Each year, around 30,000 new products enter the market. Nearly three-quarters of them will fail to sustain or grow sales within two years. So, how can a brand give a new product the best shot at success and make sure it reaches the right audience in a saturated market?

The solution is not to treat all customers equally, but to focus your product on a well-defined market segment with specific needs and preferences.

Reaching this level of precision requires proper market segmentation. It enables brands to concentrate their product development and marketing on the people most likely to buy.

What is market segmentation?

Market segmentation is the process of dividing a broad customer base into smaller groups that share common traits. This allows brands to tailor products and messaging to match each segment’s priorities and increase the likelihood of product-market fit.

Most brands lack the budget or infrastructure to reach a mass market. Instead, they must concentrate their efforts on well-defined segments where marketing spend is more likely to generate returns.

Segmenting the market helps brands understand why people buy, so they can make smarter investments with more substantial returns.

The narrower the audience, the higher the chance of successful adoption. Instead of pitching to a general market, segmentation allows you to place the product directly in front of people already looking for a solution.

Benefits of market segmentation

Effective market segmentation provides customer insight that drives better product design, smarter marketing, and long-term business growth.

●     Product development: Narrow segments reveal unmet needs. When a product speaks directly to those needs, competition is often limited or irrelevant.

●     Business growth: A deeper understanding of different market segments enables brands to expand strategically. Whether by entering new geographic markets, introducing complementary products, or developing new offerings for overlooked audiences, segmentation lays the groundwork for scalable growth.

●     Optimized marketing: Market segmentation gives marketing teams the insight to tailor messaging across channels. It also supports smarter media decisions, helping reduce costs while increasing campaign effectiveness.

●     Smarter distribution: Understanding your audience’s shopping habits helps refine distribution strategies. This can lead to lower logistics costs, better inventory planning, and stronger alignment between product availability and customer demand.

●     Customer retention: Segmentation builds loyalty by showing customers you understand them. When products and messages reflect their needs, buyers are more likely to return—and to advocate for your brand.

Brands that invest in understanding their customers gain a competitive edge. With the right segmentation strategy in place, they are better positioned to increase market share and improve profitability.

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The 4 Types of Market Segmentation

Types of Market Segmentation

There are four core types of market segmentation, each offering a distinct way to categorize customers based on shared traits. Understanding these types helps brands identify which audiences are most likely to respond to a product or message—and how to reach them effectively. For a deeper dive, see our guide to market segmentation.

Geographic segmentation

This approach groups customers by physical location, from entire regions down to neighborhoods. It’s particularly useful when products or services vary by climate, infrastructure, or local culture.

Geographic segmentation works well for industries influenced by weather patterns (like apparel or lawn care) and regional preferences (such as cuisine, sports, or recreational habits). Common variables include country, state, city, zip code, population density, and primary language.

Demographic segmentation

Demographic segmentation focuses on measurable factors such as age, gender, income, education level, marital status, family size, occupation, religion, nationality, or political affiliation.

This is one of the most commonly used methods because demographic data is relatively easy to obtain. A brand might, for example, target married men aged 30 to 40, earning over $100,000, who own a home and work full-time. However, while demographic segmentation provides a solid foundation, it often lacks nuance. That’s why it is frequently combined with other types for greater specificity.

Firmographic segmentation

For B2B brands, firmographic segmentation works much like demographics do in consumer markets. Instead of grouping people, it classifies organizations by attributes such as company size, industry, revenue, location, or number of employees.

This type of segmentation helps businesses tailor their messaging and offerings based on the structural characteristics of their target clients. For example, a software company may target mid-sized manufacturing firms in the UK with a specific compliance feature relevant to that sector.

Firmographics are often used in tandem with behavioral or needs-based segmentation to identify high-value accounts and shape effective B2B marketing strategies.

Psychographic segmentation

This method divides customers based on lifestyle, values, interests, personality, or social status—factors that aren’t easily captured through demographic data alone.

Psychographic segmentation requires more effort to execute. Brands typically gather this data through qualitative research methods such as surveys, interviews, focus groups, or social media analysis.

Once shared traits are identified, brands can build messaging that resonates on a deeper emotional level. For example, “We help busy moms who want to prepare home-cooked meals in under 30 minutes” is a psychographic profile distilled into a positioning statement. This type of segmentation is often layered on top of demographics to create more distinct customer profiles.

Behavioral segmentation

Behavioral segmentation is built around observed actions during the customer journey. It examines how people interact with a product or service—when and why they buy, how often they use it, and what makes them stay or leave.

Key behaviors include acquisition triggers, usage patterns, frequency, retention, and repeat purchases. While complex to implement, this approach often reveals unmet needs or high-value segments. It’s especially useful for identifying opportunities to refine existing products or launch new ones that match how people actually behave, not just how they describe themselves.

Advanced segmentation methods

In some cases, brands need more sophisticated techniques beyond the four foundational types—especially in data-rich or B2B contexts.

Statistical clustering methods, like k-means and latent class analysis, use algorithms to form segments based on actual customer behavior. These data-driven techniques go beyond assumptions and can reveal patterns not visible through traditional segmentation.

Today, many marketing teams rely on segmentation software to automate this process, generate real-time dashboards, and connect insights directly to product and campaign decisions.

For more on how to structure your segmentation strategy, explore our guide to market segmentation.

How to validate a segment

Not all market segments are worth pursuing. For a segment to be useful, it needs to be clearly defined, distinct from other groups, and grounded in actual consumer behavior. Before you commit resources to a product or campaign, test the strength of your proposed segment by answering the following:

  • What does this segment value most in a product like ours?
  • What is the primary reason they choose to buy?
  • What does their buying journey look like—including the platforms, features, and content that influence their decision?

These answers should be based on research, not assumptions. Anecdotes, internal opinions, and gut instincts are rarely reliable enough to guide segmentation decisions.

If you can answer these questions with clarity and supporting evidence, the segment is likely actionable and profitable. If not, the market may be too broad, too vague, or not yet well understood. In that case, you’ll need to refine the segment further or return to the research stage.

How to Segment the Market for a New Product

Segmenting the market for a new product involves two core stages: identifying customer segments and developing a go-to-market strategy. Each requires careful thought and disciplined research.

Customer Segments

Start by defining your objective. Are you launching a new product, refining an existing one, or seeking more profitable customers?

Next, choose the segmentation type—or a combination—that best suits your goal. Consider whether your proposed segment is viable. Is the audience too broad to target effectively, or too niche to support sustainable growth?

Gather evidence, including both quantitative data and qualitative insights. The research stage is foundational. Skipping it or cutting corners increases the risk of missing the mark.

Once you’ve identified and analyzed your target segment, use your findings to shape product development or positioning. Then, test your assumptions. Run surveys, conduct focus groups, or use polling to validate your offer or message with real members of the segment.

Go-to-Market Strategy

Build a launch plan aligned with your target audience’s preferences, needs, and behaviors. Be sure to implement tracking from the outset to measure conversion and performance.

As the campaign unfolds, monitor results and refine your approach. Marketing software can support this process by automating customer segmentation and surfacing insights through real-time analytics and visualization tools.

Market Segmentation Best Practices

Even with the right research, market segmentation can go off course. To maximize your impact, watch for these common pitfalls:

● Unaligned segments
The markets you target must align with your brand’s strategy and structure. Avoid reshaping your core offering just to fit a segment that doesn’t reflect your long-term direction.

● Segments that are too broad
Overly wide segments invite stronger competitors to carve out more defined niches. A narrow, well-understood segment often outperforms a diluted one.

● Segments that are too narrow
Targeting a group that’s too specific may limit your growth and reduce the return on your investment.

● Chasing too many segments
While it’s tempting to pursue every opportunity, spreading resources across too many audiences can weaken execution and reduce overall impact.

● Targeting people, not value
A segment may seem attractive on paper, but it won’t deliver returns if the audience lacks buying power. Focus on segments that offer both alignment and revenue potential.

● Neglecting updates
Consumer behaviors change fast, and segments that once performed well can quickly become outdated. Revisit your segmentation strategy regularly to stay relevant and competitive.

Market segmentation works when it’s grounded in real data, clearly defined, and continuously refined. It’s not complex, but it does require commitment. When done well, it creates deeper customer understanding, sharper positioning, and smarter decisions that drive growth.

Apply the Same Logic to your Marketing Strategy

Segmentation isn’t just for customers. The same principles apply to your digital marketing strategy—particularly when it comes to SEO and performance tracking.

Just as you break down your market into distinct groups, you can segment your website traffic, keyword targets, and content themes to sharpen analysis and improve ROI. Grouping your content by audience type or buying intent makes it easier to identify what’s working, what needs attention, and where to scale.

Segmentation at this level ensures your insights aren’t just sitting in a report—they’re guiding action across your marketing funnel.

Ready to Segment Smarter?

At Kadence, we help brands uncover the insights that matter most—so they can segment with precision, launch with confidence, and grow with purpose. Whether you’re refining an existing strategy or exploring new opportunities, our team brings the research, rigor, and global perspective to move your market forward.

Get in touch to see how we can support your next product launch or segmentation challenge.

Market research is an essential activity for companies of all kinds. When entering a new local market or category, it’s crucial to do as much research as possible in many areas to ensure you’re as prepared as possible to launch successfully, with minimal risk.

Market research is even more important when entering an international market, as the stakes are higher, and you’ll be facing entirely new market conditions.

This article will examine international market research, how it typically differs from what you’re used to in your domestic market, and some of the main reasons companies need to do it.

What is international market research?

International market research is a blanket term for all the research and preparation on a new market, usually before entering it. Unlike domestic market research, international market research focuses on an overseas market, often with different cultures, business conditions, and consumer behaviors.

There are many different methods and stages involved in international market research. In some cases, the particular methods and techniques are the same as domestic market research, but your overall strategy will likely be very different.

What are the objectives of international marketing research?

International market research is a way of understanding a new, overseas market before you launch a product or service there. The main objectives are to understand your target customers, identify any challenges, get familiar with your competitors, and do anything else to boost your chances of success and avoid unpleasant surprises.

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How is international market research different from domestic research?

There are several key differentiating factors between domestic market research and international market research. Here are three of the key differences:

1. You’re entering a market with social and cultural differences

Domestic market research is already tricky, but the often vast differences between your home country and your target country make international market research much more challenging in many ways.

Often, the reasons for this difficulty are the same reasons why you need to research in the first place — you need to learn as much as possible about a region and culture that may be entirely unlike your own. 

The differences between countries can create many challenges for researchers. For example, a research method like one-on-one interviews that work well in western countries like the UK and US may fail miserably in other parts of the world where it is considered suspicious.

2. There may be more restrictions around research

In addition to cultural and social differences, international markets also come with legal differences. While you might have a good understanding of how the law (as it relates to market research) works at home, the reality abroad may be very different.

You’ll need to be aware of an entirely new set of rules to avoid breaking them and ending up in legal trouble. One example is the USA’s TCPA, which forbids calling a cellphone using an automated dialing system.

Legal differences make it imperative to conduct legal research and coordinate with lawyers in your target market before beginning any research. Ending up on the wrong side of the law could be catastrophic.

3. It requires more investment

Conducting market research on your home soil can often be undertaken relatively cheaply. However, costs can quickly skyrocket doing research abroad. Seemingly simple things like hiring venues, running telephone interviews, and gathering people to interview can become exponentially more complicated when you’re doing it in a foreign country with people who speak another language.

You may find yourself needing to hire a small army of staff on the ground to help you carry out these tasks. To make things even more frustrating, the cheaper market research methods like email and online surveys don’t work nearly as well in developing countries with less widespread internet access.

8 reasons why companies need to research their international markets

Despite the additional challenges involved, international market research is simply unavoidable if entering a new market overseas. Here are some of the reasons why.

1. Differences in culture

The culture of your overseas target market may be completely different. Failing to research the culture of your target market adequately could result in serious blunders, which could seriously harm your market entry and brand reputation.

Cultural differences don’t have to be vast to cause significant problems. For example, in many African countries, containers are labeled with a picture of their contents. When baby nutrition company Gerber entered this market with their jars labeled with photos of babies, the reaction was understandably negative and seriously impacted sales.

2. Differences in laws and regulations

Laws and regulations don’t just have an impact on your market research methods. They can affect every part of your market entry process and how you conduct your business in your new market.

If you enter a new market without a comprehensive understanding of the law concerning your activities, you risk getting into legal trouble.

There are many different potential legal pitfalls to consider when entering a new market. Some examples are environmental regulations, tax laws, and laws that pertain to hiring new staff. On top of this, rules can change quickly, and what was legal five years ago might be a no-go today. 

Understanding legal and regulatory differences is where one-off research isn’t enough — you’ll have to conduct regular and ongoing research as well as work with legal experts in your target market.

3. Differences in customer preferences

Customers in one country may have completely different preferences to those in another. Cultural differences can be due to the earlier issues, but they can also result from other factors.

When China began allowing its citizens to buy and own homes a few decades ago, US do-it-yourself chain Home Depot quickly capitalized on this new opportunity. Six years later, they closed all their Chinese stores, never to return.

The reason — they opened all their stores in the suburbs, but most middle-class Chinese citizens tend to live in apartment blocks in the cities, homes that don’t require or allow much renovation. This simple misunderstanding due to incomplete research led to the failure of Home Depot’s market entry attempt.

4. Understand the competition

When you enter a new market, you’ll need to compete with already existing brands. Brand competition is not easy — you’re already at a significant disadvantage compared to companies that have been established in that region for a long time and are well-known to the local consumers.

It’s essential to understand who you are competing against and — more importantly — how they have been able to succeed. What exactly is it that customers like about your competitors? What keeps them coming back? What has allowed them to gain and maintain a hold in your target market?

Answering these questions through research will give you valuable direction on what your brand must do to succeed. It will also highlight weaknesses in your competitors that you can address in your marketing.

5. Mitigate risk

Entering any new market is a risky venture, and that risk increases when you expand abroad. According to the Harvard Business Review, companies operating abroad faced far lower Return on Assets than those in domestic markets. Many of these companies do not survive the attempt.

Market research allows you to mitigate your risk by being as prepared as possible for the many challenges of entering a foreign market. You’ll better understand your customers and what they want, be more prepared to take on your competition, avoid legal issues, and have a more viable strategy. 

Entering a new market overseas will never be risk-free, but research allows you to minimize that risk.

6. Logistical challenges

The logistical challenges involved in entering a foreign market can be enormous. Everything from selecting and evaluating suppliers to finding ways to transport your products around your new market, there are many things to consider.

When entering a market in the developing world, these challenges become compounded. Regions without well-established transport infrastructure, financial systems, labor laws, government, and so on can create an endless series of logistical challenges.

To prepare for this, you’ll need to research your new market rigorously. Understand all the potential issues facing you so you have time to prepare and aren’t caught unawares by a problem that might set back your operations by a significant amount.

7. Prepare a solid strategy and budget

A well-established strategy and budget plan is an essential starting point for any market entry process. The only way to do this effectively is through diligent market research.

Market research allows you to understand the costs of your new market, including unexpected expenses. It also helps you anticipate obstacles and challenges and flesh out your strategy in a way that boosts your chances of success.

Suppose you need to win the support of high-level stakeholders in your organization. In that case, a well-prepared and financed strategy is an excellent way to convince them that your market entry attempt is well-placed to go ahead.

8. Find available marketing channels

Marketing your product in a foreign market comes with a unique set of challenges and considerations. Channels that work well in your home country may fail abroad — for example, digital marketing in a country with poor internet access.

On top of that, your messaging will need to consider all the cultural and linguistic characteristics of your target market. An advertising campaign that works well at home may very well perform terribly on the other side of the world.

Market research is a great way to identify the marketing channels and approaches that typically work well for similar products in your target market, helping you plan an effective marketing strategy and boost your chances of success from the start.

Market research is an essential and unavoidable task if you want to enter a foreign market successfully. Done right, it can help reduce the many risks involved and give your product the best possible chances of succeeding in a market that may be radically different from the ones you currently operate.

Contact Kadence to learn more about how we can help you with international market research, along with all other kinds.

Considering expanding into an overseas market? If so, you’ll need to do international market research, but be warned, there are many different methods involved and choices.

The difference between good and bad market research can make the difference between the success or failure of your product launch. This is even more true when launching in foreign markets.

All the various challenges and obstacles of market entry are compounded when you enter a market with different cultures, customs, languages, laws, and infrastructure to what you’re used to dealing with in your domestic market. 

Without conducting rigorous research beforehand, you risk being unprepared for an already challenging process.

This article will look at some of the most effective methods for international market research and what you’ll need to consider compared to domestic research. 

The three main types of data

Before we explore the methods available to researchers, it’s essential to look at the three main types of data you will be aiming to collect:

1. Secondary data

Secondary data refers to data not collected specifically for the task at hand (in contrast with primary data). It can involve things like government records, business reports, information from NGOs, and scientific publications. 

Secondary data is usually the easiest to collect and makes a good starting point for your international market research. When researching a foreign market, it’s crucial to consider linguistic differences and that specific data may be less accessible for political reasons.

2. Survey data

Survey data is a blanket term for all the data you gather through speaking to real people in your target market. There are many ways to collect it, including face-to-face surveys and interviews, electronic methods like email surveys, via telephone, and more.

When dealing with an international market, surveys can be highly effective as they offer a direct connection with your target customers in your new market. However, there are challenges to overcoming language barriers and cultural differences.

The best way to conduct an international survey is to appoint a research firm with direct market knowledge and experience.

3. Experimental data

Experimental data is gathered through an experiment. In market research, this can take many forms. For example, you could divide customers into groups and offer one a full-price product and the other a discounted product, then measure which has more uptake.

Once again, experimental data is a helpful tool when researching an international market since it yields real-world findings and allows you to draw concrete insights about how the market will respond to your product.

It’s worth noting that primary data refers to any information collected solely for the task at hand, so survey data and experimental data can be considered primary or secondary depending on the source.

9 of the most effective methods in international market research

Now, let’s explore some of the most effective methods available to market researchers when getting started in a new, overseas market.

1. Overseas business research

The research conducted by other businesses can be a good starting point for your market research. Companies in your space may have already collected this data. It may have been collected by businesses based in your target market or a nearby location.

Business research is valuable because it’s an example of another organization that has done some of its work for you. You can learn a lot about business trends, cultural differences, markets, laws, and more from the research of other companies.

However, this is always just a starting point. No business in the world will have the same set of questions, challenges, and needs as yours, and nobody will have the same product and audience for it. For effective market research, you’ll have to do your own work too.

2. Collecting foreign government information

Governments collect a tremendous amount of information about their populations and the business within their borders. This includes demographics, geography, and culture, which can be extremely useful when planning your marketing and choosing where to sell your product.

In addition, government data can provide valuable insights on the legal challenges you might face when entering a new market and the various regulations you’ll be required to comply with as you market and launch your product. Much of this information is readily available on government websites.

3. Collecting information from NGOs

Non-governmental organizations like charities can be excellent sources of data due to their work in research. NGOs may provide more accurate and up-to-date data than governments in developing regions of the world, which can lack the infrastructure to collect information properly.

4. Face-to-face research

One-to-one interviews and focus groups can both be highly effective market research methods. They afford you a direct insight into what your customers think, what they want, as well as what concerns them, what their pain points are, and how they feel about your competitors, among many other things.

However, doing face-to-face research in an international market comes with a unique set of challenges. The logistical demands are higher — you’ll need to locate and hire venues and work with interviewers on the ground, which may be more complex than doing so back home. You’ll also need to consider linguistic differences, which means hiring interpreters or locally-based staff.

Another challenge is cultural differences. For example, some Middle Eastern cultures treat interviews with suspicion, and it may be not easy to gather a meaningful sample group. 

5. Attitude scales

Attitude scales — like the Likert scale — allow respondents to give a score on how they feel about a question or statement, usually on a scale of “Strongly Disagree” to “Strongly Agree”.

There are many benefits to using this type of research method in international markets. It tends to transcend language, and questions are easily translated. It’s also easy to distribute and can quickly be done either in person or electronically.

However, there are still challenges. Some cultures, such as Japan, may be unwilling to give strong responses, leading to many neutral answers and no meaningful takeaway.

6. Text message (SMS) survey

Text message surveys involve sending out a series of questions to a group of respondents via SMS. It’s quick, easy, cheap, and allows you to reach a large number of people. You won’t get detailed responses from this kind of survey, and it tends to miss out on nuances, but it’s potentially an excellent way to get lots of feedback with minimal effort.

The drawbacks are that it’s dependent on mobile access. Many countries worldwide lack this — Laos, for example, has a mobile phone penetration of just 53.4%. This makes it harder to distribute your surveys to a significant number of people.

7. Online survey

There are many different types of online surveys available to you when conducting international market research. Email, social media, and web forums are just a few examples of places you can connect with respondents and distribute surveys and questionnaires.

Online surveys are one of the cheapest and easiest ways to gather information and can be done from anywhere globally with no need to hire additional staff or deal with logistics in your target market. You’ll get fast responses, and surveys are also easy to translate into multiple languages.

There are some challenges involved, however. Anything involving the internet is dependent on internet access in your target market, which may be very low in some parts of the world. This method works well in North America and Europe but is poorly suited to countries like Eritrea, where only 14% of the population uses the internet.

8. Mobile web survey

This method involves distributing surveys via smartphones through applications or some of the other online methods mentioned above. In many countries, smartphone ownership exceeds computer ownership, making this a valid alternative.

In other countries, however, very few people own smartphones. Pakistan is one example — smartphone penetration here is just 18.4%. However, if your target market has a high smartphone penetration, this can be a reliable research channel.

9. Remote Face-to-Face

In recent years, we’ve all seen an explosion in the use of video chat software like Zoom and Microsoft Teams. Today, this is used regularly to communicate with friends and family, attend work meetings, and even see your doctor. The COVID-19 pandemic accelerated this trend and forced us to rely on remote communication for almost all of our social interactions.

This technology applies to market research and is ideally suited to researching foreign markets. Now, face-to-face interviews and focus groups can take place entirely digitally, removing the need to send team members abroad or hire people in your target market.

There are still limitations, of course — it relies on your audience having access to electronic devices which can lead to skewed results (for example, you end up interviewing only younger and more affluent people). It should be combined with other methods for best results.

Market research is an essential but often challenging process, and it becomes harder when you try to do it in a completely new market far from home. Fortunately, market researchers today have access to a wealth of methods and tools, many of which did not exist even in the recent past.
Get in touch to learn how Kadence can help you conduct international market research as effectively as possible, allowing you to mount a confident and informed market entry.

Market segmentation is the foundation of modern marketing. By dividing your audience into clearly defined customer segments based on shared needs, behaviors, and preferences, you can better understand who you’re targeting—and how to reach them with relevance and precision.

Brands that use market segmentation effectively enjoy stronger engagement, higher conversion rates, and better ROI. Segmented marketing consistently outperforms generic outreach, and many leading global brands—from Nike to Coca-Cola—have relied on market segmentation strategies for decades to maintain their competitive edge.

But effective segmentation doesn’t happen by accident. Conducting market segmentation at scale can be resource-intensive, complex, and difficult to implement across teams. This article explores five major challenges brands face when segmenting their markets—and how to overcome them with the right strategy.

Why market segmentation is so important

Segmenting your market into smaller, clearly defined groups unlocks a range of business advantages. From improved marketing efficiency to more relevant customer engagement, market segmentation gives you a structured way to focus your efforts where they matter most.

Market segmentation gives your brand sharper focus. 

Rather than casting a wide net, segmentation enables you to tailor messaging and products to specific customer segments. A one-size-fits-all approach often dilutes impact, while focused targeting improves relevance—and ultimately, conversion.

With effective market segmentation, brands can deploy distinct strategies for different audience groups. This enables greater personalization—so customers receive offers, messaging, and products that closely align with their specific needs and expectations.

Market segmentation strengthens brand identity. 

Brands that attempt to speak to everyone often end up connecting with no one. Take Coca-Cola or McDonald’s—they understand exactly which segments they serve and why. By tailoring their brand messaging to specific consumer needs like taste, convenience, and affordability, they remain top-of-mind for their audience.

By focusing on the specific needs of defined market segments, these brands create clear, compelling identities. Coca-Cola doesn’t market itself as a health product—it owns the space of refreshment and indulgence. McDonald’s doesn’t try to be fine dining; it wins on convenience and consistency. This clarity is the result of thoughtful segmentation, not guesswork.

Market segmentation helps uncover untapped opportunities for innovation. 

When you break your audience into specific market segments, gaps in product offerings and unmet customer needs become easier to spot. These insights can lead to new product development, refinements to existing lines, and sharper creative ideas for future campaigns.

Dividing your market into smaller, clearly defined segments makes consumer preferences more visible. Without market segmentation, these differences often disappear into broad generalizations, making it harder to identify what customers actually want.

Market segmentation improves precision in marketing.

With clear audience segmentation, your campaigns can speak directly to the needs and preferences of each group. This leads to more relevant messaging, better engagement, and more efficient use of your marketing budget.

Some market segments may respond well to TikTok campaigns, while others engage better through email or search. Market segmentation ensures you match the right message with the right platform, reducing wasted spend and improving campaign effectiveness.

Market segmentation supports international growth. 

When entering a new market, applying market segmentation gives your brand a focused starting point. Rather than repurposing a one-size-fits-all strategy, you can adapt messaging and product positioning to the needs of local customer segments. This improves your chances of success and makes expansion more sustainable.

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The challenges of market segmentation

Although market segmentation is one of the most powerful tools in marketing, it is not without challenges. The process can be difficult to execute and embed across an organization. The following five challenges often stand in the way of successful market segmentation, along with practical strategies to overcome them.

Challenge #1: The Cost of Segmenting a Market Can Be a Barrier to Entry

Dividing your audience into targeted groups means tailoring campaigns, messages, and product offers more than once. While this can raise costs in the short term, the long-term return from higher relevance and conversion often offsets the initial investment.

There is no shortcut around the cost of market segmentation. But when executed well, it becomes an engine for growth. Targeting the segments with the highest potential can increase revenue, improve efficiency, and create stronger long-term value.

Challenge #2: Overlapping Market Segments Make It Harder to Personalize

A common pitfall in market segmentation is assuming that each customer fits neatly into one segment. In reality, people shift between different behaviors and mindsets depending on time, context, and occasion.

For example, someone might fall into the “social drinker” segment when out with friends but align with a different segment when enjoying wine alone at home. This fluidity makes personalization difficult if your market segmentation framework is too rigid.

In sectors like FMCG, where behavior is highly contextual, it helps to build your market segmentation around occasions. Ask about different consumption scenarios so you can reflect the full range of customer needs.

Challenge #3: Vague Segments Undermine the Value of Market Segmentation

Market segmentation loses its power when customer groups are too broad or overlapping. If your segments aren’t clearly defined, it’s nearly impossible to tailor messaging, product design, or channel strategy in a meaningful way.

To avoid this, build your market segmentation on specific, research-backed personas. A well-defined persona captures the needs, motivations, and behaviors of a segment in detail, making it easier to craft distinct strategies.

For example, if you’re marketing bottled water, your “Healthy Harry” persona might prioritize hydration during workouts and value portability. Knowing this, you can fine-tune messaging and packaging for that specific use case. The sharper the definition of each segment, the greater the precision in your execution.

Challenge #4: Choosing the Wrong Segments Can Undercut ROI

Even with a solid market segmentation model, it’s easy to over-prioritize the largest or most visible groups. But the biggest segments aren’t always the best fit for your brand.

A smaller segment that aligns more closely with your product’s value proposition might deliver stronger returns than a broad category with weaker intent.

Market segmentation allows you to focus your resources with surgical precision. To get the full benefit, you need to identify which customer segments offer the greatest potential—based not just on size, but on relevance and likelihood to convert.

Take the time to validate segment choices before execution. Overlooking niche but high-potential segments is one of the most common and costly mistakes in market segmentation.

Challenge #5: Poor Internal Adoption Weakens Segmentation’s Impact

One of the most underestimated challenges in market segmentation is not the research itself, but how the findings are integrated across the business. Even the most robust segmentation framework can fail if it isn’t embedded into internal decision-making.

Market segmentation must be more than a research output. It needs to become part of how teams think, plan, and execute. That requires internal champions who understand the value of segmentation and can advocate for its use across departments.

The most successful market segmentation projects begin with stakeholder involvement. Conduct stakeholder interviews early to surface expectations and secure buy-in. Keep these stakeholders engaged throughout the project with regular updates and checkpoints.

As the research concludes, visual assets and workshops can play a critical role. Infographics, segment snapshots, and scenario-based exercises help bring customer segments to life. These tools help move segmentation from a static report to a shared lens for strategic thinking.

To make market segmentation stick, you need more than good data. You need a change management mindset that positions segmentation as a foundation for action.

FAQs on Market Segmentation

Which of the following is a major advantage of segmentation?
Market segmentation enables businesses to better understand customer needs, tailor messaging, and deliver more relevant products or services—ultimately improving customer satisfaction and ROI.

Why does a business need to identify the segments of a market it wants to enter?
Identifying target segments helps businesses focus their resources on the most valuable audiences, reduce waste in marketing spend, and differentiate effectively within competitive markets.

How would you recommend addressing this market segment?
To address a market segment effectively, tailor your product features, messaging, and channels to that segment’s specific needs, behaviors, and preferences—based on reliable customer data and research.

What is the end result of a successful market segmentation process?
The result is a clear, data-driven understanding of your customer base, enabling more personalized campaigns, stronger brand loyalty, and measurable business growth through better targeting.

Putting Market Segmentation into Action.

Market segmentation is not just a helpful marketing tactic. It’s a critical business capability that drives more efficient investment, sharper brand positioning, and closer customer alignment. Whether you are entering a new market, launching a product, or looking to refine your existing audience strategy, a clear segmentation framework gives you the tools to do it with confidence.

But the process is only powerful when it is executed with precision and followed through with action. From the cost of data collection to the internal alignment required to embed new strategies, market segmentation comes with real obstacles. Overcoming those challenges is possible—with the right approach and the right support.

At Kadence International, we work with brands across industries to deliver end-to-end market segmentation projects. From defining research objectives and conducting quantitative and qualitative fieldwork, to helping teams internalize and activate their segments, we guide companies at every stage of the journey.

We understand that segmentation is not just about clustering data. It’s about making your customers more visible, your decisions more targeted, and your growth strategies more deliberate. And we know how to make it happen.

If you’re ready to move beyond generalizations and build a segmentation strategy that truly drives business impact, we’re here to help. Get in touch to learn how our market segmentation research services can equip your team with the clarity and confidence to grow.


Segmenting your market is incredibly important if you want to achieve success in any industry. It has many benefits, from improved marketing to making it easier to expand your offerings. FMCG (fast-moving consumer goods) are no exception. In fact, there are many reasons why market segmentation for FMCG products is sometimes even more important in this industry than others. There are many steps you can take to ensure your segmentation efforts are as effective as possible for your FMCG business.

First, it’s important to understand why segmentation is so important, and what makes FMCG different from some other industries. Then, we’ll move onto some key best practices for FMCG market segmentation.

Why is market segmentation important?

Whatever industry you’re in, it’s almost always helpful to segment your market into different slices based on a range of factors like needs, values, behaviors or interests. This has a wide range of benefits, such as:

  • It helps you better target your audience. Instead of developing products for a broad range of people, you can hone in on a specific segment and create a product that addresses their pain points more effectively.
  • It allows you to market more accurately and reliably. As above, when your target audience for marketing is more precisely defined, you can create marketing materials that speak to your prospects more directly, helping you build more meaningful relationships, engage them more easily, and increase your sales.
  • It reduces risk and optimizes spending. When you (correctly) target a more specific group of people, you increase the chances of successfully converting them to customers. This allows you to use marketing budgets more wisely, focusing resources on people you know are in need of your product instead of taking a costly scattergun approach.

(Learn more about market segmentation in our ultimate guide to market segmentation)

Why is market segmentation important for FMCG products?

FMCG products can be defined as products that are sold quickly and at a relatively low cost. This bracket of goods includes things like snacks, toiletries, cosmetics, and over-the-counter drugs. 

This category has certain characteristics that make segmentation a critical initiative for any FMCG business and will influence the approach you take to your segmentation.

  • With FMCG goods, people’s needs and desires change — sometimes significantly — based on where they are and who they’re with. For example, someone eating out with friends might have very different preferences compared to when they’re eating at home after a long day of work. This means one person may fit into several segments depending on their environment. This kind of fluctuation doesn’t happen in the same way as many other product types, like cars or investment products. As such, an occasion-based segmentation is needed.
  • FMCG is a high-competition space. Just think of the enormous numbers of potato chip brands, or toilet paper options. All these brands are fighting for customers all the time, and to compete in this kind of environment you need a keen understanding of your market and how to target it.
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Market segmentation for FMCG products — guiding principles on how to get it right

For FMCG businesses, market segmentation should use many of the best practices employed by other types of companies. Here are some ways to ensure you get the most out of market segmentation as an FMCG company.

Get the right people on board at the beginning

One of the biggest challenges when you’re running a segmentation in an FMCG organization is getting buy-in to the process from the key stakeholders. A segmentation should drive decisions at every level of a business – from marketing to product development – so it’s important to get these people on board at the outset to optimize eventual adoption of the segments.

One way of doing this is to carry out stakeholder interviews with the key people in your organization. This is important for several reasons:

  • It allows you to gather important knowledge that exists in the business to inform the segmentation itself 
  • It helps create buy-in. By having skin in the game at the beginning, you are able to excite people about the project and create evangelists who will be more likely to harness the research going forwards. 

Another useful tip is to consider a client side “champion” both for the duration of the research and the internal roll out. This should be combined with a client side “core team” with representatives from each of the departments that is planning on using the segmentation. 

Remember that a person’s needs can change based on their environment, which will have implications for the way you approach segmentation in this category.

As mentioned above, one of the unique attributes of the FMCG category is that consumers’ needs change based on the situation. This means that with FMCG products, people don’t necessarily fit into fixed, static segments. As such, a lot of the time, segmentation is done based on occasions.

If we think about the alc-bev category, people tend to consume very different drinks depending on the occasion. Somebody having a beer with dinner on a Wednesday night will be motivated by a very different need than he/she will be when hanging out at a nightclub on Saturday, where they might be drinking something entirely different. Putting this person in one segment would wash out the findings, rather than accentuating the two very different motivations present in these occasions.

For this reason, when doing market research to inform a segmentation, it’s important to be specific about the what and why of the choices people make at different times. Ask them about a range of different scenarios to ensure their diverse needs are represented.

This is important to keep in mind for FMCG products since our habits and tastes fluctuate so much, in a way that they don’t always do with other products.

Identify the segments with most potential for your business

The core element of a segmentation project is the development of the segmentation solution, dividing the market up into segments that you can target. In this stage of the research, it’s important to remember that even though one of your segments might be a relatively small percentage of the market, it could account for a large share of sales. This is a vital principle to bear in mind in any category, but for FMCG it’s incredibly important, given how competitive the market can be. Focusing on a niche segment, by targeting consumers’ needs closely, can be a recipe for success. 

Augment traditional segmentation techniques with (self) ethnographic research

Every segmentation involves quantitative research to group people into segments based on certain characteristics. This allows us to target groups with broadly similar attributes with the same types of product.

We always recommend combining this with qualitative research to get under the skin of your segments and to help you create detailed personas. This qualitative research can take many forms – from in-depth interviews to online research such as an online community.

For FMCG brands, we recommend considering ethnography at this stage. This gives you a unique and unmatched opportunity to really understand your segments— if you really want to get to know your Fitness Enthusiasts, for instance, you want to see them in the course of their daily life. What do they do after work? What does their house look like? What’s in their refrigerator?

Ethnography gives you a level of insight that you can’t quite access with surveys. Doing this in person is incredibly rich, but it can be logistically challenging (particularly during Covid) and costly so it isn’t always possible to take advantage of this method. That said, there are a range of self-ethnographic techniques you can use to gain this depth of insight through mobile research. Examples include asking people to create a food diary, complete videos or photo tasks in store to help you understand the purchase journey or interview friends or family members. 

The insights from self-ethnography can be incredibly rich, helping you to really deepen your understanding of your segments so you can develop products, services and campaigns that really meet their needs. 

Bring your segments to life 

Once you’ve created your segments, the next task is to bring them to life. There are a number of ways you can do this but the first step is to create personas. 

What is a persona? A persona is a fictional profile that encapsulates the core qualities of each segment, including their needs, behaviors and motivations. The purpose of a persona is to help others in the business understand each segment and how they differ from one another so they can better serve their needs. As such, they tend to be very visual so they can be easily remembered and placed at the forefront of decision making. 

Naming here is of vital importance. A memorable name can be really useful in helping stakeholders remember the defining characteristics of a segment so that they live on in the organization.

Some personas can be as simple as a PowerPoint slide. But at Kadence, we like to take this further, developing a range of visual outputs that you can use to help everyone in the business understand your core targets – from the C suite to the factory floor. 

We’ve developed everything from interactive PDFs to infographics to bring different segments to life. Some techniques we’ve found particularly useful include: 

  • Video-based teaser campaigns prior to unveiling the different personas to build interest and engagement 
  • Posters to bring personas front and center for employees in the office
  • Documentary-style films with consumers representing each segment. These can be a really effective way of bringing the segmentation to life and helping the key insights stick with stakeholders for a long time to come

(You can find out more about our design team and their capabilities).

Video interview in a person's home

Going global – how to approach international segmentations 

Most FMCG brands are global, but their products can and do vary depending on where they are sold. As such, marketers often ask us if they should have one global segmentation solution or individual solutions by region or country. 

The answer really lies in how you will use it.  If you have marketing teams that are deployed at a country level, then country level is the way to go, with, hopefully, a global framework that the countries all fall into that the global marketing team can use. 

If most of the marketing action is coming from a single global team, then one global segmentation is better so it really does depend on the set up of your organization and team. 

Need help developing a market segmentation for FMCG products in your business?  

Market segmentation in the FMCG space is a powerful way to dig into your market, better understand your customers, create better products, and get buy-in from leadership for your plans.

It’s crucial to do this right. There are many challenges and potential pitfalls to navigate, but a huge potential upside in an industry where competition is fierce and customer expectations are high.

For best results, it helps to work with the experts. To find out how Kadence can help with market segmentation for FMCG, read more about our segmentation capabilities, our work in FMCG or get in touch with us today.

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Segmentations are powerful tools for any business. But right now, at a time where we’re seeing extremes of behavior – from lockdowns in some markets to a roaring twenties style reopening in others, how should you be approaching your segmentation?

We’ve brought together segmentation experts from across Kadence to share their top tips. In this short 10 minute video, we cover:

  • How to know if you need to refresh your segmentation – (Hint – if you’re in an industry where behaviours have changed as a result of the pandemic, the answer is very likely to be a yes!)
  • When you should embark on your segmentation refresh
  • What you can do in the interim to ensure your segmentation delivers in the short-term
  • What to do if you need to develop a segmentation now

To understand more about the best approach to segmentation, take a look at our ultimate guide or get in touch.

Introducing market segmentation

There is no product or service which fits every consumer uniformly. Sometimes there needs to be variation in products to suit different people – compact smartphones for people with smaller hands, for example, or simplified apps for those not so good with tech. It could be different ways of selling a product – appealing to some people with an emotional message and others with a technical pitch.

Knowing the ways consumers behave, feel, think and make decisions can help any business tailor its products and its pitches to meet their needs more fully. By breaking down the market into segments – which share certain traits, are identifiably different from other groups, or have similar attitudes – we can find efficient and effective ways of targeting products and services.

Market segmentation is one of the most commonly used market research and analysis tools. When you call your mobile network provider, for example, you can be sure you’ve been categorized into a tailor-made customer segment, and that the interaction you have with the call center is at least in part defined by the persona you’ve been assigned. It helps them understand how to talk to you, what behaviors you’re likely to exhibit, and the types of need you’ll have.

There are three reasons organizations typically commission a market segmentation project:

  1. They feel they don’t know enough about their customers.
  2. They have some basic ideas about the types of customers they have but they can’t apply that knowledge to meet their marketing needs.
  3. They have a successful segmentation analysis but they’re finding it’s flawed in some way and needs updating.

A segmentation doesn’t just shape the way businesses deal with target customers or existing clients, it informs the design of new products and services and will dictate how they decide to reach you and with what messages. It can shape marketing campaigns and entire brand strategies.

What is market segmentation?

Once upon a time, all business was local. Consumers bought products and services from nearby providers – people from their own communities who understood their needs. There were crude forms of segmentation but they were instinctive and obvious. Salespeople from the dawn of time have tailored their messages according to who they were addressing.

About a hundred years ago, that started to change. Mass-produced goods and emerging global business models meant companies needed to understand in more detail the different markets they might address. Mass media accelerated the trend. When you could reach anyone via a newspaper ad or a TV commercial, understanding who might buy your product, why they might like it, where to reach them and what to say to them became much more important.

Then in July 1958, consultant marketer Wendell Smith wrote an article in the Journal of Marketing titled ‘Product Differentiation and Market Segmentation as Alternative Marketing Strategies’ – the first time the word ‘segmentation’ had been used in this context. He argued that understanding the basic facts, personality traits and needs of different groups of potential customers – and tailoring products or messaging to suit – would increase sales.

By the 1970s, Smith and his colleagues were using what became known as ‘psychographics’ (psychology plus demographics) to come up with classic market segmentations, such as the Values Attitude and Lifestyle Study (VALS) – featuring segments such as “innovators” (high-income, motivated by status and exploration) and “thinkers” (well-educated, thoughtful decision-makers open to new ideas). 

The forms of segmentation have evolved over time, as have the specific categories and personas that companies target. Sometimes it’s as crude as defining a target audience as a particular age group but it can also be a sophisticated analysis of deep emotional needs. Methodologies have adapted and diversified, too. But a couple of things remain constant for market segmentation projects. First, they look for definable truths about customers – reliable information that enables you to group them in useful ways. And segmentation remains a cornerstone of marketing campaigns. Segmentation allows companies to target high value consumers and position their product or brand in ways to maximize their performance. That ‘STP’ approach remains fundamental to good marketing.

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Different ways of segmenting your customer base

There are four main categories of information we can use to segment a market:

  • Geographic: where do people live? What is their environment like? What local factors might influence them?
  • Demographic: how old are they? What social groups do they fall into? How educated are they? How big is their family?
  • Behavioral: how do they make decisions? How do they use products? What are their attitudes to brands?
  • Needs based: What are their needs? What are their attitudes and values?

One of the most obvious ways to approach market segmentations is by generations. But people quickly realized that simply looking at age groups glossed over huge variation in attitudes and needs within generations. There are relatively few ways in which an age cohort behaves uniformly. You must ally demographic with behavioral and attitudinal insights to create segments that are truly useful.

This is illustrated by the rise and fall of the concept of ‘Millennials’. There have been a number of  well publicized marketing fails of companies targeting millennials. Lumping them all together – rich and poor, graduates and school-leavers, different countries and cultural backgrounds – is a major misstep. Millennials are hardly homogenous and treating them as one group risks alienating your customer base.

Why ‘needs’ make for compelling segments

We believe that identifying segments by exploring the needs of your potential customers is much more valuable than thinking about any demographic aspects. And this is why the vast majority of market segmentation projects are now needs-based. 

For example, you might discover that there’s a portion of the population whose prime need is for low-cost products; another seeks quality or status from their purchases; and some need to have products that meet exacting technical specifications.  Once you have those needs-based segments mapped, you can cross-reference by demographics or behaviors if that looks like a useful way of finding other people who might fall into those need groups.

Behaviors are harder to use in a predictive sense. They can change rapidly, especially as a result of external influences. Attitudes and needs, on the other hand, are more revealing and often more predictive. For example, we worked with one academic institution to segment their alumni in order to target graduates with a high propensity to make donations. The value of ‘attitude’ was illustrated by two graduates who both worked in finance in the City. They were the same age, had similar jobs and backgrounds. But one had enjoyed their time at the school and saw it as a springboard for their career; the other had not relished their time there and was considering a career change. The demographics said they were the same segment. But attitudinally, they were poles apart. Creating a segment of ‘inspired graduates’ made more sense than one of ‘rich bankers’.

Getting granular: what really makes a difference when it comes to market segmentation?

Working towards a granular market segmentation is important. If your category is too broad (e.g. ‘millennials’), it’s likely that you’ll capture too many different attitudes to be able to develop compelling strategies. When you mash together a lot of different colors, you just end up with brown. You need to be able to pick out individual colors – those different attitudes and needs – so they can be addressed in a compelling way. 

How you’re planning to address your different segments should also help frame your market segmentation strategy. For example, if you’re planning to promote a product through newspaper advertising or on TV, there’s a limit to how granular you need to get.

But as new ways of interacting with customers have evolved – particularly in the digital era – the value of finer segmentations has risen sharply. Today, using tools like email, targeted advertising, or big data analytics, the subtleties between segments can really make a difference.

Imagine you have a product to help pensioners release equity in their homes, for example. There’s an obvious demographic segmentation: you’re only interested in the over-65s. You need to conduct an inspection of their home when they apply and your valuers only cover the South East of England. In this situation, a geographic segmentation is a no-brainer. 

But then you know from your existing customer data that people with grandchildren are much more likely to want to free up cash so differentiating between them and the childless elderly is worthwhile. Financial literacy is also a key factor and how trusting of financial services companies they are. Risk appetite can’t be measured demographically but it might define your segmentation.

How to use market segments

So when companies debate which kinds of factors will define the customer personas – and how finely to segment their audience – the most useful question to ask is: how are you actually going to use the segments?

You might be a global business, looking to understand how the same six segments present in multiple countries. Will you actually be able to tailor the product or service around those segments? Can a central marketing function use them in the same way in every country? Or will local teams who understand the nuances of their own markets offer more valuable insights, and perhaps even more relevant segmentations of their own? 

Or if you have 15 market segments, for example, and identify seven of them as high priority targets, are you going to tailor your product around every one of them? If not, might there be more value in a more limited approach?

We were approached by a large global business who had segmented the entire personal care market in the UK, which resulted in a lot of different segments. These included people who did the minimum to appear presentable, using the cheapest products infrequently. At the other end were big spenders on grooming who were the real target for that brand’s products. 

How might that segmentation have been done differently? In terms of time and money, making a first cut to eliminate the parts of the market that have never shown propensity to buy the brand’s categories of product creates headroom for a deeper segmentation of those more lucrative parts of the population, allowing for more effective targeting.

Embarking on market segmentation? Start with what you already know

The first step of that segmentation journey is looking at what you already know about your existing customers. What is your data telling you? If you’re a pay TV network, for example, your database contains a lot of raw material for market segmentation. You can analyze by frequency of contact, whether someone has switched away and come back to you, whether they opt in to promotional emails, etc. Those kinds of factors alone are a good start to segmentation.

For example, we worked with an online dating service to comb through their database, identifying key segments based on usage patterns and other behaviors, then assigning all existing members to one of those segments. It was a powerful tool for the company’s call center operators who quickly got a sense of the type of member they were talking to from the persona that popped onto their screen, as well as targeting email marketing and much more. The segments became a lens for the business to view its own customers but also gain insights into the wider market of potential users.

A high-quality customer relationship management (CRM) system is obviously a big help. You need to be in compliance with GDPR and be responsible in how data is used, of course. (And bear in mind: if you formally assign customers to a segment, they might one day see how that’s defined thanks to GDPR’s focus on subject access rights). But allying CRM analysis with an attitudinal, needs-based market segmentation can help extrapolate the behaviors you see in existing contacts to potentially untapped audiences, too.

Many traditional (typically pre-digital) businesses have started to accumulate a lot of data about customers but struggle to make the connection between what they know about them and how that might fuel a market segmentation project. Conversely, online-only businesses are typically built from the ground up around careful segmentations, whether they emerge organically from CRM data or are built as part of a formal project.

Why market personas must be instinctive

It’s important to create segments that are meaningful. The key to a really good market segmentation is that anyone can use it. 

  • It should be intuitive – so the personas you create from your segments are recognizable and understandable.
  • It should be useful to people in different functions – whether that’s new product development, marketing, communications, sales, customer service or even the finance function.
  • It should work as well for people in the boardroom as it does for people at the front line.

That means how you brand your segments is actually a very important part of the process. We all know some famous segment names – DINKYs (Dual Income No Kids); Yuppies (Young Urban Professionals); Mondeo Man and Worcester Woman in the UK, and Soccer Moms in the US. They’re memorable and self-explanatory.

When you’re working on a market segmentation project, you need to bear in mind who’ll be using the segment analysis. That should be everyone, from the board to the call center operative. Without their buy-in (and their insights) it’s much harder to make the segmentation intuitive. Each segment must make sense to them and tell at least part of the story.

At Kadence, we also have a graphic design team in-house. The use of visuals to bring a segmentation to life is critical, not only to make it live on in the organization but to frame an understanding of the segments. We often produce documentary videos to show what kind of people are in each segment and how they behave or react.

The impact of market segmentation

What difference does market segmentation make to key decisions? Which decisions does it most affect? We see many different benefits from market segmentations. For example:

Incremental gains in congested markets. Successful products and services rely on fine-tuning to gain market share or increase sell-through with existing audiences. Segmentation allows you to identify how to exploit opportunities in underserved areas, or segments where rivals currently outperform.

Product evolution. Segmenting the market allows you to see what other underserved needs exist in groups that are already customers, allowing you to fine-tune your offer, especially if the product or service has flexible elements built in.

Targeted communications. Even email costs money (and goodwill, if it’s perceived as spam). Identifying common traits among high-propensity segments not only allows for less wasted communications, it also allows those comms to be fine-tuned for maximum impact.

Smarter automation. Customer service and call centers are increasingly reliant on automated systems. A solid market segmentation can help ensure those interactions are properly tailored and high-value segments are prioritized.

Extrapolating from the existing customer base. Market segmentation can help identify traits in existing customers that might be shared by other segments that don’t seem at first glance to be fertile markets.

New product development and launch. You might already have an idea of the types of customers a product will work for, or situations where it might be applied. You might not even need a market segmentation in the development phase but once a product or service has launched, the need to optimize its performance becomes much greater. Who’s actually using it? How? Why? Those early adopters (another classic segment) can help define and exploit other segments of consumers.

The role of market segmentation within your long-term strategy

A market segmentation project, done right, is extremely valuable but it’s also a significant undertaking. Segmentation studies aren’t designed to be done every year – ideally it should have a five or even ten year shelf life.

Even then, some events are so huge as to require a fresh look at segmentation. The Covid-19 pandemic has prompted many businesses to refresh their buyer personas. For the bulk of 2020, people’s lives have been artificially constrained. How someone behaves or reacts, what they prioritize in life, and even what values they have, are all affected by ‘not going out’. 

Even when lockdowns (hopefully) abate in 2021, how the market breaks down for previously predictable products – from personal grooming and alcohol, to cars and holidays – is going to be quite different to what went before. And it’s very unlikely the old segments will move to adapt to the new reality in precisely the same ways.

We’ve already seen some significant pandemic-inspired segmentation projects, with brands wanting to understand how their market breaks down now that people are eating out much less and work-from-home consumers are shopping differently. Previous segments might not be helpful: do you need to re-cut by job status, for example, given higher unemployment?

It doesn’t matter whether you’re targeting niche markets and need to understand where to find them, or want to tailor a broad-based approach to maximize penetration among different personas, an effective segmentation will set you up for success. Find out more about our experience in running market segmentation studies, or get in touch with our team to discuss a specific challenge. 

The purpose of market segmentation is to group customers with similar attributes together so that businesses and brands can understand their wants, needs, and behaviors so that they can ultimately market to the segments that make the most profit. Market segmentation studies are a form of market research that helps brands understand the distinct groups of people that make up their target audience. They work by grouping customers with similar characteristics. This allows companies to identify and target the segments with the most value to the business.

Companies or brands who ignore segmentation as part of their research and marketing strategy run the risk of wasting marketing dollars, or running campaigns that do not resonate with a profitable or worthy segment.

Market segmentation is a process through which a market is divided into various groups based on the demographic, geographical, psychographic, and behavioral attributes of the population. Market segmentation is extremely important for brands because it is not possible to fulfill the wants, needs, and desires of all potential customers with a single marketing message. It is the process used first before target marketing.

One of the big questions we get asked about this type of research is “what is the purpose of market segmentation?”

It’s not uncommon to hear people asking:

  • “What’s the value of focusing in on specific segments rather than trying to appeal to the mass market as a whole?”
  • “Surely, my best chance of success comes from targeting anyone and everyone that could buy my product, rather than on particular groups?”

In short, we don’t believe it does. Market segmentation can be a powerful tool for any business. Targeting specific high-potential segments makes commercial sense and boosts the bottom line. Why?

First of all, not all customers are of equal value to your business. Imagine you’re a charity. Not everyone gives equally. They’ll be those that donate small amounts every now and again. They’ll be others that consistently contribute bigger sums, driven by a connection to your cause. It makes business sense to understand the latter segment. That way you can better appeal to these people and actively target them in your fundraising and marketing campaigns.

The second is that customers are different and have different needs. This is important to recognize for a whole host of business activities – from product development to marketing to customer service. By understanding who you are targeting and shaping your strategy around their needs, you can cut through and create a better experience for your customers.

(Take a look at our guide to market segmentation for more insights on how to better understand your market).

How market segmentation studies can inform your strategy

The results of a market segmentation study can guide strategy development in the following areas:

Designing more successful products and services

Successful product and service design rely on meeting customer needs. Rather than trying to be all things to all people, focusing on specific segments allows you to really understand the pain points your target customers face. You can use this to inform product and service design, helping you to create solutions that really delight your target audiences and customers.

Developing more effective marketing campaigns

Segmentation studies help you understand who to target. They can also reveal how to speak to your target customers. The result? You’re able to spend your marketing dollars more wisely and achieve greater cut through with your comms.

There are numerous ways for marketers to segment their audiences and tailor marketing easily. Email marketing to granular digital advertising to name but a few. Against this backdrop, a one-size-fits-all approach is not enough. Segmentation allows you to create sophisticated marketing strategies based on the principle that different consumers respond to different messages.

Offering more relevant customer service

Segmentations don’t just benefit marketers. They can have an impact right across a business. We’ve worked with companies to empower their customer service reps by helping them understand the different types of customers that exist. For instance, we worked with a dating app to build segmentation and integrate it into their CRM system. That way, when a customer interacted with the brand, it was easy for the customer service team to see which segment they belonged to. This approach can be really valuable. It helps customer service reps to react in the most appropriate manner to meet the customer’s needs and the company’s corporate objectives.

Using your resources most effectively

Segmentation studies can be really useful in helping businesses understand where to focus their time, money and resources for maximum effect. Insight from a segmentation study can inform how you spend your marketing budget, determine where you focus your sales staff or how you deliver your customer service.

Whether the applications of segmentations are made to product development, marketing, service or resource/budget allocation, ultimately they help businesses to better understand their target audiences and become more customer-centric. The result (and the ultimate purpose for conducting a segmentation)? You’re able to create superior customer experiences that meet and exceed your customers’ needs.

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What does a typical market segmentation study look like?

Like all of the market research projects we work on, each segmentation is designed around our client’s needs. That said, most segmentation projects involve the following stages:

Immersion  

The first step in any successful situation is immersion. This is where the agency tasked with creating the segmentation works closely with key stakeholders in a series of workshops. The purpose of these sessions is to understand the existing knowledge within the business. This can allow you to begin developing hypotheses for potential segments. Immersion sessions align key project stakeholders, ensuring that the segmentation delivers for the business. The immersion stage also has a role in establishing buy-in to the project early on. This will encourage greater adoption of the segments in the long term

Fieldwork

Next comes the fieldwork itself. This allows the business to understand more about its customers and gather the data needed to create the segments. The fieldwork stage will typically involve a quantitative study for collecting this data. However, the research that takes place around it can differ from project to project. Some segmentations we run involve a qualitative stage upfront to test hypotheses. Other involve omnibus studies to determine the incidence of customers and non-customers in the wider population.

Creating the segmentation solution

After the data has been collected, data analytics allow us to find the survey variables which best define the segments. We work closely with stakeholders to create a segmentation solution that is:

  • Actionable (allows you to target the segments at both a tactical and strategic level)
  • Future-proofed (will stand the test of time)
  • Intuitive (easy to understand)

This stage of segmentation also typically involves understanding the current and potential value of the segments and detailed analysis to understand the individual characteristics of each segment. It’s also when the all-important segment naming takes place. Giving segments memorable names shouldn’t be underestimated. This allows people across the business to instantly grasp what that segment is about. This can be crucial for helping embed and encourage the adoption of the segments.

Bringing the segments to life

After you’ve settled on your segmentation solution, the next stage is to bring the segments to life. A lengthy PowerPoint might give the insight or marketing team the information they need. But it’s likely to be too detailed for other functions. Developing impactful deliverables that allow people to easily understand the segments should be high on your priority list if you’re leading a segmentation. This could be anything from posters to infographics. One of the key deliverables we see many organizations investing in is short documentary videos that bring segments to life. It’s human nature to be able to remember stories and characters better than numbers or data points. That’s why videos like these can really help segments live on in an organization, ensuring the segments are front of mind when making business decisions.

Activating the segments

It’s not enough to hope that stakeholders will embrace and use the segments. This process needs to be actively managed. One way to do this is by running activation workshops. This is where you work closely with individual functions to help them understand the segments and what they mean for their department and their role. These sessions are action-orientated, focused on understanding the opportunities and implications for strategic planning.

Segmentations can be powerful tools for businesses. Find out more about our capabilities in this area or get in touch to discuss a specific project.

Market segmentation is one of the most effective ways to sharpen strategy and deliver measurable results. Rather than treating all customers the same, segmentation studies uncover the distinct groups within a market—each defined by shared behaviors, needs, or priorities. The real value lies in what happens next: brands can prioritize the most profitable audiences and tailor their efforts with precision.

Common Methods of Market Segmentation
The most widely used segmentation types include:

  • Demographic segmentation: Age, gender, income, education
  • Geographic segmentation: Country, region, climate
  • Psychographic segmentation: Values, lifestyle, attitudes
  • Behavioral segmentation: Purchase patterns, brand loyalty
  • Firmographic segmentation: For B2B, based on industry, size, revenue

Each method reveals different dimensions of your target audience, and most effective strategies combine two or more types for greater precision.

How to Conduct a Market Segmentation Study
A successful segmentation study follows a clear, structured process:

  1. Define your overall target market
    Clarify the scope of your audience and the goals of your segmentation effort.
  2. Collect data
    Use surveys, customer databases, interviews, or third-party research to gather relevant information.
  3. Analyze customer differences
    Identify meaningful patterns in behavior, needs, demographics, or attitudes that can separate one group from another.
  4. Build detailed segment profiles
    Turn raw data into useful customer segments with clear traits, motivations, and needs.
  5. Apply segments across your business
    Use your insights to guide product development, marketing messages, sales targeting, and service design.

What is market segmentation in market research?

In market research, segmentation—sometimes called marketing segmentation—is the process of identifying distinct groups of customers and understanding how best to reach them. It’s not just about splitting an audience. It’s about uncovering patterns in behavior, values, or needs that allow brands to shape products, services, and messaging that resonate more deeply.

Segmentation helps brands stop guessing. Instead of casting a wide net, they can deliver targeted strategies built on evidence—matching products and messages to the people most likely to respond. Whether the segments are based on demographics, psychographics, or needs, the goal is the same: sharper decisions across product development, marketing, and sales.

What is market segmentation?
Market segmentation is the process of dividing a broad market into smaller groups of customers with shared characteristics, needs, or behaviors. These segments can be defined by demographics, interests, values, purchase behaviors, or location—enabling brands to design more relevant products, communications, and experiences.

7 key benefits of market segmentation studies

#1 Focus on the customers that matter most

At its core, market segmentation is about prioritization. Instead of treating the entire market as a single audience, brands can identify the segments most aligned with their goals—whether that’s profitability, ease of conversion, or long-term value. It’s a shift from trying to appeal to everyone to focusing squarely on the customers who matter most.

A recent example illustrates this well. We partnered with a leading university to segment its alumni base, aiming to increase donation rates. While the common assumption might be to engage all former students equally, the data told a different story. A small group accounted for the majority of giving—proving that a one-size-fits-all approach can miss the mark entirely.

There are multiple ways to segment a market. In this case, we pursued a needs-based segmentation, analyzing alumni attitudes, values, and emotional connection to the institution. A demographic approach—such as focusing on income or profession—would have painted a less accurate picture. What made the difference wasn’t financial capacity, but sentiment: those who viewed their education as instrumental in their careers were the most inclined to give. By identifying and targeting this high-potential group, the university could channel its resources more effectively and lower donor acquisition costs.

#2 Power new product development

Market segmentation isn’t just a marketing tool—it’s a foundation for innovation. By identifying unmet needs within specific groups, segmentation studies reveal whitespace opportunities that can shape entirely new products or services. This is especially true of needs-based segmentation, which focuses on what customers actually want, rather than who they are demographically.

For brands looking to innovate, this insight is invaluable. It allows teams to move beyond assumptions and design offerings that address real pain points in the category. Whether it’s refining a product already in development or spotting demand for something entirely new, segmentation gives brands a clearer view of where to invest.

The value doesn’t end at launch. Segmentation studies can diagnose performance gaps—highlighting where a product misses the mark for certain audiences, and how it can be adjusted to better meet their expectations. In competitive categories, these insights can be the difference between a product that fades and one that pulls ahead.

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#3 Design more effective marketing

Segmentation sharpens marketing strategy by showing brands who to target, where to find them, and how to speak to them. With the right data, brands can shift from broad, inefficient campaigns to tightly focused efforts that drive greater impact for less spend.

A segmentation study might reveal that the audience you’ve been chasing with national TV campaigns is actually more active on social platforms—or more likely to engage with a niche publication. In one market, your most responsive customers may be Instagram devotees. In another, they may prefer trade magazines or podcasts. Knowing this lets you optimize spend and focus on the channels that matter.

Segmentation also enhances the message itself. Different audiences respond to different cues—price, innovation, social proof, simplicity. A targeted segmentation strategy can uncover these preferences, helping you tailor creative that resonates. For example, if you’re a telecom provider, your early adopters may want detailed tech specs, while your budget-conscious buyers care more about value bundles. Precision in messaging isn’t just about tone—it’s what drives engagement and conversion.

#4 Deliver better customer service
Segmentation studies aren’t just for marketers. When shared across the business, they become tools for customer experience, sales, and support—offering frontline teams the context they need to respond in more personalized, effective ways.

In one project, we helped a digital dating platform segment its user base based on behavior and engagement patterns. Each customer in their database was assigned to a segment, and this profile was made visible to call center staff during every interaction. The result? A support team that could anticipate needs, adapt its tone, and offer more relevant solutions—faster.

This type of approach is becoming standard in customer-centric organizations. The streaming service that suggests upgrades based on your preferences? The telco that offers a retention bonus when your usage drops? These aren’t guesses. They’re segmentation strategies embedded into service operations—designed to reduce churn, drive loyalty, and unlock new value from existing customers.

#5 Use your resources more efficiently
Segmentation also helps brands get smarter with their resources. When you know which customers are most likely to buy, respond, or convert, you can direct your teams, time, and budgets more strategically.

A sales team can prioritize outreach to the most promising segment. A marketing budget can be allocated to the events or platforms that matter most to a specific group. The focus created by segmentation reduces waste—and increases results.

This is especially powerful for small to mid-sized businesses, which often assume segmentation is only for larger brands. In reality, even a simple demographic or geographic segmentation can deliver clarity and focus. It doesn’t require a massive investment. You can start with basic behavioral data or purchase history. What matters is acting on it. When resources are tight, market segmentation becomes not just a strategic advantage—it’s a necessity.

#6 Develop a more customer-centric culture

One of the most overlooked advantages of market segmentation is its ability to shift internal culture. When done well, segmentation can help embed a deeper understanding of the target customer across departments—aligning teams around shared priorities and driving more customer-centric thinking at every level.

But that shift doesn’t happen on its own. Creating a segmentation model is only the first step. To influence culture, it must be activated—intentionally and consistently.

Start by securing early buy-in. When key stakeholders are part of the segmentation process, they’re more likely to take ownership of the findings and use them in decision-making. This is critical, especially in organizations where teams may be working in silos. Segmentation can challenge assumptions and unsettle old habits. Involving leaders early helps smooth the path for adoption.

Next, make the segments visible and memorable. They need to be easy to grasp and clearly differentiated. We’ve seen how well-designed deliverables—infographics, printed cards, interactive dashboards—can bring segments to life in a way that a presentation deck never will. These tools help keep the customer front of mind, from product development to sales conversations.

Finally, integrate segmentation into strategy and operations. We often work with functional teams—engineering, retail, marketing—to translate segments into meaningful action. A strong segmentation framework should inform everything from design briefs to service protocols. The goal isn’t just understanding customers. It’s making sure that understanding drives what people do.

#7 Foster a customer-centric culture across your organization

One of the most powerful but often underused benefits of market segmentation is its ability to reshape company culture. When executed well, segmentation doesn’t just support external campaigns—it transforms how teams think, plan, and prioritize internally.

But that transformation isn’t automatic. Creating a segmentation model is only the first step. To drive real cultural change, it must be integrated across the business with intent and persistence.

Start by securing early buy-in. When stakeholders are involved from the outset, they’re more likely to trust the outputs and use them to guide decisions. This alignment is especially important in large or decentralized organizations, where assumptions and approaches can vary widely between teams.

Second, make segmentation tangible. Visual outputs—designed for memorability and ease—can help bring each segment to life. From infographics to segment personas to interactive dashboards, these tools help ensure teams can recall and act on segmentation insights in the moment, not just in planning sessions.

Finally, activate the segmentation across departments. Whether it’s shaping product roadmaps, customizing sales pitches, or refining customer service protocols, the segmentation framework should be a core input. It’s not enough to understand your target audience—you need to build a business that acts accordingly.

Limitations of Market Segmentation

While segmentation offers significant advantages, there are a few limitations to consider:

  • Over-segmentation can lead to fragmented strategies and brand dilution.
  • Data quality is critical—poor or outdated data can lead to inaccurate segments.
  • Resource constraints may make smaller segments impractical to serve.
  • Complexity increases as more segments are introduced, especially across functions.

Frequently Asked Questions about Market Segmentation
What are the 4 main types of market segmentation?
Demographic, geographic, psychographic, and behavioral segmentation.
What are the 4 elements of market segmentation?
Measurability, accessibility, substantiality, and actionability.
What are the 4 market segmentation theory strategies?
Concentration, differentiation, mass marketing, and micromarketing.
What are the 5 main market segments?
Demographic, geographic, psychographic, behavioral, and firmographic (common in B2B).
How do you do market segmentation?
Define your market, gather data, analyze differences, build segments, and apply them to strategy.
What is an example of market segmentation?
A tech brand using behavioral data to target frequent buyers with loyalty offers.
What is the function of market segmentation?
To help businesses tailor offerings to specific customer groups for better alignment and performance.
What are the disadvantages of market segmentation?
It can create complexity, depend on strong data, and risk focusing on segments that are too small.

Ready to put segmentation to work for your brand?

Whether you’re starting from scratch or want to get more value from your existing segments, we can help. Get in touch with our team to explore a tailored approach to market segmentation that drives real results.


Market segmentation is a crucial strategy for businesses to target and cater to specific customer groups effectively. By tailoring your strategy based on the needs of your key customer segments, you can better appeal to the customers that matter most. This guide explores four key types of market segmentation: geographic, demographic, firmographic, and behavioral.

Geographic Segmentation

Geographic segmentation divides the market based on location factors such as:

  • Country
  • Region
  • City
  • Area (urban, suburban, rural)
  • Climate or season
  • Timezone
  • Language

Example: An automotive manufacturer selling four-wheel drives may target rural areas where such vehicles are more practical. However, relying solely on geographic data can be limiting as other factors like income and lifestyle also play significant roles.

Demographic Segmentation

Demographic segmentation creates customer segments based on demographic information, including:

  • Age
  • Gender
  • Income level
  • Level of education

Example: A luxury brand might focus on customers who earn above a certain income threshold, as they are more likely to afford high-end products. However, assuming that people of the same age or income level are alike can lead to ineffective marketing strategies, as demonstrated by Air France’s failed millennial-targeted airline, Joon.

Firmographic Segmentation

Firmographic segmentation is often used for segmenting B2B customers and relies on similar principles to demographic segmentation, looking at factors such as:

  • Company size
  • Industry
  • Job title

Example: Segmenting businesses by company size can help tailor services to the specific needs of small, medium, and large enterprises. However, it’s important to remember that individuals within these companies have unique motivations and values that also need consideration.

Behavioral Segmentation

Behavioral segmentation analyzes customers based on their past behaviors such as:

  • Spending patterns
  • Browsing history
  • Interactions with the brand

Example: E-commerce sites can use browsing history to tailor product recommendations, enhancing the shopping experience. However, behavioral segmentation based on digital footprints only tells half the story and may miss deeper customer motivations.

Needs-Based Segmentation

Needs-based segmentation creates customer groups based on attitudinal factors such as:

  • Needs
  • Values
  • Motivations
  • Priorities

Example: This approach allows businesses to understand how their products or services fit into customers’ lives, helping to put customer needs at the heart of their strategy. It can also reveal opportunities for innovation by identifying unmet needs.

Summary

Market segmentation includes geographic, demographic, firmographic, and behavioral types, each offering unique insights into customer behavior and preferences. By employing these segmentation strategies, businesses can create personalized experiences, retain loyal customers, and effectively target their desired audience.

FAQs

What is market segmentation? Market segmentation is the process of dividing a broad consumer or business market into sub-groups based on shared characteristics.

Why is geographic segmentation important? Geographic segmentation helps businesses tailor strategies to local needs, making it easier to target specific areas effectively.

How does behavioral segmentation improve marketing? Behavioral segmentation allows businesses to tailor marketing efforts based on customers’ past behaviors, leading to more relevant and impactful campaigns.

Learn More

Find out more about our capabilities in market segmentation or get in touch to discuss a new project with us. We’d be happy to share our expertise.

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