Research Tips

Market Segmentation

Many companies use demographic characteristics such as income, age, or gender to segment their market. While this approach is simple and straightforward, it is often not very useful. That’s because attitudes and purchasing behavior are often unrelated to these demographic characteristics, or are only related in a more complex way.

Consumers assigned to a given market segment should be similar to one another but different from consumers in other segments with respect to their attitudes and behaviors related to the specific market in question. A good way to form such segments is to ask attitude and behavior questions in a survey, and then use cluster analysis to group respondents based on the similarity of their responses. This can be followed by analysis that shows whether different segments do have different demographic characteristics and, if so, which demographic characteristics distinguish the segments from one another.