Market segmentation is necessary to improve the effectiveness of marketing campaigns. The research will allow you to define and segment your target audience. Then, when you run ads, you won’t direct your efforts to people who aren’t interested in your product.
You will understand how to improve the product and sell it correctly to different target audience segments. Marketing today focuses on individual offers for customers.
What Is Market Segmentation?
Market segmentation is the division of the target audience into groups with similar needs and characteristics. This process depends on the manufacturer’s goal – for example, to attract more potential buyers from a certain region.
There is no single right way to segment the market. Let’s look at what criteria need to be taken into account to reasonably segment the audience.
Types of Market Segmentation
There are four main types of market division that any business focuses on:
This is one of the simplest types of segmentation. Its main criteria include:
- Family status
- Level of education
The main advantage of demographic segmentation is that this information is easy to obtain – for example, by using a survey or using social media analytics.
This segmentation will create a more targeted marketing campaign. For example, your products or services are intended for people with a high level of income – this must be considered when segmenting the target audience.
- Shopping habits
- Interaction with content on the site
Use this data to target your ads only to potential customers. This type of segmentation is especially good for online stores. Here’s how it works: You determine whether a person is visiting the site for the first time or has come to make a repeat purchase. These buyers will see different ads and product or service recommendations depending on the situation.
Geographic segmentation works based on data about the physical location of customers: country, state, city, etc. This is especially beneficial for local businesses that do not ship products to other cities. For example, you can set up ads in one city and not spend your budget on a general audience. It will also help determine the demand for your services or products in different regions of the country or the world.
Psychographic segmentation focuses on the emotional side of the question: “Why do people buy?” That data that is tracked is:
- Purchase motives
- Values and beliefs
Use this data to understand why people buy from you or refuse to buy from you and what type of content they interact with more. For example, members of the same demographic segment may react differently to ads. Add psychographic segmentation to this data, and you will understand why customers do not respond to publications.
10 Benefits of Market Segmentation
Market segmentation is necessary to direct an advertising campaign to the most loyal audience to identify new development paths for a product or business as a whole. Let’s take a closer look at each benefit.
Have a Higher Rate of Success
With segmentation, you focus on the most profitable areas of the entire market. Marketers determine the potential and possible risks, saving the business from unnecessary costs.
Develop Consumer Insights
The task of a business is to keep the attention of a potential customer and encourage them to buy. This is difficult given how many ads a user consumes daily. With segmentation, you get to know your customers better, study their needs, and offer them incentives to buy products or use your services.
Focus on the Customers That Matter Most
Market segmentation allows you to identify a group of positive customers about your business. Then, instead of spreading your attention and budget over the entire huge market, you focus on those segments that are guaranteed to bring profit.
Creates and Provides Market Opportunities
Market segmentation identifies those areas of the market where your company has the greatest chance of success. For example, marketers will notice an unoccupied niche or region, which will allow you to be the first to “close” a market segment and win more customers.
Effective Market Campaigning
If the marketing department deep analyzes the target audience from different segments, you will create well-defined buyer portraits. Today, it is extremely important to use personalized marketing to feel cared for and treated personally. So, your advertising campaign will be predictable and bring results.
Design More Effective Marketing
Market segmentation will improve the overall marketing strategy. For example, you have an online store website where you sell products and publish news and reviews on the blog. The analysis of the target audience showed that the majority of potential customers want to receive news and view products on Instagram. So, now you know what specific actions are needed to “drain” the advertising budget.
Create a Superior Experience for Customers
Segmentation is essential to provide the customer with the best user experience. You sell a product based on the needs and requests of the consumer, show care, and customers will return to you for a second purchase.
Know Your Customer Better
A marketing strategy should be developed after a detailed analysis of the market and its segmentation. Always put yourself in the buyer’s place and identify their problems needs – why they should choose you over a competitor.
Optimize for Cost Efficiency
Market segmentation allows you to identify a solvent target audience. Then, by properly planning and optimizing costs, you are guaranteed to get new customers.
Use Your Resources More Efficiently
Market segmentation gives you an idea of where to direct your business resources (monetary and human). As a result, they will increase the effectiveness of advertising campaigns and increase the lead at a lower cost.
Market Segmentation Examples
This company effectively uses behavioral segmentation. For example, sports fans see Nike shoes and apparel on world-class stars. They are associated with success and fame – they will certainly buy the same sneakers that their idol wears.
For example, the Nike Air Force 1 x Colin Kaepernick with the portrait of the American football player completely sold out. The inspiration for the creation of shoes was the story of Colin Kaepernick himself and his position on racial discrimination in America.
Coca-Cola analyzes each market segment and creates its products. Some vivid examples that take into account a variety of preferences include:
- Packaging that can be recycled
- Caffeinated drinks
- Drinks without added sugar and with different tastes
- Themed holiday packaging
This is necessary to create a range of products so each customer can find what they like.
Volkswagen sells vehicles in many countries worldwide, which are known for their reliability and affordability. The corporation also covers other market segments, being responsible for producing cars of such brands as Audi, Lamborghini, and Porsche. Therefore, their target audience is expanding: customers with different income levels can afford a good car.
An example of psychographic segmentation can be seen in the collaboration between the Los Angeles Lakers basketball team and Beyond Meat. The advertising campaign aimed to attract the attention of those interested in sports. Beyond Meat is a plant-based meat company, and their collaboration with NBA players has focused on creating content that educates audiences about healthy eating.
McDonald’s marketers use all types of segmentation to achieve the best results. For example, they collect data and use a geographic approach to select countries for franchises.
The demographic approach is manifested in the diversity of the menus in different restaurants. They have combos for adults and separate sets for kids with toys inside. McDonald’s also analyzed the complexity of customers – and used behavioral segmentation. Their service saves customers time: you can place an order via a special application or drive directly by car to the pickup point.
The psychographic approach is manifested in the working schedule of restaurants. They evaluated the working schedule of clients and determined the most profitable time.
As a Result
Market segmentation helps companies understand customer needs, identify key growth paths, and avoid wasting unnecessary resources on ineffective advertising campaigns. The best cases of world brands are an example of this. Learn more about your customers and build a profitable business!