Marketing Segmentation: How to Define Your Next Customer

How to define your next customer

How to define your next customerYou’ve probably heard of the term ‘segmentation’, whether or not you’re familiar with marketing jargon. Have you scrolled down your news feed on Facebook and noticed a sponsored post, which advertises a music video from an artist that is right up your street? Or had the complete opposite effect, where you’ve been targeted a heavy metal band when you’re a hip-hop type of person? That is the difference between good and bad marketing segmentation. It is used in almost every marketing campaign, behind the scenes of every product you buy, and is under-appreciated for how fundamental it is to a marketing strategy. You can’t afford to not consider marketing segmentation in your strategy, because it could make or break your ability to actually determine who your customer is. This blog will help you to find out who your customer really is, and what you can do to precisely target your potential customers, to avoid blind marketing and meaningless results.

What is Marketing Segmentation?

Marketing segmentation according to Investopedia is a term ‘referring to the aggregating of prospective buyers into groups or segments with common needs and who respond similarly to a marketing action’. It is not to be confused with the definition of a market segment, which is a group of people that share one or more characteristics, providing the essential ingredients to deliver an appropriate marketing action.

So, why is it used? The nature of marketing segmentation is to inform marketers of potential groups of customers they can sell their product/service to. Also, segmentation can help you retain your customers because you already have sound knowledge of who they are, how they behave, and what they’re interested in. Additionally, it allows a company to differentiate themselves and their products from its competitors, with the customer in mind.

The Six Elements of Segmentation Success

These elements are the core-influencing factors, which determine segmentation success for your marketing efforts:

Measurable

Your company must have the ability to measure your segment, internally and externally. Consider an analysis of the internal/external environment and how your segment can be affected by this and your objectives.

Accessible

You need to have the resources in order to exploit the segment. You can’t choose a segment with a potential of 250,000 people if you only have resources to target 2500. However, Facebook is a great tool for effective marketing segmentation, which is measured by the ‘Insights’ page on your business page. In-house social media tools have made segmentation much easier for businesses.

Substantial

The segment must be viable in its scale to be cost-effective. Remember, there is such a thing as too niche! Determine the scope of your segment and ensure it can be profitable, while thinking about your ROI.

Unique

Guarantee that your segment is specifically identifiable. For example, if you’re launching a shampoo product that is designed to fix dry hair, you need to assure that you’re solving the problem for your segment, focusing your targeting efforts on specifically, people who have dry hair.

Appropriate

Your chosen segment should be aligned with your company’s mission, vision, and brand values.

Stable

To develop consistency within your segment, you should effectively forecast future behaviour and performance of your segment with a degree of accuracy.

Contemporary Strategy: 5 Elements of Personalisation for Marketing Success

Alongside market segmentation, new methods have been developed to ensure that brands can connect with their customers on a personal level. This takes away the ‘salesy’ feel of marketing, creating a genuine relationship with your customers, generating brand loyalty. Stephanie Miller, an author for Clickz and TargetMarketingMag, suggested a model that builds on the foundation of market segmentation, introducing five elements of personalisation as another layer to inform marketing strategy:

Effective Content

Content must be aligned with the product and should be viewed as part of the product, solving the same problems that the product solves. Website content and social media content are essential.

Cross-Channel Data Collection

Although complicated, it can provide actionable information for marketers to develop campaigns with more efficiency. If all channels are monitored and have a collective ambition with the customer in mind, CMO’s can make more informed decisions on segmentation to determine what is working and what isn’t, respective of the channel being used. This data can swing a decision on whether to stay with one segment or move to another.

Dynamic Targeting

Multi-device browsing habits and shifting interests have the potential to break traditional segmentation methods. Stephanie suggests that automation technology needs to be implemented to create dynamic and agile models that adapt to behaviours as they occur, to improve targeting. This should also personalise content at an individual level, not a campaign level. eBay and Amazon are giants at this method, including personalised emails with ‘products you will love’, measured and delivered by your online buying behaviour.

Customer-Level Media

Integrate your data into social media platforms (Facebook, Instagram, LinkedIn, Twitter), and tune your audience via analytics. This can inform you for future campaigns, deciding on which platforms to use more than others, changes in behaviour, demographic, geographic, etc.

Brand Promise Ubiquity

Ensure you’re not just conveying a message, you’re resonating your brand with all departments within your company, to enhance the overall customer experience. Marketing data can’t just be utilised in the marketing department, it needs to be utilised throughout, to maintain significance.

How to Segment Your Market

You’ve analysed your market, now you need to find out who your potential customers are. There are four variables to determining your segment.

  • Demographic Variables: Age, gender, occupation, race, ethnicity, income, education, occupation, family life cycle, social class.
  • Behavioural Variables: What is the customer using the product for? End use is important. Will they be a light, medium or heavy user? Are they a loyal customer? Will they be an early adopter or a laggard?
  • Geographic Variables: Based on location, identifying markets across continents, regions and countries, then cities, towns and villages etc.
  • Psychographic Variables: Also referred to as ‘lifestyle segmentation’, which focuses on beliefs, opinions, motive and aspirations. It’s plausible to target a segment that is focused on one opinion or belief, consider the way political parties run marketing campaigns in the run-up to an election.

Summary

Despite marketing segmentation being considered a calculated generalisation, it gives you a solid understanding of who your customers are, and how you’re going to go about targeting them via your marketing mix. Traditional segmentation is evolving and building up layers of personalisation. It’s essential for every business, new or old,  to understand how to segment a market. Once you’re knowledgeable on your segment, the possibility of market expansion is prominent. If you have your eyes on scaling your audience, breaking out your local audience, or going international, market segmentation is crucial.

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