For instance, suppose a catering business offers catering services in the client’s home. Instead of advertising via a newspaper insert that goes out to everyone, the caterer would first identify the target market for its services. It could then target the desired market with a direct mail campaign, flyer delivery in a particular residential area, or a Facebook ad aimed at customers in a specific area, thereby increasing its return on investment in marketing and bringing in more customers. Social media platforms, such as Facebook, LinkedIn, Twitter, and Instagram, have sophisticated options to allow businesses to target users based on market segments. A bed-and-breakfast business, for example, could target married Facebook followers with an ad for a romantic weekend getaway package. LinkedIn, on the other hand, is more B2B (Business to Business) oriented, so you can target businesses using a variety of criteria such as the number of employees, industry, geographic location, and so on. Although you can approach market segmentation in many different ways, depending on how you want to slice up the pie, three of the most common types are demographic segmentation, geographic segmentation, and psychographic segmentation.
Demographic Segmentation
Demographic grouping is based on measurable statistics, such as:
GenderAgeIncome levelMarital statusEducationRaceReligion
Demographic segmentation is usually the most important criterion for identifying target markets, which means that knowledge of demographic information is crucial for many businesses. A liquor vendor, for instance, might want to target its marketing efforts based on the results of Gallup polls, which indicate that beer is the beverage of choice for people under the age of 55—particularly in the 18 to 34 range—whereas those aged 55 and older prefer wine.
Geographic Segmentation
Geographic segmentation involves segmenting the market based on location. Home addresses are one example, but depending on the scope of your business, you could also use:
NeighborhoodPostal or ZIP codeArea codeCityProvince or stateRegionCountry (if your business is international)
Geographic segmentation relies on the notion that groups of consumers in a particular geographic area may have specific product or service needs. For example, a lawn care service may want to focus its marketing efforts on a particular town or subdivision inhabited by a high percentage of older residents.
Psychographic Segmentation
Psychographic segmentation divides the target market based on socioeconomic class or lifestyle preferences. The socioeconomic scale ranges from the affluent and highly educated at the top to the uneducated and unskilled at the bottom. The UK-based National Readership Survey segregates social class into six categories: Psychographic segmentation is based on the premise that the choices people make when purchasing goods and services reflect their lifestyle preferences or socioeconomic class.
An Example of Target Marketing
According to QSR magazine’s 2021 QRS 50, McDonald’s is the largest fast-food chain in the U.S. ranked by sales. It’s also one of the most successful examples of demographic target marketing, aiming its products at children, teenagers, and young urban-dwelling families by offering PlayPlaces & Parties, the Arch Card (reloadable cash card), free wifi, Happy Meals that include toys such as Marvel Studios characters, special promotions, and clever ad campaigns. Targeted advertising and aggressive pricing have enabled McDonald’s to capture nearly 29% of the fast-food market share in the U.S. as of the second quarter of 2022. However, around the time millennials surpassed baby boomers in 2016 to become the largest generation in the U.S. workforce, McDonald’s revenue saw a sharp decline as fast-food menu items, such as the ubiquitous Big Mac and fries, have less appeal to millennials. In response, McDonald’s has altered its marketing strategy to target the millennial generation by advertising fresher, healthier menu options and upscale coffee products such as espressos.
