Introduction of Market Segmentation Methods
Market segmentation describes the concept of division of a random market into specific homogeneous groups, each one carrying similar characteristics within the group but different traits among the segmented groups. Your target customers are unique identities having different needs and preferences, meaning there’s no one-size-fits-all solution that you can use for them. So, they will tend to respond differently to promotions, communications, advertising, pricing, and other marketing mix variables. The segmentation should be done in such a way that the groups formed can relate to your product are interested in the personalized content you offer.
Before market segmentation methods came in, all that marketers knew was billboards, radio ads, TV commercials, and print ads. They could only rely on the hope that their messages and campaigns somehow reach their target audience.
Marketers gradually realized the gap and started using sophisticated techniques, including market segmentation methods, to reach potential buyers with the most customized offering possible. Since then, better tools and techniques have come up to improve the market segmentation system in the marketplace.
Benefits of Market Segmentation Methods
Advertising was there always. But, you just saw how much of a difference does market segmentation make. Therefore let’s understand how market segmentation methods benefit our overall marketing campaign.
Minimizes Time and Money
Marketing campaigns can be costly. But cutting your expenses can be difficult with so much to do. So, utilizing your campaign’s budget towards only selected customer segments that are more likely to engage and convert can easily cut your cost and also reduce the time and effort you invest otherwise.
Avoids ‘just Got Lucky’ Situations
With market segmentation, you don’t have to rely on the mere hope that your message will somehow come across your actual audience. It’s a sure-shot victory when you use tools like Google Adwords to specifically filter your targeted audience.
When you make sure of filtering out the unwanted segment, through customer segmentation and personalized marketing campaigns, you can reduce the risk of your money going waste without giving any results. Hence, the money you are spending will increases the efficiency of the campaign actually generate you better revenue.
Increases Brand Value and Eliminates Competition
When you project your message in front of your specific subset of prospects, your brand value for that segment definitely increases. Say, if your product or service primarily caters to fitness lovers, putting your time and money towards targeting them will yield the maximum conversions. This will also ensure brand recall and loyalty, eliminating other competitors.
Fosters Customer Retention
By understanding your customers in aspects involving their age, preferences, income level, buying behavior, etc. while segmenting them, you are able to serve them better. As a result, the customers become used to your better service which leads to greater customer retention.
That’s why you need to know the smart market segmentation methods to achieve all the benefits mentioned above.
Top 5 Smart Market Segmentation Methods
To predict the buying habits and preferences of the audience and target the right set, one must know and follow the right approach for market segmentation. Here are some techniques you can use:
1. Get Demographic Data
Fetching publicly-available data that can be gained from your customers during the check-out phase for that first purchase or through other (non-invasive) means like location, age, gender, life stage, and marital status can be a very useful method. Sources like Facebook and other social media platforms often have much of this information stored on users and can help you build custom audiences for ad outreach.
2. Tap the Best Customers Based on Past Data
Segmenting your audience based on this data through the use of marketing and data analysis can be highly useful. The following can be 80% of your customers who generate 20% of your revenue. So keep a special focus on the following set of customers:
- Highly involved customers who engage with your emails/content the most
- Users who give a positive response to coupons/promotional content
- Customers interact with your content on your website
- Customers based on the last engagement/action (downloads, blog post, social media post)
- Use Smart Tools to make and craft your audience set
The use of tools is a great way even when you are a new advertiser and don’t have a pre-defined customer set. You can very easily make the use of advertising tools like Facebook Ad Manager or Google Ads to find the audience that matches your requirements. You can even get a lookalike audience to craft your personal target audience. Going further, make the use of Pixel on Facebook to save the audience that has interacted with you on your Facebook or website.
3. Focus on Decision-Making Audience
Targeting the person directly responsible for making decisions you can increase the probability of conversions. So segmenting the decision-making audience and targeting them can be very useful. Say, if you’re trying to sell children’s products, you’ll need to target those with the expendable income (the parents).
4. Plot Prospects on the Customer Lifecycle Path
For one to understand the behavior and pattern of customers and classify them into the right segments, it is very important to identify the stages of your would-be customer’s journey. Say, a person can be an innovator or a laggard. So, for a fresh arrival or a new concept, it is more expected of an innovator customer to show a positive response to your marketing efforts than a laggard customer. You may require upgrading your system or plan for automation within the system.
5. Test your Segments Well
Comparing groups, segments, and interests in conversion A/B testing to see which of your segments convert better is always a good idea. This way you can look at the performance of different categories or segments on different channels. Collect this data and you will be ready with your customer segments.
And finally, once you’re done identifying and pulling all the segments together, you’ll have to the data into a useable form. A successful way of doing it is making a list of email addresses that you can use to run an automated email cadence in your email marketing campaign. You can also use this data to target social media. Upload that list of customer emails into your marketing automation and start using it directly once your campaign is ready to shoot.
This is a guide to the Market Segmentation Methods. Here we discuss the Definition, Benefits, and Top 5 Market Segmentation Methods. You can also go through our other suggested articles to learn more –