Market segmentation is one of the most effective ways to grow your business. Show
If you simply treat all your customers the same then you are not optimizing your sales and marketing. Even large SME’s often fail to dig into the different ways to segment markets. As a result, competitors steal customers by creating more personalized offers and erode market share.
If you want to maximize revenue and profits then you need to get smart about segmenting your market.
Personalization of MarketingMarket segmentation done well offers you the chance to develop more personalized marketing communications, offers and ultimately drive more sales. Here some statistics on marketing personalization:
How Powerful Is Segmentation?Watch this video from the infamous Cambridge Anayltica. You’ll begin to understand the power of big data, AI and segmentation/profiling techniques. what are the 4 types of market segmentationMarket segmentation matches what you offer to customers that want to buy what you offer. They are 4 types of market segmentation: geographic segmentation, demographic segmentation, behavioral segmentation and psychographic segmentation. It makes it easier to personalize marketing communications as well as develop products and services that meet the needs of the customer segment.
Some argue that market segmentation is outdated and there are more sophisticated ways to market to customers. Whilst that is true, there are new tools using AI to spot patterns, you still need to understand the basics and focus on identifying customer needs. To create a group there needs to be a common set of characteristics that the people share e.g. age range, location where they live, lifestyle, interests… What Is Market Segmentation?Market Segmentation is a decision-making process that involves dividing a market of potential customers into smaller groups to improve what products it offers and how it communicates. Definition of market segmentationMarket segmentation is a process that organizes customers into groups that can be researched and defined by their characteristics. Market research is used to gather demographic, psychographic and behavioural characteristics to identify common characteristics that allow a group to be defined. Benefits of Market Segmentation
Typically, market segmentation involves the full marketing planning process from strategy to marketing campaigns and communications. The concept of market segmentation was coined by Wendell R. Smith who in his article “Product Differentiation and Market Segmentation as Alternative Marketing Strategies”. Today market segmentation is more sophisticated and the tools you can use enable you to segment a market-based in more nuanced ways e.g. lifestyle choices, behavioural segmentation and occasions. Market Segmentation MethodsTo start the process you need to use data. Most companies use demographic data because it is easy and gives you an initial picture of who your customer is. But demographic data doesn’t tell you much about why people buy. To. divide customers into groups that help you to improve conversions you need to get into why they buy. That will make your marketing more relevant and contextual to them. Your segmentation then affects how brand campaigns, the images you use as well as the tone of voice and copy. As an example, it’s no good sending out emails to people who don’t play football as a hobby if you’re selling personalized football kits for local teams. Use a mix of data sources to develop a rounded view of the customer. In other words, you need to answer who they are and why they buy. Use customer personas then to represent each segment you create. How Segmentation is changingAs marketers we are inundated with data from social media, search data…e.g. Google as well as many other sources such as Facebook. Big data and analytics are now coming together to create new platforms that provide deep insights into customers. Everything from how customers interact with your website/content to psychographic profiling and much more, now provide marketers with an incredible opportunity to improve ROI and the customer experience. Some important considerations for reviewing a possible segment:
Requirements for Market Segmentationmarket segmentation requirements
What is demographic segmentation?Demographic segmentation divides markets using demographic variables like age, gender, marital status, family size, income, religion, race, occupation, nationality, etc. This is one of the easiest ways to segment because of the availability of this type of data. Demographic segmentation is used as a start point in almost all industries. e.g. automobiles, beauty products, mobile phones, apparels, etc What is geographic segmentation?Geographic segmentation divides the market on the basis of geography. Often people in different regions have different requirements and may source and buy differently. Another simple reason is distribution. In other words, people often want to buy products locally or source them locally. The dating industry, for instance, uses location as key way to segment and match people. The Uber business model is built on matching local drivers with people who need a ride. People belonging to different regions may have different reasons to use the same product as well. Geographic segmentation helps marketer create relevant marketing campaigns for everyone. What is behavioral segmentation?This form of market segmentation is based on how customers behave, e.g. usage, preference, choices and decision making. Typically, you have segments like early adopters (based on technology adoption model – TAM), knowledge of the product and usage of the product.
What is psychographic segmentation?psychographic segmentationPsychographic segmentation divides the market on the basis of their personality, lifestyle and attitude. This segmentation process works when buying behaviour affects the decisions about the purchase of a product. As an example, people who buy a holiday can be targeted on lifestyle choices, personality and attitude.
The luxury market and targeting high-net-worth individuals is a good example. A person who has a high-net-worth will often live a luxury lifestyle and may consider buying only luxury cars e.g. Ferrari, Lamborghini… B2B market segmentationSegmentation equally applies to business to business environments. Often, the process of buying in B2B is more complex and involved understanding:
For these reasons, a B2B marketing strategy has to be able to understand the buyers and buying process first. The four-level of market segmentationThe most common forms of segmentation that companies used to were the four levels proposed by Kotler:
What is Mass Marketing?Mass markets are mainly viewed with businesses such as Amazon, Walmart and general consumer goods. Fast-moving consumer goods such as pizzas, soap… sold through grocery stores would be an example of mass-market goods. The marketing campaigns and communications tend to appeal to a broad audience. This, in fact, lowers the cost of marketing in terms of production e.g. one TV ad campaign but is high cost because of the need to reach a big audience and therefore use large channels such as TV. What are segmented Markets?A segmented market is divided using one or multiple types of segmentation approaches e.g. demographics, geographic, behavioral or psychographic. This becomes a narrower and more focused approach compared to mass marketing. What is Niche Marketing?If you are going to focus on niche marketing you are aiming to target a small number of people that have common characteristics. These niche segments usually have quite different needs to a mass market. Often this is referred to as underserved. As an example, a diabetic who needs a special diet might be a niche customer and under-served by Walmart. A nice company specializing in providing diabetic foods (and possibly other niche segments) could generate a profitable business. What is one-to-one marketingOne-to-one marketing is the approach of personalizing interactions with customers. As digital technologies for CRM systems have become more sophisticated there are increasingly higher levels of personalization methods available. Companies now like Nike and Levi’s even have radically transformed the supply change and production methods to be more modular. This has led to products being personalized by customers. levis segmentation and personalization Levi’s personalization optionsThe art of market segmentation is to be relevant to your audience across the full 360 degrees of your marketing. You plan this by understanding the customer journey and then mapping your messages and branding to fit. Segmentation, Targeting, And Positioning FrameworkSegmentation Target Positioning FrameworkThe core questions that relate to STP: Where am I?The first stage of the process involves assessing the market. In other words, where you intend to launch your product or service. Understanding the market is critical to understand how and what business model you will need to design. organization. How and what type of organizational design you need. How long it will take to acquire each customer. How much it will cost to acquire them… Who is my key customer?Understand your customer and place your customer at the heart of everything you do. Too many companies suffer from having departments that do not share the same common view of the customer and do not understand how and why customers are important. Conduct market research to understand the potential customer and don’t treat is as a one-off exercise. You need to constantly experiment and learn about your customer. Each time you learn about your customer you can improve your value proposition fits and how your product or service offers value to your customer. Remember that Value = Benefits – Cost What problem does your product solve? If you want to learn more about the jobs to be done framework and how to understand customers and identify problems take a look at the value proposition canvas. What Content Engages Them?It is easy these days to find out what channels your customer uses, but the harder part is to spend time understanding what type of content they engage with and how that fits with the buying process. How Do you Reach Customers?The next step involves marketing to your customers. How do you reach them? What are the different channels and how do they fit the buyer persona or customer persona. Customer journey and experiences are designed at each stage by understanding how and why customers use each channel. Market Types: The Four Types of MarketsSteve Blank developed this as a method to analyse some of the factors that affect new venture success. Existing marketsThe well-defined markets are dominated by a few key players. Re-segmented marketsA market is dominated by a few companies leaves room for niche marketing and to develop value propositions to the under-served customer. Clone marketsClone markets are really replications of existing markets and customer segments. This model fuelled a lot of growth for Chinese companies when they replicated early versions of social media sites. How to Get Better At Market Segmentationmarket segmentation processWhen designing and conducting segmentation it’s important to consider:
Things to avoid are relying solely on data. No amount of data that has not been cleaned into a set of algorithms alone will select the best model for you. This in fact is an example of worst practice. Remember, market segmentation can dramatically improve your return on investment. What are the characteristics of a market segment?Often companies offer multiple products that appeal to different market segments and let customers self-select.. Identifiable. ... . Substantial. ... . Accessible. ... . Stable. ... . Differentiable. ... . Actionable.. What are the 5 market segments?There are many ways to segment markets to find the right target audience. Five ways to segment markets include demographic, psychographic, behavioral, geographic, and firmographic segmentation.
What are the different market segments?There are four key types of market segmentation that you should be aware of, which include demographic, geographic, psychographic, and behavioral segmentations.
What are the 7 market segments?Market Segmentation: 7 Bases for Market Segmentation | Marketing Management. Geographic Segmentation: ... . Demographic Segmentation: ... . Psychographic Segmentation: ... . Behavioristic Segmentation: ... . Volume Segmentation: ... . Product-space Segmentation: ... . Benefit Segmentation:. |