7 steps in market segmentation: A Step-by-Step Guide

7 steps in market segmentation: A Step-by-Step Guide

Date & Time
August 4, 2023
Reading time
6 mins
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Lopamudra Barik

Market segmentation is an important component of any effective marketing plan. Why? Just consider your own target market.


Hopefully, your target market is interested in your products or services. But are all of your potential consumers the same age, gender, or geographical location? Do they have the same degree of income and education? Do they all share the same problems, wants, or needs?

If your market is typical, your target audience will comprise a diverse range of potential buyers.


The market segmentation process is divided into three stages:

  • Research
  • Analysis
  • Implementation

This article will help you in developing segments that are appropriate for your business, complementing your research approach, and generating insights that have the potential to impact your bottom line.

What Is a Market Segment?

A market segment is a collection of people within a broader target market who share certain characteristics. Most target markets will have a number of market segments, or groupings with comparable characteristics.


If we look at the athletic footwear market, for example, we'll see a range of different segments:

  • One group could be true athletes who train hard in the gym every day. Another segment could be people seeking for a comfortable pair of shoes to wear when walking their dog.
  • Some customers may be interested in fashion in order to impress others in their social circle.
  • Others may need stability to alleviate pain and prevent falls.

Market Segment
A market segment is a collection of people within a broader target market who share certain characteristics.

Why Is It Important in Marketing?

They may find a group that eats vegetarian, wants to drink IPAs, wants to pay less and drink more, appreciates funny beer names, and likes to bring their entire family out for dinner.

So, what is the significance of segmentation for marketing teams? Understanding segments can benefit in a variety of ways. To summarize, we may state the following:


Marketers can use segmentation to deliver the right offers to the right customers with the correct messaging. 

Segmentation for B2B (business-to-business) marketers differs from that of B2C(business-to-consumer) marketers. While B2C customers are concerned with the qualities of their individual customers, B2B marketers are concerned with firmographics and company requirements.

B2B marketers may focus on criteria other than demographics, psychographics, or habits, as B2C marketers do.

  • Industry
  • Number of employees
  • Location
  • Revenue
  • Purchasing power
  • Customer lifetime value

B2B marketers must understand the buying process and decision-making criteria within firms in order to make effective marketing decisions.

7 steps in market segmentation

The quality of your insights can often determine your success in a digital context. Your strategy is only as good as the data you utilize to support it. Let's look at what information you'll need to segment the market and how you'll use it.

Step 1: Identify your target market

Begin by defining your market and conducting market research to learn more about your customer base. Investigate the statistics of your nearest competitors to learn about their market position and where you might reclaim traffic share.

identify  target market

Extend your understanding of your strengths, weaknesses, opportunities, and threats by benchmarking against industry norms and doing a SWOT analysis.

Step 2 : Analyse existing customers

A systematic audience study is part of the market segmentation process. We encourage using a variety of research approaches and types since the more thorough your data, the better you can identify groups and fulfil their requirements.


Discover information on demographics, behaviour, preferences, and trends. Again, compare yourself to the competition. You might come across market segments or niches you hadn't considered.

Step 3: Develop buyer personas

Skip this step if you already have a buyer persona. However, it is always a good idea to double-check and review. Markets are dynamic, and you must stay alert to developments. Creating many buyer personas might assist you in properly defining and addressing certain segments.

Step 4: Assess and identify gaps, groups, and opportunities

Comparing the data from the first three processes allows you to detect market gaps. You can define a hitherto untapped audience or discover groups with shared interests or habits that you can target collectively. To find market segmentation opportunities, map the audience.

Step 5 : Define and name segments

Define your market segmentation based on what the various groups have in common. Set data-driven criteria for allocating prospects to segments and tracking performance. Make sure each target segment is properly defined so that everyone on your team knows what specialty you're talking about.

Step 6 : Separately research segments

That's all. You've segmented your market and can now begin developing funnels, campaigns, and messages to match. Use your market research tool again, but this time for each group individually, before you begin any creative work. Take the following steps:

  • Perform a separate conversion analysis to identify divergence and potential leaks in your funnel.
  • Evaluating engagement numbers for each section will help you fine-tune your segmented marketing approach based on audience preferences or special demands. Certain marketing channels may be more active in one group than others.
  • Performa competitive analysis on each part. In any target category, not all competitors are equally powerful. This can allow you to focus on segments with the greatest potential or identify ways that may work well for other businesses.
  • You can see if your performance varies by segment or is reasonably steady.

Step 7: Test and improve

Keep track of the outcomes of your new segmentation strategy. Test several ways and continue to evaluate for ongoing improvement.

  • Improve your understanding of a target market and uncover opportunities.
  • Customize products and services to satisfy the needs of a certain market.
  • Enhance the consumer experience by providing personalised offers.
  • Reduce marketing expenses by focusing on specialized markets.

Find your market

Market segmentation will only produce meaningful outcomes if combined with data-driven insights. Even in a narrow industry, you may segment your audience for more tailored marketing and a better user experience.

Similar web provides the tools you need for in-depth research and market analysis, which are essential components of every successful plan.



1. What is market segmentation?

Market segmentation is the process of dividing a larger target market into smaller, distinct segments based on shared characteristics or behaviors. This helps businesses tailor their marketing efforts for maximum effectiveness.

2. Why is market segmentation important?

Market segmentation allows businesses to understand their customers better and create more personalized marketing strategies. By targeting specific segments, companies can increase customer engagement, improve ROI, and develop products that cater to specific needs.

3. How do I identify the right segmentation variables?

The right variables depend on your industry, product, and target audience. Common variables include demographics (age, gender), psychographics (lifestyle, values), geographic location, and behavioural patterns.

4. How do I create profiles for each segment?

Profiles involve detailing the characteristics, preferences, and pain points of each segment. This helps in tailoring marketing messages and offers to resonate with the specific needs of each group.

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