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For businesses looking to expand their global footprint or grow locally, geographic segmentation is a powerful tool that can help create customer focus groups, understand trends and patterns, and identify areas to boost business growth and revenue.
This blog discusses geographic segmentation in detail, including its meaning, examples, significance, how technology can help, and more.
Geographic segmentation is a type of market segmentation that classifies the customer pool based on their geographic location, such as country of residence, state, city, or even zip code. It is an important marketing strategy as location is a key factor that influences a customer’s needs and preferences. Understanding geographic marketing segmentation can help you craft targeted and personalized campaigns and messaging that resonate with prospective customers.
That said, geographic or geo segmentation is not just limited to location. You can use geographic market segmentation to segment your audience by:
Segmenting the audience into niche groups has become the go-to marketing strategy across industries. Reasons are many—from personalized marketing and optimum utilization of resources to product and feature innovation and beyond. Using geographical factors as the criteria for grouping customers has many benefits.
Categorizing customers based on their geographic location is relatively easier than other types of segmentation, especially behavioral segmentation and psychographic segmentation. Not only is it easier to collect consumer data for geographic segmentation but also it requires fewer data points.
Often, companies collect data on customers’ location when they create their profile on their app or website for the first time. This is a quick and easy starting point to start creating customer groups.
Understanding customers, their cultural and lifestyle preferences, their needs and wants due to climate and seasonal conditions, and other such factors can help you ensure that you are targeting the right people at the right time with the right product and the right message.
For example, marketing winter wear in coastal areas wouldn’t make any sense. Geo segmentation, when done effectively, can help a business ensure its relevance.
Geographic segmentation enables you to better align your product and its features and capabilities with customers’ preferences in a particular location. For example, streaming apps display and recommend content in the language based on their audience’s location, such as Thai in Thailand, German in Germany, and so on.
Grouping customers based on their location helps you create more tailored and personalized marketing campaigns. This goes a long way to guarantee that not only customers are approached with more relevant ads and communication but also that every dollar is spent for maximum customer outreach.
For example, a bicycle manufacturer will market mountain bikes with sturdy make in hilly and rural areas while targeting urban regions with lightweight and comfortable bikes.
Geographical market segmentation enables you to drive business growth in a sustainable and efficient manner. Understanding what the customers need, their cultural considerations, and more, helps you forge strong relationships with them over time, which improves customer loyalty and retention.
It is important to note here that as customer preferences keep changing, it is imperative that businesses should review and update their segments regularly to ensure the relevance and effectiveness of their segmentation.
Let’s understand geographic segmentation in the context of its various factors with the help of some marketing-focused examples.
“Location” is generally the first thing that comes to mind when referring to geographic segmentation. Location-based segmentation could be done on a global or local level, depending on business requirements.
Consumer location data is the basis on which other geographical variables depend, be it language, culture, or type of area.
For example, global food and fast food companies, such as McDonald’s, align their products, taste, and flavors, or even add new region-specific products based on the region where they are marketing.
For global brands with operations across geographies, time zones are critical factors that influence marketing strategies.
Social media tools offer optimal time recommendations for publishing posts for maximum outreach and engagement. Likewise, for email marketing efforts, time zone plays a key role—you would want to send your emails when the probability of the recipient clicking on the email is high. Global businesses are also mindful of the time zone when planning company announcements and press releases.
Segmenting customers based on their language is critical to ensure product relevance and maximize customer outreach. For example, language-based segmentation can help FMCG companies determine which languages they should translate their ingredients and labels to.
Streaming apps like Netflix, Amazon Prime, and others ask their audience about their language preferences when they set up an account for the first time. This information is crucial to help them decide on content recommendations as well as which language subtitles or dubbing they need to offer to improve viewership and customer engagement.
Creating customer groups based on population density can help brands determine their marketing and overall business strategy. It involves classifying the area into rural, suburban, or urban categories.
For example, an auto manufacturer will market luxurious cars like sedans and SUVs only in urban and suburban areas; a premium clothing manufacturer will set up its outlets in urban areas, agricultural products like seeds and fertilizers are usually marketed in rural areas, and so on. Cafes and restaurants prefer densely populated suburban or urban areas and even consider opening multiple outlets in the area or city as their business flourishes.
Culture is another important factor that can be used for segmentation and involves creating customer groups based on cultural nuances such as values, customs, traditions, and religion. It influences how consumers view products, messaging, and brands, and their purchasing decisions significantly.
For example, German confectionary company Haribo uses bovine gelatin instead of the otherwise used porcine gelatin while making gummies in Turkey to align with halal practices.
Climate and weather conditions can greatly influence the needs and preferences of the consumers. For example, in tropical regions, people regularly purchase sunscreens and prefer cotton clothing. Seasonal changes in the same country or region also dictate consumer buying behavior, such as high cold drink and ice cream sales during summers, room heaters and car seat warmers during winters, and so on.
Read More: What is Customer Segmentation? The Complete Guide
While there are several benefits of using geographic market segmentation, it might not be the right strategy always. Here are some of its limitations and drawbacks.
Geographic segmentation holds little to no value for brands that offer products that do not depend on any location-based factors. For example, FMCG companies offer certain food products like chocolates, cookies, and cooking oil.
With increasing globalization and cultural exchange, geographic segmentation poses the risk of being ineffective. With people relocating to other regions, such as from rural to urban or even from one country to another, for jobs or lifestyle preferences, businesses need to account for this diversity when creating customer groups. Relying only on location as the basis for segmentation is no longer enough.
Tastes, likes, and preferences vary from consumer to consumer. Geo segmentation largely assumes homogeneity of customer needs and preferences, which can result in a brand missing out on nuances and even the right audience.
To get the most out of your customer segmentation strategy, you need an all-in-one solution like CleverTap. The tool allows you to not only segment your customer pool based on geographic factors such as country and city but also combine it with other demographic, psychographic, and behavioral attributes to create segments that are most relevant and unique to your business. Powerful analytics and real-time data capabilities enable you to slice and dice the data to unlock valuable insights.
CleverTap’s Clever.AI further amps up your segmentation strategy with optimized customer journeys, better engagement, and improved conversion rates and loyalty.
Let’s see the comparison between different types of segmentation based on factors such as relevance, data collection, personalization, and more.
| Geographic | Demographic | Behavioral | Psychographic | |
| Data Collection and Implementation | It’s relatively easier to collect customers’ geographic data compared to other types of segmentation. | While collecting some demographic data points like age and gender is easy, other details occupation, family structure, etc. could be relatively difficult. | It requires analyzing customer behavior over time, such as spending habits, average order value, feature use, browsing history, etc. | It requires conducting data via surveys and other methods to understand customer likes, dislikes, interests, personality traits, etc. |
| Relevance | It can help with ensuring product and business relevance but needs to be combined with other types of segmentation for more accurate results. | It can help with ensuring product and business relevance but needs to be combined with other types of segmentation for more accurate results. | It is relatively more helpful in ensuring product and business relevance. | It is relatively more helpful in ensuring product and business relevance. |
| Cost | It is cost-effective. | It is cost-effective. | It is expensive. | It is expensive. |
| Personalization | It has a limited scope for personalized messaging. | It has a high scope for personalized messaging. | It has a high scope for personalized messaging. | It has a high scope for personalized messaging. |
| Channels | It is not very useful for identifying effective channels for customer outreach efforts. | It can be useful for identifying effective channels for customer outreach efforts for certain businesses. | It is very useful for identifying effective channels for customer outreach efforts. | It is very useful for identifying effective channels for customer outreach efforts. |
Geographic segmentation is a powerful tool that can help you with your target market segmentation strategy. While it might not be the most accurate as standalone segmentation, it is a crucial aspect of creating customer groups and is an easy and cost-effective approach. When combined with other types of segmentations, it can help you identify and create customer segments that are most relevant and unique to your offering and business.
