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What is market segmentation, and why is it important?

Updated: Jun 18, 2023

Market segmentation happens when your target market is segregated according to groups that represents market segments that have certain preferences.

They are usually segmented according to;

  1. Income

  2. Age

  3. Gender

  4. Lifestyle

  5. Location

  6. Socio-economic groups


Customers in a certain income group may be able to afford and are willing to spend a certain amount to purchase certain products or services. As such, income segregation is very important to identify the price suitable to market the product, should the firm wants to target a certain target market. Should the firm decide to target a high net-worth market segment, they would be able to price the product at premium, but must ensure that the quality and service meets the expectation of the consumers.


The age of the consumers influences the design of the product. Younger consumers are more capable of navigating gadgets and devices than older consumers, who may not be familiar with the current technological advances. Therefore, e-commerce is appealing to younger than older consumers. As such, there are higher chances of young consumers purchasing a product online from a social media promotion.


The difference of preference by gender is clear as opposite genders have different needs. Females are willing and will spend more money on beauty products, while men will spend more on gadgets and video games. Men are also less likely to compare prices and would prefer convenience to save time, while women prefer comparing prices and taking their time to compare product features before making a purchase.


Customers with different hobbies and lifestyle are more willing and tend to spend more on certain products. Many consumers who are becoming more conscious of climate change would be more willing to spend more on these sustainably made products. They would prefer to purchase electric cars more than petrol powered cars. Avid runners would also be willing to spend more on quality running shoes than non-runners.


Location of stores are beginning to be less relevant these days with online shopping gaining more popularity. However, strategic location of business is still important for many sectors especially the F&B industry, as food needs to be served fresh and warm on delivery. As such, they most still locate close by their customers. During the Covid-19, many businesses were forced to close due to lockdown, and were only able to sell their products online. The F&B industry relied heavily on food delivery apps to ensure that their businesses survived.

Socio-economic Groups

Socio-economic groups involve consumer segment that belongs to certain profession, economic or education status. These groups may have a certain preference influenced by their profession and economic statuses. Wealthy businessmen are more likely to invest in an expensive country club membership, as they can afford it, and would elevate their status among their peers. They would likely wear designer cloths, purchase expensive cars, prefer fine dining and shop in luxury shops.


  1. Target Market

  2. Consumer Preference

  3. Marketing Strategy


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