Comprehensive Target Market Segmentation Analysis: Strategies for Effective Customer Targeting
What is market segmentation?
Market segmentation is the process of taking a large target market or population and dividing it into subgroups of consumers who share certain common characteristics. Some of these may be demographics (age, gender, etc.), geographic location, attitudes, and behavior.
How does market segmentation fit into your target market?
A person can be a member of many diverse groups. They might share one group's interests or needs, live in another group's location, or be the same age as another group. Any one of those subgroups could be a market segment for the analyzing company or brand.How can segmentation strategies vary significantly for various companies?
Let's say you're marketing raincoats. Demographic segments of men, women, and children probably have totally different tastes than one another. Geographic segmentation might also discover that people who live where it rains a lot—like Seattle or Mawsynram—might view raincoats differently than someone living in Arizona or Adelaide.When you understand these different segments (and kinds of segments), you can begin to build customer profiles that allow you to better strengthen everything from product development to advertising in order to be on target.
Let's consider some of the advantages of market segmentation.
Advantages of market segmentation
Once you've spent some time segmenting your target market, you'll be in a good position to enjoy its benefits.Better marketing messages
Let's say you've created a tasty new chocolate bar. How would you convince your target market to try it? The most effective way would be to find out what your target audience likes in a chocolate bar, or what would lead them to try something new. But those likes and motivations will differ based on some characteristic of your potential customers. For example, people who like to cook might look for chocolate that melts well, while workers who take chocolate snacks to the office might be looking for something that will fit in their lunch box.
Having both the snackability and meltability messages of your chocolate in the same marketing communication could be confusing and even lead to message overload. After segmenting your market according to their demographics, habits and preferences, you can tailor your marketing messages to each segment to handle their respective unique and specific needs—positioning yourself well to convert viewers or targeted accounts into customers.
Targeted advertising
Hand in hand with more relevant marketing messages is targeted advertising. If, for instance, you have to make sure that messages about the meltability of your new chocolate reach bakers, you might want to place advertisements in cooking magazines or on baking websites. As you segment your market, in addition to learning more about different segments' needs, you also learn how to best reach them.
Lower acquisition costs
One of the highest costs for businesses is customer acquisition costs.
These are all the money and efforts you spend to reach, touch and persuade prospective customers to become buying customers - things like your marketing budget, your salespeople's salaries, advertising spend, inventory maintenance, and so forth. When your salespeople, operations staff, and marketers understand the different needs and wants of different customer segments, they can tailor their messaging, sales pitches, and resource allocation so that there is less wastage of resources and costs can be significantly reduced. Attracting the right customers Not all customer segments are created equal!
For example, some customers are more loyal than others; they have found the brand they prefer and are content to remain with them, and may even pay more.
Others prefer to switch between brands and products and may be enticed away by offers. This has the effect of making some customer segments more profitable than others—and these are the ones you should be targeting. But to do that, you'll have to cut your customers up into segment first. Greater profitability Market segmentation can be one of the secrets to building profitability.
Because once you segment your market, you'll have a much better understanding of the needs of your customers, which means that you can reduce wasteful marketing spending, and invest in messaging and initiatives that more completely resonate with your most profitable customers.
For instance, Spotify's recent revenue growth has been attributed to how it splits and understands its 158 million subscribers—using its recommendation engine to discover and suggest songs it understands each and every client will love.
Successful market segments
Now that you know the advantages of customer segmentation, how do you segment? To maximize your chances that market segmentation will lower costs, target marketing, and boost profits, you'll need to identify useful market segments: segments that are measurable, accessible, substantial, and actionable. Let's look at each of these factors in turn.
Measurable
In order for your customer segments to be viable, they need to be measurable.
In other words, you need to be able to get measurable information about each segments' size, needs and desires, and purchasing power.
If you do not have this information, you will not be in the position to create targeted, effective, and meaningful marketing campaigns.
So, first establish whether there is a market for your product or service and then measure how many prospective customers are in the total market before you go ahead to carry out market segmentation. This will enable you to estimate each segment's size as compared to the overall market. Accessible The attributes and behaviors of each of your segments should point you to the best way of reaching them at an affordable price. For instance, if you find that one significant segment you're targeting is housewives, you might be able to reach them through, for instance, placing advertisements on the kinds of websites they like to visit. Substantial
An ideal customer segment is a segment that has the potential to purchase your product or service.
It just does not make business sense to spend time, money, and effort trying to target a small segment.
Even if you manage to convert most of them into customers, their low buying power is a waste of resources.
You should try to outline the profile, purchasing power, and ultimate contribution to your bottom line of each segment, and then target the most significant segments. Actionable Each segment should be unique from the other, and should be in a state to respond to your marketing initiatives in a way that is worthwhile. To render your segments actionable, you will wish to try to find out which marketing strategies perform best for specific segments through market testing.
We possess a range of handy expert tools to help you:
tools like our Ad Creative Analysis for testing the effectiveness of creative campaigns, or our Messaging and Claims Analysis, whereby you can make sure that your messages connect with your target segments.
Now, we will discuss the most common types of market segmentation. Market segmentation questionnaires allow you to learn quickly what various members of your target market have in common—and how they differ. Here are some examples of market segments you can use to find your target market:
Demographic segmentation
Some of the most significant bits of information about present and potential customers are their basic demographics, Some of the most significant bits of information about present and potential customers are their basic demographics, i.e., how old they are, what is their income level, how much education they have attained, etc.Demographic segmentation is generally an effective way to segment your target market, and a good place to start with any marketing campaign.
(You can study this topic in depth on our demographic survey page.)
The types of attributes that you can use to achieve demographic segmentation are:
- Gender Age Income Level Marital Status
- Education
- Race
- Religion
Geographic segmentation
Where a person resides can greatly change their behavior when they engage with your company. For example, if you're selling cars, you'll find that the needs and interests of people who reside in the rural areas are quite different from those who dwell in the inner city. Determine where your ideal clients live and mold your marketing efforts accordingly to echo their localized values. Some data points that you could potentially use for geographic segmentation include:- Neighborhood
- Postal or ZIP code
- Area code
- City
- Province or state
- Region
- Country (if your company is international)
Psychographic segmentation
Psychographic segmentation involves the segmentation of the target market on the basis of socioeconomic class or lifestyle preference.Psychographic segmentation helps to reveal the emotional side of buying that would otherwise be unknown.
This is because there is a relationship between lifestyle preference/socioeconomic status and factors such as attitudes, values, habits, and opinions.
Psychographic segmentation, therefore, enables you to reach the underlying reasons for people acting as they do, making certain purchases or forming specific habits and behaviors - valuable information that you can use to increase sales.
Behavioral segmentation
This type of research illustrates how your customers use your particular product or service. For example, how often do they buy it, and where do they buy it? Market differently to those who use your product as a daily necessity than to those who consider it a luxury item and only use it occasionally. How to use market segmentation to target your market The various types of market segmentation can be used in all kinds of business projects, including marketing campaigns, product launches, and customer support and experience initiatives. Here are some examples where this strategy can be useful to your company:
Market research
When you carry out surveys of potential customers who would most likely consider your product or service, you'll have an opportunity to segment.For example, if you send a questionnaire survey of a new product concept to a general population, the inclusion of demographic questions will tell you of the differential appeal to men and women, which age bracket you might need to focus your marketing on, and what weaknesses you will have to overcome to increase your market size.
Segmentation can be an effective strategy in concept testing, branding, or product development.
Customer satisfaction
If you have patients, clients, or customers, there is a likelihood that different people have different experiences with your brand. Adding segmentation questions to your CSAT surveys makes it easy to spot issues and improve customer service. Other opportunities Segmentation is not limited to those examples. Event planners might segment sponsors from attendees. Educators might look at the difference between boys and girls, or support staff and teachers. HR departments might segment scores by department, company tenure, or job level.The survey is key to thinking about how you would like to segment in advance and designing a survey with that in mind. If you do not ask the right questions, you won't be able to segment your market as you would like when the time comes to evaluate your results. Demographic information is typically the first type you will want to collect on your customers. It is worth looking deeper into it.
Related: Target market analysis:
Why you need it and how to conduct it
Learning about your target market via demographic surveysA few well-thought-out demographic survey questions can enable you to obtain significant information for your market segmentation analysis. Discovering your target market's age, sex, income, and education levels (among other attributes) can give you a much better idea of who they are.
Utilize these demographic survey templates to incorporate the right expert-designed questions in your market segmentation questionnaire.
US demographics template
If your target market happens to be the US, we've designed a template that you can utilize to gather significant demographic data such as their age, location, income, and education levels. Our template has been specially designed to gather information on American consumers. Use this as your baseline for in-depth analysis.Typical customer demographics template
The typical customer demographics template is useful if you're a B2B business: If you're selling to other businesses, you can ask them about their customers to gain more insight into what they require. As soon as you know who their ideal customers are, you'll have vital information on what they'll be looking for from you.
Target market demographics survey template
A target market demographics survey is convenient for combining data on the demographics of your market with insight into how they view the landscape for your product or service. You can, for example, inquire about awareness of competitive brands, or what kinds of products they buy and use.Start with segmentation
Ready to dive in and target your audience with market segmentation? Here are our recommended 5 steps:- Define your market
First, you must define your overall market. That is: identify the specific group of people that your product or service is aimed at. Easier said than done, as getting market sizing right can be a challenge. Learn how you can use more than 50 attributes to accurately define your own target market.- Segment the market
Perform the segmentation based on what is most relevant to your market, whether demographics, psychographics or geographic. You can consider this step as a kind of initial draft of what will become the ultimate segments - after they are validated and tested in the subsequent step.- Understand the market
In step three, you'll need to do a bit of market research to get acquainted with the segment. We've got a deep dive here, but in general, you'll want to try to find out things like what your different segments require and want, their hobbies, what kinds of services and products they already buy, how they view competitors, as well as their spending and buying habits.- Create customer segments
Based on the information you uncovered during your market research activities, you can now finalize your segments. You might have hit the initial segmenting right on the nose, or you might need to adjust your segmentation strategy. Once you have your customer segments, create customer profiles for each of them outlining their characteristics, size and purchasing power.- Test your marketing strategy
Finally, test your marketing approaches on each segment. This is a crucial part of the process of market segmentation that is overlooked. However, there is little use segmenting your market if you are not going to tailor your marketing efforts towards them in a manner that works. So, make your marketing messages and communications appropriate for each segment.Ready to reach your target market with market segmentation? Get in touch with our market research experts today. We can help you tailor an audience to take market segmentation surveys—and we even help you create the survey.
FAQs
Q: Why is market segmentation important?A: It helps businesses tailor their marketing strategies, improve customer targeting, increase sales, and optimize marketing efforts for better ROI.
Q: How do I choose the best market segmentation strategy for my business?
A: Identify your business goals, analyze customer data, test different segmentation models, and choose the one that aligns with your target audience and business objectives.
Q: Can a business target multiple market segments?
A: Yes! Many businesses use a multi-segment strategy to cater to different customer groups with tailored products or marketing campaigns.
Q: What is the role of market segmentation in B2B marketing?
A: In B2B, segmentation is based on industry type, company size, revenue, and decision-making processes to create tailored marketing and sales strategies.
Q: What are common mistakes businesses make in market segmentation?
A: The most common mistakes include using overly broad segments, ignoring customer behavior data, failing to test segmentation strategies, and not adjusting over time.