When trying to reach customers with a marketing message or ad campaign, targeting the right market with the right message is essential — If you aim too broadly, your message might reach a few people who end up becoming customers, but you’ll also reach a lot of people who aren’t interested in your products or services. When your messaging isn’t optimized for your audience, you’ll end up with a lot of wasted advertising dollars.
Market segmentation can help you to target just the people most likely to become satisfied customers of your company or enthusiastic consumers of your content. To segment a market, you split it up into groups that have similar characteristics. You can base a segment on one or more qualities. Splitting up an audience in this way allows for more precisely targeted marketing and personalized content.
Understanding Market Segmentation
Companies can generally use three criteria to identify different market segments:
- Homogeneity, or common needs within a segment
- Distinction, or being unique from other groups
- Reaction, or a similar response to the market
For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements. Understanding these different market segments enables the athletic footwear company to market its branding appropriately.
Market segmentation is an extension of market research that seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group. The objective of market segmentation is to minimize risk by determining which products have the best chances of gaining a share of a target market and determining the best way to deliver the products to the market. This allows the company to increase its overall efficiency by focusing limited resources on efforts that produce the best return on investment (ROI).
The Importance of Market Segmentation
Market segmentation can help you to define and better understand your target audiences and ideal customers. If you’re a marketer, this allows you to identify the right market for your products and then target your marketing more effectively. Similarly, publishers can use market segmentation to offer more precisely targeted advertising options and to customize their content for different audience groups.
Say, for example, you’re a marketer who’s advertising a new brand of dog food. You could split an audience into segments based on whether they have a dog. You could then segment that audience further based on what kind of dog they have and then show them ads for food formulated for their dog’s breed. A publisher could use this same information to show content about dogs to people who have or like dogs.
Market segmentation allows you to target your content to the right people in the right way, rather than targeting your entire audience with a generic message. This helps you increase the chances of people engaging with your ad or content, resulting in more efficient campaigns and improved return on investment (ROI).
Types of Market Segmentation
Market segmentation is the process of breaking up a large market into smaller groups of customers with similar needs, traits, or ways of behaving. There are 5 types of market segmentation. Below, we describe each of them:
1. Geographic segmentation
Geographic segmentation consists of creating different groups of customers based on geographic boundaries.
The needs and interests of potential consumers vary according to their geographic location, climate, and region. So, geographic segmentation is valuable. Understanding geographic segmentation allows you to determine where to sell and advertise a brand and where to expand a business.
2. Firmographic Segmentation
Firmographic segmentation is the same concept as demographic segmentation. However, instead of analyzing individuals, this strategy looks at organizations and looks at a company’s number of employees, number of customers, number of offices, or annual revenue.
3. Psychographic segmentation
Psychographic segmentation consists of grouping the target audience based on their behavior, lifestyle, attitudes, and interests.
To understand the target audience, market research methods such as focus groups, surveys, interviews, and case studies can successfully compile psychographic segmentation conclusions.
4. Behavioral Segmentation
Behavioral segmentation relies heavily on market data, consumer actions, and decision-making patterns of customers. This approach groups consumers based on how they have previously interacted with markets and products. This approach assumes that consumers’ prior spending habits are an indicator of what they may buy in the future, though spending habits may change over time or in response to global events.
5. Demographic segmentation
Demographic segmentation divides the market through different variables. Demographic segmentation includes age, gender, nationality, education level, family size, occupation, income, etc.
Demographic segmentation is one of the most widely used forms of market segmentation since it is based on knowing how customers use your products and services and how much they are willing to pay for them. Surely demographic segmentation is very important.
Benefits of Market Segmentation
Marketing segmentation takes effort and resources to implement. However, successful marketing segmentation campaigns can increase the long-term profitability and health of a company. Several benefits of market segmentation include;
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. Stronger brand image
Marketing segment forces management to consider how it wants to be perceived by a specific group of people. Once the market segment is identified, management must then consider what message to craft. Because this message is directed at a target audience, a company’s branding, and messaging are more likely to be very intentional. This may also have an indirect effect of causing better customer experiences with the company.
3. 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.