Market Segmentation Strategies - How to Divide and Conquer Your Target Market

Identifying and defining segments is critical for a successful marketing campaign. This involves gathering data on customer demographics, behaviors, interests and purchasing patterns to accurately organize customers into groups with similar characteristics and needs.

This can be done using CRM tools that analyze data and offer business insights. The goal is to minimize incremental development and marketing costs while maximizing value with each segment identified.

1. Demographics

Demographic market segmentation involves dividing your target audience into groups by factors like age, gender, income level, education and occupation. This approach is based on the idea that people with similar characteristics will have shared consumer behaviors, interests and needs. Demographic market segmentation allows businesses to tailor their marketing campaigns and product offerings to the specific wants and needs of a group of potential customers.

This approach is useful because it can help businesses to create more relevant advertising for their target audience and reduce costs. For example, if you want to advertise your business's products in Scotland, it's more cost effective to target only the people living there than to create ads that will reach everyone on the island of Britain.

Other common demographic market segmentation strategies include dividing audiences by their social class (for the promotion of goods that reflect particular lifestyles), and using personality factors to divide consumers into groups according to their moods, tastes and opinions. This can lead to a more targeted approach to the marketing of goods and services that is more likely to produce strong ROI.

Geographical market segmentation, which is also often used in conjunction with demographics, splits potential customers into groups based on their location, including things like state, county, zip code, climate and language. This is a good choice for businesses that sell products and services that have a local appeal, such as lawn care, home furnishings, restaurants and other leisure activities. It can also be helpful for identifying existing customers who have the profiles of high-value customers and may be worth upselling to. This is a type of marketing that can be difficult to carry out effectively, though, as it can result in an overly complicated and fragmented product line that fails to communicate the company's overall brand image.

2. Psychographics

Market segmentation isn’t all about demographics; it’s also about understanding what drives people to buy your products. Psychographics bridge that gap between your customers’ psychology and data, allowing you to tailor your marketing messages to the specific needs of each audience member.

The main psychographic variables include attitudes, activities/interests/opinions, lifestyles, and personality. These variables allow you to identify customer groups that share similar interests, opinions, and motivations. This is a great way to target your marketing to improve customer engagement and sales, but it’s important to keep in mind that these factors are often changing and require constant attention and flexibility.

Using a psychographic approach to market segmentation can help you better understand your audience, develop effective campaigns, and create successful products. It can also improve your communication with your customers and optimize the use of your resources and marketing budget.

For example, a coffee company that discovers its customers are active and health-conscious can promote metabolism-boosting products to this group. Similarly, a luxury vehicle company that identifies its lower-income customers can focus on promoting its affordable options rather than its more expensive models.

When choosing which psychographic variables to use, it’s important to balance their actionability with the time and cost required to collect hard data. Also, remember that a well-defined market segment is useless if its members don’t have the buying power to purchase your product. That’s why it’s important to revisit your market segments on a regular basis and to only choose those that offer a positive ROI.

3. Behaviorals

Market segmentation based on behavioral data involves breaking markets down into groups of consumers based on their purchasing behavior and other decision-making patterns. This type of market segmentation is best based on information your company already has about its existing customers. For example, a brewery might find that its most loyal patrons are families with young children. It could then tailor its marketing efforts to draw that audience in and create a more personal experience.

This may also make those customers feel like their needs are valued and understood, leading to increased customer satisfaction levels. Personalized marketing strategies also improve the effectiveness of your marketing budget, as you can target the audience most likely to buy and avoid wasting funds on uninterested customers.

Examples of behavioral market segmentation include generations (Gen Z, Millenials, Generation X and Baby Boomers), lifestages (such as going to college, getting married or having children) and geographical areas prone to certain natural disasters. The key is to understand that behaviors change and that market segments should be revisited frequently to keep your marketing activities current and on track.

Behavioral market segmentation is often the most time-consuming and expensive form of marketing research, so it’s important to have a strong team on your side. However, the effort pays off by providing your business with a clearer picture of your ideal customers. This, in turn, allows you to develop products and marketing campaigns that speak directly to their needs and help to ensure long-term customer loyalty. It also helps your company stay competitive and relevant, especially as other marketers adjust their approaches to match the changing consumer market. This step is a critical component of developing a successful business model and should be part of any marketing strategy.

4. Socials

Market segmentation should identify a group of potential customers that has some kind of need or value for your product. It can also help you identify the best way to reach that audience, and what kinds of messages will resonate with them. For example, if one of your segments is resistant to technology and relies on newspapers and radio ads, you might want to avoid targeting them with an email campaign. However, if you find another segment that is highly responsive to social media and mobile apps, then leveraging those channels could be a good idea.

Segmentation should be based on hard data from actual research, not intuition or anecdotal experience. You need to be able to answer a series of questions about your target market’s needs and wants, including the things that are most important to them when they choose a particular product or service provider.

There are four primary types of market segmentation: geographic, demographic, psychographic and behavioral. Each of these methods has its own advantages and disadvantages, and they all should be weighed carefully when deciding how to segment your market.

For example, geographical segmentation involves dividing your audience into groups based on their physical location, language and other demographic factors. Using this method can give you a very precise, targeted target market.

Likewise, demographic segmentation is useful for identifying key characteristics of your audience, such as age, religion, sex and income level. This can be a great way to target your marketing efforts, especially if you have limited resources.

Psychographic segmentation focuses on grouping people together based on common interests, beliefs and values. This can be a powerful tool for creating targeted marketing campaigns, such as ones that focus on a specific personality type or interest. Using this method, you can provide your audience with the personalization they increasingly expect from brands. For example, luxury goods brand Montblanc used Yieldify to create personalized recommendations on their website, which increased conversions by 118%.

5. Positioning

Market segmentation helps businesses understand their customers’ needs, desires and buying habits. This information allows them to tailor their products, services and marketing efforts to meet those needs.

The main types of market segmentation include demographic, psychographic and geographic. Each type of segmentation has its own benefits and uses. Demographic segmentation divides the market into groups based on attributes such as age, gender, education and income level. This strategy is best for businesses that are looking to target a specific audience.

A brewery, for example, could use demographic segmentation to target families with young children. This is a great way to encourage repeat business and attract new customers. The brewery would focus on promoting their kid friendly environment, offering a kids menu and offering special deals for families. This type of targeting can be achieved through targeted social media campaigns, email marketing and targeted advertisements in family publications.

Psychographic segmentation involves dividing the market into groups based on their attitudes, interests and values. This is a good way to target potential new customers with a message that speaks directly to them. Using language that is familiar to them in your ads, such as local slang or referencing things they can relate to in their area, will make them feel like you are speaking directly to them and not to the general population.

Geographical segmentation is a great way to target people in the same location, such as a city, state, county or zip code. This type of targeting is useful for businesses that want to send out location-specific coupons or offers or offer free shipping on orders placed in their store.

When creating your market segments, it is important to be as thorough as possible. This will allow you to find the groups that are most valuable and will give you the best results. You may need to experiment with different segments to see which ones work best for your business.