2. MARKET SEGMENTATION
Market segmentation is a business practice that brands use to
divide their target market into smaller, more manageable
groups of people based on common ground they share to
optimize their marketing, advertising, and sales efforts. Simply
put, customers of each market segment have similar
characteristics that businesses can leverage to advance their
efforts.
Accept the fact that you can’t be everything for everybody,
for everybody, and as a marketer, you can’t solve everyone’s
solve everyone’s problem or appeal to every single person.
single person. This is exactly why market segmentation is
segmentation is such an effective growth strategy to
3. types of market
segmentation
As you can imagine, there are many different
approaches you can take when segmenting your
target market.
This article will walk you through the four
main types and real-life market segmentation
examples to help you get started. Learning
from those who have done it right will help
your brand garner that success you’re looking
for.
1. geographic segmentation
2. psychographic
segmentation
4. Geographic segmentation
Geographic segmentation targets customers based on a
predefined geographic border. Differences in interests,
values, and preferences vary dramatically throughout
cities, states, and countries, so it’s important for
marketers to recognize these differences and advertise
accordingly.
Parkas will be sold for most of the year in the
colder, northern half of the country, whereas southern
areas may only be able to find parkas in specialty
stores during the wintertime. Bathing suits, on the
other hand, are sold year-round in the warmer states
but typically only sold during the spring and summer in
the cooler states.
Another example of geographic segmentation is the
iconic fast-food chain, McDonald’s. If you’ve never
5. Demographic segmentation
Demographic segmentation divides a market through
variables such as age, gender, education level, family
size, occupation, ethnicity, income, and more. This
form of segmentation is widely used due to specific
products catering to obvious individual needs relating
to at least one demographic element.
Perhaps the most obvious variable of them all, age is a
crucial element for marketers to understand thanks to
the fast-paced nature of preference changes within the
various stages of life.
Even media consumption differs greatly between each
generation, so it’s important to recognize what your
target age range is and which channels they use to
consume information to ensure your tailored message
reaches them appropriately.
6. Psychographic segmentation
Psychographic traits can range from values, personalities,
interests, attitudes, conscious and subconscious motivators,
lifestyles, opinions, and more.
To understand your target audience on this level, methods
such as focus groups, surveys, interviews, audience testing,
and case studies can all prove to be successful in compiling
this type of conclusion.
It’s one thing to sell products that can appeal to everyone,
but it’s a whole new ball game when those products make every
single person feel individually catered to. This is what
Starbucks does through its messaging by creating a sense of
belonging.
They cater to each segments’ wants and needs through
targeted marketing campaigns to ensure their coffee brand is
inclusive to all, even if you aren’t a coffee drinker.
7. Behavioral segmentation
Behavioral segmentation has similar measurements to
psychographic segmentation, but instead, it focuses on
specific reactions and the ways customers go through
their decision making and buying processes.
Attitudes towards your brand, the way they use and
interact with it, and their knowledge base are all
examples of behavioral segmentation. Collecting this
type of data is similar to the way you would find
psychographic data.
To target customers that have great brand loyalty, many
companies will offer rewards programs to enhance this
behavior with the hope of capturing new loyal customers
as well.
For example, the makeup and beauty company, Sephora,
has an excellent rewards program for its loyal
customers. The more you spend at their store, the more
8. The importance of using market
segmentation for your business
Now that you understand the four major types of market
segmentation, you’re probably wondering what the major
benefits are to implementing them.
The importance of this strategy goes far beyond placing
your target market into cohesive segments.
Customer retention
For starters, those cohesive customer
segments will lead to great customer
retention. Capturing customers at the
beginning of a perfectly tailored customer
journey will provide an excellent brand
experience and increase the likelihood that
they will stay loyal to your brand.
9. Grow your business
Market segmentation can not only help you
discover new ways to reach your current
customers but also help you find new markets
of potential customers that you haven’t
previously reached. Analyzing your
customers in-depth will help you uncover
unknown needs or problems that they face
that your brand can solve.
This discovery can lead to new product
lines, rebrands, or new brands, all to
catapult the growth of your business by
appealing to your current customers better,
as well as new consumers that were
previously uninterested.
10. Lower spend rate
If you know how to speak to your customers correctly, you’re
more efficient with your efforts, which means you spend less
money. It’s as simple as that.
Gone are the days of your team spinning its wheels trying to
come up with something that will stick. By segmenting your
customers correctly, you’ll get it right every single time.
Common market segmentation mistakes
Now that you understand the basics of market segmentation and
have seen it in practice, it’s time to focus on the common
mistakes marketers can make when segmenting their target
market for the first time.
11. Creating too small of segments
This can be rather easy to do if you’re trying to ensure that
you have every last detail included. If a segment is created
too small, you’ll lose the buying power of that group as well
as create a segment with non-quantifiable metrics.
At the end of the day, every single person is vastly
different. You cannot appeal to every aspect of every person.
Not updating your strategy as your
customer base changes
People change, and they can change fast. It’s in your brand’s
best interest to refresh its strategy and resurvey its
customers from time to time.
Choose a cycle that makes sense for your business and stick
to it. This can be a quarterly refresh, yearly, or every
couple of years; if you’re seeing big changes within your
customers, perform a refresh then, too.
12. Targeting the segment instead of the money
You may have segmented a large customer base that aligns with
your strategy, but if that segment doesn’t have the buying
power or a legitimate need for your product, then you won’t
have a positive ROI.
Market segmentation can be a laborious and complicated task,
and mistakes in the beginning stages may seem inevitable. Being
aware of these common downfalls will better prepare you and
your team so you don’t make them in the future.
How to implement your own market
segmentation strategy
It’s time to put what you’ve learned to use. Here are five
steps that lay the process out simply, plus the two strategies
that are most commonly used to guide them. Once you’ve got
these basics down and you have a solid foundation for your
strategy, branch out, and make it uniquely your own.
13. Concentrated strategy
As the name suggests, a concentrated marketing strategy is
when a company chooses only one market to focus all of
their time, money, and efforts on. This strategy is usually
chosen by smaller businesses or those that are just taking
off and starting to make a name for themselves in the
marketplace.
Success is typically seen when targeting a smaller group of
people since the strategy has to appeal to the entire
segment. Appealing to an entire segment becomes challenging
when the segment is too large.
You should be aware that when using this strategy, your
growth opportunity is limited. Once you’ve capitalized on
your market and are seeing great success, consider tapping
into other similar markets to continue to drive growth.
14. Differentiated strategy
On the other hand, a differentiated marketing strategy
is when a company focuses on two or more markets.
Companies that utilize this strategy market their
products to many different segments, they just change
their messaging to appeal to all of the differences.
Although a differentiated marketing strategy requires a
lot more effort, time, and money than a concentrated
marketing strategy would, it typically yields more
success since there are many more avenues to rake in a
profit.
15. 1. Define your market
Where does your brand fit within the current market
landscape? Is there a need for the solution you promise to
provide? How large is the market? These are all important
questions to consider when starting this step.
2. Segment your market
This is where it gets fun. Decide which of the four
segmentation methods you’re going to use, but don’t feel
confined by one segmentation method.
It’s common for brands to implement more than one
segmentation technique and take a combination approach, so
play around with each and find the perfect mix for your brand
16. 3. Understand your market
Ask your target market the questions that relate to the
segmentation categories you chose. You should get to know
your target market through and through at this step. You
can use surveys, focus groups, polls, and more to obtain
your answers. Make sure you’re asking questions that will
provide quantifiable answers.
4. Build your customer segments
Interpret the responses you received to create dynamic
customer segments that are unique to your brand. Make
sure that you’re focusing on the buying power of the
segments and not creating any that are too small. Look
over the common mistakes one last time to ensure you’re
not making any!
17. 5. Test your strategy
Ensure that you have interpreted your responses
accurately by testing it on your target market.
Implement conversion tracking early. It’s one of the
best ways to determine the effectiveness of your
strategy.
If you’re not relating to your customers with the
segments you’ve created, then you’ll need to relook at
your survey methods and analysis. Be sure that the
strategy you choose has unique characteristics from
others in the marketplace so you can stand out.
By determining the proper strategy for your needs and
following the basic steps outlined above, you can
ensure that your market segmentation strategy will be
effective and successful.
