What’s it: Geographic segmentation divides consumers into segments based on where they live. It is a market segmentation alternative to demographic segmentation and psychographic segmentation.
Some items may only be suitable in tropical countries like Indonesia rather than countries in Europe because they have warm and hot temperatures and occur all year round. For such reasons, companies divide the market according to the specific location of consumers. Then, they modify the product being sold.
Why geographic segmentation is important
First, the geographic segment shows you, location affects the needs and tastes of consumers. Some products are suitable for particular regions but not for others. By dividing the market according to location, companies can offer the right product.
Second, geographic coverage also affects resource consumption. Medium and small businesses may prefer local markets over international markets. Apart from their limited budget, they have a more in-depth insight into the customers’ tastes around them.
They then focus their marketing efforts and avoid inefficient expenses. For example, they could use the local radio or newspaper to target a local audience instead of using the national newspaper.
How geographic segmentation is used
Geographic segmentation is important for targeted marketing. Differences in a geographic location often give rise to different cultures, tastes, and needs. Such diversity requires a different marketing strategy and marketing mix. Therefore, the company divides its market and determines the targeted segments.
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Companies can divide the market based on the following geographic variables:
- Regional areas such as the Eurozone
Other options are based on climate, for example, tropical and subtropical.
Some products require companies to adapt their offerings to the location of the consumer. They may need to sell products only in specific regions and not in others. For example, alcoholic drink producers will not sell their products in Muslim countries because it is prohibited.
Or, the company may have to modify the product to suit local demand. For example, the company sells air conditioners in tropical countries such as Indonesia and Malaysia. Meanwhile, to sell it in cold countries like Europe, they modify it into space heating.
McDonald’s or KFC are examples of companies using geographic segmentation. Both modify their menus according to local tastes and tastes, thus creating more demand in their respective countries.
Geographical differences also require companies to adjust other marketing mixes. Take, for example, promotion. Companies advertise products using local languages instead of international languages. It makes the advertising message more attractive and convincing to influence the target audiences.
Usually, companies also combine geographic segmentation with other segmentations to reveal a specific consumer profile. It is essential for accurate market targeting and appropriate marketing strategies. For example, a manufacturer of air conditioning may target consumers in cities with middle to upper incomes. Because prices are relatively high, they see more demand coming from urban consumers with relatively high incomes.
Geographic segmentation advantages
Some of the advantages of geographic segmentation are:
- Save resources. The company selects a particular area as a marketing target. It then focuses its resources on satisfying consumers in the target segment instead of the entire customer. Of course, it has to ensure that the region’s consumers have unique tastes and can be satisfied with its products.
- Deeper knowledge. Focusing marketing on a specific area makes the company more familiar with customers and competitors. They can observe demand trends, consumer tastes, and competitors over time to create a competitive advantage.
- Easy to do. Determining the location where consumers live easier because it is objective. It differs from psychographic segmentation, where companies must understand consumer psychology to segment markets. Psychological variables are subjective and, therefore, more challenging to do.
- Promotion relevance. The development of the promotional mix often depends on different geographic variables. For example, companies must match advertising messages and techniques to local culture or language to reach audiences.
Companies often do not rely solely on geographic segments to determine their target market. That is the main drawback of geographic segmentation. They will usually combine with demographic and psychographic variables such as population density, consumer income, and lifestyle. The goal is to produce more accurate market targeting.