Segmentation – The Reason, The Method
What is Market or Customer Segmentation?
Segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers or categories that share common needs, interests, or behaviors.
Why should you care about segmentation?
Most businesses utilize segmentation in order to gain a competitive advantage by understanding the needs of a specific customer base. When segmentation is correctly used it allows businesses and marketers to better know their customer base and unify marketing and communication strategies. It provides context to consumer behaviors and what drives them.
The most common ways in which businesses segment their customer base are:
Demographic information, such as gender, age, familial and marital status, income, education, and occupation.
Geographical information, which differs depending on the scope of the company. For localized businesses, this info might pertain to specific towns or counties. For larger companies, it might mean a customer’s city, state, or even country of residence.
Psychographics, such as social class, lifestyle, and personality traits.
Behavioral data, such as spending and consumption habits, product/service usage, and desired benefits.
The Group Method, Persona Development, and Real Segmentation
What happens when segmentation is done wrong?
It’ll come to no surprise to you that not all customers are equal; every market is composed of different people and organizations who can benefit from your product or service. Some segmentation companies sell you on the idea that all your customers can be evenly distributed into social or lifestyle buckets labeled as things such as “High Society”, “Early Earners”, or “Towne Folk”. And that by doing this, you can achieve greater latitude in your communications or marketing efforts.
There is also a form of segmentation in which businesses create buyer or user personas in order to provide qualitative insights into how they might behave in the future. Personas are fictional representations and generalizations of a cluster of your target users who exhibit similar attitudes, goals, and behaviors in relation to your product. They’re human-like snapshots of relevant commonalities in your customer groups and are based on user research.
But there’s something innately wrong with these types of segmentation, and it ties back to core marketing fundamentals. Not all markets are equal. Whether that be in size, population, demographic, or behavioral factors. And that by equally divvying up your customers into these special classifications, you can solve your UX, developmental, and personalization woes. If businesses follow these types of “bucket” segmentation to open new stores, expand their reach, or attempt to enter a new target audience they will be left in the dark when it comes to operational performance metrics, accurate depictions of customer value, and the way consumers actually behave within new market areas.
So, how can you use market segmentation to your advantage?
In order to maximize the return on your marketing investment you need to first view segmentation as a tool in order to target the customers who’s needs you best serve.
At its core marketing is about creating value for the consumer, focusing and refining resources, and having competitive positioning. To begin utilizing market segmentation the right way, you should first start by creating subgroups of customers based on patterns of behavior.
Some customer behavior patterns could include:
Customers buying your product as a gift for someone
Customers buying your product as a gift for themselves
Early adopters/purchasers of a new product in your line
Shoppers of a particular store location
Businesses who purchase your products within the Healthcare industry
Businesses who purchase your products within a certain timeframe (seasonality)
By analyzing and understanding your customers patterns of behavior, you can begin to create a roadmap of sustainable segmentation for your business.
Most companies are looking for ‘one-size fits all’ solutions to fix their marketing/communication ailments. The fact is that there is not a single solution for you to optimally personalize your campaigns based on customer behavior. When thinking about implementing market segmentation techniques it is wise to use tools that bring both qualitative and quantitative data to the table for your business. CraniumTap has turnkey solutions that help you analyze your current customer base and find ways to effectively target them in the long run. Our Profile Analysis will allow your business to harness market segmentation done right. Or you can see more of what we do at craniumtap.com.