In today’s fragmented digital marketplace, segmentation has become more important than ever. By providing a clear roadmap for reaching and converting their most likely customers, businesses are increasingly relying upon market segmentation not only to ensure successful sales and marketing, but also to inform decisions on distribution, customer service, product design and other core functions.
With that in mind, studying successful examples of market segmentation can yield some important lessons for today’s business leaders. From B2C types like geographic, demographic and behavioral segmentation to B2B or firmographic — and including a look at iconic brands like Coca-Cola and Tesco — here’s a closer look at some noteworthy market segmentation examples, and the lessons they have to offer.
Market segmentation examples
The process of dividing a customer base into different groups based on shared traits, market segmentation is key to ensuring that businesses know who’s most likely to buy what they’re selling — and helps them tweak that offering over time to better serve those customers.
Market segmentation also enables other key processes, like more specific customer segmentation, and the creation of buyer personas. A clear and accurate understanding of all these processes is necessary to deliver the personalized messaging that’s now expected by 71% of U.S. consumers, according to a 2021 report by McKinsey & Company.
“Companies that grow faster drive 40 percent more of their revenue from personalization than their slower-growing counterparts,” the report added.
The difference between examples of market segmentation and customer segmentation
What’s the difference between market and customer segmentation? Nike is a good example of the distinction. The company has succeeded at leveraging demographic segmentation to essentially divide the market in half by gender, famously growing its revenue by 24% as a direct result of its efforts to court female consumers.
Yet Nike is also known for the customer segmentation it applies within those larger market segments. For instance, it invests in developing dozens of individual products and campaigns for individual sports like basketball, running, football, and soccer. And its iconic Air Jordan line not only dominates but basically created the designer basketball shoe. It’s certainly aimed at a different segment than the shoes that Nike distributes to big-box retailers at less than half the price.
Of course, Nike also benefits from having a long-established brand and extensive revenue, both of which help fuel its lucrative endorsements and ambitious marketing campaigns. Yet over the decades, it not only successfully defended its position but enhanced it, doubling its revenue in the 2010s, to the point where it dwarfs that of popular competitors like Under Armour and even Adidas.
Types of market segmentation examples
Different types of market segmentation are used to group people in different ways, depending on each company’s unique needs or niche. Businesses must begin by deciding which of these segments makes the most sense for them to pursue — or, more often, which combination of them.
For example, demographics segmentation can group people by age or income, while geographic segmentation groups them by where they live, and behavioral segmentation by their actions and direct input. And their value is enhanced even further when combined, enabling businesses to pinpoint their most likely buyers in any given geographic area, or other specific characteristic.
Operational necessity often simplifies this decision. For example, a craft brewery may be limited in its geographic segmentation by lack of distribution availability in a neighboring state or country, which validates its decision to pursue a demographic segmentation that focuses on age or income.
With that understood, here’s a closer look at the main types of market segmentation, and some examples of each.
Demographic market segmentation examples
Demographic customer segmentation groups people by age, gender identification, income, or other basic identifiers — for instance, Nike’s decision to more actively pursue women. A company that sells toys is better advised to buy ad space during a children’s show than a late-night talk show. And property management companies will seek to target single renters rather than married couples looking to purchase their first home.
Companies that may seem limited to one demographic can often open up their segmentation opportunities with some creative thinking. For example, the traditional target market for Victoria's Secret may be women, but they’ve also been successfully marketing to men over the past decade, with advertising directed at boyfriends and husbands.
Geographic market segmentation examples
Geographic market segmentation can also be used to break into new local markets. For instance, Iowa-based supermarket chain Hy-Vee is currently pursuing an ambitious expansion strategy stretching from “the Canadian border (Minnesota) to the Gulf Coast (Alabama).” To be successful, though, it will have to navigate the existing competitive landscape and local pricing expectations for each new location — a variable that differs widely across different states and even counties.
Behavioral market segmentation examples
Behavioral market segmentation examples involve companies that successfully target customers based on past actions. Thanks to online commerce, the ability to gather this kind of data has never been more robust. Simply by utilizing data generated from their own transactions, companies can more effectively connect with everyone from loyal customers to bargain seekers.
This kind of segmentation can improve the quality of new leads, and enable businesses to maximize relationships with their most valuable customers — particularly in the form of rewards and bonus programs. For example, outdoor gear and clothing retailer REI offers Co-Op, a socially conscious membership program designed to appeal to consumers who value the outdoors and who want to support measures to protect the environment.
Psychographic market segmentation examples
As opposed to demographic information that’s objective by nature, psychographic segmentation examples use subjective data to group people by their memberships and affiliations, lifestyle interests, religious sentiments and even dedication to sports teams — for example, the fanatics of Manchester United, Real Madrid, New York Yankees or Los Angeles Lakers who can be found around the world.
Writing at the Harvard Business Review, Gretchen Gavett points to a psychographic market segmentation example used by a pregnancy test provider to divide customers into “the hopefuls and the fearfuls.” By addressing the most common attitudes towards a potential pregnancy with different product names, package designs, and even aisle placement, the company maximized market share for a single, specific product.
Technographic market segmentation examples
Examples of technographic market segmentation include companies that build campaigns around the specific technological habits, preferences and capabilities of their existing (or desired) customer base. This often takes the form of digital marketing, such as special incentives offered to customers who shop exclusively on the app, who join a social media group, or who sign up for an email newsletter.
Airbnb has used technographic market segmentation, and not only to target people who are seeking an alternative to hotels — but also those who are doing so online. As such, they’re competing more with other online travel hubs like Expedia and Hotels.com than with more traditional bed-and-breakfast establishments. They’ve also leveraged another form of tech segmentation by investing in TV ads.
Firmographic/B2B market segmentation examples
Firmographic market segmentation is used in business-to-business (B2B) campaigns. The principles of segmentation are the same, but they’re based on data that’s specific to business, like industry, type of corporation and number of employees. For instance, Amazon uses firmographic market segmentation for its Amazon Web Services (AWS) web hosting service, as opposed to the B2C emphasis for Prime.
Banking is an example of an industry that often focuses on firmographic as well as B2C segmentation. For example, a bank may tier its firmographic segments by the individual in charge of purchasing for a business. In doing so, it will offer different messaging to larger companies that have a credit or financial manager, versus smaller entrepreneurs where the owner makes all the decisions.
What examples of market segmentation work best for your company?
What examples of market segmentation work best for your company?
As with most aspects of branding and marketing, the specific solution that works best for an individual business will depend on its unique combination of market share, resources and long-term goals. In other words, market segmentation examples are best taken into consideration as part of a larger strategy.
A good way to illustrate this is with a closer look at some key multinational brands: Coca-Cola and Tesco
Market segmentation examples: Coca-Cola
One of the world’s best-known brands, Coca-Cola’s stock value of approximately $274 billion rests on its skill in navigating geographic segmentation on a global scale. And yes, as a company that’s been around for more than a century, Coca-Cola enjoys inherent appeal for people with traditional or “Classic” tastes. But it’s also demonstrated an ongoing savvy for seizing new market opportunities in recent decades.
For instance, the company has either created or acquired a series of products aimed at specific segments. Offering low-calorie (Diet Coke and Coke Zero) and caffeine-free (Fanta and Sprite) options, and even orange juice (Minute Maid) and bottled water (Dasani), the company’s range of products appeals to young and old, families and individuals alike.
And with a careful pricing strategy, Coca-Cola also continues to appeal to virtually every economic segment — a benefit that’s underlined by its widespread availability, in rural as well as urban areas. And with frequent sponsorships of celebrities and international sporting events like the Olympic Games, the company also serves as a savvy example of psychographic market segmentation.
Market segmentation examples: Tesco
Tesco is a pioneer in multi-market segmentation, known for its success in putting demographic data and patterns to work engaging customers. Based in the United Kingdom but currently in multinational expansion mode, the retail giant sells the gamut of consumer goods, from food and clothing to household goods and electronics, and even financial services.
Yet most of the segments that Tesco targets are highly competitive, and only getting more so — for instance, the rise in recent years of ALDI and Lidl as low-cost alternatives. As such, it has a lot of competition. And it’s met that challenge by segmenting its stores in a number of ways — Tesco Express in dense urban areas, and Tesco Metro and Tesco Homeplus in the suburbs, for example.
In addition, Tesco Bank embraces customers looking for convenient financial transactions and basic guidance, while the Clubcard program brings it all together in an inter-related rewards program to enhance customer loyalty. And the company is constantly developing new campaigns to attract and reward specific customers, particularly in ways that cross-promote its different service lines.
Go beyond market segmentation examples with GfK
In the face of rapidly diverging consumer tastes and communication channels, effective market segmentation is an absolute necessity. Yet it’s also a dynamic and complex task, requiring research that isn’t just in-depth but guided by real expertise. Among the market segmentation examples we’ve reviewed here, you can bet that each was the result of careful, long-term strategic planning.
If you could use a hand with segmentation or other aspects of marketing and branding, the experts at GfK are here to help — not just with in-depth market research and planning capabilities, but also the expertise to put it all to the best possible use for your organization, today and in the years to come.