Introduction
Your business hinges on your ability to market the right product to the right customers at the right time. There's no simple way to do that, but one of the most effective steps you can take is to segment your market.
Market segmentation allows you to divide up your broad consumer base into more manageable groups. Once you've done that, you can craft strategies that address each group individually, increasing both sales and customer loyalty along the way.
In this blog post, we'll walk through all things market segmentation: what it is, why it matters, and how to use it in your own business.
What is segmentation?
Market segmentation is a marketing tool that helps you define, identify and communicate with customers. It helps you grow sales by understanding which types of customers are most profitable.
You can use market segmentation to:
Identify your target market and the key characteristics of each segment
Develop a business strategy for each market segment that fits its needs, wants and values
Communicate with customers in their language, on their terms
Variations of Market Segmentation
Geographic Segmentation
Demographic Segmentation
Psychographic Segmentation
Behavioral Segmentation
Product Segmentation: the type of product that is being sold - such as a hat vs. a car. This is also known as a "product line."
Price Segmentation: The price of the product or service being offered to customers can be segmented, for example, high-end vs. low-end products.
(Sales) Channel: Examples include an online store vs. local stores, etc; this is also known as a "distribution channel."
Customer Segmentation: Customers are not all alike and can be segmented based on their demographics, psychographics, behavioral traits, or purchase history with your company
How to Communicate With Your Customers Across Multiple Market Segments
There are many ways to communicate with your customers across multiple market segments. Here are some suggestions:
Different channels: Use different channels for each segment, such as email for one segment and Google AdWords for another. If you're in retail, then it's likely that you'll have physical stores and online stores, so make sure you're using both effectively.
Different messaging: You don't want to send the same message or offer to all of your users; it's important to customize your message based on their needs and interests. For example, if someone is looking at paint colors on an e-commerce site like Amazon or Houzz®, they may need more information than if they were visiting a retail store where they can touch products before buying them (or not). The goal here is not just getting sales but also making sure that customers feel like they've received great customer service (which will ultimately lead them to come back). In addition to tailoring messages based on a user's specific needs, consider offering incentives such as free shipping when ordering certain items in order to incentivize purchases from less profitable locations like rural areas where shipping costs increase substantially due largely because transportation options are limited compared with urban centers where there may be more options available including railroads or airplanes depending on how far away from cities these areas might lie within their respective states.
Different pricing models: Pricing is always tricky when dealing with different market segments because each person has different priorities regarding quality vs price point; therefore some people will pay more while others will try finding cheaper alternatives where possible (such as buying generic brands instead). To maximize profits while still providing adequate value at lower prices requires extensive research into what these consumers actually require versus their perceived needs which could vary greatly depending upon personal experience level/education level etcetera.]
Use market segmentation to identify customer segments that are profitable for your business.
To get started, you'll need to create the right datasets. For example, if you are trying to segment your customers based on age or gender, you will need a way of identifying these attributes in your customer data. If you have a large enough dataset with clear identifiers for each customer (such as email addresses), then it might be easier to build custom segments that correspond directly with those identifiers. But even if you don't have this kind of data available, there are still ways to use existing information about the customers and their purchases to identify groups that share similar characteristics:
Age: You can look at the average age of people who purchase each type of product or service.
Gender: You could compare what percentage of men and women buy each product type over time; this may help determine whether certain products tend toward one gender more than another (or vice versa).
Geography: Where someone lives might also provide clues into who buys what from your company—and where people are located offers insight into how much they're willing to spend on certain items or services.
Conclusion
If you’re looking to grow your business, market segmentation is a great place to start. By dividing your total market into segments—or subgroups of customers who share similar characteristics and needs—you can target and tailor communications to specific groups more effectively. And if you need some help, don’t be afraid to reach out! We’ve helped many businesses with their market segmentation, and we would love to talk with you about how we can do the same for you.
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