Market profiling and segmentation generally yields customer profiles that are based on the customers’ geographic location (geographic), traits or characteristics (demographic), personality and lifestyle (psychographic), and buying patterns (behavioral). Altogether, profiling and segmentation-related activities will help business owners understand the reason behind under-performing business areas or marketing campaigns that did not fare well among others.

Kinds of Profiling

When a business profiles or segments its customer base, they can be more aware of the risk patterns, the level of profitability, and their customers’ demographic, psychographic and behavioral characteristics. This information can be used by the company in developing and advancing its products or services, modifying its customer service, choosing its media and channels, and in target selection.

The three commonly utilized types of profiling and segmentation are RFM, demographic, and life stage.

Recency, Frequency, and Monetary Value (RFM)

RFM is a segmenting technique that is based on the customers’ purchasing behavior. The main purpose of RFM is to better the efficacy of the company’s marketing efforts to its current customers.


Recency refers to the total number of months since the last procurement. It is also considered as the most powerful instrument in forecasting replies to ensuing offers amongst the three. The logic here is that a consumer who purchased something from the company not long ago is more likely to make a purchase again, compared to someone who did not buy anything recently.


Frequency pertains to the number of acquisition. This includes procurement in a given period of time or encompasses all purchases made.

Monetary Value

Monetary value is the overall currency amount. Against Recency and Frequency, monetary value has the least ability and forecasting responses. This value shares similar attributes with frequency where it involves a certain time frame or all purchases made.


The major concern in demographic is to look for people who do not belong to the local demographic characteristics. However, it is perceived that individuals who reside in the same locality often have similar behaviors.

There are various approaches on how to segment database and create consumer’s profile, which can be used in targeting, creative design, and product development. It can be based on their age, marital status, gender, etc.

Life Stage

Everyone adheres to patterns which change as time progresses. These patterns are rounded up according to demographics such as age, gender, and marital status to constitute the life stage segments. These segments are further classified into young singles; couples or families; middle-aged singles, couples, or families; and older singles or couples.

Market Profiling and Segmentation

Market profiling is basically enhancing the company’s knowledge regarding their typical customers. The entire process utilizes information to profile or describe the business’ clients or target customers. Profiling can be conducted either in its entirety or in subsets (segments). The general idea here is that no customer can be a part of two or more existing segments.

Collecting consumer data involves three steps. First, identify your clients. This is associated with knowing the range of their ages, geographical background, income bracket, lifestyle habits, etc. Next, recognize and comprehend the interplay between the company’s customers and the company’s products or services. When do they buy your products? How much are they willing to spend for it? How frequently do they make a purchase? Lastly, determine and understand how the customers regard the company’s product or service. For instance, does the company offer products or services that fulfill their client’s basic needs?

Market segmentation is associated with making intelligent decisions regarding the relationships of the aforementioned information, in order to establish groups or patterns within the company’s customers. Basically, it divides the business’ customer base into clusters that are characterized by similar age, gender, or interests, among others. Through market segmentation, companies are able to effectively target groups and apportion marketing resources.

Market Segmentation versus Market Profiling

There are disparities between segmentation and profiling, although the former is usually combined used in conjunction with the latter. Profiling is not ideal when specific segments of the population are being identified. An example is profiling persons with disabilities (PWDs). They are divided among various neighborhood profiles. Similarly, segmentation, e.g. gender, is seldom identified with a neighborhood.

Basic Segmentation Techniques

There are two common approaches when segmenting the market: market-driven and data-driven. In a market-driven segmentation technique, managers utilize the attributes that they deemed to be as important business drivers. To put it simply, they pre-select the features that characterize the segments. On the contrary, a data-driven segmentation technique employs methods like cluster analysis in identifying homogeneous groups.

Pros and Cons of Market Segmentation

The most pronounced advantage of market segmentation is that it provides a more competent advertising. Advertising is a lot simple and forceful when the market is segmented. Various marketing alternatives will become more evident and accessible too. In addition, market segmentation helps companies to develop new products, discover undeserved markets, and spur them to be focused. Be that as it may, market segmentation drives the cost, as well as promotion and distribution expenses to swell. It can also provide inconvenience since a larger inventory has to be managed by the distributor and manufacturer. Moreover, changes in the characteristics of the market will render market segmentation pointless and useless.