies require minimal knowledge of market segments. And as the company grows larger, entrepreneurs can also gain new knowledge and explore more market segment options for their company.

At least, there are 5 main benefits of market segments for their company’s needs. In fact, these benefits may increase according to their experience in segmenting. Check out the following explanation for more clarity!

1. Expand Product Reach

It has been discussed earlier that the market segment is one part of marketing. Marketing itself has a goal to promote products or services offered by a company. Segmenting the market can help achieve this goal.

By doing good market segmentation, a company can expand the reach of their products into market segments that are in accordance with their marketing targets, in a more efficient way and save costs.

2. Assist in Product Development

Product development is also an important factor for the success of a company. They cannot use the same formula over and over again, because over time there will be changes in the market. If companies cannot adapt, they will be left behind by other companies.

Market segments can help a company to find out the shortcomings of their products, as well as research what is needed by their current target consumers so that they can issue new products according to current market desires.

3. Finding New Market Segments

Still around the topic of adaptation, there are times when companies also have to change or maybe add to their market segments. This is again related to the changing times. If they continue to push their products into the old market segment, there is a possibility that that market segment will no longer need this company’s products or services.

However, if they move to find other market segments that match the criteria for the product sales target, this can be a turning point for the company in trading goods or services. The company is no longer dependent on the old market segment, because it already has a new target consumer.

4. Increase Focus in Business

If market segmentation is done properly, this can increase the business focus of the company. Market segments can shape the identity of a company, because these companies understand their customers and the products they have to buy and sell.

This is very important for the company.  can see a number of well-known companies both in Indonesia and abroad. They generally already have their own branding, and already know who will be their market segment.

5. Improve Business Quality

In addition, by studying and understanding market segments, companies can improve other aspects of their business. The goal is to facilitate consumer access to buy and use the products or services they offer.

Companies can change and adapt regarding an aspect that was previously applied, based on information from market segments. If used optimally, then the quality of the company’s business will definitely increase.

After reading this article, does Nikereact.org now understand the importance of market segments? Or maybe,  is interested in going directly to the world of entrepreneurship and applying what has been learned from this article?

Although at this time  is not yet interested in opening an entrepreneur, I hope that at least this article can add knowledge and insight on the topic of market segments, and spark’ curiosity about new knowledge in various fields.

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