The science of knowing who your customers are is called market segmentation. It is the process of breaking down your customers into segments that share distinct similarities. Also, many business analysts encourage business owners to look beyond market segmentation and towards knowing who their non-customers are, and why these are not buying from them.
But for the purpose of this article, here are some common market segmentation terms and what they mean:
1. Geographics
This involves the organisation of customers by their physical locations to determine the regions, states, countries, where current and prospective customers live.
For example, importing thick woolen winter coats into Nigeria will be a poor business move because of its year-round tropic conditions, but manufacturing durable raincoats and umbrellas during the rainy season will be more profitable.
2. Demographics
This involves grouping customers into groups based on factors such as age, sex, ethnicity, religion, education, marital status, income, and household size.
For example, it wouldn’t be a smart business move to sell pork and related products in a predominantly Muslim area because they do not consume such, but opening a book store in a school environment or child and household care products close to a residential area are examples of smart use of demographics in business.
3. Psychographics
This involves splitting up customers by lifestyle choices, behavioural and purchasing patterns, beliefs, values, and attitudes about themselves, their families, and society.
For example, selling trendy and latest fashion on university campuses is good business because of students’ love to keep up with the trends, as against selling similar items in booths set up during religious conventions.
4. Geodemographics
This is a combination of geographics, demographics, and psychographics. Geodemographics, also called cluster marketing or lifestyle marketing, is based on the idea that birds of a feather flock together — that people who live in the same area tend to have similar backgrounds and consuming patterns.
Geodemographics helps you target your marketing efforts by pinpointing neighborhoods or geographic areas where residents share the age, income, lifestyle characteristics, and buying patterns of your prospective customers.
For example, people who live in Lekki, Ikoyi and Victoria Island are perceived to be wealthy, hence are willing to pay more for a product that satisfies their need.
