15 Benefits of Market Segmentation
For some years now, experts and executives in the business world have been discussing whether market segmentation has already arrived at its dead end or still remains relevant. Some business executives, as big as former IBM CEO Ginni Rometty, argue that segmentation, as a marketing strategy, has become an obsolete idea, even though there are many benefits of segmentation.
So, what has prompted the theory of the demise of the market, customer, or consumer segmentation? According to them, it is the arrival of Big Data and data-driven personalized customer services.
Has Big Data really made market segmentation redundant? The simple answer is “Not just yet”. As long as you will be conducting market research and as long as you will need to know the common attributes of your diverse customers for targeted marketing, you will be applying market segmentation techniques in your marketing strategies.
What Is Market Segmentation?
Market segmentation is one of the most useful and practical strategies used in business planning and marketing. Segmentation is a process of dividing the market or consumers on the basis of commonalities and differences and grouping them together on the basis of specific characteristics that are relevant to marketing, such as income, occupation, and gender.
Market segmentation helps businesses to develop a good understanding of the current or potential market base on a broad spectrum, make plans targeting customers with specific needs, interests, or preferences, and carry out marketing strategies in focused and systematic ways. With segmentation, businesses explore and identify their unique opportunities in the market and concentrate their efforts on the prioritized segments.
Demand Generation Through Segmentation
To ensure that marketing advertisements and messages reach the right audience, targeting the right market is essential. If you are aiming too broadly, the message will read only a few people that are going to end up becoming your customers, but it will obviously reach plenty of such people who aren’t interested in your product. This is where market segmentation comes into action. This can help you in targeting the people who will most likely convert.
However, to understand market segmentation better, you must know what it actually is and the advantages market segmentation can offer you.
10 Benefits of Market Segmentation
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. There’s a reason improving segmentation was the most frequently reported priority in the survey. Market segmentation offers many benefits to marketers, publishers, and others, including the following advantages.
1. Improves Campaign Performance
Market segmentation can help you to improve the performance of your marketing campaigns by helping you to target the right people with the right messaging at the right time. Segmentation enables you to learn more about your audience so you can better tailor your messaging to their preferences and needs.
Targeting a specific segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience. If you advertise to an entire market, you will end up spending a massive amount of money on ads, but a relatively small percentage will convert. If you instead direct your marketing to a segment with the right characteristics, you can increase the conversion rate of your campaign considerably.
2. Increases Clarity
The first and foremost use of market segmentation is to develop clarity. After mining and cleansing your data, all you have is the most accurate and relevant information about the customers. Once you have the data ready, you can use this information to put the customers, who share particular business-relevant attributes, together in a group.
The primary objective of segmentation is to remove the unimportant clutter of information and keep what is useful and actionable on your desk.
3. Improves brand loyalty and customer engagement
Customer engagement is one of the most important advantages of market segmentation because it is critical to influencing the needs and interests of customers.
You can collect customers’ behavioral data from social platforms, mass media, or any other source and can use that to develop customer and market psychographic segmentation to address their needs more effectively.
Market segmentation has improved the way to engage customers with motivational efforts and communication. Ultimately, this has impacted brand loyalty as well in a positive way.
4. Develops Consumer Insights
If “Know thy customers” has always been an oft-quoted mantra in marketing, it has become even more loaded with meanings in the digital era. Today, your customers are just a click away, expecting you to frequently pat them on their backs.
With clearly defined customer segmentation and contact profiling, you can know who your customers are, where they are, and what they need better.
5. Reveals Areas to Expand
Market segmentation can also help businesses to identify audience segments that they are not currently reaching with their marketing efforts and then expand into new markets.
When you look at your audience data, you might discover interests that you didn’t realize your customers had. For example, a company might make the majority of its sales in physical stores. When looking at behavioral data, they might see that many of their customers like to shop online. Based on this information, they could then either open an online store or start advertising their online marketplace more.
6. Enhances reliable assessments
Market segmentation can make marketing efforts more manageable. Measuring segment-specific policies and strategies and practices’ success has also become easier. Growing access to data can let businesses analyze and assess marketing performance and re-segment these more effectively.
7. Optimizes Cost-efficiency & Resource Management
Market segmentation is an important tool for developing business intelligence and maintaining competitive advantage. It gives a deeper insight into the market and helps business firms to identify the segments of customers with greater profits and allows them to carry out more targeted micromarketing.
All the top-notch companies make the best use of their data to implement precisely defined market segmentation in their marketing and service delivery.
8. Improves Business Focus
Market segmentation can also help businesses to focus their efforts, which enables them to establish a brand identity and specialize in a particular type of product. A brand that tries to appeal to everyone in its marketing will come off as generic and unmemorable. It could also leave customers confused about what the brand stands for and what kind of company it represents. Similarly, a company that tries to sell everything likely won’t make a big impact in any one market, and its offerings may be of lower quality compared to companies that specialize. As your company grows, you can expand your offerings, but when first starting out, it can be challenging to differentiate your company if your product offerings are too broad.
9. Streamlines Mass Customization
Mass customization is a process of providing especially tailored products or services to fit the specific needs of a large number of customers in specific segments. The growing amount of clickstream and customer behavior data has helped businesses to apply more accurate customer segmentation, which has made the practice of mass customization more effective.
Mass customization significantly improves the level of customer satisfaction by helping your company to offer value-added and custom-tailored services to a large segment of customers.
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10. Maintains Freshness
It would be misleading to presume that customers who fall into a group or subgroup of segmentation stay there forever. In this digital era, customers are bombarded with information, which continuously influences their preferences and priorities, increasing their mobility across the segments.
Data-driven market segmentation heavily relies on the accuracy of customer profiles with new information on a regular basis. It helps your business to deal with your customers with up-to-date information.
11. Stronger market differentiation
Market segmentation gives a company the opportunity to pinpoint the exact message they way to convey to the market and to competitors. This can also help create product differentiation by communicating specifically how a company is different from its competitors. Instead of a broad approach to marketing, management crafts a specific image that is more likely to be memorable and specific.
12. Promotes the Application of Business Data
These days, all businesses, regardless of their size and scale, generate business data and have access to data across industries. Companies today have the advantage of using both the a priori and post hoc methods in market segmentation. Moreover, you can also use data visualization and cluster analysis techniques to improve the process of customer segmentation.
13. Informs Other Business Decisions
Market segmentation can let you indulge in useful insights about customers and the market. Which ultimately, helps you to understand the needs and potential of the market in a better way and can let you make well-informed business decisions.
14. Grows Niches Marketing Capabilities
Data plays a mission-critical role in discovering the hidden dynamics of the market and in developing newer insights and marketing strategies. Using the market/customer data to systematically segment the market can help your business to discover the potential niche markets where you can maintain your lead and domination with rapid customer conversion and market expansion.
The bowling pin strategy applied in niche marketing has helped many online businesses to grow rapidly. You can take Amazon as an example.
15. Keeps Focused & Goal-oriented
The whole purpose of market segmentation is to know the customers better and to cater to their needs in an effective manner. Data provides very precise and accurate customer insights and helps you to stay focused and targeted.