5 Reasons Your Marketing Strategy Needs Market Segmentation
‘One-size-fits-all’ is a phrase that might have made sense in the past, but when it comes to modern marketing this approach no longer cuts it; customers want and have become accustomed to, greater choice.
People have always had varied needs, that’s no secret, and businesses today have the power and knowledge to tailor their marketing strategies in a way that caters to a range of requirements. How I hear you ask? Simple — through clever market segmentation.
What is market segmentation?
Market segmentation is a process wherein the market, or a portion of the market, is separated and grouped into different ‘segments’ based on their shared or common characteristics.
The aim of this is to enable brands to understand customers and prospects better so that they can accurately strategize and specifically target people with more relevant (and therefore more valuable) communications and offerings.
There are 4 main types of segmentation:
- Demographic segmentation
Demographic segmentation takes into account basic information such as age, gender, income, occupation, etc. It’s one of the most basic forms of market segmentation, and demographic data is the easiest to collect and analyse.
- Geographic segmentation
Geographic segmentation groups people based on factors relating to their geographic information, i.e. location, urbanicity, climate, culture, and language. Geographic segmentation is based on facts and is useful for brands both big and small; global or local.
- Psychographic segmentation
Psychographic segmentation roots itself in psychology; understanding peoples’ values, opinions, interests, and attitudes, for example. Psychographic data is harder for businesses to collect and analyse than the previous two mentioned. Still, it has the power to offer a lot more value to businesses in return and, therefore, customers and prospects.
- Behavioural segmentation
Behavioural segmentation groups audiences based on how they act. This data is generally collected by analysing how customers and prospects behave on a website, in an app or in-store. The insights gained through behavioural data are highly actionable — allowing businesses to monitor the actions made by customers in a way that is transparent, and to act according to specific touchpoints and pain points.
Each of the four types of market segmentation has its own functions and benefits. Some businesses favour just one, and others use multiple segmentation types in tandem to advance their insights. Overall, the type or types of segmentation that you choose to implement in your marketing strategy are dependent on your overall business goals and objectives, and the decisions that will be made based on the data that you gain.
So, now that we’ve got a better understanding of what market segmentation is, here are five key reasons why you need to implement it in your marketing strategy
5 Reasons Your Marketing Strategy Needs Market Segmentation
- Market segmentation enhances business focus
Key advantage: streamlined decision-making.
Market segmentation provides businesses with a sense of direction. Sure, there are many brands whose targeting strategy is ‘undifferentiated’, i.e. mass marketing is their preferred method, but attempting to serve too many markets or offer too many products can dilute a business, weakening the brand itself, and the trust that customers and prospects would otherwise have.
Say, for example, you own a shoe store and sell every type of shoe available; trainers, heels, sandals, boots, slippers, wedges, etc., but you realise that you’re always running out of stock in the ‘boots’ category. By conducting market research, your geographic segmentation data tells you that most of your audience resides in a cold climate with a higher-than-average rainfall. Your psychographic segmentation data tells you that the majority of your audience values time spent with family, exercise, and outdoor activities like hiking in the mountains. By analysing the data that’s available to you, it’s clear that you’ve been wasting your money stocking a wide variety of sandals and heels; you make the well-informed decision to widen the range of boots that you offer to include more durable, warm, and waterproof shoes.
And voila! By utilising your market segmentation data, you have been able to shift your focus onto the things that matter most to your target audience.
You want your brand to be memorable; market segmentation gives you a deeper and clearer understanding of your audience’s needs, wants, and motivations, and therefore means you can focus on how to best serve them.
2. Market segmentation optimises user experience
Key advantage: improved brand affinity.
Understanding your customers is integral to the continued success of your business. There are loads of different brands out there, so consumers have a huge variety of choice for almost any product or service they desire. That means if you’re ignoring the needs of your audience, they will notice this and find a brand who can offer them a greater service, more specific products and a valuable experience.
Whether you’re focusing on an app, a website, or products in a brick-and-mortar store, great user experience (UX) relies on these primary factors:
- Usefulness: does it have a function and is that function necessary?
- Usability: are the navigation and app functions clear?
- Findability: can your audience locate your product online and/or offline? Can they communicate with you when they need to?
- Credibility: does your audience trust your brand and your offerings?
- Desirability: is the experience offered engaging and wanted?
- Adaptability: will people easily and willingly be able to use your product?
- Visual: is it aesthetically pleasing?
- Value: is the customer satisfied with your product or service? Are you as a business receiving an expected (or increase in) profit or brand affinity in return?
Let’s say you’ve created a new app that sells the latest tech products. There are other apps out there that are similar to yours, but it receives lots of downloads because the visual design is on-point, you’ve marketed it really well, and you’ve taken the time to optimise it for app stores so it pops up instantly. But there’s an issue; people seem to be downloading your app, spending a short amount of time on it, and then uninstalling at a rapid rate. You take a look at your behavioural data and realise that users are clicking on an item, hitting ‘back’, and then exiting (which is subsequently followed by the dreaded uninstall). What could be the issue? You create an A/B test and see if adding breadcrumbs will help. Guess what? It does! Breadcrumbs within apps and on websites allow users to know where they are and helps them to easily navigate whilst taking up very little space.
So, not only were you offering poor user experience because your customers are becoming frustrated and confused, but you were also damaging your brand reputation.
In fact, research shows that a massive 57% of internet users say that they won’t recommend a business with a poorly designed website on mobile, and 50% of customers will stop visiting the site even if they like the business. By actively including market segmentation research in your marketing strategy, you can clearly identify the touchpoints and pain points of your customers and prospects.
One of the main reasons that brands fail is because they don’t understand their customers well enough. Market segmentation is the gateway to discovering the actionable insights that you need for optimised UX.
3. Market segmentation improves product development
Key advantage: strengthens your competitive position.
Your customers are real people. And, just like real people, they don’t want their opinions to be ignored. So in order to ensure the continued stability and growth of a company, it’s important that businesses listen to their audience and act in accordance with customer requirements.
As environmental, social, and technological changes and advancements occur, global trends follow. Of course, people change of their own accord, but global trends that are caused by external factors, such as a steep increase in the global use of plastic, play a huge part in the motivations of consumers. Market segmentation allows businesses to better understand their audience; taking note of these shifts and burgeoning requirements, ultimately, makes for improved product development and gains a competitive advantage.
Take the example of Adidas; a couple of years ago they teamed up with the environmental group Parley, after noticing that their customers and prospects were becoming more concerned with the growing amount of plastic waste littering oceans. Because of this, they decided to create a sneaker that was made using recycled ocean plastic.
Source: Brandwatch
By analysing the behaviours, values and opinions of their audiences, Adidas was able to improve their product development and create something good for the environment, good for their customers and, therefore, good for the company.
4. Market segmentation helps break into new markets
Key advantage: economies of scale
It’s not uncommon for businesses to break into new markets. Whilst there are risks involved, expansion into new areas, amongst other things, offers companies the ability to generate new sales and profits, influence market price, and snatch a competitive advantage.
Market segmentation can help you to identify gaps in the market or recognize markets that are being underserved. For example, you might have a multitude of physical stores but by analyzing your audience’s behavioral data, you realize that a lot of your customers like to shop online and actively use social media. Therefore, it makes sense for you to digitally transform, right? By going digital and marketing your products or services online, or creating an online store for your customers and prospects to visit, you can utilize new avenues that will increase your value.
A key factor when it comes to breaking into a new market is knowing that market and the people who reside within it. You can conduct research on your potential customers’ demographic, geographic, psychographic, or behavioral information to discover how you can effectively provide a solution to a problem.
Before you rush into any new market, physical, digital, or both, make sure you identify your goals, identify market gaps, identify your desired audience, and conduct thorough market research.
5. Market segmentation reduces costs
Key advantage: an increase in ROI (return on investment)
As much as you don’t want to hear it, not everyone will want or need what you have to offer. That’s just the way it is. But there are a lot of people who will want your product or service, and market segmentation allows you to identify and target those segments that can bring you the most value. Reduced costs and an increase in ROI are some of the primary reasons that companies actively apply market segmentation in their marketing strategies.
Wes Rangel of DotcomWeavers says that “market segmentation creates a cycle where you study data, improve marketing tactics by segment, earn more sales, get better information, improve tactics again, and so on”.
As we’ve mentioned briefly, mass marketing entails trying to capture the widest possible market of consumers and can be hugely costly for businesses. Market segmentation results in, well, the opposite of that. The ability to target a more limited audience and track their actions and motivations means that you can allocate resources and trim unnecessary spending, therefore saving money and reducing waste. This gives the business freedom to reach out directly to customers and prospects in a specific segment, guiding them towards particular, clear-cut products and services with the knowledge that they will more than likely make a purchase.
Including segmentation in your marketing strategy significantly influences the decision-making process, enabling brands to heighten their personalisation efforts, more accurately and effectively target customers, and therefore see an increase in sales.
Conclusion
Whether you’re a new business with a small customer base or a huge, successful corporation with innumerable customers, utilising audience data and market segmentation analysis in your marketing strategy allows you to gain valuable insights and make decisive moves.
In today’s data-driven world, harnessing your customers’ information for improved products, services, experiences, and communications is relatively simple and is highly beneficial for both parties involved. With such a wide range of options available, it’s important for businesses to really get to know their audiences if they want their brand to be successful and lasting.
So don’t try to squeeze your audience into a one-size-fits-all box — after all, we’re in the 21st century; analyse, segment, strategise, and create unique and personalised experiences for your customers.
Author Bio:
Stevie is a Content Specialist at Hurree. She uses a variety of mediums to develop creative content in order to inform and optimize Hurree’s strategy. Hurree is a marketing automation platform that helps you to create better relationships with your audience by enabling your multi-channel tools to work together through clever segmentation.
