One of the biggest marketing mistakes business owners and startup founders make is not performing a 360-degree marketing analysis. You must define your customer segments and target them accordingly, no matter how “revolutionary” and valuable you think your product or service is.
Ninety-five percent of new consumer products launched in the US fail due to lack of market segmentation. Many business owners are unaware that their market has hidden segments. Understanding each market segment holistically will help you reach a larger share of your target market.
What is Market Segmentation?
You may have organized your employees into teams or departments to achieve specific goals. It involves dividing a large target audience into smaller, more defined segments based on shared characteristics, interests, or needs.
The overall goal is to better understand your target demographic. Whole Foods Market is a great example of a retailer who successfully segmented their market. They became a leader in natural and organic food retail. They primarily target health-conscious individuals who earn a good living and don’t mind paying a premium for natural and organic foods.
They’ve identified their target market, aligned their messaging, and developed an effective marketing strategy. Their target markets are:
- Those who want to eat organic.
- Animal lovers.
- Those with dietary or health issues.
- Proponents of sustainable practices.
- Those willing to pay more for higher-quality goods
Should Market Segmentation Be A Concern You?
By segmenting your market, you can focus your company’s resources where they’ll be most effective. Whole Foods, for example, markets its organic products to health-conscious consumers rather than the entire American population. The ability to target only consumers interested in or in need of what they offer has given them a competitive advantage.
Market segmentation allows for stronger marketing messages, more effective marketing tactics, identification of niche markets, and brand identity. As a result, you get better response rates, more customers, and lower costs. It’s also easier to identify growth areas. A marketing plan template can help you define your target markets.
The Foundation of Segmentation
Customer segmentation isn’t as difficult as you think. The four basic levels of segmentation are:
When it comes to behavioral segmentation, it involves categorizing customers based on their interactions with your product. This includes the actions that customers take on your website, their online shopping habits, the frequency with which they use your site, and their brand loyalty.
- Psychographic segmentation is the process of categorizing consumers based on their values, personality traits, beliefs, hobbies, motives, preferences, lifestyles, aspirations, and attitudes, among other factors.
- Demographic segmentation is the process of categorizing consumers based on observable non-character characteristics such as level of education, nationality, age, level of income, marital status, sexual orientation, religion, and so on.
- Geographic segmentation is the process of categorizing consumers based on where they live, such as a specific neighborhood, city, region, or country.
Because market segments are so vital to businesses, figuring out how to segment is critical. With proper segmentation research, you can learn about consumer experience, customer behavior, and product development methods. Market segmentation research has several stages:
1. Setting Goals
You probably already know what kind of market you want to target. But you’re probably still figuring out your brand’s place in that market. You can’t do this without clear segmentation goals. Create market models and variables with your team and use your findings to create a hypothesis.
2. Identify and categorize your customers
Remember that you can combine the above market segmentation techniques to segment your customer base. However, you must create a research strategy and collect data that will help you identify market segments. Your team can now assess the research methodology’s dependability and validity.
3. Identify the Targeted Customer Segment
Based on market research, you’ve identified dynamic customer segments for your brand (either through publicly available market data or by hiring a market research firm). Next, focus your efforts and resources on the most lucrative market segment based on consumer spending power. After all, your current customers can help you segment your market. And polls, focus groups, and customer surveys are the best ways to understand your audience.
4. Create a Segmentation Plan
Focus on a subset of consumers who are unique to your brand. Even as you project your goals and start moving, it’s critical to consider the implications of your choices.
Create a highly targeted strategy that appeals to the chosen customer segment. Start with your email list. Increase click-through, open, and conversion rates by sending targeted emails to customers. Email segmentation can boost open and click-through rates by 26% and 100%, respectively. You can also expect a 760 percent revenue increase.
5. Identify Launch Plan
After testing your segmentation strategy, bring all key stakeholders together and agree on how to launch the project targeting the specific customer segment you identified.
Take a step back and look at your research and survey results. Use conversion tracking and marketing automation to see how well each market segment responds to your marketing efforts. That means you’ll need to keep doing split and A/B testing to see what works.