How to segment the market for a new product in 5 steps


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Marketing to the wrong audience is a wasted effort for you and your team. Investing company revenue in various marketing efforts but not seeing any return can harm the company morale. You may be making excellent strategies, sending attractive email campaigns, and advertising on all the right media, but still failing to see any profit. 

What is the problem? If we have to guess, you are not segmenting your audience right. 

In this article, we will break down how you can create targeted segments to increase the likelihood of a successful marketing strategy. 

What is Market Segmentation

Market segmentation is a marketing term that refers to segmenting, or grouping, prospective buyers into different segments based on shared characteristics. It involves segmenting a heterogeneous market into a number of smaller homogeneous markets based on different customer characteristics that play a role in determining their wants and purchasing decisions.

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What are the Different Types of Market Segmentation?

There are four types of market segmentation you can use to ensure precise targeting for each segment. These segmentations are behavioral, geographical, psychographic, and demographic segmentation. 

What are the different types of Market Segmentation

There are four main types of market segmentation, and they are:

Behavioural Segmentation

This type of market segmentation divides consumers into different groups based on specific behavioural patterns that they share when making purchasing decisions. Behavioural segmentation involves categorizing consumers by usage, occasion, loyalty, and benefit.

Geographical Segmentation

Geographical segmentation involves segmenting consumers based on their geographical boundaries. Customers can be segmented by country, state, city, area, or region. As potential customers may have varying habits, wants, and interests influenced by their geographic region, this form of segmentation allows these segments to be targeted more effectively.

Psychographic Segmentation

In this type of segmentation, consumers are grouped based on psychological characteristics such as social class, lifestyle, and personality.

Demographic Segmentation

Demographic segmentation is the most straightforward way of segmenting customers. This technique segments customers based on demographic characteristics such as age, gender, income, education, religion, etc.

How to Segment the Market for New Product1

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How to Segment the Market for a New Product

How to Segment the Market for New Product2

Segmentation is especially important while introducing a new product in the market. Proper segmentation ensures that new products are exposed to the right customer as soon as they are introduced into the market.

Use these five steps to effectively segment the market for a new product:

Define your Market

The first step in segmenting your market is identifying the market you are interested in. You must clearly outline the different characteristics of your target market. It is important that this market isn’t defined too broadly, but instead focuses on specific characteristics.

Create Market Segments

Once you’ve clearly defined your market, you can begin to segment this market into different groups based on shared characteristics. While doing so, the four different kinds of segmentation discussed above should be considered. Depending on the type of product you want to introduce into the market, you can pick a segmentation type.

Construct Segment Profiles

Create a profile of your segment that describes the market segments accurately. This profile should include descriptions on the geographic spread, demographic distribution, psychographic description, segment size, segment growth rate, consumer needs, usage level, and additional relevant details on consumer behaviour.

Evaluate Segments

The fourth step involves evaluating segment profiles. You must evaluate the attractiveness of each market segment before you can select the one that is most appropriate for you to target. Different structural and financial factors will play a role in determining the attractiveness of a market segment. This includes profit margins, type of distribution channels, segment size and growth rate, and competitors.

Select your Target Market(s)

Once you’ve properly evaluated the different segments, you can select the segment that you want to target. This is the most important step in the whole process, as the segment you select will shape all your marketing strategies and your product positioning going forth.

[Related read: Why is Market Segmentation Important?]

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FAQs on Market Segmentation for New Products

Segmentation allows organizations to use their resources, time, and money more efficiently as it provides information on customers. When you know who your customers are, you can target them more effectively through the right marketing strategies and messaging. 

The four main types of segmentation techniques are:

  • Geographical Segmentation
  • Psychographic Segmentation
  • Behavioural Segmentation
  • Demographic Segmentation

The following five steps can be used to segment a market:

  • Define the market you are interested in
  • Create market segment using a segmentation technique
  • Create segment profiles
  • Evaluate each segment profile
  • Select your target market

These are a few benefits of market segmentation:

  • Higher customer retention
  • More effective marketing campaigns
  • Increased competitiveness
  • Increased customer satisfaction
  • Better use of firm resources


Customers need to change as time goes by. Having a flexible process to create market segments can help you prepare for any change in customer preference, or behavior. 

You can follow the 5 steps to create market segments to ensure you deliver the right message to the right audience.

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