Market Segmentation to Boost Your Marketing Strategy | DT Evolve

Introduction

Are your current marketing efforts not reaching your target audience? Are you failing at retaining your customers and building strong relationships with them due to a lack of personalized marketing efforts? Are you struggling to choose marketing channels to effectively reach your segmented audiences?

For a successful organization, market segmentation is important for marketing strategy. This process involves dividing a larger market into smaller groups of consumers. Tailoring your marketing efforts according to these segments can help you effectively reach and engage your target audience, increase sales, and build stronger relationships with customers. With rapidly evolving consumer preferences and ever-increasing competition, it has become more critical than ever. Digital marketing and data analytics have now given us access to so much information about customers. So, it is easier to identify and target specific segments with tailored marketing campaigns.

In this blog, you will gain insights into market segmentation. You will learn the need for market segmentation, types of market segmentation, objectives, and strategies of market segmentation. There is a huge role of technology in market segmentation. You will also learn the advantages and disadvantages of market segmentation, which can help you make better decisions about your marketing strategies. It includes various steps.

What is Market Segmentation?

Market segmentation refers to the process of dividing a larger market into smaller groups of consumers who have similar needs, interests, and behaviors. The main motive of segmentation is to identify and target particular groups of consumers that may be interested in a product or service. It helps tailor marketing strategies and messages to segmented groups to meet their needs.

It results in effective marketing, higher conversion rates, and increased sales and revenue. There are mainly four types of market segmentation. You will read them briefly below.

Need For Market Segmentation

Market segmentation is a great tool for organizations. However, it is needed for some reasons, like:

• Identify Target Market: Through market segmentation, organizations can recognize groups of consumers that are most likely to be interested in their products or services. This focuses on their marketing efforts and resources on those particular segments. 

• Tailored Marketing Strategies: These segments have different needs, preferences, and interests through which organizations can prepare targeted marketing messages and strategies that can resonate with a specific segment. 

• Product Development: Market segmentation helps marketers develop products that meet the needs of specific segments. It can help in creating products and services that are successful in the market.

Also Read: Occupation: Definition, Meaning, Types, and Categories

Types of Market Segmentation

It is mainly divided into four types:

Geographic Segmentation

Geographic segmentation refers to the division of groups of customers on the basis of geographic boundaries. Geographic location can influence the needs and interests of potential customers. This segmentation helps organizations discover what to sell and advertise in that specific geographic location, which will expand their business.

For instance, when McDonald’s decided to expand its franchise in India, it had to make alterations to its menu because it mainly had beef and pork items, which were made according to the geographic location of America. Whereas, in India, people did not prefer these items. To expand its business, McDonald’s introduced vegetarian products and even used egg-less mayonnaise in vegetable burgers.

Demographic Segmentation

Demographic segmentation refers to the division of groups of customers on the basis of different variables such as age, gender, nationality, education level, family size, income, etc. 

For instance, a cartoon channel has advertisements for Kinder Joy, Lego toys, etc. Will these advertisements appeal to the audience watching daily soap channels? Demographic segmentation helps to target specific customers who are more likely to be interested in those products or services. Kids watching cartoon channels will be more likely to be attracted by advertisements for toys. 

Psychographic Segmentation

Psychographic segmentation divides groups of customers based on their behavior, lifestyle, attitudes, and interests. This segmentation can be done through surveys, market research, and case studies. Factors that affect this segmentation are lifestyle, personality, and values.

For instance, advertisements for clubs and large social events would not appeal to introverts. Whereas, extroverts will not be impressed by suggestions for books, creative writing, and an art exhibition.

Another example to make you better understand this is, advertisements for junk food such as burgers, pizzas, and fries won’t be appealing to fitness maniacs as they focus more on eating a healthy and green diet. These advertisements will be valued by the people who are not conscious about eating healthily.

Behavioral Segmentation

Behavioral segmentation is done on the basis of consumer behaviors, patterns, and how customers make decisions and purchase products. Customer attitudes towards a brand and how it is useful to them help in behavioral segmentation. It is mainly done if the customer has visited the landing page of the service provider or signed up on their landing page.

For instance, Grammarly consistently sends emails to new users if they have stopped using their chrome extension for a few days. This mail sometimes includes technical difficulties, any new discounts in the subscriptions, how-to’s, etc to keep their users hooked on their services.

Objectives of Market Segmentation

• Product: In order to thrive, the organization must create successful products to make profits. If an organization fails to make profits then it will be hard to survive in the market. It helps to add on the specific features that your customers need.

• Price: Deciding on the right price is one of the main objectives of market segmentation. It helps decide the right price that customers will be willing to pay for their products or services.

• Promotion: It enables you to target and categorize the participants in each segment so that your strategies are directed appropriately. 

• Place: The end of this process is to decide the right place. If your products qualify in categories of price, needs and interests, and promotion but do not reach the right place then all your efforts will be in vain. It allows organizations to know where and how to offer a product or services.

The Role of Technology in Market Segmentation

Technology plays an important role in market segmentation. With the rapid development of technology, businesses are able to collect, analyze, and interpret data about their customers easily and in an effective manner. Organizations can collect data about their customers like demographics, interests, and preferences. Digital channels such as social media, website analytics, and Customer Relationship Management (CRM) software can help in the collection of data. 

Data analysis has also become very easy with the arrival of new technologies such as analytics tools and techniques. Through data analysis, organizations can recognize patterns and trends to understand their customers using techniques such as clustering and predictive modeling.

Technology provides personalization to marketing efforts by offering services to a specific segment of customers, which can be done through email marketing campaigns, social media advertising, and personalized website content.

Strategies for Market Segmentation

Strategies for segmenting the market lay out a plan for categorizing a market into various segments based on demographic, geographic, psychographic, and behavioral characteristics. Here are some strategies that can be used to create segments:

Research the Market

The very first step is to research the market. Market research allows you to understand the needs, behaviors, and interests of potential customers. Surveys, customer feedback, questionnaires, and market analysis can be used to conduct market research for better market segmentation.

Identify Criteria for Segmentation

After understanding your target market, you must decide on the criteria for segmentation. As you have read earlier, these criteria are demographic, psychographic, geographic, and behavioral. 

Market Segmentation

Once you are done deciding the criteria for your market segmentation, you can start by segmenting the market into smaller groups based on the decided criteria. Categorize and divide the market into groups. 

Creating Targeted Marketing Strategies

Now, you have to focus on creating marketing strategies for targeted groups. You can develop messages and email campaigns that resonate with each group. For instance, a cosmetic company may have different marketing strategies for women of different ages. Young women prefer trendy cosmetics, whereas, older women prefer the anti-aging benefits of cosmetics.

Evaluating the Segmentation Strategy

At the very end of this process, you must evaluate whether your strategy is working well or not. It is important to reassess your strategy on a regular basis. The evaluation process can involve monitoring sales, and customer feedback in order to see whether your marketing efforts are working for segmented groups. You need to adjust your segmentation criteria if a particular strategy is not working for you.

Also Read: SWOT ANALYSIS: The Complete Guide.

Steps in Market Segmentation

To successfully implement a strategy, you need to follow these steps.

Step 1: Define your market

Step 2: Market segmentation

Step 3: Understand your market

Step 4: Create your customer segments

Step 5: Test your strategy

Step 6: Implement your marketing strategies

Step 7: Evaluate on a regular basis to improve your strategy

Advantages of Market Segmentation

Segmenting your market can offer your organization many advantages. Here are some of the advantages:

• Better Understanding of Your Customers: It provides a deeper understanding of the needs, interests, and behaviors of your target customers. This allows you to develop targeted marketing strategies and products that can meet their specific needs.

• More Profits: If you create marketing strategies based on specific market segments you will be able to increase your profits. Customized products that cater to the needs and interests of specific customer groups can generate more profit than usual as organizations can charge higher prices for customization. 

• Reduced Risk: Organizations can reduce risks of product failures by segmenting products that are made on the basis of the needs and interests of the targeted market.

• Efficient Marketing: Organizations can consciously invest resources in marketing to customers who are likely to be interested in their products or services. This can increase the chances of successful product launches.

Also Read: Business Communication: An amazing tool to enhance yourself! | DT Evolve

Disadvantages of Market Segmentation

You have read about many advantages of market segmentation earlier, but it also has some disadvantages that must be considered while decision-making:

• Increased costs: It requires a bigger marketing budget in order to conduct market research. This involves customized products, and creating targeted campaigns. 

• Complexity: Management of multiple market segments can be a daunting task, especially for small businesses that do not have enough resources. It creates an administrative burden for an organization such as managing inventory for a number of product lines.

• Cannibalization: Cannibalization refers to the competition where one product takes sales away from another product. This may lead to a huge loss for an organization.

• Overlooking potential customers: Organizations may focus too much on the targeted customers that they may lose the opportunities of new customers that do not fit into the segments.

Conclusion

In this blog, you have learned all about market segmentation. There is a huge need for this is to effectively and efficiently use your resources. There are four types of market segmentation, including geographic segmentation, demographic segmentation, psychographic segmentation, and behavioral segmentation. You also learned about various objectives, strategies, advantages, and disadvantages of market segmentation. Technology plays a vital role in this. There are also steps to implement the best-suited strategies for your organization to increase sales.