What is Market Segmentation?
Market Segmentation is the practice of dividing your target market into approachable groups. These groups are based on demographics, needs, priorities, common interests and other criteria used to understand the target audience better.
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How to Get Started with Segmentation
Define Your Market
Market
Segmentation
Best Practices
• Is there a need for your products and services?
• Is the market large or small?
• Where do you fit in the market?
• Conduct research and ask questions.
Understand Your Market
• Test your findings and use conversion tracking to determine your marketing effectiveness.
Test Your Marketing Strategy
• Analyze responses from your research and questions.
Create Your Customer Segments
• Decide which of the five Market Segmentations you want to use.
Segment Your Market
How to Get Started with Segmentation
Stronger Marketing Messages
You speak directly to a specific group of people in ways they can relate to because you understand them better.
Targeted Digital Advertising
You understand and define your audience’s characteristics.
Developing Effective
Marketing Strategies
You understand what your target audience responds to most.
Attracting the Right Customers
More people want to buy
from you.
Increasing Brand Loyalty
Customers feel better understood.
Differentiating You From
the Competition
Makes you stand out.
Identifying Niche Markets
Uncovers underserved markets and new ways of serving existing markets.
Staying On Message
It is easier to stay on track with your marketing strategies and not get distracted.
Driving Growth
It encourages customers to buy from you again.
Enhanced Profits
You ensure that you don’t over (or under) sell yourself to the willingness of what
your customers can spend.
Product Development
You meet the needs of your customers and develop products that cater to your different customer bases.
The Five Types of Market Segmentation
• Based on behavior patterns specific to interactions with a brand or company
• Used to gain insights into the customer experience, improving customer success
• Used for marketers to determine future customer leads and market prospects who are more likely to
purchase your products
EXAMPLES: Benefits sought from product or service, readiness to buy or purchase, usage-based segmentation and common characteristics
Behavioral Segmentation – Digging deep into customers’ purchasing habits
• Used to develop a “brand personality” or brand personification
• Ways to collect these traits
• Interview existing clients
• Observe customer data
EXAMPLES: Habits, hobbies, activities, interests, values and opinions, personality, lifestyle, social status
Psychographic Segmentation – Focuses on inner or qualitative traits (attributes that aren’t obvious)
• Offers basic information about your customers. This is a broader segmentation
• Cuts down on time and resources to understand your target audience or tap into potential consumers
that you have yet to reach
EXAMPLES: Occupation, marital status, political party, race, religion, living status
Demographic Segmentation – Focuses on the breakdown of your customer personas in the market for cursory traits
• Works best paired alongside more abstract types of segmentation like behavioral
EXAMPLES: City, state, country, neighborhood, economic status, climate, population
Geographic Segmentation – The study of your customer based on their physical location
• Firmographics are to firms and investors as demographics are to people
• Companies use this to determine whether a small firm is likely to invest
• Identifies prospects based on size, scale and funding
EXAMPLES: Performance, annual revenue, average sales cycle, employee population, ownership, organizational trends
Firmographic Segmentation – Describes the attributes of firms and businesses
The Five Requirements for Effective Segmentation
Measurability
The size and purchasing power profiles of your market need to be measurable. It provides marketing strategists with the necessary information on how to carry out their campaigns.
Accessibility
Customers and consumers are easily reached at an affordable cost. Determines how specific ads can reach different target markets to make ads more profitable.
Substantial
Clearly define a consumer’s profile by gathering data on their age, gender, job, socio-economic status and purchasing power. Don’t make your market too small.
Differentiable
Make sure your markets respond differently to different marketing. This ensures that you are creating strategies that are more efficient and cost-effective.
Actionable
Ensure your market segments have practical value. A market segment should respond to a certain marketing strategy or program and be easily quantifiable.
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