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What is a Geographic Market?

By Jess Rhodes
Updated May 16, 2024
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A market that is classified by geographical segmentation is a geographic market. Geographical segmentation seeks to identify marketing strategies accounting for variations within geographical markets in regard to language, climate, and lifestyle. Geographic markets can range in size or in market definition. Three geographical units that distinguish geographic markets are regions, countries, and population density; each of these units can be split into subunits.

A regional geographic market can be segmented in various ways. Countries, counties, and metropolitan areas all represent various geographical regions. Regions can also vary in size and population density. Examples of regions in the U.K. include Scotland, Wales, and Northern Ireland.

Geographic markets separated by country are often subdivided by development level, size, or their membership in a particular region. Various development levels can include status, industrial level, and speed of growth. Size segmentation can be based on population or financial capacity; this can include marketing to countries with a certain gross domestic product. Geographic markets based on country membership may refer to continents, countries with similar systems, or with similar languages.

Geographic segmentation by population density can include splitting areas into urban, suburban, or rural areas. Marketing by population density often splits larger geographic regions or countries into smaller subunits. The smaller the subset, the more precise the marketing mix can become, but the smaller the market, the higher the cost for implementing individual marketing plans.

Geographical segmentation is most frequently used by global and multinational businesses. Operating over a large geographical subset often means that companies need to alter their marketing mix for various regions. These businesses can choose to alter a product based on market segmentation or to keep a generic product. Both options must take geographic differences, languages, and lifestyle preferences into account.

Elements that businesses consider when choosing the parameters for a geographic market are transport costs, geographic competition, and demand. High transport costs can dissuade businesses from entering into distant geographic markets. High competition and high entry barriers can also deter organizations from pursuing a particular geographic market.

A geographic market with high entry barriers, for example, might be an unprofitable investment despite other favorable factors. Many barriers to entry may exist, including predatory pricing and high advertising spending by incumbent firms, making it difficult for new industries to enter the market. Very high or absolute barriers to entry can indicate a monopoly that, depending on the location, could be subject to international anti-trust scrutiny.

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Discussion Comments

By comfyshoes — On Jul 17, 2011

@Subway11 - I think that that makes sense. I wanted to add that I was once involved in a market segmentation research study.

A market research company contacted me in order to have me answer questions about my views on lipstick in general. After filling out the questionnaire, the company wanted me to try the product and give them feedback on it.

This is another way that companies test new products on their actual target market. I was also involved in a focus group for a retailer that wanted to expand their product lines and enhance their customer service.

I was selected for the focus group based on the market segmentation criteria that the company was focusing on which included my buying patterns as well as my age and household income.

It was really a lot of fun and I really noticed a lot of positive changes at the store. It seemed that they really paid attention to our suggestions.

By subway11 — On Jul 16, 2011

I know that a lot of high end retail stores and grocery stores do market segmentation demographic studies to see if a given area could support their business model.

For example, Saks usually does a study of a geographic area and looks for household incomes that exceed $250,000 a year. This is really there target market and they will not put a store in an area that does not have enough people earning this type of income. This is really their target market segmentation criteria. I think that Whole Foods does the same thing.

By GreenWeaver — On Jul 15, 2011

@Icecream17 - Wow that is a big mistake for a store to make. I think that a lot of companies are doing market segmentation research and testing certain products in similar markets to see if they should be launched nationwide or remain in only those markets.

I know that one of the fast food chains offered flavor lattes and later tropical smoothies in certain areas in Florida and California, and then after the results were in from those markets they rolled out these products nationwide. I wonder why certain cities are used as test markets and other are not.

By icecream17 — On Jul 14, 2011

I think that businesses that have a really defined market segmentation strategy do a lot better than those that have a more general market segmentation strategy.

I wanted to add that I once worked as a manager for a retail chain that was based in Northern California. I was in South Florida and was shocked to see shipments of fleece jackets and vests.

In fact we had a whole wall dedicated to fleece which is hard to believe when you live in Miami. It appears that the buyers did not consider market segmentation variables when they ordered their assortments for the South Florida stores. Miami has a year round tropical climate, and if the buyers had done a more targeted approached when they selected merchandise for this part of the country, the store would have been more profitable.

We had to markdown this fleece to 75% off and even at that rate it still was not moving. This really lowered the gross margin for the buyer and probably made it harder for her to meet her numbers.

By manykitties2 — On Jul 14, 2011

When I worked with some of the higher ups at the retail store I was at I realized that the store used the concept of geographic markets to divide our provinces into specific areas. Each of these areas competed with one another for prizes in regards to sales and presales of certain items.

What was most interesting to me was seeing how these areas seemed to lump populations together in order to create a sort of unity for their delivery. Each area had a different number of stores, but the population they served was roughly the same. I imagine that this kind of use of a geographic market made it easier to budget.

By drtroubles — On Jul 13, 2011

Understanding how geographic markets work makes traveling really interesting if you enjoy looking at various businesses from back home to see how they are changed to suit different areas.

For myself I always check out the biggest fast food and clothing brands to see how they are handling the change in climate, location, language and even population densities.

One of the strangest things I have seen done in really overpopulated countries were fast food places where you would take a number. They would take as many orders as possible, as quickly as possible, then you would just grab your food when your number popped up. There is no way you would ever see that back in North America.

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