Most businesses understand that trying to advertise to everyone is a waste of time and money. Instead they try and identify their target audience to narrow their focus. Experienced marketers know that even that is not enough. If they are able to identify particular groups within their target audience, then they can customize their message and deliver it at the optimum time for maximum effect. That is why you need market segmentation.
A restaurant owner might segment her audience into three groups, those who dine in, those who take out and those who dine at similar restaurants but not hers. Each one would receive different messages with different offers. Smart customized messages are much more likely to be successful.
What Is Segmentation
Market segmentation means creating audiences that meet certain criteria or share certain characteristics. Segments are made up of people who will respond to the same messaging. They share needs, wants, interests etc.
Segments generally fall into four categories. One of the most basic is geographic. Knowing where a customer is located can inform a company about specific needs. Geography can be regional or very specific, down to zip codes. It can also consider climate or population density. A retailer is less likely to push coats in a warm-weather climate. Geography can also affect language or local terms of speech.
Another basic but highly effective segmentation is Demographics. Segmentation can include age, gender, occupation, education, income and nationality. This is a very quick way to narrow your audience and be more efficient with ad dollars. Demographic information is relatively easy and inexpensive to obtain, allowing implementation for a broad range of marketers.
Behavioral segmentation is a more sophisticated means of dividing a target audience. By dividing an audience based on behaviors you can customize messaging to speak directly to that behavior. Characteristics that are often considered here are visits to the company website, online shopping habits, how loyal the customer is and usage rate, or how often they use the product or service being marketed. Behaviors relate directly to how a consumer interacts with your products. Therefore, businesses can market more effectively to customers by knowing their behaviors. This kind of information can be collected via cookies on your website, your own purchase data or third-party data that is purchased.
Psychographic data is similar to demographic data instead it considers people’s mental or emotional states. Things that are considered include lifestyles, interests, personality traits, and values. This data is not as easily observed or gathered. But psychographic information provides an understanding of needs, motives and preferences of the customer. This information allows the marketer to construct emotionally compelling advertising.
In a recent survey of marketing professionals in North America, 62 percent of respondents said improving audience segmentation to enable more precisely targeted messaging was a top priority. Market segmentation provides many benefits to companies. By providing greater focus of marketing efforts it greatly improves efficiency. Instead of running “spray and pray” campaigns media dollars are directed at the prospects most likely to buy. Because messaging is more customized, the engagement and conversions are higher. At a time when advertising dollars are at a premium efficiency is more important than ever.
With segmentation comes a better understanding of your customers, their wants and needs. That can inform product or service development. The restaurant owner might find that take-out segments order more appetizers. Adding more appetizers to her menu might increase sales or loyalty.
Segmentation can also show areas where expansion is possible. If we learn how to serve a geographic segment, we can expand to neighboring geographies. Similarly, if we find out that customers who are middle aged women like to shop for their families in one place, we may add products for their children.
Why You Need Market Segmentation
There are many advantages to using market segmentation. Advertising planning and execution are easier because they are more focused. Advertising becomes more efficient, utilizing time and money better to increase ROI. With segmentation we learn more about our customers, so that we can better serve them over time. With better understanding we can tailor our products, services and messaging to customer segments. Marketing segments just makes advertising better. That’s why you need market segmentation.