Geographic Segmentation: When and Why to Use It

Some applications of geographic segmentation are obvious: In winter a seller of outerwear might use it to promote snow boots to customers in Boston and lightweight jackets to customers in San Diego. Other uses of geographic market segmentation, however, might be less intuitive but just as beneficial.

Geographic segmentation can be as broad as sorting consumers by country, state or time zone or as narrow as identifying them by nine-digit zip code or census block. It can also be a means of categorizing audiences by type of location rather than actual location — for instance, segmenting consumers by whether they live in a city, a suburb or a rural area. While geographic segmentation can be useful in and of itself, when employed alongside other forms of segmentation it provides an added layer of actionable insights.

Determining the Best Parameters for Geographic Segmentation

As is the case with other customer segmentation methods, deciding the characteristics by which to geographically segment an audience depends on the brand’s offering and goals. Below are common parameters for geographic segmentation and examples.

Governmental unit

This is simply segmenting an audience by country, state or other legally defined geographic area. Identifying consumers this way is important when laws or regulations differ. For instance, while most New England states allow alcohol to be shipped to consumers from out of state, Rhode Island does not. A direct-to-consumer seller of wines, therefore, would not want to waste resources marketing to Rhode Island residents.

Time zone

For pay-per-click (PPC) advertising, email marketing and other time-relevant campaigns, geographic segmentation by time zone greatly boosts effectiveness. If a brand’s emails garner the greatest response when they hit inboxes at 9 am, the company will want to make sure it is sending those emails to its British customers at 9 am Greenwich Mean Time, then to its customers on the East Coast of the U.S. five hours later, then three hours after that to its West Coast customers.

Physical proximity

Say a brand has determined that visitors to its stores typically travel from up to 70 miles away. Assuming it lacks a significant e-commerce presence, the brand would want to segment by physical proximity so that it doesn’t promote its stores to consumers who live farther than 70 miles from one of its locations.

Climate

While parkas might not be a big seller in Phoenix, that doesn’t mean they won’t sell elsewhere in Arizona. Flagstaff and the White Mountains, for example, average more than 100 inches of snow a year. Sellers of winter sports gear, then, would be better off setting climate as their geographic segmentation parameter than state.

Population density

Certain marketing media, such as outdoor branding and pop-up events, won’t garner enough exposure in areas without significant population density and foot traffic. Beyond differences in marketing channels, there are also differences in consumer needs and preferences among urban, suburban and rural residents. For example, city-dwellers might prioritize ease of parking and performance in stop-and-go traffic when selecting a car, while those who live in less densely populated areas might be more concerned with durability and comfort on long hauls.

Language

At least two-thirds of residents in Miami speak Spanish as their first language. Marketing to people there, or in numerous other locales through the U.S., exclusively in English is unlikely to provide a suitable return on advertising spend. Geographic segmentation by language spoken can help brands ensure that they are communicating effectively and accessibly with their target audience.

Culture

In terms of population density, household income, climate and other particulars, New York’s Rockland County is very similar to its neighboring counties. However, it has the highest percentage of Jewish residents of any county in the U.S., and certain towns within the county are almost exclusively populated by Orthodox and Hasidic Jews. For this reason, brands specializing in non-kosher foods would want to use geographic segmentation within the county to avoid marketing to these consumers who would definitely not purchase these products.

Identifying wealthy vs less wealthy neighborhoods by zip code or census block is a more common use of culture as a parameter. So is segmenting locales by household size, education level and various consumption patterns and preferences: A brand might want to promote its matcha tea in neighborhoods that overindex for Japanese rice purchases, for example. Because people within specific locales often share similar personal traits, geographic segmentation is sometimes considered a subset of demographic segmentation.

Benefits and Drawbacks of Geographic Segmentation

Geographic segmentation can help businesses uncover opportunities they might otherwise overlook. The McDonald’s Filet-O-Fish, for instance, was invented to cater to a heavily Catholic neighborhood, where sales of hamburgers plummeted every meatless Friday. Geographic segmentation by climate can also help brands compensate for seasonality: A seller of patio furniture that might have stopped marketing in winter could continue to do so in locations where temperatures don’t dip below a certain point.

Using geographic segmentation to localize content also helps brands personalize communications and relationships with consumers. A company that refers to hoagies rather than subs or wedges when targeting Philadelphians, for example, will feel more authentic to the people living there. Likewise, an e-commerce site that greets residents of Quebec in French rather than English will engender more goodwill among the Francophones who are the province’s dominant population.

That said, geographic market segmentation is best used in conjunction with other types of segmentation. While people living within the same city/zip code/climate/time zone are apt to share many traits, they’re just as likely to differ from their peers in significant ways. Not only might the demographics differ — in a neighborhood with an average household income of $500,000, a third of households could have income under $100,000 and a third income over $5 million — but so might behavior and psychographics. Brands need to weigh the importance of location against the significance of other purchase drivers when determining the role of geographic segmentation in their marketing efforts.

How Material can Help with Geographic Segmentation

At Material, we understand the importance of incorporating multiple types of customer and market segmentation to help organizations grow sales, personalize communications, uncover new markets for expansion and improve return on advertising spend, among myriad other outcomes. Beyond tailoring segmentation strategies for each brand’s needs, we also help them execute and iterate those strategies for continued success. Contact us today to learn how we can use geographic segmentation, as well as other types of segmentation, to enable your organization to achieve its goals.

FAQ

How is geographic segmentation different from other segmentation frameworks?

Each segmentation framework categorizes audience members based on criteria likely to influence their shopping and purchasing decisions. In demographic segmentation and its B2B counterpart, firmographic segmentation, customers and prospects are sorted based on personal characteristics such as age and gender (for consumers) and industry and number of employees (for businesses). Behavioral segmentation identifies consumers based on their shopping habits, purchasing frequency and other actions. Psychographic, also known as attitudinal, segmentation creates groups based on customers’ lifestyles, opinions and interests. Geographic segmentation classifies consumers by where they live. Because people within specific neighborhoods or zip codes often share similar traits, geographic segmentation is sometimes considered a subset of demographic segmentation.

What challenges are inherent in geographic segmentation?

Because much of the data is self-reported or available via third parties, ensuring its accuracy can be a challenge when undertaking geographic segmentation. What’s more, information can quickly become outdated, due to economic changes, population shifts and other factors. A rural area can easily become more densely populated due to real estate development of a previously unoccupied tract, for instance. Then there’s the danger of assuming consumers within a geographic area are homogenous in terms of demographics and of overlooking enclaves of disparity within an area.

What industries or businesses should consider geographic segmentation?

Some geographic segmentation applications would benefit just about any type of business. Segmenting audiences by time zone to ensure email messages arrive at the optimal time is one example; sending direct mail only to consumers within a 100-mile radius of a brand’s store is another. In addition, any brand whose offering is climate related should use geographic segmentation, as well as businesses that sell products or services particularly relevant to certain types of locale and those living there.