Market segmentation examples
Why are market segmentation examples important, and what can businesses learn from examples of successful market segmentation like Tesco and Coca-Cola?
In today’s fragmented digital marketplace, strategic 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.
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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.
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 NIQ
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 NIQ 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.