As a business owner, you know how important it is to meet the needs of your potential and existing customers. And you are well-versed in telling stories about how your product or service can improve their lives. Last week, we talked about niche marketing, and it makes a good segue to the concept of market segmentation.
Maybe you already have been through the important process of creating a digital marketing strategy. Maybe you’ve thought about your ideal customer who would benefit from niche marketing. In addition, you probably have found your social media voice too.
But you might have more than one specific kind of target customer.
So how do you speak to the needs of these different customers while keeping your digital marketing strategy organized? This is where marketing segmentation is critical to your success.
In today’s blog post, we’ll talk about the ins and outs of marketing segmentation and how to make it work to grow your business.
What is Marketing Segmentation?
Marketing segmentation is the act of dividing your broad base of prospective customers into smaller groups.
You can divide them into groups based on their:
- purchasing patterns
- geographic location
- gender, or any additional identifying markers.
For example, if you own a business that sells pet supplies, your potential and current customer base is more specific than just people who need pet supplies. You could segment your markets into dog owners, cat owners, bird owners, snake owners, veterinary practices, and small general shops in your area. You could separate even further by age, gender, whether your targets live in an urban or suburban location, and more.
Marketing segmentation is a way of gaining a deeper understanding into the desires, dealbreakers, and preferences of the people who might or have purchased your products. Your product might have multiple benefits, or your services appeal to multiple audiences. Marketing segmentation helps you draw out those messages and target them to the people who need to hear them. Tailored messages can increase conversion rates and create loyal customers.
Why is Market Segmentation Important?
Marketing segmentation isn’t just an interesting thought experiment. It’s critical to a successful digital marketing strategy. This is because it allows you to tailor messages to each market segment in the way that speaks to them most directly.
With a strong marketing segmentation plan, you can begin to gain a deeper understanding of who is purchasing your products, and who is a significant potential market.
You can also identify and remove those who are not potentially lucrative segments – customers or leads who didn’t connect with the ads you put in front of a general audience.
To illustrate the importance of market segmentation, let’s continue with the example of the pet supply shop owner. She might just be running general ads that promote generic pet supplies using pictures of a cat and a dog. Yet she might be missing out on several important customer bases.
If she does some work to look through her existing customer data, she might notice some interesting trends. While she doesn’t have many customers who purchase her supplies for pet snakes, those few snake owners who do come in end up spending twice the amount of any other pet owner. This is a good sign she should try attracting more of the snake owner segment. There’s clearly good return on investment there.
And her old ads probably missed the mark for this segment. After all, snake-care needs are pretty different than dog care needs, and can be harder to find. Her ads for those snake owners will need a more distinct focus – pictures of happy snakes or ads on snake-owner niche websites will speak to their needs much more than a picture of a fluffy kitten.
Or perhaps she’s spending all of her ad budget on targeting individual pet owners, but half of her purchases come from local shops and veterinary offices. A small shift in increasing ads to those shops and offices could yield big results. The language an ad uses to speak to other businesses is different from the ads used to target individual consumers.
How to Make Marketing Segmentation Work for You
The first step in creating your successful marketing segmentation strategy is defining your market.
What separates your business or product from your competitors?
Do you have a niche service, a higher-end offering, or increased speed or convenience?
Once you’ve sorted your own offerings, use one (or more) of the following four types of marketing segmentation.
Geographic segmenting separates your customers by where they live. This is important because each area has different needs and priorities. It’s not going to be effective to sell heavy winter coats in LA, or flood insurance to Chicagoans. Urban consumers may not have cars and live in smaller apartments, while suburban consumers have different purchasing habits.
Demographic segmentation helps you organize current and potential customers by data like age, gender, income, education, job, and more. Age is one of the most popular market segmentation types, because people at different phases of life have different needs, desires, and media consumption habits.
Psychographic segmentation divides your target by their interests, values, opinions, lifestyles, and more. It focuses on intrinsic traits, and can be a powerful segment. If you sell gym apparel, your target customer should be someone with an active lifestyle.
Behavioral segmentation has things in common with psychographic segmentations, but it focuses on how consumers go through the decision-making process and how they react to information. Brand loyalty is a common component of this type.
Next, it’s time to do some research into your potential market segments. You can do this a few ways – choose whatever methods make the most sense for your business. Look through your sales for the previous year – what items or services were popular, and what had a high margin? Do any of these past purchasing patterns fit with the information you found in your segmenting process, or are there gaps or disparities? These can indicate opportunities.
The final step is to integrate your new marketing segmentation knowledge into your digital marketing strategy. Create a plan for ads that appeal to each of your segments. Develop content that speaks to each segment. And make a plan to review your segmentation research a few times a year, as needs can change.
Marketing Segmentation Mistakes to Avoid
Not keeping a balance.
It’s easy to get excited about the power of market segmentation. But diving too far into niche groups can leave your business books off-balance.
Let’s go back to the pet supplies owner example again. Her new focus on the snake-owner segment could be worthwhile from an ROI perspective because this demographic spends twice as much money per visit compared to owners of other pets. But she will have to balance this new ad focus with the rest of her customers – after all, snakes are a much less common pet than cats.
Going all-in to one market segment can damage your overall business. It’s critical to balance these segments to make sure you reach a well-rounded customer base.
Don’t focus solely on the size of the segment.
Finding a sizable market segment can seem like a goldmine. Perhaps the pet shop owner discovers in her research that she’s near a large university, and many of the students own pets.
But though this is a large market segment in numbers, the ROI is probably not worth it. After all, college students don’t have much money, and her pet supplies are on the high end of the market.
Avoid dividing your markets into too-small segments.
It’s not possible to speak to every consumer on an individual level. If the pet supply shop owner gets too far into segmenting, she could end up trying to target urban middle-income 35-45 year old snake owners who really love cowboy hats. That’s much too narrow of a group – even if every one of them makes a purchase, it’s too small to make a difference.
Not reaching your audience where they already are
Ensure you’re speaking to your segments where they spend time. The initial research of marketing segmentation is important – who are your targets? But that can’t be where the research stops.
To successfully integrate your market segments into your digital marketing strategy, you need to also discover where your segments spend their time. For the pet supplies shop owner, that could mean LinkedIn or a local or community website. But for the snake owners, that could mean a targeted website or the social media platform where there’s a large community.
Market Segmentation Powers your Digital Marketing Strategy
Digital marketing is a powerful way to grow your business. It’s the best way to target your ideal audiences directly, with timely messages that speak to them. A good digital marketing strategy doesn’t need to cost a lot, and it can give you a good ROI – when it’s done with a critical eye and a way to measure your results.
That’s what makes marketing segmentation such a powerful tool for businesses of any size. It can help make your digital marketing strategy as effective as possible – ensuring you’re sending the right information to the right customers and leads.
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