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, behaviours 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.
Woman shopping for FMCG products at a supermarket
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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 organisation 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 optimise eventual adoption of the segments.

One way of doing this is to carry out stakeholder interviews with the key people in your organisation. 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, behaviours 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 organisation.

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 centre 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 organisation 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 behaviour – 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 categorised into a tailor-made customer segment, and that the interaction you have with the call centre is at least in part defined by the persona you’ve been assigned. It helps them understand how to talk to you, what behaviours you’re likely to exhibit, and the types of need you’ll have.

There are three reasons organisations 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 maximise 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?
  • Behavioural: 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 realised 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 behavioural 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 publicised 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 behaviours if that looks like a useful way of finding other people who might fall into those need groups.

Behaviours 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 colours, you just end up with brown. You need to be able to pick out individual colours – 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 analyse 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 behaviours, then assigning all existing members to one of those segments. It was a powerful tool for the company’s call centre 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 behaviours 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 recognisable 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 centre 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 organisation 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 centres are increasingly reliant on automated systems. A solid market segmentation can help ensure those interactions are properly tailored and high-value segments are prioritised.

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 optimise 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 prioritise 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 maximise 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. 

Market segmentation studies help brands uncover the distinct groups within their customer base. By grouping people with shared characteristics (such as needs, behaviours, or attitudes), brands can identify which segments offer the most commercial potential. This enables sharper targeting, clearer positioning, and more relevant customer engagement across marketing, product, and service functions.

What is the purpose of market segmentation?

Just because your product can reach everyone doesn’t mean it should. People have different priorities, and they respond best to brands that reflect those differences. Segmentation helps you focus on the right audiences, so your message cuts through and your offer resonates. It’s also the foundation for creating customer experiences that feel personal and intentional, rather than one-size-fits-all.

A common question clients ask is: “What’s the real benefit of market segmentation, especially when mass marketing feels more scalable?” We often hear variations of the same concern: “Why narrow our focus if anyone could be a potential customer?” and “Wouldn’t we see stronger returns by casting a wider net?” These are fair questions, especially for fast-growing or resource-limited teams trying to scale quickly.

In practice, the opposite is usually true. Segmentation is powerful because it helps you identify and prioritise the customers who drive the most value. It’s a more focused and efficient route to growth—and often more cost-effective than broad-reach tactics that fail to convert.

One of the biggest misconceptions about segmentation is that it’s only valuable for large brands with vast data sets. In reality, businesses of all sizes can benefit. For smaller companies, segmentation helps stretch limited budgets by focusing on the audiences that matter most. For enterprise brands, it ensures that marketing, product, and service teams aren’t speaking to everyone—but to the right ones. We’ve seen clients across industries—from tech startups to heritage FMCG brands—unlock new value by focusing on high-potential groups rather than chasing scale for its own sake.

There are two key reasons why segmentation works.

First, not all customers deliver the same value to your business. Take a charity, for instance. Some donors give sporadically, while others contribute regularly and at higher amounts, often because of a stronger emotional connection. Understanding and prioritising these high-value groups ensures your efforts are directed where they’ll have the greatest return. Whether you’re optimising acquisition, retention, or service tiering, focusing on value-driving segments gives clarity to your commercial strategy.

Second, customer needs and expectations vary widely. These differences influence everything from what people buy to how they interact with your brand. When you tailor products, messaging, and services to reflect the needs of each segment, you increase relevance. This creates stronger customer experiences and delivers better outcomes—whether that’s improved satisfaction scores, stronger conversion rates, or more effective upselling.

Not all segmentation methods deliver the same depth of insight. While demographic and geographic segmentation are common starting points, they often create overly broad groupings that miss the nuance of real customer behaviour. Just because people share an age bracket or live in the same location doesn’t mean they share the same needs, values, or buying motivations. Over-reliance on these basic approaches can lead to ineffective targeting—or worse, misalignment with your audience that damages engagement and trust. To uncover what truly drives decision-making, brands need to go deeper.

How market segmentation studies can inform your strategy

When done well, a segmentation study becomes more than just research—it becomes a blueprint for better business decisions. From product design to marketing and customer service, segmentation brings clarity to where and how to focus for commercial success.

Design more successful products and services
Customer-centric product and service design starts with knowing what different audiences need. Instead of trying to appeal to everyone, segmentation allows you to focus on solving the real pain points of high-potential groups. This results in solutions that feel more relevant, driving greater satisfaction and adoption.

Develop more effective marketing campaigns
Segmentation clarifies who to target and how to reach them. When you tailor campaigns to each segment’s priorities and preferences, your marketing becomes more precise and efficient. It also performs better. Mailchimp found that segmented campaigns had open rates 14 percent higher than non-segmented ones.

Build stronger emotional connections
Messaging that reflects a customer’s values builds trust. When creative assets and communications align with what matters to each segment, brands can foster deeper emotional connections. This improves retention, loyalty, and long-term value.

Maximise marketing ROI across channels

Segmentation enables brands to target with greater precision across channels, from personalised email campaigns to highly focused digital advertising. As media budgets come under increasing scrutiny, the ability to align messaging with customer mindset delivers a measurable advantage. Generic campaigns struggle to gain traction in an environment where relevance is expected.

Offer more relevant customer service

Segmentation can also enhance the quality of customer service. We have worked with clients to integrate segment profiles into their CRM systems, allowing frontline teams to tailor interactions based on customer type. One dating app, for example, used this approach to help service staff adjust their tone and guidance depending on the segment profile. The result was improved customer satisfaction and closer alignment with the brand’s positioning.

Allocate resources more effectively

Segmentation provides clarity on where to direct investment, staffing, and strategic focus. It supports better decisions about which product lines to prioritise, where to focus acquisition efforts, and which customer groups warrant additional service or retention strategies. This structured approach enables brands to maximise returns by aligning internal efforts with external value.

Improve overall customer experience

A segmentation model that is embedded across product, marketing, and service functions can transform how brands engage with their audiences. By understanding and addressing the specific needs of each group, brands can deliver experiences that feel relevant, considered, and consistent. Over time, this builds loyalty and supports sustainable growth.

What makes a good market segment?

Before investing in a segmentation study, it’s essential to understand what qualifies as a good segment. A well-defined market segment must be strategically valuable, actionable, and enduring—not just statistically interesting. Strong segments typically meet the following criteria:

It’s large enough to be profitable
While micro-targeting is possible, segments must have enough commercial potential to justify marketing investment, product development, or operational focus.

It’s internally homogenous
A good segment is made up of customers who think and behave in similar ways. This consistency allows you to craft messaging and experiences that resonate across the group.

It’s externally heterogeneous
Each segment should be clearly distinct from others. If two segments respond the same way to offers or messaging, they may not need to be separate.

It’s stable and future-proof
A segment should remain relevant over time. This means avoiding definitions tied too closely to short-term trends or temporary behaviours unless that’s the goal (e.g. campaign-specific segmentation).

It’s identifiable and targetable
Beyond analytics, segments must be practically usable—i.e., you should be able to identify and reach them through your channels, whether through CRM systems, digital targeting, or media buys.

It aligns with your strategic goals
Not all segments are equal in value to your business. A useful segment supports your commercial objectives—whether that’s increasing share of wallet, growing in new markets, or building loyalty.

Keeping these principles in mind ensures your segmentation outputs are both methodologically robust and commercially meaningful—enabling real-world activation and strategic impact.

What does a typical market segmentation study look like?

Market segmentation studies are not one-size-fits-all. Each one is tailored to the business’s objectives, the market it operates in, and the resources available. While some projects aim to create broad strategic frameworks, others focus on campaign targeting or product development. That said, most segmentation research follows a common set of stages—each critical for uncovering meaningful customer groups.

Start with the right type of segmentation
Not all segmentation methods deliver equal value. Basic demographic or geographic segmentation can be easy to execute, but they rarely reveal the motivations or needs that drive consumer behaviour. For a more meaningful understanding of your audience, consider behavioural segmentation (based on actions), psychographic segmentation (based on beliefs and attitudes), or needs-based segmentation (based on problem-solution alignment). These approaches often provide greater business value by helping brands craft experiences that align more closely with what customers care about.

Behavioural data—while rich—isn’t the full story. It tells you what someone did, but not why. For instance, a customer’s browsing history might show interest in winter jackets, but without understanding their underlying need—are they shopping for fashion or function?—you risk missing the mark. This is why needs-based and psychographic segmentations are often more effective. They reveal the motivations behind behaviours, offering deeper insight for product innovation, creative messaging, and brand positioning.

Immersion and stakeholder alignment
Every successful segmentation study starts with immersion. In this phase, your research team works closely with internal stakeholders across departments—marketing, product, sales, and leadership—to understand business goals and existing customer knowledge. Through stakeholder interviews or workshops, hypotheses around customer types begin to emerge. These early-stage insights not only shape the questionnaire design but also promote internal buy-in, setting the stage for long-term adoption. We’ve seen clients revise their entire view of the market after initial assumptions were disproven during this stage.

Designing and conducting fieldwork
Once the groundwork is laid, it’s time to collect the data. Most segmentation studies are grounded in quantitative research—typically a large-scale survey that includes behavioural, attitudinal, and demographic variables. Depending on your goals, this may be complemented by qualitative research up front (e.g. focus groups or in-depth interviews) to explore hypotheses in more depth or post-survey to humanise the segments. In some cases, omnibus surveys help establish market incidence, especially when segmenting between category users and non-users, or customers and prospects.

Sampling and questionnaire design
A robust segmentation requires a representative sample. We ensure the respondent base reflects your actual or intended customer base—across age, region, usage, or industry vertical. Questionnaire design is equally important. It should include a mix of profiling questions, attitudinal and needs-based statements, and behavioural indicators. These are later used in the segmentation modelling to form clusters that are both statistically and commercially relevant.

Creating the segmentation solution

Once the data is in, the focus shifts to turning it into a usable framework. Advanced analytics identify patterns in attitudes, behaviours, and needs that group respondents into distinct segments. But statistical rigour isn’t enough. A strong segmentation solution must translate into real-world impact.

At this stage, we work closely with stakeholders to refine the segments, not just for statistical validity but also for business relevance. This includes evaluating each group’s size, commercial potential, and strategic fit. What makes each segment tick? What do they value? How do they behave? We go beyond demographics to uncover motivations, preferences, and barriers to purchase.

Just as important is how segments are communicated. Naming matters. Clear, descriptive labels—rather than generic ones like “Segment 3”—make insights easier to adopt across departments. Memorable names humanise the data and accelerate internal alignment, ensuring segmentation becomes a shared language, not just a research output.

Bringing the segments to life

Once the segmentation model is finalised, the real work begins: embedding it across the organisation. A 100-slide PowerPoint may satisfy the insight team, but it won’t drive adoption. To make segmentation operational, you need materials that are practical, memorable, and easy to absorb—regardless of someone’s role or data fluency.

Think beyond reports. Effective deliverables include one-page segment summaries, posters, wallet cards, internal wikis, and short videos that showcase each group’s mindset and behaviour. Documentary-style videos in particular are powerful—they use real quotes and relatable settings to turn data into compelling human stories. Humans relate to people, not charts, and that emotional resonance is key to building internal empathy.

When done well, these materials become everyday tools. They help teams across departments understand and relate to their audience, guide product innovation, inspire creative briefs, and onboard new hires into a customer-first culture.

Activating the segments

Even the strongest segmentation will stall without a clear plan for activation. Success depends on structured rollout and consistent reinforcement across the organisation.

Activation workshops are among the most effective tools. These sessions are tailored to each department, helping teams translate insights into action—mapping segment needs to product roadmaps, campaign strategies, service protocols, and sales tactics.

Some organisations go further by embedding segments into CRM and analytics platforms, enabling personalised engagement at scale. Others develop segment-specific playbooks, personas, or test-and-learn frameworks to guide execution.

Ultimately, activation is about turning insights into outcomes. It’s what ensures segmentation doesn’t gather dust, but instead shapes real decisions and delivers measurable impact.

Ready to unlock the full value of market segmentation?

Segmentation isn’t just a research tool—it’s a strategic asset that can transform how your brand develops products, communicates with customers, and allocates resources. If you’re looking to better understand your audience and turn insight into action, request a proposal to see how we can help.

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Market segmentation studies are powerful tools for businesses. They help organisations divide the market into distinct groups that share specific attributes. This enables businesses to focus on the most lucrative segments. Segmentation can guide everything from marketing to product development, right through to identifying new market opportunities. In this article, we outline the key benefits of market segmentation and how it supports growth across functions.

The benefits of market segmentation studies

Focus on the customers that matter most

The core principle at the heart of market segmentation is to divide the market into groups of customers you can target, rather than addressing everyone in the same way. Instead of trying to be all things to all people, segmentation helps brands concentrate on the most valuable customers—those with the greatest potential for conversion, loyalty, or long-term value.

So what does this look like in practice? A recent case study brings this to life. We partnered with a leading university to design a segmentation of its alumni. Securing donations from alumni is a core revenue stream for universities. While it might seem logical to target all alumni equally, the reality is that a small proportion make the biggest impact.

There are many ways of segmenting a market. In this instance, we used a needs-based segmentation, exploring the attitudes and values of past students. A demographic segmentation would have enabled targeting based on income bracket or profession—but what truly mattered was alumni sentiment. Those who had valued their university experience and saw it as a stepping stone to their careers were most likely to donate. By segmenting in this way, brands can focus on those most likely to convert, helping to lower acquisition costs.

Power new product development

Another benefit of market segmentation is the ability to uncover new opportunities for innovation. Needs-based segmentation is particularly valuable here, as it breaks the market into distinct groups based on underlying customer needs. By understanding what people are looking for from the category—and the pain points they experience—brands can identify whitespace and design products, services, and experiences that genuinely meet demand.

Segmentation can also play a crucial role post-launch. It helps brands assess where a product may be falling short of customer expectations—and how to refine the offer to better compete.

Design more effective marketing

Segmentation also strengthens marketing strategies. It doesn’t just clarify who to target—but also where to find them and how to tailor messaging. This ensures your marketing spend is more efficient, while delivering greater cut-through and relevance in communications.

You might be investing in TV advertising year after year, aiming to reach as much of the mass market as possible. But segmentation often reveals smarter paths. Your audience may be Instagram enthusiasts or loyal readers of niche publications—reachable on those platforms at a lower cost. In an age of digital targeting, market segmentation provides the clarity needed to invest wisely and improve campaign efficiency.

Another important application of segmentation is in shaping your marketing messaging. Different customers respond to different triggers, and a strong segmentation can help you understand what to say—and to whom. Imagine you’re a mobile phone company with a broad customer base spanning all ages and levels of tech fluency. Segmenting this audience enables you to create tailored campaigns that speak to each group’s priorities. Early adopters may want technical specifications front and centre. Bargain hunters will be drawn to pricing and value. By matching messages to mindsets, you can boost engagement and increase conversion.

Deliver better customer service

Segmentation is often mistakenly viewed as the sole domain of marketing. In reality, its value multiplies when everyone—from the CEO to the cashier—understands and uses it.

We partnered with an online dating platform to build segments based on user behaviours and usage patterns. Each customer was assigned to a segment in the CRM, which appeared during every interaction—giving call centre agents instant insight into the person they were speaking with. This context allowed them to tailor conversations more effectively. You’ve probably experienced something similar: the network provider that offers you new perks when you threaten to leave, or the TV service that recommends the perfect plan based on your habits. These aren’t guesses—they’re segmentation strategies in action. Armed with the right insights, frontline teams can drive retention and upsell with confidence.


Use your resources more efficiently

As the examples above show, segmentation studies can help businesses understand where to focus. This leads to more efficient use of resources—whether it’s allocating sales teams to high-value segments or prioritising marketing spend on high-impact channels, like a trade show known to attract your target customers.

This focus on smart resource use is exactly why segmentation studies can be especially valuable for the businesses least likely to consider them: SMEs. While robust segmentation requires investment—often involving in-depth research into behaviours, attitudes, values, and needs—there are ways to start small. Begin with simpler segmentation types, such as geographic, demographic, or behavioural (if the data is available). Even a basic approach can cut through the noise and bring sharper focus to your strategy.

Develop a more customer-centric culture

One of the more underrated benefits of segmentation is the cultural shift it can support. A well-executed segmentation can encourage employees across departments to better understand your target customers—and to put their needs at the centre of business decisions.

It’s important to recognise that creating a segmentation alone won’t lead to cultural change. That shift needs to be nurtured through intentional management and internal engagement.

Start by securing buy-in early. Work with key stakeholders so they feel involved in the process. Segmentations can be disruptive, so it’s critical that those expected to use them feel a sense of ownership. That ownership is what drives long-term adoption.

Next, ensure the segments are clearly communicated across the organisation. They should be easy to understand and memorable. Visual tools can help here. Our in-house design team has created deliverables that transform insight-heavy slides into accessible, engaging outputs—ensuring segments live on beyond the research team. These should be widely shared. Everyone, from engineers to sales teams, should be able to picture the segments and use them in their daily work.

Finally, activate the segments and embed them into future strategy. We often work directly with teams to help them interpret the segments and understand what they mean for their work.

Create a superior experience for customers

At its core, segmentation is about delivering a better experience for the people you serve. When targeted marketing, responsive service, and innovation are aligned to customer needs, brands create experiences that build loyalty and strengthen long-term relationships.

Increase profitability

Segmentation is one of the most effective ways to improve your bottom line. By focusing your time, energy, and budget on the most promising customer groups, brands reduce waste and increase conversion. You’re no longer investing equally in every potential buyer—you’re prioritising the ones who are most likely to deliver value. That shift leads to higher margins, stronger returns, and a more efficient path to growth. It’s a smarter way to work—and one that delivers results.

Improve return on investment (ROI)

ROI is a critical metric for every team—especially when budgets are under pressure. Segmentation boosts ROI by helping teams allocate spend more effectively across campaigns, channels, and initiatives. Instead of spreading your marketing or product development budget thin, you can focus it on the segments most likely to respond. Whether you’re launching a new product or testing messaging strategies, segmentation helps you get more out of every pound spent.

Achieve better customer retention

Acquiring customers is one thing. Keeping them is another. Segmentation helps brands better understand what their different audiences need—not just to buy, but to stay. When service teams are armed with segment-specific insights, they’re more likely to anticipate problems, offer the right solutions, and build relationships that last. Personalisation becomes easier. Upsell opportunities are clearer. And the cost of churn goes down.

Gain competitive advantage

In crowded categories, segmentation can be the difference between blending in and standing out. It allows brands to position themselves more precisely, spot unmet needs faster, and adapt more quickly to shifting consumer expectations. Rather than chasing trends, you’re responding to real differences in what customers want. That deeper understanding of your market gives you an edge—and a roadmap for staying ahead.

Why segmentation is more essential than ever

Segmentation isn’t just a research exercise—it’s a strategic imperative. In markets shaped by shifting behaviours, evolving needs, and rising customer expectations, brands that truly understand their audiences are the ones that thrive. The most successful organisations use segmentation to focus their resources, spark innovation, and build lasting relationships.

Whether you’re targeting new customers, refining your messaging, or transforming how teams make decisions, segmentation provides the clarity and confidence to move forward.

Want to know how we can help? Explore our segmentation services or get in touch to discuss your next challenge.

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Market segmentations can be powerful tools for companies big and small. By tailoring your strategy based on the needs of your key customer segments, you can better appeal to the customers that matter most. But how do you segment your audience and what are the different forms of segmentation you can use?

There are 5 main types of segmentation

A segmentation divides the market up into distinct groups of customers, and identifies those that are most valuable to your business. There are 5 main ways you can do this. 

Geographic segmentation

The first and most basic form of segmentation is geographic segmentation. This approach to segmentation looks to create groups of customers based on the following factors:

  • Country
  • Region
  • City 
  • Area e.g. urban, suburban, rural
  • Climate or season
  • Timezone
  • Language

Geographic data is some of the easiest data to obtain and analyse, and for some businesses this can be a useful way of segmenting the market. Imagine you’re an automotive manufacturer selling a four wheel drive. Segmenting the market based on location could be useful as a starting point as you’re likely to have much greater success targeting those in rural locations than urban centres. But this example shows that the effectiveness of a geographic segmentation is limited. There are a number of other factors that play into willingness to buy a four wheel drive – income level, lifestage, previous purchase patterns, attitudes and values all play a role too.

This demonstrates that in most cases segmenting on geographic factors alone is insufficient. Doing so can lead you down a dangerous path. Assuming that all customers are the same simply because they live in the same place is reductionist and can risk stereotyping and as a result, alienating customers. 

Demographic segmentation

As the name suggests, a demographic segmentation seeks create customer segments based on demographic information including:

  • Age 
  • Gender
  • Income level 
  • Level of education 

As with a geographic segmentation, this is one of the easiest ways for a company to approach segmentation as demographic data on existing customers is easy to collect and in many cases, is already readily accessible in a company CRM system.

It does have some uses. For instance, if you’re a luxury brand, focusing on existing or potential customers who earn above a certain income threshold is a no-brainer, as it means you’re able to focus your resources on the people that are most likely to be able to buy your product. 

That said, segmenting on demographic factors alone has been largely discredited, as whilst people may be the same age or earn a similar amount, this does not mean they are all the same. 

That said, many brands still seem to be falling into the trap of targeting based on generational differences and the current obsession with “millennials” or “Gen Z” is case in point. Joon, Air France’s failed attempt to to create an airline for millennials, shows the danger in doing this. The airline played into all the stereotypes about this segment – hip and trendy uniforms for the crew, digital services including VR headsets on board and quinoa front and centre in the in-flight menu. Unsurprisingly, the concept alienated target and non-customers alike and the airline flopped.

Firmographic segmentation

A firmographic segmentation is often used for segmenting B2B customers. It relies on similar principles to a demographic segmentation, looking at factors about current and target companies such as:

  • Company size
  • Industry 
  • Job title

Like geographic and demographic segmentations, this type of data is readily available either in a company CRM system or online so can be a good starting point for businesses wanting to segment the market and focus on the customers with most potential. But when working in B2B, we mustn’t forget that the clients we are dealing aren’t just companies. They are people too. A marketing manager in a small firm in the professional services sector might have more in common with a marketer in a large FMCG firm than with their peers, as their motivations and values may be similar. 

Behavioural segmentation 

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More sophisticated forms of segmentation look not just at who consumers are, but how they behave in relation to your brand and category. Behavioural segmentations do what they say on the tin, they analyse customers based on their past behaviours such as:

  • Spending patterns 
  • Browsing history 
  • Interactions with the brand 

Behavioural segmentations have become popular with digital first brands and B2B firms embracing marketing automation, as not only can this data be easily gathered and analysed, but once the segmentation has been finalised, it’s possible to allocate customers to a segment and then tailor comms accordingly – all within the digital ecosystem. For instance, a first time buyer will receive different promotions and messaging to a returning customer. This can be very powerful, ensuring that marketing campaigns have more cut through and result in greater conversion.

However there are some drawbacks. Behavioural segmentations are predominantly based on a consumer’s digital footprint. As we’re all aware, this only tells half the story. Whilst you might be able to identify that a customer is looking for a new pair of shoes, you won’t know why. As such, marketing strategies based on behavioural segmentations tend to be quite product-focused and won’t necessarily connect with consumers on a deeper level. Behavioural segmentations are also less helpful for informing product development. Sure – you’ll be able to ascertain the product or service a customer is interested in right now, but behavioural segmentations don’t take into account customer needs which can reveal opportunities for innovation or to optimise your existing offering.

Needs based segmentation 

The fifth and final type of segmentation is a needs based segmentation. Needs based segmentations look to segment customers based on attitudinal factors such as:

  • Needs
  • Values
  • Motivations
  • Priorities

Needs based segmentations are widely regarded as the most effective approach to take segmentation and as such, make up the vast majority of segmentations used by businesses nowadays. Why?

Needs based segmentations don’t assume that people are the same simply because they share geographic or demographic characteristics or because they’ve bought the same thing. Instead they look deeper, creating groups of people based on shared needs and values.

This can be extremely powerful as it allows you to understand how your product or brand fits into customers’ lives, helping to put their needs at the heart of your strategy and allowing you to be more customer-centric as a business.

Segmenting based on needs can power innovation by illuminating unmet needs or areas where your product or service falls short. It can provide inspiration for powerful marketing campaigns that align with consumers’ attitudes and values, creating a strong connection with the brand and fostering loyalty.

Market segmentation studies can be powerful tools for any business. Find out more about our capabilities in this area or get in touch to discuss a new project with us. We’d be happy to share our expertise.

In today’s globally connected world, every product has a potentially vast market. Trying to target everyone in this market with the same materials, approaches, and techniques would be crazy — people are too varied and different to respond to the same marketing message.

So how do you ensure your marketing connects effectively with as many people as possible in your target market? The only real solution is to use market segmentation.

In simple terms, market segmentation is the process of taking a diverse and varied market and dividing it into more homogeneous segments.

Typically you’ll split your market into sub-groups based on criteria like their needs, behaviours and attitudes. . Market segmentation is nothing new, but it delivers a wide range of benefits to businesses if you do it the right way.

In this guide, we’ll take a look at why market segmentation is so important, the benefits it delivers, and how you can do it effectively.

Why do we need it?

Targeting everyone in a broad market with the same message is a fast route to poor response rates and low conversion rates.

Imagine you’re selling a new smartphone. The kind of message that will resonate with a 19-year-old customer is likelyto be very different from the message that resonates with a 74-year-old. Whichever you opt for, you’ll end up alienating a segment of your market.

It’s crucial to split your market into different groups so you can use a more tailored marketing message for each one. This works across all channels, from social media ads to email and direct mail.

What are the benefits of market segmentation?

There are many good reasons to segment your market, such as:

  • Better conversion rates. The ultimate reason to use segmentation is to improve your conversion rates and increase your revenue. By targeting groups with an offering more relevant to them,  you boost your chances of a positive response.
  • It helps you lower acquisition costs by focusing on the most profitable customers. By targeting customers who are easier to sell to and bring on board, you’ll be able to focus your efforts more efficiently and avoid spending lots of resources on tricky customers. This is the approach MetLife took with their segmentation efforts, and it’s strategy we’ve used to great effect with a university looking to secure donations from its alumni. 
  • Create more tailored marketing content. By creating content and ads that are specifically targeted to a certain sub-group of your market, you’ll be able to build a closer relationship with customers. This ensures better retention and stronger connections that, over time, leads to more sales.
  • Better response to marketing campaigns. Email is one area where segmentation can work extremely well. Research by Mailchimp found that segmented campaigns had open rates 14.31% higher than those that didn’t use segmentation.
  • It saves cost. By increasing the accuracy of your marketing, you’ll get more for your money and ensure less is wasted on poorly targeted marketing campaigns
  • Greater personalization. In one report by SmarterHQ, 80% of people who classify themselves as frequent shoppers said they only shop with brands who personalize their experience. By segmenting your market, it’s possible to personalize your messaging and connect more deeply with your target audience.
  • Better service. A good segmentation can help you to provide more effective customer service. Some businesses empower their front of house or call centre staff with information as to what segment a customer falls into so that they can tailor their interactions accordingly. 
  • It provides a focus for further market research so that you spend your budget and time on getting to know your most valuable customers

How to do market segmentation

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Before you start segmenting your market, it’s important to know what to aim for. A good market segment should have the following attributes:

  • It’s big enough to be profitable. If your segment is too small, there simply won’t be enough demand for your product or service and you’ll fail to reach your goals.
  • The members of your market are similar enough to respond to one message. This is the main reason to segment — is your sub-group homogenous enough for the same marketing strategies to be relevant and effective?
  • It’s future-proofed. Will your segment stand the test of  time?
  • It’s distinct. The segment is memorable and easy to distinguish from other segments.

What categories should you segment your market into?

When it comes to deciding on the criteria for your segments, there are a number of options. Let’s take a look at some of the main types of market segmentation and the benefits and drawbacks of each.

  • Demographic segmentation. This involves using criteria like age, gender or income level to segment your customer base.. It’s one of the easiest ways to quickly start dividing up your market,but it is a very simplistic and outdated approach to segmentation. As Mark Ritson rightly argues “millenials are not a segment”. Assuming that everyone of a certain age has the same needs and attitudes and behaves in the same way is misguided and has resulted in some well-known marketing fails. Take Joon, Air France’s sub-brand for millennial travellers. Rooted in stereotypes, the brand alienated its target customers and crashed and burned. 
  • Geographic segmentation. Similar to demographic segmentation, segmenting your customers based on where they live can leave you in hot water. Assuming that all consumers are the same just because they live in the same place is reductionist and is unlikely to be effective as a segmentation strategy.
  • Behavioral segmentation. This type of segmentation is based on how customers have responded or behaved in the past in their interactions with your brand. It’ll help you understand your most profitable customers and what to sell to them but the drawback is in the name. This type of segmentation only tells you how customers have behaved in the past. As such, it’s a poor predictor of future behaviour, and it doesn’t provide any insights around motivations, values or needs which can help you connect with consumers on a deeper level. 
  • Psychographic segmentation. This segments customers based on their views, values and lifestyles. s . It makes it easier to create a more resonant and relatable marketing message and avoid alienating your market with views they won’t agree with.
  • Needs-based segmentation. This is by far and away the most effective approach to segmentation. Segmenting people with similar needs allows you to be more targeted in product and service design or marketing campaign development, as you can focus on addressing customer needs and pain points. What’s more needs-based segmentations tend to be more long lasting and future-proofed than other approaches. 

Market segmentation is a great way to ensure you’re targeting the right customers  and tailoring your interactions for maximum success.

It allows you to forge a deeper bond with your audience. and whilst, it requires more work than a one-size-fits-all message, it’s well worth it in terms of the results.

At Kadence International, we help our clients design effective market segmentation studies and do it in a way that maximizes revenue. To find out how we can do this for you, get in touch.