After doing steps one to three, take note of the similarities and start grouping them into segments.
Your market segmentation can be classified through any of the following:
Group your potential customers according to the city, state, region, or country where they live.
If you are in the business of selling farm, air conditioning, heating, or lawn equipment, geographic location is one of your major considerations. Climate, for example, is something you cannot control, differs locally, and influences your income stream in these lines of businesses.
Decide if you want your business to focus on a local level or at a national level if you want a broader target market.
Classify potential customers according to their age, gender, religion, race, education level, occupation, income level, family size, and marital status.
Identify those characteristics of your demographic target market that could influence their ability, interest, and need to avail of your product or service.
If your business offers products or services that appeal on the customer’s attitudes, beliefs, and emotions, psychographic segmentation is a must for you.
Examples of psychographic variables that can influence your customer’s decision to purchase are: the desire for enhanced appearance, more money, and higher social status. A business who sells luxury bags and jewelries would want to appeal to a person’s desire for a higher perceived status.
Business owners should determine why their customers purchase their products or services.
Some of these reasons for purchase could be: affordability, brand loyalty, and seasonality. Its is important to analyze and understand the buying patterns and habits of your customers.
Low-involvement (i.e. buying a candy or ice cream) products are bought because of affordability and the low risk it presents to consumers. These products are often bought without much research or consideration prior to purchase.
High-involvement products (i.e. cars, houses, furniture), on the other hand, are more expensive and pose a high risk to the buyer if he/she makes the wrong purchase decision. Buyer’s remorse is usually high for these products. That’s why customer’s behavior is usually to take their time, do some research, ask for recommendations, and make comparisons before arriving at a purchase decision.