Market segmentation, also called customer segmentation, is in essence dividing the market to customer groups having common characteristic and sharing similar buyer patterns.
The simplest type of segmentation is dividing the customers according to the socio-demographic and geographic parameters. As a result of this type of segmentation we can identify such customers’ characteristics as age, sex, education, location and nationality. Often this type of segmentation is enough to get a basic impression about the main groups of customers of certain products.
In some cases, research reveals that age, sex or social status are not the main criteria for customer segmentation. It sometime happens that customers of different age or sex can have the same buyer profile, i.e. share the same consumption patterns, while consumers with similar socio-demographic characteristics can have different consumption patterns. In this case, it is necessary to do customer segmentation according to behavioral principles, meaning to divide them into groups basing on the methods of purchasing, deep purchasing insight, habits, internal barriers, product evaluation criteria and perception of advertising.
Another distinctive method of customer segmentation is psychographic segmentation.