What is Segmentation?
Segmentation is the process of dividing a market into different target groups based on specific needs or interests. In general, segmentation is done by using demographics, psychographics, and other factors. It is a marketing strategy that helps a business understand its customers so the firm can better draft strategic plans and create more effective advertising. Understanding a customer base helps marketers identify trends, develop specific marketing strategies, and tailor products to those segments. The basic concept comes in two parts:
Segmentation has been used since the 1990s when sales tracking tools such as CRM systems were able to show how customers behaved. The idea was that these tools would allow businesses to focus marketing strategies on specific segments, such as young-adult consumers or single mothers. These early applications of segmentation focused on individual consumer behavior and established how people were likely to behave in certain situations. As technology advanced, the ability for marketers to analyze data became more sophisticated and businesses turned their attention towards segmenting products and services. Companies began devising products aimed at specific demographic groups and marketing them toward specific segments in order for their products or services to be successful within these groups. Businesses segmented goods and services by demographics, psychographics, behavior or lifestyle.
Goals of Segmentation
The goal of segmentation is broadly to use these divisions to identify individual segments with high potential for useful relationships with one another and to take action that would optimize the relationship opportunities between them. Segmentation helps marketers understand how their offerings can influence a group of consumers, which then influences what actions they might take towards the product later on. Segmenting markets allows for smoother transfer of information from one group to another, as well as greater access to buying power from those groups. The commercial goals of segmentation can be very varied and may include elements beyond those listed.
Market Segmentation
Market segmentation involves dividing a larger population into smaller interested groups so as to gain more information about them and marketing products more effectively to them. Market segmentation aims to find a balance between too broad a market and too narrow a market. If the market is too broad, it will be difficult to target a large enough audience to make an impact. If the market is too narrow, there will be little benefit from the division itself since so few people fall into that specific category. The correct balance can help improve both efficiency and effectiveness of marketing strategies. In other words,a Segment is the division of a group of target customers based on common attributes whose needs are similar because they have a common problem or desire to which a company’s product or service could provide an answer. The segment can be identified using such tools as demographic, psychographic and behavioral data.
Steps for Effective Segmentation
In order for segmentation to be effective, a business must first give consideration to the criteria it will use to segment its customers. Marketers must consider their current customers and what attributes they have in order to identify which criteria will be most effective for their products or services. The second step is the development of marketing strategies for specific segments. This includes creating unique marketing techniques geared toward each group, making sure that the message appeals to the target audience. The third step is determining how businesses can market these unique products or services based on how they are segmented.
The process of segmentation is not an exact science — in fact, it is necessarily a subjective exercise depending on the criteria used to define segments. When businesses segment their consumers they will often produce reports and use data tools in order to gauge the success of specific marketing strategies and products aimed at specific segments. A customer’s fidelity to a brand can be measured by tracking purchases made with differing brands and observing behavior changes over time using predictive analytics. Predictive analytics are used by companies to help them figure out whether or not customers are likely to leave. Loyalty programs are used by businesses to try to retain their current customers, and by marketing departments interested in understanding the characteristics of their best customers.
Many companies rely on loyalty programs as a way to understand their customer base and as a way to increase profits; however, bringing those programs to success requires careful planning and execution. The initial step in planning is to determine whether or not a loyalty program is right for the company. The next step is to figure out what kind of program will work best for the kind of customers being targeted. Businesses should then develop specific goals for the program, including how much should be spent on the program, how many members they expect to have, and what kind of merchandise should be offered as rewards. Once goals have been set, businesses can begin implementing their loyalty programs. One way to do that is by selecting a rewards provider who can help businesses create their programs and offer assistance in maintaining them throughout the life of the program. Businesses can also use their loyalty programs as a way to improve customer service. Using customer feedback to make improvements in the loyalty program is another way businesses can use these programs as a tool to improve business. There are trends in the way that consumers prefer to be served, and businesses that understand these trends can better serve their customers. Understanding these trends can help businesses create new products and services that will attract users, and help them choose the products or services they want to buy.
One way business use segmentation to determine the characteristics of their best customers is by using data analytics tools. Companies are able to use data analytics tools to find out the habits of their best customers, what makes them different from all other shoppers, how much they spend on specific products or categories of products, what special interests they have, how often they shop with them or for other reasons. Data analytics can also be used to analyze data about the patterns of group behavior, which helps companies figure out how best to serve their customers.
Predictive analytics can also be used to determine whether or not a certain segment is good for any business. Using segmentation data, marketers can then determine which segments will help them maximize their profits and which segments will likely decrease profits. Businesses that understand their customers and the kinds of products and services they prefer will be able to make more profitable decisions when deciding whether to increase production, reduce prices, or both.
When businesses segment consumers according to traits such as personality characteristics (tattoos), personality type (intellectuals), or location (New York City), they use these traits in order to create specific marketing campaigns. For example, if a business knows that its customers are more likely to buy their products online than in stores, they can create marketing campaigns to help them reach this segment.
Segmenting customers according to the demographic information available about them gives businesses the ability to target specific groups of people. For example, part of what makes young adult males such an attractive market for businesses is the fact that they frequently buy new products and spend good amounts of money doing so. This means that companies can use their segmentation data in order to come up with marketing strategies that will help them attract this group of people.
Businesses can use their segmentation data in order to create a variety of targeted marketing campaigns designed with the objectives mentioned above in mind. Marketers can use that data in order to figure out who this group of people is, how much they spend, what kind of products they use, how often they buy new products, and what makes them different from other groups. They can then develop specific marketing campaigns designed with this group in mind.
Companies are able to adjust their marketing strategies depending on the segment information available about their customers. For example, if businesses are about to launch a new product that is targeted at the 18–35 year-old demographic, they might want to test it by sending out samples of the product to some members of that particular segment. Alternatively, they could also use their segmentation data in order to adjust their advertising campaigns.
Segmentation helps businesses make more accurate predictions about which people are likely to make purchases. For example, segmentation data can show companies that people who buy one kind of product are likely to buy another kind of product. An example of this is a computer manufacturer that determines that people who buy its computers are also likely to buy its software, or that people who are interested in one kind of software are also interested in buying computers from that company. Even better, segmentation can help businesses target consumers who have never made purchases similar to theirs before by analyzing consumer data and identifying potential new customers.
Another way businesses use segmentation to maximize profits is by helping them figure out how much money they will spend on marketing. The more accurately businesses are able to determine how much consumers spend, the better they can plan their advertising campaigns. Businesses use segmentation data to figure out which markets are the most likely to be profitable for them.
Finally, business can use segmentation data in order to come up with specific strategies for attracting new customers and increasing sales revenue. Identifying groups of people who are willing to buy their products gives businesses the ability to make efficient marketing strategies designed for reaching these groups of consumers.
Segmentation is not merely an analytic process, but rather the development of a marketing strategy to take advantage of these insights. The central premise is that businesses should treat their customers differently — and in so doing, will attract and retain more customers than would be possible by treating them all in the same way. Individual consumers can be segmented along many lines, but businesses need to give careful thought to what criteria they will use in order for segmentation to help them achieve their goals. lot of the outcome of segmentation would depend on the level f rigour employed in carrying out the process. Fintalent’s Freelance Strategy Experts will employ top level data analytics to arrive at the best segmentation plans for your business.
