What is Market Segmentation?
Your competition grows every day, so finding ways to ensure you come out on top is vital. One powerful tool that can significantly impact your sales and customer base is market segmentation. Let’s look at market segmentation and how to apply it for greater success.
What is Market Segmentation?
Market segmentation divides a broad market into smaller ones based on similar demographics, behaviors, and buying habits. Companies that effectively segment their markets can experience increased revenues by up to 15%.
An excellent example of a company that nails market segmentation is Nike. Nike uses market segmentation to target different customer groups, like runners, basketball players, soccer players, kids and adults, and causal athletes. Catering to each market segment results in higher customer satisfaction and increased sales.
Benefits of Market Segmentation
Market segmentation might sound complicated (it isn’t), but it’s worth it in the long run and here’s why.
Segmenting your market allows you to create customized marketing campaigns that resonate with each segment, which is more effective than a one-size-fits-all marketing approach. According to a study by HubSpot, personalized emails based on segmentation deliver six times higher transaction rates.
For example, let’s say you run a pet food company that segments its market based on pet size and age. You could send targeted promotional offers for appropriate pet food formulas for each group, which can increase your overall sales.
Improved Resource Allocation
Market segmentation also allows you to allocate resources more efficiently by focusing on high-potential segments. For example, a travel agency that segments its market based on travel preferences can allocate marketing budgets toward promoting adventure travel packages to adventure enthusiasts, thus maximizing their marketing efforts.
Finally, market segmentation helps you identify gaps and opportunities in your market and target them specifically. Think about it: With so much marketing noise people wade through every day, speaking directly to a group, and letting them know that you “get” them, will help you break through the clutter and make people more likely to pay attention.
Steps for Successful Market Segmentation
Segmentation sounds difficult, but it isn’t. It takes some planning and forethought, and you likely already have everything you need.
Define Your Overall Market
Before you divide your market into segments, you need to know your overall target audience as well as possible. What do they want? What problems do they have? What’s the average demographic? And how do you appeal to them and meet their needs?
Identify Segmentation Criteria
Once your overall market is nailed down, determine which segments are most relevant to your product or service. This can include demographic, geographic, psychographic, or behavioral factors.
Analyze and Segment the Market
Using the criteria you sussed out above, divide your target market into unique segments. Note that it’s helpful to divide these segments into groups large enough to warrant the time and expense of setting up separate marketing efforts, and they need to be uniquely different from each other.
Develop Segment Profiles
Create detailed profiles for each market segment, similar to what you did for your overall market. This includes gathering information on demographics, needs, and buying behaviors. These profiles will help you better understand each segment, making creating the perfect target marketing campaigns easier.
Tailored Marketing Campaigns
Using the data from the profiles, create your marketing campaigns for each segment. These can include everything from targeted email campaigns, text messaging campaigns, and social media advertising. If you have better goods or services for a specific segment, now is the time to promote them.
Measure and Refine
Lastly, like all your marketing efforts, you must regularly track performance to know what is and isn’t working. This allows you to refine and adjust your strategies to maximize your efforts or pivot when necessary.
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