“Good communication is the bridge between confusion and clarity.”
There are a lot of places where communication happens but a very few instances where the message is conveyed in the right format. There are high chances for a message to get lost, confused or absolutely ignored, especially once your audience increases.
The bigger your database or audience, the broader their preferences, needs and opinions become, which increases the possibility of your marketing message to get lost or go unheard. Market segmentation comes as a solution to this vagueness.
What is market segmentation?
Market segmentation is a process of dividing your customers and your visitors into segments based on the qualities that they share in common. There is no set format to segment your market. You can choose to build groups based on the type of service or product you offer. Hence, you will have your own definition of market segment, which will be different from your competitors.
As a whole, this practice allows you to focus your marketing efforts on a specific customer segment that will help you cater to their specific needs and wants.
Market segmentation: An Overview
Market segmentation is crucial for businesses to better understand and cater to their target customers. Market segmentation involves dividing a broad target market into smaller groups of consumers with similar needs or characteristics. This allows businesses to tailor their marketing strategies and product offerings to each specific segment, increasing the likelihood of success.
Objectives of Market segmentation
The primary objective of market segmentation is to better understand customers and their needs. This knowledge can then be used to create targeted marketing campaigns and develop products that better meet those needs. Market segmentation can also help companies differentiate themselves from their competitors by offering unique products or services. Additionally, market segmentation allows companies to optimise their marketing and advertising budgets by targeting specific segments that are most likely to convert.
Market segmentation strategies
There are five key strategies to market segmentation: researching the market, identifying segmentation criteria, market segmentation, developing targeted marketing strategies, and evaluating the segmentation strategy’s effectiveness.
1. Research the Market:
Companies should conduct research to gather information about their customers, such as demographics, psychographics, and buying behaviour. This information can be gathered through surveys, focus groups, and other market research techniques.
2. Identify Segmentation Criteria:
Once companies have gathered data about their customers, they can identify the criteria that will be used to segment the market. This could include demographic factors such as age, gender, or income, geographic factors such as location or climate, or psychographic factors such as values or lifestyle.
3. Market Segmentation:
Using the identified criteria, companies can then divide their customer base into different segments. These segments should be distinct from one another and should have different needs and preferences.
4. Develop Targeted Marketing Strategies:
After identifying the market segments, companies should develop targeted marketing strategies for each segment. This could include creating specific advertising campaigns, promotions, or product offerings that appeal to the needs and preferences of each segment.
5. Evaluate How Well the Segmentation Strategy Worked:
Companies should evaluate the effectiveness of their segmentation strategy to determine if it met their marketing goals. This could include analysing sales data, customer feedback, and other metrics to determine if the strategy was successful and if changes need to be made.
Types of market segmentation
As mentioned above, there can be a number of ways to segment your market. But broadly, listed below are the four majorly used market segmentation practices.
Source: Slide Model
This form of segmentation is the most commonly used form. As the name suggests, this includes dividing the audience on parameters like age, gender, marital status, occupation, education level, income, family size and so on. This is the most basic form of segmentation since the information here is relatively easy to access and incurs a low cost to the organisation.
For example, this type of segmentation is a good choice for an automobile company. One company can have both luxurious cars and an economical range of cars. The company can choose to market the audience based on the type of vehicle, the income of the target group and market specifically to the right set to get the maximum ROI.
Another way to segment your market is by observing your consumers’ behaviour. This can include simple habits like their online behaviour, most visited day and time of the week, actions taken on your website and so on.
Segmenting your audience based on their real behaviours allows you to create messaging that caters to those behaviours. Behavioural data is useful because it tells you how an individual interacts with your product or service, further market in the most effective way to them.
Geographic segmentation basically means splitting up your market on the basis of their location. Like the demographic form of market segmentation, geographic segmentation is basic but highly useful. Especially when you want to target an ad to a particular group of people based on nationality or language.
Football, for example, is more popular in the North-Eastern states of India in comparison to cricket. If you have a sports-based campaign or a series of articles pertaining to sports for that region, it’s important that you take such details into consideration to make the best of all of your efforts.
Companies can also consider different needs in different regions. For example, a clothing company will feature warm clothes to people living in cooler climates and feature the opposite of this to the people living in warmer climates.
On the lines of demographic segmentation, market segmentation based on psychographic deals with more intangible characteristics like mental and emotional sides. These attributes might not be as easy to get as demographics are but they give you valuable insight into the motive of your audience. Examples of psychographic characteristics include interests, beliefs, values, attitudes and lifestyle choices.
How to get started with market segmentation
To get your business into the execution phase for this exercise, you can choose to follow this 5 step process:
01. Collect all available data
The most important aspect of doing this is to look at all of your available data. You can explore all the possible channels and create a dump of it.
02. Decide what all segments you want to create
Sit back and think of your end goals – business goals & marketing goals. Think about your audience and what gets you the maximum revenue. Further mellow your list to the required number of segments.
03. Use all your available marketing tools
Check all of your email & SMS marketing tools. Take a sneak peek into your CMS and other tools like Hotjar. Spend time diving deep into these platforms and analyse your users’ behaviours.
04. Draft your content for different platforms
Now that you have all your basics in place, the next step is to create the right content for the right set of people. Since you have segmented your audience, you have the liberty to talk to each of them in the way they would acknowledge.
05. Initiate the conversation and track the metrics
It’s time you reach out to all of your segments and analyse the difference this exercise gets. Track the metrics and compare the two sets. Repeat the practice that works in favour of a particular segment and revamp the one that doesn’t.
Benefits of market segmentation
Are you still wondering what is the importance of having a proper market segmentation in place? Have a look at the benefits below:
Helps to convey the message in the right way
When you know who you are talking to, the possibility of vague content almost vanishes. Rather, you can edit and directly talk to your audience in the way they would relate to.
Tells you what works the best with your audience
At a time when we have multiple ways of marketing, it gets difficult to understand what exactly attracts your audience. Segmenting helps you to personalize and get more visibility since you will avoid doing generic marketing all throughout.
Increases returns on the money you spend on ads
Be it an ad on Google, Facebook or any other platform, having a proper target audience in place helps you get metrics that are appealing to both you and your business. Imagine a scenario where you spend hundreds of dollars showing an ad to a generic audience. There are high chances that you will spend more while you won’t get the expected traction. Here, demographic segmentation plays a massive role to make the best out of all your spending.
Attracts the right set of potential buyers
When your message is accurate and clear, there are high chances of your brand to stand out from your competitors. With the right set of segmentation, you draw in ideal prospects who are likely to convert into your customers.
Many companies across the globe have tapped into the power of market segmentation and transformed their business. With proper segmentation, you can save on your ad spends and have a set of all-happy-customers. However, you must remember that there is no one way to do this. You can test what works best and choose the best for your business.
Market segmentation’s limitations
Market segmentation is a useful tool for businesses to target their marketing efforts to specific groups of customers. However, it has some limitations that should be considered before implementing it.
1. Increased up-front marketing costs:
Businesses may need to invest in market research and advertising to effectively reach their segmented target markets. This can be expensive and may not yield immediate results, leading to increased financial risks.
2. A more complex product line:
As businesses try to meet the specific needs and preferences of each segment, they may end up offering a wide range of products or services. This can increase operational costs and may be challenging to manage.
3. A higher risk of misassumptions:
While businesses may use data to create customer segments, they may not always accurately capture the needs and behaviours of the segment. This can lead to misassumptions about customer preferences, leading to ineffective marketing strategies.
4. Increased reliance on reliable data:
Without accurate data, businesses may not be able to create effective segments, leading to ineffective marketing strategies. This requires significant investments in data collection and analysis to ensure that the segments accurately reflect the needs and preferences of the target customers.