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What Is Market Segmentation?

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Last editedJul 20213 min read

Not all of your customers think or act in the same way, and knowing how to target your marketing strategies towards different segments of your audience will go a long way in connecting with them on a more personal level, boosting customer loyalty in turn. Market segmentation helps businesses identify new opportunities, optimize their approach to existing opportunities, and drive sales.

Market segmentation definition

Market segmentation is the process of dividing your target market into separate segments and taking a tailored approach to marketing and sales for each. Establishing separate marketing strategies for separate market segments means you’re able to better serve your audience and their needs.

Why is market segmentation important?

If you have or are targeting a broad customer base, you might find that it’s difficult to develop a one-size-fits-all approach to marketing. For example, you might find that you connect better with younger audiences through social media, while email marketing may work better with older audiences. You don’t want to bombard your customers with marketing that isn’t tailored to their needs.

You want to sell the relevance and necessity of your product, but what appeals to one segment of your customer base may differ from another. Perhaps the functionality and convenience of your product is a better sell to certain segments of your audience, while something like its design or its sustainability may be the most attractive attributes for others. It could be that you want to market your service differently to local customers compared to how you market to your global audience.

There are plenty of reasons why it helps to divide your customer base and form a different approach for each, but in essence, it’s simply a matter of better serving the needs of each individual customer.

Your brand still matters

While you might market your brand to different segments in different ways, consistency is still important. You can play around with structure, format and tone as you explore different segments, but you should always have a unified brand. For instance, you might market your brand in a more casual tone for one audience and more formal for another – but you should never have, for instance, a different logo for each.

Market segmentation is a way to emphasize different strengths and qualities in your product or service, but it should always tie back to the overall values and vision of the brand.

How to segment your market

Avoid going too niche with market segmentation. There are lots of ways you might divide your market into segments, but it always helps to use one or more of the following criteria as a guide:

  • Demographic segmentation: One way to segment your market is by demographics like age, gender, location, or income level.

  • Psychographic segmentation: You might choose to segment your market based on certain attitudes, perspectives or values.

  • Behavioral segmentation: You could segment your existing customers based on how they interact with your brand and product. Do they buy online or in stores? Do they interact on social media? Do they buy products with or without certain ingredients? Do they make regular repeat purchases? Spending some time to understand the different behaviors of your existing customers will help you identify trends that you can use for target market segmentation.

You don’t necessarily have to pick just one criteria to define your segments – and you may find that different criteria intertwines with each other in certain ways (for example, age might influence attitudes, which may influence behaviors). Use the above criteria to guide your approach, but don’t feel constricted by it. If you understand the market, you’ll be able to easily identify the most sensible market segments.

You might choose to develop your own customer personas, based on your research, that have different sets of traits, demographics and behavior, and use these different personas to navigate your different marketing methods.

Of course, to actually understand the different options you have, you need a solid understanding of your existing customer base and of the market itself. In order to find things like demographic information or behavioral traits, you need to analyze the data.

Conducting market research is one of the most helpful market segmentation strategies. Competitor analysis is also useful, especially if you’re running a new business that hasn’t established a large customer base just yet. There’s a lot of research you can do on your own without having to hire a third-party by simply analyzing the customer data you have, measuring engagement online, researching search trends, and by interacting directly with consumers to better understand their needs.

However you choose to define your different market segments, once you’ve done it you can then begin to analyze which of them present the most opportunity, which should get the most attention, and which could perhaps require less emphasis.

You’ll be able to identify niche subsections of the market to capitalize on, or subsections that are too competitive to be profitable. Market segmentation will highlight opportunities and weaknesses and give you the data-driven insight you need to better connect with a broad customer base.

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