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Market Category Vs. Market Segment

Friday, January 05, 2024

Market Category Vs. Market Segment

Market categories and market segments.

You may have heard these two terms of concepts thrown around loosely, used separately, or used together, but do you know exactly what they mean?

While they both fall under the umbrella of market identification, you need to know that they’re not interchangeable at all. In the most basic of terms, a market category is a classification of products or services based on the general types or classes available.

A market segment, on the other hand, is a more detailed and targeted subgroup within that category, representing consumers with similar traits or preferences.

With that being said, if you’re still wondering why I’m even talking about this, then that is a clear sign that you need to keep reading. Both concepts are crucial for a business to understand the needs of its target market. I’ll show you why.

Market Category

As I said, a marketing category is a classification of products or services. More specifically, it is an identifier for the marketplace that labels your competition, partners, and value proposition.

The category can be focused on core technology, a product, or a system. It’s a way to categorize different products based on their features and the needs they address in a consumer.

Market categories help people navigate a diverse market by organizing products that are similar in their own categories. The product type, industry, functionality, or target audience can all be used to define each unique category.

Think of smartphones – that’s a market category within the broader market of technology.

The category of smartphones includes various brands and models that may look and feel different, but they all ultimately share the common features of being handheld, mobile communication devices with the capabilities of a mini-computer.

Other market categories in technology would be computers, laptops, etc.

Outside of the technology market, we have the entertainment industry.

Market Category

Within that industry is the market category for streaming services. Services like Netflix, Hulu, Disney+, and Amazon Prime may each have different content available, but they all address the same need: offering on-demand video content on the internet.

Establishing these market categories is crucial for market analysis.

It helps businesses identify their competition within a broader market and position their products within the defined market space.

Consumers also benefit from these categories because it helps them easily compare similar offerings and make informed purchases based on their individual needs and preferences.

Market Segment

A market segment is a subgroup of a larger market that shares specific characteristics and needs.

It is also the process of dividing a broad market into distinct groups of consumers based on factors such as demographics, psychographics, behavior, and geographic location.

The goal of market segments is to identify groups of customers with enough similarities so specific marketing strategies can be tailored to meet their needs.

Here is a more in-depth explanation of each key element in market segmentation:

  • Demographics – This is a segmentation based on demographic factors such as age, gender, income, education, marital status, civil status, and occupation.
  • Psychographics – Divides the market based on psychological and lifestyle factors. These factors include values, interests, attitudes, and personality traits. The popular MBTI personality test is a great example of this.
  • Behavioral – This segmentation is based on consumer behavior, such as purchasing habits, product usage, brand loyalty, and responses to marketing stimuli.
  • Geographic – Segments the market based on geographical factors that include region, country, climate, urban or rural areas, and population density.
  • Technographic – Most relevant in B2B (business-to-business) markets, this involves segmenting based on the technologies and tools a business uses.
  • Firmographic – Another B2B-relevant segmentation, this considers characteristics such as company size, industry, revenue, and location.
Market Segment

Again, market segmentation allows businesses to think up marketing strategies and craft product offerings that are more tailor-made for a specific segment.

For example:

  • Cars designed for families with more safety features would be made and marketed toward the demographic segment comprised of parents.
  • Luxury cars would appeal to the psychographic segment of people who prefer a rich lifestyle.
  • Fuel-efficient or electric cars would be marketed to the environmentally conscious behavioral segment.
  • Vehicles with robust features might appeal more to the geographic segment of people living in regions with more challenging weather conditions.

Market segmentation is a dynamic process.

Businesses may choose to use a variety of different segmentation variable combinations to create a clear understanding of their target market. Either way, it helps companies allocate resources more efficiently by focusing marketing efforts to better meet the diverse needs of their customers.

Market Category and Market Segment

Market Category and Market Segment

As you should know by now, market categories and market segmentation are related concepts in the vast field of marketing. They share similarities in the way they aid both consumers and businesses.

Both concepts serve as frameworks for organizing products and consumers, which then allows consumers and businesses to gain a clear enough understanding of a broad market to navigate through, making strategic decisions as they go based on preference.

Both emphasize a consumer-centric approach, as they’re ultimately created to better meet the individual needs of a consumer. That’s about where their similarities end, though.

There is a wide gap in the scope and level of detail between the two concepts.

A market category represents a broader group of products based on a common characteristic or use, whereas a market segment gets down to the nitty-gritty details – it focuses more on specific groups of consumers who share similar characteristics, needs, or behavior, and delves much deeper into understanding the diversity of the market.

Additionally, the market category serves more to compare and contrast similar products for retail organizations, while the market segment aims to guide businesses in understanding consumers, targeting specific groups of customers with tailored marketing strategies.

In a nutshell, a marketing category will help you position your product strategically within a broadly classified market.

A market segment will help you identify exactly what group you want to position yourself for and understand what they need from you and your product. Again, they are completely different concepts, yet they’re also similarly important for a business to thrive.

If you’d like to learn more about market identification, or even just marketing strategies in general then I urge you to register for our NO BS Newsletter. You can also join us at Diamond, where we host related monthly masterclasses, LIVE Q&As with me, and so much more.

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