Market Segmentation: How To Perform It Properly For Better Results
The Types, Benefits & Strategies of Market Segmentation
I recently came across an article by Hannah Tow, titled ‘What is Market Segmentation and How to use it for Max ROI’ which helped me understand the importance of implementing market segmentation into my business strategy for better results.
Hannah Tow highlighted the importance of segmenting your target market to avoid making your marketing message irrelevant.
One of the main reasons this can happen is because of the expanding market and its different needs and desires.
By segmenting, you are better able to focus your message on different customer groups and customize it accordingly in order to resonate better with them.
Market segmentation is a growth strategy that simplifies the process of breaking up smaller, manageable groups of people based on their common opinions and needs. This helps to better improve the optimization of your brand’s marketing, advertising, and sales efforts.
It works great for brands that offer services and products with multiple benefits and that cater to different needs.
The Four Types of Market Segmentation
There are four main types of market segmentation that help you to understand and implement the process correctly.
- Breaks customers based on physical location.
- Perfect for paid search campaigns.
- Examples: McDonald's caters to different menus in different countries to appeal to customer preferences based on location.
- Divides customers based on factors such as age, gender, education level, family size, occupation, ethnicity, income.
- An example is when media advertisements cater to different genders and age groups, as well as clothing lines.
- Focuses on the customer experience such as reactions.
- Focuses on the process of customer decision-making and buying.
- For example, attitudes, interactions, and customer knowledge of your brand.
- Brand loyalty can be accomplished through different means among them a great reward program rewarding repeated customers, such as Sephora’s brand loyalty program.
- Focuses on intrinsic traits of target customers, such as values, personalities, interests, attitudes, conscious and subconscious motivators, lifestyles, opinions.
- Research methods such as focus groups, surveys, interviews, and case studies are implemented to understand customers more.
- For example, Starbucks makes every single person feel individually catered to by offering different products that cater to people’s needs and drink preferences.
Benefits of Market Segmentation
- Better customer retention.
- Drastic business growth.
- Lower spend rate.
Mistakes of Market Segmentation
- Creating Narrow Segments.
- Failure to update strategy as customer base changes.
- Targeting the segment instead of the money.
Two Strategies To Implement Market Segmentation
There are two main strategies that work great to apply market segmentation to your business plan.
1. Concentrated strategy
- This is where a company chooses only one market to focus all of their time, money, and efforts on.
- This is mainly implemented by small business owners.
- More sensible and cost-effective.
2. Differentiated strategy
- This is when the company focuses on two or more markets.
- The business is more likely to market its product to different segments.
- Requires a larger budget and more resources.
How To Implement a market strategy
The 5-step process to implementing a successful market segmentation strategy is as follows:
- Define your market
- Segment market
- Understand market
- Build customer segments
- Test your strategy
Example of Market Segmentation Strategy for a Supermarket
To help bring the information together, I have chosen a Finnish local supermarket, K-Plussa for this example. Yet, any small franchise works for this example.
•Geographic — provides discounts that are specifically based on location. In many instances, discounts are only available to customers residing in a specific suburb.
•Demographic- advertises and breaks up products based on age and gender, as with children’s shoes and clothing.
•Behavioural- great reward program was given by the K-plussa card that can be used to gain discounts and special offers as well as money reimbursement that can be cashed out in purchases based on the number of points accumulated.
•Psychographical — focuses on consumer-specific lifestyle and eating habits to cater for them and provide a great selection of products to cater to their needs. They recently introduced up to 8 products catering to customers on the keto weight loss diet, which is heavily trending.
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About The Author
Noor is a second-year business student at Tredu and an owner of multiple digital businesses since 2016. She is passionate about marketing and content creation. She recently launched her YouTube channel specializing in holistic healing.