The whole market can be segmented in a number of different ways. This article is about geographic market segmentation.
The most common profilers used in customer segmentation include the following four: behavioral market segmentation, geographic market segmentation, demographic market segmentation and psychographic market segmentation.
Geographic market segmentation
Geographic market segmentation divides the market into different geographical units. It assumes that people who live in one place will be different, have different needs and wants, from consumers living in other areas. Geographic factors include location, climate and population density.
Location
There are geographical differences in different regions, countries and areas around the world. Customers in different locations will belong to different cultures, have different tastes and follow different beliefs. The demographic market segmentation by location can include:
- Different regions of the world such as people living in different continents.
- Different countries in the world grouped according to market size, population, level of economic development, etc.
- Different areas in the same country such as England, Northern Ireland, Wales and Scotland in the US.
In order to cater to customers in different locations, the business should offer different products and market them in the location-specific way. Due to varied preferences in different places, consumers demand products that are tailored towards their specific needs and wants.
Example 1: People in Northern China prefer rather heavy cuisine based on flour-based dished such as bread, dumplings and pancakes while people in Southern China prefer light meals including lots of soups, green vegetables and seafood.
Example 2: Certain products are not legal in some countries such as gambling or drugs, while these products might be heavily regulated in other countries. In Sweden, alcohol can only be sold by Systembolaget, a government owned chain of liquor stores and only the state-monopoly and government-licensed wholesalers can import alcoholic drinks.
Climate
The weather is different in different geographical area which has serious impact on customers’ needs and wants. Businesses will need to adjust their business activity and product offerings depending on climate – whether hot, mild or cold. Modifying the products which businesses sell in parts of the world with different climate should be based on detailed market research. The same applies before thinking about expanding into different markets with different weather.
Example 3: Air-conditioner producers such as Gree will see strong demand in countries with hot and humid weather such as Malaysia or The Philippines. While there will not be many customers for cooling equipment in countries with cold climate such as Sweden, Finland or Norway.
Example 4: Warm clothing such as winter jackets, scarfs and gloves will have many customers in Canada while almost zero demand from people living in areas with a tropical climate.
Population density
The markets can be divided according to customers living in urban, suburban, semi-rural, rural and remote areas. The density of population will be very important for businesses offering services as services such as banking, higher education and entertainment are mainly available in the cities and medium towns. In this category, markets can also be segmented based on the exact population density for 1km2 within ranges or above a certain level.
Example 5: Coffee shops such as Starbucks and bakeries will see strong demand in the downtown where shopping streets and office buildings are located. Certainly, there will be no demand for coffee and pastries in underdeveloped rural areas with sparse population.
Geographic market segmentation is important for firms with business activity in many areas around the country and around the world. Global multinational businesses will modify their products, prices, promotion activities and distribution networks in order to meet local needs of different geographical units.
