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Reach your target market using market segmentation

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You can have the best air conditioner in the world but you’re likely to have trouble selling it in Antarctica. The same rule applies to any product or service—no matter how good it is, the other half of the equation is finding the right target market for it.

This is where market segmentation comes into play. This marketing strategy lets you identify the different types of customers that you have and that you want, and it helps you reach them with the right product and the right message.

Let’s review the definition of market segmentation, how it relates to finding your target market, and what types of market segmentation surveys you can use to know your customers in-depth.

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What is market segmentation?

Market segmentation is the process of dividing a broad population or target market into subgroups of consumers according to certain shared factors. These can be based on demographics (age, gender, etc.), geographic location, attitudes, and behavior.

How does market segmentation relate to your target market?

A single person could be part of various different groups. They might share common interests or needs with one group, be residents of the same area as another, or be the same age as another. Each of those subgroups could be a market segment for the brand or company doing the analysis.

How can segmentation strategies vary drastically for different businesses?

Let’s say you sell raincoats. Demographic segments like men, women, and children probably have drastically different preferences from one another. Similarly, geographical segmentation might reveal that people who live somewhere where it rains often—like Seattle or Mawsynram—might view raincoats differently from someone who lives in Arizona or Adelaide.

When you understand these different segments (and segment types) you can begin to craft customer profiles that allow you to better improve initiatives from product development to advertising in order to make sure you’re hitting the mark.

Let’s focus on some of the advantages of market segmentation.

Advantages of market segmentation

Once you’ve spent some time segmenting your target market, you’ll be in a great position to enjoy its benefits.

Stronger marketing messages

Let’s say you have come up with a tasty new chocolate bar. How can you convince your target market to try it? The most effective approach would be to find out what your target audience likes about chocolate bars, or what motivates them to try something new. However, those likes and motivations are likely to differ based on certain characteristics of your prospective customers. For example, people who like cooking might be looking for chocolate that melts well, while workers who take chocolate snacks to the office might be looking for something that fits in their lunchbox. 

Including messages about both the meltability and snackability of your chocolate in the same marketing communications can be confusing and might lead to message overload. When you segment your market according to characteristics like their demographics, habits and preferences, you’ll be able to tailor your marketing messages to each group to meet their individual and specific needs—putting you in a strong position to convert viewers or targeted accounts to customers. 

Targeted advertising

Linked to stronger marketing messages is targeted advertising. For instance, if you want to make sure messages about the meltability of your new chocolate reach bakers, you might want to invest in ads in cooking magazines or on baking websites. When you segment your market, as well as learn more about different segments’ needs, you also find out how best to reach them.

Lower acquisition costs

Customer acquisition costs are one of the most significant costs for businesses. These costs include all of the resources and strategies you use to reach, contact and convert prospective customers into buying customers - things like your marketing budget, your salespeoples’ salaries, advertising costs, inventory maintenance, and more. If your salespeople, operations staff, and marketers understand the different needs and preferences of different customer segments, they will be able to tailor their messaging, sales pitches, and resource budgets, so that there will be less waste of resources, and costs can be significantly reduced.  

Attracting the right customers

Not all customer segments are created equal! For example, some customers have a tendency to be more loyal than others; once they’ve found the right brand, they’re willing to stay with them, and may spend more. Others prefer to switch between different brands and products and can be enticed away with deals. These differences mean that some segments of customers bring in more revenue than others—and these are the ones you should be targeting. But to do that, you’ll first need to slice your customers by segment.

Enhanced profits

Market segmentation can actually be a crucial tool in building profits. That’s because when you segment your market, you’ll have a much better understanding of the needs of your customers, which means that you can avoid wasteful marketing activities, and invest in messaging and initiatives that better appeal to your most valuable customers. For instance, Spotify’s recent profit growth has been attributed to the way it segments and understands its 158 million subscribers—using its recommendation engine to locate and suggest songs that it knows each individual customer will love. 

Effective market segments

Now you know the advantages of customer segmentation, how should you go about segmenting? In order to bolster your chances that market segmentation will help lower costs, improve marketing efforts and drive profits, you’ll need to identify effective market segments: segments that are measurable, accessible, substantial, and actionable. Let’s take a look at each of these factors in turn.  

Measurable

In order for your customer segments to be of value, they should be measurable. In other words, you should be able to gather quantifiable information about each segments’ size, preferences and needs, and purchasing power. Without this data, you won't be able to create targeted, effective and impactful marketing campaigns. So, first find out whether a market exists for your product or service, and then measure how many possible customers exist in the overall market, before moving on to perform market segmentation. That way you can measure the size of each segment relative to the overall market.

Accessible

The characteristics and behaviors of each of your segments should help you identify the best way to reach them at an affordable cost. For instance, if you find that a significant segment you’re targeting is housewives, you might be able to access them through, for example, placing advertisements on the kinds of websites that they like to visit. 

Substantial

An effective customer segment is one that has the ability to purchase your product or service. It just doesn’t make business sense to spend time, money, and effort trying to reach a tiny segment. Even if you do manage to convert most of them to customers, their low spending power represents a waste of resources.  You should try to define the profile, purchasing power, and potential contribution to your bottom line of each segment, and then focus your efforts on the most substantial segments.

Actionable

Each segment should be differentiated from one another, and should be able to respond to your marketing strategies in a way that yields value. To ensure that your segments are actionable, you’ll need to try to find out which marketing strategies are most effective for certain segments through market testing. We have a range of handy expert tools to help you: tools like our Ad Creative Analysis for testing the impact of creative campaigns, or our Messaging and Claims Analysis, which you can use to make sure your messages land with your target segments. 

Now, let’s look at the most common types of market segmentation.

Types of market segmentation

Market segmentation surveys help you quickly understand what the various members of your target market have in common—and how they differ. Here are a few different types of market segments you can apply to find your target market:

Demographic segmentation

Some of the most critical data points on existing and potential customers are their basic demographics, Some of the most critical data points on existing and potential customers are their basic demographics, like how old they are, what their level of income is, how far they went in their education, etc. Demographic segmentation is often a useful way to divide up your target market, and is generally a good first step in any marketing initiative. (You can research this topic in-depth on our demographic survey page.). The types of characteristics that you can use to build demographic segmentation include:

  • Gender
  • Age
  • Income Level
  • Marital Status
  • Education
  • Race 
  • Religion

Geographic segmentation

Where people call home can drastically change how they respond to interactions with your company.. For example, if you’re selling cars, you’ll find that the needs and preferences of people who live in rural areas are very different from those that reside in the inner city. Learn where your target customers live and tailor your marketing efforts to account for their local values. Examples of data points you might consider using for geographic segmentation include:

  • Neighborhood
  • Postal or ZIP code
  • Area code
  • City
  • Province or state
  • Region
  • Country (if your business is international)

Psychographic segmentation

Psychographic segmentation is a way of dividing the target market based on socioeconomic class or lifestyle preferences. Psychographic segmentation helps decode the emotional elements of buying that might otherwise seem mysterious. That’s because there’s a relationship between lifestyle preferences/socioeconomic status and things like attitudes, values, habits, and opinions. Psychographic segmentation, therefore, helps you get to the bottom of why people act the way they do, make certain purchases or adopt certain behaviors and habits - crucial insight you can use to drive sales.

Behavioral segmentation

This type of research reveals how customers interact with your particular product or service. For example, how often do they buy it, and where? Position your marketing differently for those who use your product as a daily necessity versus those who see it as a luxury and use it only occasionally.

How to use market segmentation to reach your target market

The various types of market segmentation can be useful in different kinds of business projects, including marketing campaigns, product development, and customer experience and support initiatives. Here are a couple of examples of when this strategy may come in handy to your company:

Market research

When you survey potential customers who are likely to consider your product or service, you’ll have an opportunity to segment. For example, if you send a survey questionnaire about a new product concept to a broad group of people, adding demographic questions will help you understand the differing appeal to men and women, what age group you might want to focus your marketing efforts on, and what shortcomings you need to address to increase your market size. Segmentation can be a useful strategy in concept testing, branding, or product development.

Customer satisfaction

Whether you have customers, clients, or patients, it’s likely that different people have different experiences with your brand. Adding segmentation questions to your CSAT surveys makes it easier to pinpoint issues and improve customer service.

Other opportunities

Segmentation isn’t limited to those scenarios. Event planners might segment sponsors from attendees. Educators might look at the differences between boys and girls, or teachers and support staff. HR departments might segment survey results by job level, time with the company, or department.

The key is to think about how you will want to segment before writing a survey. If you don’t ask the right questions, you might not be able to segment your market the way you want to when the time comes to analyze your results. Most of the time, demographic data is the first type you want to collect about your customers. It’s worth taking a deeper look into it.

Understanding your target market with demographic surveys

A few well-directed demographic survey questions can help you obtain key data for your market segmentation analysis. Knowing your target market’s age, gender, income, and education levels (among other factors) can give you a much better sense of who they are.

Try these demographic survey templates to add the right expert-designed questions to your market segmentation questionnaire.

US demographics template

If your target market is based in the US, we’ve prepared a template you can use to gather key demographic data such as their age, location, income, and education levels. Our template has specifically been designed to capture data relevant to American consumers. Use this as your starting point for in-depth analysis.

Typical customer demographics template

The typical customer demographics template is useful if you’re a B2B firm: If you market to other businesses, you can ask them about their own customers to better understand their needs. Once you know who their typical customers are, you’ll gain critical insight into what they’re looking for from you.

Preview the typical customer demographics template 

Target market demographics survey template

A target market demographics survey is useful in combining knowledge about the demographics of your market with insight into the way they view the landscape for your product or service. For example, you can ask them about their awareness of competing brands, or the kinds of products that they buy and use. 

Get started with segmentation

Ready to begin reaching your target audience via market segmentation? We recommend the following 5 steps:

  1. Define your market
    First, you need to define your overall market. That means: identify the specific group of people at whom your product or service is aimed. While that seems straightforward, getting market sizing right can be a challenge. Learn how you can use more than 50 attributes to define your own target audience.
  1. Segment the market
    The next step is to perform the segmentation based on whatever is relevant for your market, such as demographics, psychographics or geographical factors. You can consider this step as a kind of rough draft of what will become the final segments - after they are validated and tested in the next step.
  1. Understand the market
    In step three, you’ll need to perform some market research in order to understand the segment. We have a deep dive here, but in general, you’ll want to try to find out things like what your different segments want and need, their preferences, what kinds of products and services they already buy, how they feel about competitors, and their spending and purchasing habits. 
  1. Create customer segments
    Based on the insight you gleaned from your market research activities, you can finalize your segments. It might be that you got the initial segmenting right, or you might need to refine your segmentation strategy. Once you’ve identified your customer segments, create customer profiles for each that describe their characteristics, size and purchasing power.
  1. Test your marketing strategy
    Finally, test your marketing strategies out on each segment. This is a crucial part of the market segmentation approach that is often overlooked. But, there’s little value to segmenting your market if you don’t tailor your marketing efforts towards them in a way that lands. So, make sure your marketing messages and communications are appropriate for each segment.

Ready to reach your target market using market segmentation? Reach out to our market research experts today. We can help you tailor an audience for conducting market segmentation surveys—and we even help you construct the survey.

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