Geographic market segmentation groups customers and prospects based on where they’re physically located. This isn’t just where they live, but also the place they work, were born, or where their family comes from — all of which can strongly influence their purchasing decisions.

For instance, different types of food, beverage, cars and even architecture can be tied to certain cities and states. The climate of a given geographical region will often dictate the purchasing preferences (or limitations) of its residents regarding everything from clothing to insurance to gardening supplies. And those who live in a metropolitan area may simply be easier to reach than those in more isolated regions.

Offering powerful baseline information, geographic segmentation is a cornerstone for most market segmentation strategies. It’s relatively easy to collect, with much of the applicable data available by public record. Defining a competitor’s sales performance within a certain state can be easier than among, say, a specific age group.

At the same time, the effectiveness of geographic segmentation in recent years has been diminished by the prevalence of online shopping. Because it can be difficult to get actionable data from a strategy that relies only upon geographic segmentation, it’s often best used in combination with another type.

Demographic market segmentation groups people based on personal identifiers like age, gender, education and income. Some of the biggest driving forces behind purchasing decisions can be tied to these traits, making demographics an essential component of most segmentation strategies.
 
Like geographic data, demographic information is relatively easy to get. What isn’t available from government sources like the U.S. Bureau of Labor Statistics can generally be either purchased or acquired via surveys. Though this information may come at a price, it’s also much more likely to yield actionable insights
 
In addition to identifying potential customers, demographic segmentation can also give businesses an idea of the size of the market for new products or services, which can help drive overall business strategy. Like geographic segmentation, it’s best used in coordination with other segmentation strategies.

Behavioral market segmentation is the grouping of customers and prospects by behavior, rather than by a physical attribute like age or geographic location. In theory, this behavior could be anything; in practice, it usually applies to patterns of interaction with a particular business, brand, product or website.
 
It makes sense to speak differently to people based on how they perceive a product. For instance, a frequent buyer should receive different messaging than someone who’s never used or heard of that product or service. And the ability to focus on known or likely customers rather than cold leads can save substantial time, effort and expense marketing and sales efforts.
 
However, actionable behavioral market segmentation can be difficult to achieve. Especially if the desired data is specific to a company, it must be newly researched, which can be expensive and time consuming. However, the resulting information can provide a depth of knowledge that more than justifies the expense — especially when combined with geographic or demographic segmentation.

Psychographic market segmentation groups customers and prospects by personality and social identification. This includes everything from political affiliations, religious beliefs and club memberships, to personality types — for instance, introverts and extroverts, or those who closely watch their budgets versus those who prefer to spend more freely.

If some of these categories seem broad, consider the benefits of being able to define groups by criteria such as wine enthusiasts, frequent flyers or fans of Marvel or the NFL. The purchasing preferences of these groups can be predicted with a specificity far beyond what’s possible with just demographic or geographic segmentation.

Psychographic information isn’t as readily available as geographic and demographic data. Surveys can be a good source for this data, as can focus groups, market research panels, and digital analytics that track customer behavior — although businesses must be careful to adhere to applicable data privacy laws like the California Consumer Privacy Act (CCPA) and Europe’s General Data Protection Regulation (GDPR).

Firmographic market segmentation groups companies, as opposed to people. Useful for B2B strategy, this type of segmentation breaks down organizations by factors like revenue, number of employees, type of industry, and so on. Like demographic data for consumers, this data can be used to help businesses better understand and communicate with potential clients.
 
Firmographic data has the benefit of specificity — simply put, there are fewer businesses than customers, making for easier identification and outreach. Firmographics can also help businesses better understand their viability within certain parameters, helping them make important decisions about product development and whether or not to enter a specific market,
 
Firmographic data is also relatively easy to acquire; for instance, an organization’s industry can be determined by its North American Industry Classification System (NAICS) code. Ownership and legal status can be found online at government websites and in trade journals. When more specific information is needed, targeted surveys can be created.