Market segmentation is the process of grouping target audience into groups of people with shared characteristics, product needs, and purchase habits. This identifiable groups of individuals allow marketers and businesses to produce customized products and create a specific marketing strategy to reach potential customers. When grouping the target market, marketers identify the qualities of their product and list down the attributes it will best suit. This process includes identifying the demographic, behavioral, geographic and psychographic traits of the population who would potentially use the merchandise.
Demographic traits are the socioeconomic characteristics of the population. They are useful in the process of segmenting the consumers and include: age, gender, religion, education, nationality, social class, occupation, family size, and ethnicity. The behavioral segmentation focuses on the benefits of the product to a particular group of people, how they use the product and the usage frequency either daily or occasional. It also considers the buyer status and gives focus to consumer loyalty. Geographically, people fall into various categories by the region they live in, the state, country, continent and the size of city or town. They also consider the population density of an area and the climatic condition. Psychographic qualities used in segmentations include the lifestyle of a population, the activities, opinions, values, and attitude.
A firm can use more several segmentation bases when classifying their customers which diversifies the value of their product. Having purchased a backpack to use for carrying a laptop and school books recently, focusing on market segmentation of a backpack company is rational. It would segment by benefits sought from using the backpacks, the usage situation of the pack, the frequency of use, the age of users, social class which determines income level and affordability, and the climate to ensure it is durable in all weather changes. The attitude of the target audience is also of importance as well as the opinion of peers.