What is Marketing Segmentation and Why is it Important?

What is marketing segmentation? It divides a market of prospective buyers into target segments based on different characteristics.

What is marketing segmentation?

Marketing segmentation is a part of market research that helps divide a market of prospective buyers into target markets (or segments) based on different characteristics. Each segment represents buyers who will have similar traits and responses to marketing strategies.  

Customer segmentation is a crucial part of a small businesses marketing strategy. According to a Harvard Business study, 95% of 30,000 new products launched each year in the US fail because of poor market segmentation. Click To TweetWhen personalizing marketing materials, you want to understand each customer on an individual level and cater towards their needs, wants and demands. The main goal is to differentiate brand products and messages between the commonalities of the market segment.

Four types of segmentation

What is marketing segmentation? It divides a market of prospective buyers into target segments based on different characteristics.

1. Geographic segmentation

Geographic segmentation is based on variables such as nations, states, counties, regions, cities, neighborhoods, population density, population growth rate etc. Marketers will tailor their marketing products or services to fit the needs and wants of individuals in these areas based on the climates and geographic regions. This helps determine where to sell, advertise and expand your business.

2. Demographic segmentation

Demographic segmentation is based on variables such as age, gender, race, religion, family size, income, ethnicity, education etc. This information can easily be accessed through census data. This is one of the most used types of marketing segmentation. The products and services that people buy are often determined by age and gender.

3. Behavioral segmentation

Behavioral segmentation is based on behavior and decision-making patterns such as purchasing decisions, consumption, and lifestyle. Younger buyers are most likely buying different products than older buyers which means you want to market in ways that appeal to different age groups.

4. Psychographic segmentation

Psychographic segmentation is based on variables such as the lifestyle, activities, and interests of individuals. Though this may seem similar to behavioral segmentation, it differs by taking into account the psychological aspects of consumer buying behavior. Activities, interests, and opinions will tell a marketer what a consumer likes and how their thought process works, ultimately providing them with a psychographic profile.

What is the role of marketing segmentation in marketing?

When researching target audiences, you will find a common need, but you will also find that different customers have different needs on top of those. Marketing strategies will only work if they are targeting each specific need, which is where marketing segmentation comes in. Marketing products that target specific needs will increase the effectiveness of your strategies.

Advantages of marketing segmentation

What is marketing segmentation? It divides a market of prospective buyers into target segments based on different characteristics.

By breaking down your target customers into groups based on specific needs, you will gain a better understanding of your customers, increasing the effectiveness of your marketing strategies. This will also allow you more insight into those groups that are less satisfied.

Focus.

Market segmentation encourages focus to be set on specific markets allowing it to define itself as a unique business with unique offerings. Attempting to capture the attention of a wide range of markets at once can be detrimental to your success as you aren’t able to put maximum effort into each one.

Competitiveness.

Accurately defined market segments give your business a competitive edge over competing businesses. The better you know your customers in each segment and what makes them unique, the better you can tailor your marketing efforts to match their needs and wants.

Expansion.

Geographic segmentation can help you expand your market immediately. Once you cater to a specific area, you can easily expand to nearby markets and reach potential customers in new areas.

This can also help identify underserved markets which present the perfect opportunity for a business to establish itself as first in that particular market. Being the first business to offer a service or product to a market leads to control over that market even after competitors move in.

Improved communication.

By knowing your target audience, you know how to reach them best, be it by television, radio, magazine etc. which improves the efficiency of your communication.

Profitability.

You may initially lose sales from those outside of your target audience, your overall sales will increase within the target.

Marketing segmentation best practices

What is marketing segmentation? It divides a market of prospective buyers into target segments based on different characteristics.

Research your customers.

The first step in getting started with segmentation is to research your customers and getting to know them better. Analyze the needs and wants of different segments to ensure they’re accessible to the business and are large enough to provide a solid consumer base.

Determine segment criteria

Once you have conducted preliminary research you can narrow down what criteria you want to segment your market based on.

Conduct more in-depth research

Ask questions based on the criteria you want to segment your market to further define the needs and wants of your customers.

Define segments

Analyze responses to define the characteristics you will base your market segments on.

Test the effectiveness of segments

Make sure your segments are useful, otherwise try re-segmenting based on different criteria.

Measurability

You should be able to measure your market segments in terms of sales value or volume to help you figure out how much effort should go into marketing to a specific segment.

Size

When delegating resources you would not want to waste any on a market segment that is so small it doesn’t make an impact. Likewise, if your segment isn’t based on stable characteristics such as age group, it’s likely to drastically change over the course of a year or two, rendering your efforts useless.

Accessibility

A segment will only be useful if you can reach them. It’s important to take this into consideration to determine the advertising that will garner the most response.

Differentiable

A segment should have characteristics in common within the group but should be different overall than other segments. These differences should be clearly defined to avoid overlapping marketing campaigns and strategies.

Actionable

Each market segment is broken down with the goal of creating a response based on the advertising geared towards them. Effective marketing segmentation will result in the desired reactions of your groups.

Marketing segmentation isn’t an exact science. It may take some trial and error to figure out what works best for your business but don’t get discouraged.

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Jackie Vlahos is the Content Specialist at Printi. She is an expert in design, marketing and anything in between. When she's not blogging her life away, she can be found with a camera in one hand and a coffee in the other.

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