What are the benefits of market segmentation?
- Theme: Plan to start your business
Many successful businesses continue to grow simply because they really understand their markets and their customers. One of the most popular techniques businesses can use to better target their products at the right customers is market segmentation.
Put simply, it’s an identification process that allows businesses to pinpoint the specific demands of particular customer demographics and use those learnings to develop products and services that tick those boxes.
Whatever your industry, the chances are that your customers will differ in many different ways:
- The benefits they’re looking for
- The price they are willing to pay
- How they interact with your brand
- The quantities they desire
- Where and when they make a purchase
Four common types of market segmentation
Some of the most frequently used methods a business can use to segment their market include:
Geographic segmentation divides your target market into various geographical areas e.g. neighbourhoods, towns, cities or countries. Most commonly utilised by multinational firms that are likely to need to alter the way they market their products and services depending on the local traditions and demands of each geographic segment.
Such factors that geographic segmentation will take into consideration are lifestyle, climate and common languages.
Demographic segmentation allows businesses to separate their target market into specific groups based on demographic variables such as gender, age, family size and life-cycle stage. Age is a particularly common form of demographic segmentation particularly as consumer needs evolve with age.
Gender-specific segmentation is popular too. It gives businesses the opportunity to hone in their products and services in areas where there may be more of a male or female-specific demand.
Many businesses will also divide their market into consumer groups based on their stage in the life cycle. Whether an individual is young and single, newly married, married with children or retired, by segmenting target customers by their life cycle stage you can cater to their needs and desires between specified life milestones.
Many businesses will also consider segmenting their markets based on the assumption that the type of dwelling and neighbourhood a person lives in is a reasonable indicator of a person’s behaviour as a consumer. In some industries, neighbourhood and dwelling classification gives businesses a reliable view of the types of products and brands they like.
Consumer behaviour is another important facet of market segmentation. There are several factors which a consumer takes into consideration before making a purchase. There are four main types of behavioural segmentation:
Buying on occasion is one of the most obvious forms of behavioural segmentation i.e. Christmas, Easter, birthdays, festivals and so forth.
Buying for benefits – many products and services are aimed at consumers that seek specific benefits. For example, some hair shampoos are targeted at those with anti-dandruff needs and others are designed and marketed to those worried about split ends.
Consumer loyalty – as well as acquiring new customers, growing businesses also need to retain existing customers. Customer loyalty is another key behaviour that market researchers target to discover the best possible way of delivering the highest standards of service that keep them coming back.
Consumer usage rates – whether it’s B2C or B2B, heavy, moderate or low usage rates are very important to businesses. Any product that tends not to be targeted towards the mass market will have some form of behavioural segmentation. Using this information, niche products and services can be marketed depending on the wants and demands of target customers.
Psychographic market segmentation is another form of demographic breakdown that enables businesses to understand a potential customer’s habits, hobbies, spending habits and core values.
Typical examples of psychographic information include:
- Someone that’s concerned with their appearance
- Someone that tends to prefer quality over value
- Someone that’s career or family-focussed
- Someone that’s a socialite or prefer a smaller, close-knit circle of friends
- Someone that tends to be a brand advocate
The most common methods of obtaining psychographic information are interviewing existing and previous customers. Personal interviews allow you to understand how your customers think, feel and interact. One-on-one interviews can give incredible detail, but for those seeking a larger sample size could consider sending out a customer survey, asking them to help you better understand their needs.
It’s also possible to build up a psychographic view of how your customers interact with your website. Website analytics tools allow businesses to understand the calls-to-action and content types that have moved people to make a purchase.
A mass marketing approach will, by all means, work for some products that serve a sole purpose to everyone. But market segmentation enables a business to target different groups of customers by adapting their services and marketing collateral to suit each targeted segment best, resulting in much-wanted brand advocacy and long-term growth.
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