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The Complete Guide to Market Segmentation

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You’ve worked hard to create the perfect marketing strategy for your company. But it doesn’t matter what platforms and tactics you implement if your messaging isn’t on point. Fortunately, market segmentation makes it easy to craft messages that resonate.

Modern consumers want personalized experiences from the brands they support. This is one of the reasons why social media, email marketing software, screen recorder and screenshot tools for Mac and PC have become so popular: they allow companies to connect with customers on an individual basis.

By segmenting your audience into like-minded groups, you’ll be able to craft marketing messages that feel personalized to the people who receive them. Keep reading to learn how.

What is Market Segmentation?

We’ll start with a definition…

Market segmentation is an important business practice that you can use to divide your company’s target audience into smaller groups based on similar traits.

For example, you could create a market segment that targets women between the ages of 25 and 39, who live in North America and have a household income of $100,000 a year or more. Or men above the age of 45, who have a history of back pain.

The market segments you create will completely depend on your unique audience and the products and/or services you sell. But the benefits of this business practice are clear.

By splitting your target audience into smaller, like-minded segments, you’ll be able to create tailored marketing messages that speak to their exact wants and needs. Doing so will help you increase sales, lower acquisition costs, and boost customer loyalty.

What Are the 4 Types of Market Segmentation?

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Before you start slicing and dicing your audience into smaller groups, you should know that there are four main types of market segmentation. These are geographic segmentation, demographic segmentation, psychographic segmentation, and behavioral segmentation.

Let’s explore each of them in greater detail now:

Geographic Segmentation

The simplest form of segmentation is geographic, which divides audience members into groups based on physical location. Some examples include zip code, city, state, and climate.

Let’s pretend your company sells swimwear to both men and women. Most of your customers in New York, Minnesota, and other northern US states won’t be interested in purchasing a swimsuit in January. It’s way too cold to go swimming. On the other hand, customers in Florida go swimming year round because of the warmer climate.

Geographic segmentation will help you promote the right products to the right audience members by accounting for important location data.

Demographic Segmentation

Demographic segmentation uses variables like age, gender, income, education level, and ethnicity to divide target markets into like-minded groups.

For instance, a luxury car manufacturer could use demographic segmentation to promote their products to qualified potential customers. The segment might look something like this: male, above the age of 45, who has a college degree, and makes $150k+ a year.

One great thing about demographic segmentation (and geographic segmentation, mentioned above) is how easy it is to find the necessary information. Demographic details are all factual, which means basic market research can be used to uncover them.

Psychographic Segmentation

Psychographic segmentation attempts to divide audiences based on their personality traits and characteristics. A few examples include personal values, attitudes on certain subjects, specific interests and lifestyle choices, and more.

A company that donates a portion of its profits to charity could use psychographic segmentation to identify potential customers who support similar causes.

It can be difficult to identify psychographic variables like the ones mentioned above because they aren’t always based on cold, hard data. They’re usually more subjective. Because of this, customer surveys and interviews are usually the best ways to obtain these details.

Behavioral Segmentation

Behavioral segmentation is all about how your target market acts. So this type of segmentation takes into account purchasing habits, user statuses, and brand interactions.

Loyalty programs are a great example of behavioral segmentation. Customers that purchase frequently are put into an exclusive group (like Marriott’s Ambassador Elite tier) and given enticing perks that encourage them to keep spending and remain loyal.

Another example of this segmentation type would be a B2B brand targeting leads who’ve already downloaded a free ebook on the company’s website.

How to Use Market Segmentation in Your Business

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Now that we’ve covered the four types of market segmentation, the question is: how do we actually use them? That’s what we’ll cover in this section. Follow the three steps below and you’ll be able to successfully segment your target market and boost your business.

1. Research Your Target Audience

First, you need to take time to research your target audience. Who are they, where do they live, and what do they look for in the kind of products your company sells? You need the answers to these kinds of questions. To find them, dig deep into the following:

Your Industry

Start by looking at your specific industry as a whole to learn more about your target audience. You should be able to dig up a lot of general demographic and geographic information. Pay special attention to details like age, gender, and country of residence.

How do you find this data? Simple: you use the internet. Scour websites and forums that your target customers frequent, read annual reports on your industry, visit the Bureau of Labor and Statistics and Chamber of Commerce websites.

If you’re able, you can also attend industry events like trade shows and conferences. This will allow you to meet your potential customers face to face and have conversations with them.

Your Customers

Next, dig into your own data. Your current customers should be able to give you a TON of valuable information regarding your target audience. After all, these folks have already purchased from you, so you know that targeting folks like them will be successful.

The analytics dashboards for your company website, social profiles, and email marketing software will contain the details you’re looking for. Take screenshots of these dashboards so that you can easily compare them to each other and source usable data.

While it’s important to analyze geographic and demographic data when assessing your customer base, make sure you look into psychographic and behavioral details, too. Doing so will help you learn who your target audience is and how they behave in specific situations.

Another way to get customer data is to simply ask them. Send your target market a survey or ask to interview specific customers. Then analyze the results. To get more people to participate, consider offering an incentive such as a small discount or free download. 

Your Competition

Finally, take a look at your competitors to see who they’re targeting and how. You can learn a lot by studying other companies in your industry who have already achieved success.

See if you can ascertain anything about their targeting strategy and positioning choices by analyzing their social media profiles, website and blog posts, commercials and advertisements, and any other form of customer-oriented messaging.

2. Create Distinct Buyer Personas

Now that you’ve collected data about your target audience and begun to study it, you should see natural market segments take shape.

For example, you may notice that a large portion of your audience is female and under the age of 30. Or english-speakers in warm-weather climates. Take these natural segments and build them into distinct buyer personas.

A buyer persona is a fictional character that marketing departments create to represent their company’s ideal customer. The best personas use market research and in-depth data to home in on both demographic and psychographic details.

Once you’ve segmented your audience into different groups of like-minded individuals and created buyer personas for each group, marketing will become much easier. Why? Because you’ll be able to personalize your message to each segment, which will allow you to get precise with your messaging and secure better results for your company.

3. Test Your Market Segmentation Efforts

You’ve studied your target market and segmented your audience into distinct personas. Now what? You need to test your market segmentation efforts.

Use your personas to inform your marketing strategies; then analyze the results. Are you able to connect with your customers on a personal level? Are you making more sales now than before you started segmenting your audience? If not, you need to re-evaluate.

It’s possible that you misinterpreted the data and segmented your audience incorrectly. Or maybe you went overboard/underboard with your market segmentation efforts. Don’t worry, this happens. Run back through your research and adjust your segments.

Market segmentation is a process — one that never really ends. You should evaluate your segments on a regular basis to make sure they’re always as effective as they can be.

Common Market Segmentation Mistakes

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We’ve covered a lot so far. But before we call it a day, we want to go over the three most common market segmentation mistakes. Do your best to avoid these pitfalls:

Not Accounting For Business Goals

Every marketing strategy you implement, from social media to market segmentation, should align with your company’s goals. This is crucial!

If you owned a SaaS company, for example, and a segment of your users’ subscriptions were about to expire, would you want to email them information about renewing or a blog post explaining the benefits of the new product you just released?

Most people would agree that the former would be preferable because keeping current customers should always be a top priority. Make sure your market segmentation efforts help you achieve business goals, not keep you from accomplishing them.

Relying on Instincts Over Data

Another common mistake is segmenting based off of instinct rather than the cold, hard data available to you. Instincts can be wrong; data doesn’t lie.

If you’re just starting out, you’ll likely need to make some assumptions to create your buyer personas (mentioned above). There’s nothing wrong with this. Just make sure you back up (or replace) your assumptions when you have more information.

For instance, you may believe that plain text emails convert best for your audience due to their no-nonsense, business-like personality. But you won’t know this for sure until you test emails using visual elements. Who knows? Maybe your audience will respond better to GIFs in your monthly newsletter.

Over Segmenting Audiences

It may be tempting to use every single datapoint at your disposal and create hyer-segmented groups, but this is a mistake. Overly small segments often lose their buying power. Segmenting in this way will also force you to use irrelevant metrics that are better left alone.

While market segmentation will allow you to offer more personalized experience to your target audience, remember that each potential customer is different. Trying to cater to every personality trait of your audience isn’t a winning strategy.

Wrapping Up

Market segmentation is absolutely essential to effective marketing in this day and age. Fortunately, it’s completely attainable for just about every company, big or small.

The key is to first learn what are the four types of market segmentation available to you. Then study your target audience and use this information to craft data-based buyer personas. After that, all you need to do is monitor your segments and update them when necessary.

Modern consumers demand personalization from the brands they support. Segmenting your audience will help your company provide it.

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