Your Essential Guide to Market Segmentation

Do you want to break through the noise? To climb over the clutter and emerge as the beautiful thought leader that you know you are? In today’s digitally-dominated world, market segmentation is your key to rising from the safe bounds of your chrysalis into an inspiring world of success. ‘How?’ I hear you ask. Before we get into the ‘hows’ and ‘whys’ of market segmentation, let’s take it back to the ‘what’…

What is Market Segmentation?

Put simply, market segmentation is the process of grouping or dividing an audience into subgroups based on commonalities and shared characteristics. These characteristics can range from things such as a user’s age, location or income to their needs, wants, behaviors and values. This results in valuable subgroups consisting of existing and prospective customers for your brand.

It’s important to remember that these individuals allow your brand to thrive. So, reaching the right people, in the right place, at the right time is key. And it’s market segmentation that makes all of this possible for you.

Camilleri notes that:

Market segmentation is the first move any brand should make when determining the desired target market. Why? Because the very nature and function of market segmentation is to allow you to create those legitimate, relevant and ultra-precise audience segments who are the perfect match for your brand.

Segmentation essentially gives your brand confidence in the knowledge that the people you are reaching are the most appropriate audience for you, and will find your product, service or content meaningful and valuable. In fact, research shows that 34% of consumers would be motivated to promote a brand online if the content that’s shared is relevant to their interests.

Related content:

[Infographic] Market Segmentation Matters

You might be thinking, accurate market segmentation seems tough. Which it can be. However, with the help of a well-structured marketing strategy, the right tools, big data and the array of actionable insights that this data provides, anything is possible. We’ll touch on the topic of big data later on.

But before we get into all that, let’s take it back a step and have a brief peek into the history of market segmentation.

Segmentation, in its purest and most basic form, has been around since the 1950’s — 1956 to be exact. The term ‘Market Segmentation’ was first coined by marketer and academic, Wendell R. Smith.

It started off small, by segmenting users based on simple demographic information. Of course, this is still used today, but segmentation in the 21st century has grown to be much more varied and complex.

Read the full, free guide here

It’s no surprise that we’ve come a long way since 1956. And modern market segmentation is so multifaceted that it gives you the opportunity, and options, to be super-specialized. Segmentation facilitates the delivery of content that is streamlined, personalized and gives value to your users. It’s so advantageous as a marketing tool that any brand would be foolish to overlook it.

Research shows that marketers noted a 760% increase in revenue from segmented campaigns

Source: Campaign Monitor

To be entirely truthful, personalization today is so common that people actually expect to receive messages and products that are highly tailored. If you think about it, It would be totally normal and plausible for someone to think…

Giving users what they want, i.e. hyper-personalization and relevant offerings is essentially a requirement for brands today. And this is only achievable through clever segmentation.

Sarah Mansfield, VP of Global Media for Europe and the Americas at Unilever, puts it this way:

“[Personalised marketing is] a journey from mass reach to mass customisation to mass personalisation. It’s about reaching large audiences but doing it in a really smart way [and this requires] understanding consumers, their traits and behaviours, to identify actionable targeting segments for which we can develop different messages. In summary, true mass personalisation means the right time, right place, right targeting.”

Accurate market segmentation can be beneficial for both brands and individuals. Accuracy, here, begins with properly obtaining and using data i.e.:

  • Data that is collected according to GDPR regulations.
  • Data that is collected in order to aid or fulfill your brand’s goals and ambitions, no unnecessary collection of big data.
  • That the analysis is professional, accurate and yields useful, meaningful results that your brand can utilize in order to improve user experience (UX), customer experience (CX), product targeting or communication management.

Only once you have established your brand’s goals, and have gathered and analyzed your data appropriately, can you then fully utilize your segmentation outcomes.

The benefits are real. Precise segmentation simplifies and facilitates the process of setting objectives, strategizing and tailoring products, services, and brand-audience contact. And the benefit for these segments and the individuals within them? Well, they then receive connections and offerings from brands that are highly personalized and intelligently delivered, i.e. to the right person, in the right place, at the right time.

Market Segmentation and Big Data

First of all, what is it? Put simply, big data describes a large, and continuously growing, the volume of online information — both structured and unstructured. This information is collected, recorded, stored and analyzed with the purpose of uncovering actionable insights that add further value to your brand.

Or as Gartner puts it:

It has been proven that data-driven marketing can work. So it’s no surprise that more than 63% of marketers claim to have increased their spending in this area. In fact, around 20% of all marketing spend today goes on data-driven campaigns.

Gauging the intentions and meeting the needs of current and prospective audiences is an ever-present quest for brands today. And, when it comes down to it, brands can only segment a market based on what they know.

Read the full, free guide here

In the not-so-distant past, it was relatively difficult to gather data that went further than, say, basic information like someone’s age, gender or income. This inability to gather consumer data meant that marketing was once almost entirely one-sided; with marketers simply guessing the needs and wants of individuals and groups with little information to back-up their marketing efforts.

But not today. Times have changed. Big data itself is advancing at an alarming rate, as are the endeavors of brands.

Don’t get me wrong, big data isn’t some kind of magic genie that will grant all of your wishes, but what it can help with is…

  • Advanced targeting
  • Meticulous and accurate segmentation
  • Coefficient brand — audience relationships

Big data streamlines your marketing efforts

The rate at which brands are able to collect and analyze digital data is remarkable, given the fact that data is constantly accumulating. In fact, according to computer software company Domo, around 2.5 quintillion bytes of data are created each and every day… globally. It’s clear that this number is only going to increase as the number of internet users worldwide has grown by over 2 million in the past 10 years. That’s really something.

So, it’s no wonder that brands utilize data from multiple sources, simply because the data is so widely available and, arguably, because it’s now a necessity. That is, if you want to keep ahead of competitors and draw deeper, more intimate relationships with your audiences.

Source: Forbes

As well as identifying both the similarities and nuances of individuals, big data also tracks consumer segments as they evolve. Meaning that as audiences change and grow, so does their data. So a user who is currently a young, spritely law graduate could later become a high-end, seasoned barrister, with different requirements and interests.

Source: Forbes

Essentially, people change and big data changes with them. This then paves the way for brands to be consistent in their marketing efforts by adapting their personalization endeavors and, consequently, boosting brand loyalty by optimizing user experiences.

Source: Forbes

Getting to grips with the similarities and differences of your current and prospective audiences is what makes accurate segmentation possible. Segmentation today is data-focused and data-driven.

Read the full, free guide here

Types of Segmentation

Segmentation is a marketer’s best friend and can certainly be the key to skyrocketing your brand’s success… but that’s only if you select the right type of segmentation for your brand.

We now know that segmentation is the subdivision of a market. But what matters most is deciding which type, or types, are right for your goal. For example, there’s no point in delving into something like demographic segmentation if the age or income of your audience is irrelevant. In the same way, there’s no use in identifying your user’s behavior if it’s their geographic location that identifies them as valuable.

There are 4 main types of market segmentation:

  • Demographic
  • Geographic
  • Psychographic
  • Behavioral

Each type will serve its own unique purpose, and all of them vary in their functions, elements and what they can offer your brand. Chances are that your marketing strategy will include at least one of these different market segmentation types, so let’s take a closer look at each.

[Video] 4 Market Segmentation Types in 40(ish) Seconds

1. Demographic Segmentation

Demographic segmentation organizes a market based on their most basic elements: their demographic information. It is one of the simplest, and most commonly used, forms of segmentation. This can be put down to the fact that demographic data is one of the easiest for brands to collect and analyze in a short amount of time.

So what does demographic segmentation take into account? It focuses on a range of information, but predominantly revolves around these elements:

  • Age
  • Gender
  • Income
  • Education
  • Occupation
  • Marital status

2. Geographic Segmentation

Geographic segmentation groups audiences based on, you guessed it, their geographic information. But there’s more to this than you might think. That’s right, geographic segmentation doesn’t just look at an audience’s current residence or the street that they live on. It actually constructs different target groups based on a number of integral aspects, most importantly these 5:

Why do all of these differences matter?

Put simply, they all matter because they all have the ability to impact your segmentation efforts in a multitude of ways.

You see, you may find a number of individuals living in the same country and think that you can segment them based on this simple, common factor. But, in reality, it would make sense to create smaller, separate segments as this particular country may encompass two different languages, or a range of ‘urbanicities’, for example.

You might be thinking, this all seems quite obvious. However, if you simply group audiences by singular, broad factors, without accurate segmentation analysis, you may find that whilst factors such as their zip-codes are the same, their cultural values or climate may be opposing.

Read the full, free guide to Market Segmentation HERE

Much like demographics, geographic data is relatively easy to collect, analyze and implement in your marketing strategy.

But it’s not always simple demographic or geographic information that brands require. Often it’s a deeper, more personal look into an audience that really makes the difference.

That’s where psychographic segmentation comes in.

3. Psychographic Segmentation

When you dive deep into your target market and discover who your audience really are, you know you’re taking the right steps on the path to success.

Why? Because the more you get to know your audience the better you can accommodate them; cater to their needs and discover their motivations. In today’s digital landscape, you can easily find out who your audience is, but going one step further and discovering the fundamental aspects of their characters is even more valuable.

Cue: psychographic segmentation.

Psychographic segmentation branches from aspects of psychology, which focuses on things like personality traits, perceived values, interests, lifestyles, and motivations, etc. So, as you can imagine, identifying these aspects of your audience will undoubtedly be advantageous to your marketing campaign.

Incorporating psychographic segmentation in your marketing strategy can optimize your personalization efforts and draw actionable insights.

Read the full, free guide to Market Segmentation HERE

4. Behavioral Segmentation

What is behavioral segmentation and what’s all the fuss?

Behavioral segmentation entails dividing and grouping an audience [or audiences] based on how they act. This could range from in-app and website behavior to in-store actions. And the fuss is there because behavioral data has the potential to bring huge amounts of value to brands.

Take app-use, for example. There are currently over 2.7 billion smartphone users globally, and 90% of mobile time is spent on apps. And with over 2.8 million apps currently available for download on the Google Play Store, in-app behavior is entirely significant for brands when it comes to shaping who they are, what they offer and how they offer it.

Behavioral data offers brands a clear window of opportunity. By this, I mean that those organizations leveraging behavioral data can see benefits such as an increase in ROI and improved customer experiences.

Source: McKinsey

Opportunity is a key concept here. It’s important for brands to realize that the actions of their audience are impactful and present an opportunity for improved user experience. After all, user experience is one of the fundamental features of marketing success.

Essentially, behavioral data gives brands the advantage of knowing when, why and how to optimize their audiences’ experiences which, in turn, facilitates streamlined brand development.

Read the full, free guide to Market Segmentation HERE

Benefits of Market Segmentation

Ever since it was first coined in 1956, the prominence of market segmentation and its problem-solving capacity has been clear. This is because all brands, whether global or local, need to identify different audiences in order to discover what really works and where, why and how value can be delivered.

In an age where increased sensitivity and differentiation of audiences is the key to a sustainable competitive advantage, segmentation by preference and other functional structures becomes an approach that marketers would be foolish to overlook.

Source: Wunderman

So what are the real benefits of market segmentation? Well, we’ve got a few ideas:

Market Segmentation Improves Business Focus

Market segmentation gives you a deeper and clearer understanding of what you need to focus on and what you should avoid, and why.

For example, there’s no point in offering the biggest, most chocolate-y cake to your audience if the segment that you’re targeting consists of individuals who are lactose-intolerant or opt for a vegan diet. This would not be favorable for your brand.

Market segmentation alleviates potential blunders like these by meticulously analyzing data which lets you know the preferences of your audience. This means that you can focus all of your efforts on aspects of your product, service or content that you know will be well received by this audience. I mean, you might even be rewarded with the sought-after position of Thought Leader in your industry, if they really love your stuff!

Market segmentation is essentially an exaggerated form of hyper-organization and analysis: once you have grouped your audience and analyzed their data, you can then move on to looking at things like your budget and how you can utilize it to offer your segment the most value. Clever segmentation is also utilized as an advice tool; by establishing the most appropriate areas to allocate your precious resources in order to get ahead of those problematic competitors.

Market Segmentation Improves Product Development

Research shows that 30–45% of new products fail to deliver a valuable financial return.

Wow. We really don’t like the sound of that. But I’m afraid that’s the harsh truth. So unless you’re really into mass marketing, chances are you can’t just make any-old product and ship it off to market. Because the nature of segmentation means recognizing and understanding the different requirements of your audiences; specifically honing in on these requirements and developing products that are likely to be highly sought-after by a particular group.

That’s the beauty of market segmentation. Your product development will begin simply as an idea and will swiftly be concentrated into a specialized, segment-specific product with unique features and functions.

Without market segmentation, where do you begin? It’s tough to know which product to offer your audience, and which features and functions will be entirely necessary, appropriate, or valuable to this audience. But clever segmentation and analysis relieve these worries by competently streamlining and improving your product development.

Impeccable product development reduces the potential for errors, and fewer errors eliminates product recall. This results in a satisfied audience, and also yields:

Read the full, free guide to Market Segmentation HERE

Market Segmentation Optimizes User Experience [UX]

Great user experience is key in today’s digital scope. Poor user experience? You may as well quit now. Because I can assure you, your audience will expect more.

Now, user experience doesn’t simply mean… can your audience physically or mentally use what you have to offer. It means do they like it; do they love it? Do they love how it works, looks, feels, acts, responds etc? Because usability is only one of many prominent aspects of user experience. UX also takes into account these key features:

UX is an integral part of market success as it directly impacts your conversions, revenue and peoples’ overall feelings and perceptions toward both your brand and your products or services.

Data gathered through behavioral segmentation is one of the primary ways to optimize your UX: analyzing behavioral data lets you understand your user a little better. Well, a lot better. It is the gateway to discovering what really drives that user’s actions which, in turn, provides valuable insights for growth, and makes way for smarter marketing

Read the full, free guide to Market Segmentation HERE

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