Effective market segmentation leads to customer satisfaction, which, of course, leads to sales and profits. It is essential to know the complexities of marketing segmentation to gain a competitive edge in today’s marketplace.
The entire marketing segmentation process depends on one particular aspect, i.e., knowing your audience. Brands that understand their audience’s needs and target them specifically are significantly more successful than those who aim to target the general or average consumer.
What is Market Segmentation?
Just as the name suggests, marketing segmentation is the process of dividing a rather heterogeneous market into comparatively homogeneous groups of people who share similar characteristics. Brands segment based on specified parameters, such as demographics, behaviors, needs, gender, or lifestyles.
To further explain this, we can consider the example of a commercial bank that plans to target millennials. The bank may research its target demographic to deduce that most millennials are at the age where they are planning to have families. In this case, the bank can utilize this information to advertise college-friendly savings and investment accounts to this particular consumer segment. This is what is known as market segmentation.
How can Market Segmentation Benefit You?
Usually, marketers fixate on the supposed universality of their product. Assuming that the product is for everyone, they tend to rely on mass marketing and overlook market segmentation’s benefits.
Research conducted by Harvard Business Review suggests that over 85% of product launches fail because of the marketer’s inability to segment their audience effectively.
With market segmentation, you understand the specific needs and desires of your potential consumers. This allows you to construct a more personalized marketing campaign, which then yields better results.
Ok, but how can you effectively segment your audience?
Importance of Research
Essentially, brands conduct market segmentation based on some characteristics. These characteristics, known as segment descriptors, are reliant on the aim of your campaign.
There are numerous descriptors that you use to segment your audience. For example, your segment descriptors can be demographic, geographic, psychographic, or behavioral.
Before segmenting your consumers, you must conduct the necessary research to determine what works.
Some ground rules to follow are:
1- Make sure that your segments are specific and narrow.
2- You need to take the various market segments into account and organize your business model accordingly.
3- It is beneficial to manage market segments globally. This will help you adapt to the global economic processes.
4- Once you have done the research and uncovered the significant market segments, do not hesitate to target the right one!.
We can say that the efficacy of your marketing segmentation depends on the research you conduct. In-depth research provides you with a better understanding of which segments are right for your brand. It also streamlines the marketing process and lays down the right direction for your business.
Your research does not stop at your audience, though. You also need to be aware of the kinds of segmentation available to determine which one suits your business.
Types of Market Segmentation:
Primarily, there are three basic kinds of marketing segmentation. These are:
1- Geographic Segmentation
This type of segmentation divides the market based on geography. Quite obvious, yes. The principle behind this is that consumers residing in different areas have different needs and behaviors. Therefore, they will have different reasons to buy your product or avail of your services. Segmenting the consumer into geo-locations, thus helps you personalize your marketing strategy.
2- Demographic Segmentation
This is possibly the most straightforward and most widely used form of market segmentation. In demographic segmentation, consumers divide into segments based on their age, gender, religion, race, ethnicity, income, family size, or education. All these aspects have a significant impact on the buying behavior of the consumer. Thus, segmenting the audience and targeting them based on their demographic is a profitable tactic.
3- Behavioral Segmentation
This type of market segmentation is more complicated than the previous two as it deals with a lot of subtle intricacies. It is based entirely on the behavior of the target audience. This includes their preferences, habits, usage, adoption history, etc. It consists of a more detailed study into the consumers’ buying habits and the factors that impact their decisions.
Market segmentation can be a complicated process. However, some practices have proven to be beneficial over the years. These are:
A Robust Database
A rich, robust database is the prerequisite to effective market segmentation. Having necessary information on around a dozen prospect consumers will take you nowhere. You need to make sure that you derive your database from a large sample size from varying market segments. You must have a rigorous understanding of competing and similar solutions, adoption trends, market share, and so on. The more information you have, the better insight you can gain into a specific market segment.
Prioritize your Goal
Before you begin the process of segmentation, you need to have an end goal in your mind. Why do you need to segment your audience? What do you want to accomplish?
Develop a reasonable goal, and then ensure that you do not lose sight of it. It is easy to get tangled up in numerous target goals. Make sure you have a robust, clear plan in place that entails profitability for actionability focus.
Most commonly, companies tend to segment based on the demographic or geographical basis of their audience. Even though it is useful and widely used, it does not offer you any competitive edge. To segment effectively and propel ahead of your competitors, you need to consider your consumers’ needs. Needs are at the heart of consumerism. Uncovering the needs of your consumers and then effectively catering to them can dramatically increase your sales. Therefore, needs-based segmentation holds the key to profits.
But how do you uncover the needs of your market? Through thorough research, of course. Requirements can be challenging to keep track of, as they are often changing, which is why you need to be complete in your audience’s research. You need to continually be aware of your market’s changing needs and behavior and then adjust your strategy accordingly. Without adequate analysis of your market, you will end up simply wasting your time and effort. Before even attempting to segment your audience, ascertain that you are up to date with the behavior, preferences, and trends.
Let your Market Dictate your Parameters
Don’t just assume your parameters baselessly. Often, your market and even the product itself uncover your parameters for you. This can help you implement a segmentation system that is far more fruitful. How can you go about this?
Firstly, you need to be tactical and leverage market dependence. Focus on the solution your product provides to the pressing need of the consumers. If your market is somewhat independent, you need to focus on the want for the product rather than the need.
Again, you need to keep your end goal in mind. Furthermore, ensure that your assessment of the marketplace’s needs and wants is based on hard data, not simple conjecture.
Make Continual Improvements
Just because you have managed to segment the market effectively does not mean that you can now sit back and relax. The market is in a constant state of evolution. You need to remain up to date with the changes and make improvements to your market segmentation always. You can do so by analyzing what worked for your company, what works for competitors, and how the audience behavior changes. This will help you develop and enhance your strategy based on how well you are catering to a particular segment– and how you can do better.
Effective market segmentation enables you to tailor your strategy according to your audience. This ensures more sales and higher profitability. By segmenting consumers based on their characteristics, you can develop a more granular understanding of their needs. This will enable you to target with specificity and yield better results. Set specific goals, conduct thorough research, and keep updating your strategy. You will lead your company to boundless profits!
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