What is market segmentation? The ultimate guide

Have you ever wondered what distinguishes Amazon? What makes them "highly competitive businesses"? Market segmentation is the answer.

If you want to sell a product and make a good income, you need to group your target audience according to their specific characteristics and provide them with the products/services that suit them best. This is the key to market segmentation.

Amazon primarily focuses on the buying patterns of its global audience and services them accordingly. And, when we say buying patterns of your audience, we mean each customer individually. That's how deep Amazon dives. The company segments its audience at a micro level to find their buying patterns and then finds them the product/service that can specifically address their needs.

So don't you want your brand to stand out too? This is what you should do: research your market and segment it effectively. Find out what kind of products your customer likes, why they like them, their purchasing patterns, their age group, etc. The golden rule is to listen and innovate. You must continually listen to your customers to understand them and adjust your products accordingly.

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The 'what' and 'why' of market segmentation

Essentially, market segmentation is a marketing concept where you divide your brand's largest target audience into smaller subsets/segments based on certain characteristics like age, gender, region, etc. Each subset will contain customers with common interests.

By segmenting your customers, you understand them better and this helps you formulate sales and marketing strategies that are more efficient. Market segmentation tells you how to further develop your product so that it strongly resonates with your customers' needs. And what's even better is that the risks of an unproductive marketing campaign are almost eliminated with this methodology. You can devise promotional strategies and schemes according to the preferences of each customer segment.

Surprisingly, you are also helping your customers buy the right product that suits their needs and (why not even) their budget. For example, people with an average income would not buy a Rolls Royce, they would prefer to buy a Toyota or a Nissan; college students would also not go to a store that sells business clothes when they need casual clothes. Therefore it is imperative to segment your market.

The digital platform amplifies the importance of market segmentation. Today, customers are highly informed and purchase decisions are made faster than ever. From what shoppers want to how they think, you need to control every little distinguishing factor to bring them closer to your product. And this is where market segmentation comes into play. Creating ads based on your targeting on social media platforms like Facebook will help you get a remarkable response rate.

Whatever your business or wherever it is, segmentation is an empowering factor and improves the chances of success.

The basics of market segmentation

Now, since you know the importance of market segmentation, you will want to implement it. These are the basics that will help you filter and interact with your target audience to produce solid marketing plans:

Age and buying patterns: Your population of buyers may have expanded. The new buyers will have joined your existing group. When that's the case, you'll need to diligently segment your older buyers from those who recently joined. This step ensures a healthy relationship and you will know how to interact with each segment. You can also segment your customers based on their product preferences or even their buying cycle so that customers' future purchases depend on the inference you've drawn from the segmentation. That is, you should be able to pull products according to their buying behavior. Trust me, this works like magic. Buyers will have bought your product even before they know it.

Identifying the dominant social channels: We live in an era driven by digital platforms, so this is one of the integral steps. You need to identify the social channel that drives your brand effectively. The social channel should be able to leverage the content to find a large unique audience for you. This way you can find out what kind of products they prefer, when, their buying behavior, the circle of people they interact with, and why, you can even discover the preferences of your customers' connections. Segmentation is the closest thing to a child's play with social networks.

Customer targeting: You must target your audience after segmenting them. Once you have finished segmenting them, you should focus on tips and tricks to attract them to your product or renew it to adapt it to your needs. Marketing campaigns and schemes must be selected to address the needs of your customers and combine them with your product in the best possible way. Your product must be the solution that can fill the 'gap' of their requirements. Create your programs keeping the buyer's personality and demographics as the basis for deducing the characteristics and requirements valued by the audience.

Once you take care of the marketing communication part, you need to dig into the results. You will want to know why a certain section of customers did not show up for the purchase. You'll also want to find ways to engage and retain customers who have responded to your marketing programs and made a purchase. Surveys can do the trick here. There are many platforms such as SurveySparrow, which provide you with quick and very attractive surveys that provide detailed information on customer loyalty.

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Retarget: Why did your customers open the email? Why didn't they stay on your website long enough? Now, this requires retargeting. Retargeting techniques use cookies to track the activities of your audience once they leave your website. Cookies help targeted ads reach this particular section of people who have left your site after one or two visits. The main goal of retargeting is to engage your audience in real-time to entice them to your site and buy your products. If your goal is to get conversions on multiple platforms, you can incorporate it with inbound and outbound content marketing.

Retargeting never fails you.  It may or may not fail to retain the customer, but it sure gives you the right information to restructure and design your product's marketing strategy.

Types of market segmentation

Depending on the customer information collected, industry, and brand, you can segment your audience. Ideally, there are 4 types of segmentation:

Demographic segmentation: Customers are divided into different groups based on demographic characteristics such as age, gender, marital status, income, occupation, etc. Demographic segmentation is quite popular among marketers and is widely used.

Geographic segmentation: People from different regions would have different requirements. Geographic segmentation addresses this issue by dividing the audience based on their location. Geographic segmentation is very helpful when it comes to international marketing.

Psychographic segmentation: This segmentation helps you categorize audiences based on their lifestyles, likes, dislikes, opinions, and activities. Psychographic segmentation helps you connect with and engage with your customers on a topic of their interests that matches your product; thus helping you to develop or modify it accordingly.

Behavioral segmentation: In this segmentation, your audience is divided into subsets based on the knowledge or relationship that the customer has with your product. Factors include customer loyalty, product usage, rate of consumption, etc.

Advantages of market segmentation

Segmentation is better. Next, we present the advantages of market segmentation.

Convey specific and more powerful marketing messages: You will be able to create precise marketing messages and address customers' needs and requirements.

Recognize and implement constructive marketing strategies: When you segment the market, you understand customers better. Therefore, you can find the most effective methods to impress them.

Get ahead of the curve: Market segmentation helps you be more specific with your prepositions and focus on the unique needs of your customers. This eventually sets you apart from your competitors to become a 'customer brand'.

Understanding niche markets: The process of identifying a broader audience for particular industry segments and finding new ways to serve them is often called niche marketing. By employing market segmentation, you can create new products or services by identifying the underserved section of the market niche.

Conclusion

The interesting thing is that market segmentation has existed since time immemorial. Well, it wasn't as advanced as it is now, nor was it called that. Come to think of it, why do ice cream vans stop near schools and not offices? Another simple example of market segmentation. Segmenting and targeting particular sections of customers has been an integral part of marketing. Well, it doesn't matter when and where it all started. But yes, certainly, market segmentation is here to stay.