What is Segmentation in Marketing and Why is it Important?

4/10/2022 | E-mail Marketing, Marketing Automation

Market segmentation divides the target market into smaller groups with similar characteristics such as age, income, personality traits, interests, needs, and location. This list of segments can be used to optimize and improve products, advertising, sales efforts, and marketing. This is a key to both the businesses’ success and the consumers’ satisfaction.

 

What is the Purpose of Segmentation?

 

The segmentation process helps brands create strategies for different types of customers depending on how they perceive the overall value of certain products and services. Segmentation helps identify the types of customers, and form groups from people who share similar characteristics and traits, consequently helping a company customize their products and advertising services according to each group and their possible demands. Segmentation makes connecting with bigger audiences and managing them easier and faster for companies and grants the possibility of maintaining their customers as long as they desire.

 

Why is Customer Segmentation Important?

 

Customer segmentation in marketing holds great importance for brands in the present and the future. Every single person having a unique character and different living conditions results in different needs, and therefore segmentation plays a big role if a company is aiming to expand its audience and keep growing. Spending time and effort to divide your customer base and catering to them according to what those groups possibly need or want instead of offering everyone the same product results in higher customer satisfaction and thus brand loyalty. Knowing what people from different groups demand also helps brands improve their products, advertising, and marketing for future projects.

 

What is a Segmentation Strategy?

 

A market segmentation strategy organizes your customer or business base along demographic, geographic, behavioral, or psychographic lines. A combination of these according to what works better for your services can be used as well and is definitely worth a try. Knowing your target market is the first step to selling your products and services. A segmentation strategy further divides your target market into subgroups, thus making everything easier to manage and adjust in the future to suit the customer’s needs. Customized services lead to higher satisfaction rates, thus higher loyalty and more successful marketing campaigns. Better brand marketing and recognition open the doors to higher profits from offered products and/or services.

 

The 5 Segments of Marketing

 

While going through the process of segmentation, dividing the customers according to these five areas is proven to be one of the most efficient roads to customer satisfaction and thus higher brand success and profits.

 

  • Geographic Segmentation

 

Geographic segmentation is the process of dividing your customers into groups based on geographic boundaries. Consumers in similar areas might share similar preferences due to living under similar conditions, and understanding this allows brands to determine where to place and adjust the advertisements accordingly. Geographic segmentation also helps to decide where to expand a business.

 

  • Demographic Segmentation

 

Demographic segmentation is dividing the market by different variables such as age, gender, family information, education level, income, nationality, etc. Demographic segmentation is one of the most widely used forms of segmentation. It is based on the customer’s basic profile and allows brands to know how and why customers use your products and how much they are willing and able to pay. Spending time on these resources cuts down on the time taken to understand your target audience.

 

  • Psychographic Segmentation

 

Psychographic segmentation focuses on traits such as your audience’s lifestyle, habits, hobbies, values, opinions, personality, etc. These attributes are not as obvious and easier to reach as demographics and require brands a deeper analysis. But by defining and dividing the customer base in detail, it gets easier for brands to appeal to their customers’ tastes and interests.

 

  • Behavioural Segmentation

 

Behavioural segmentation divides customers according to their purchasing habits, making it require a deeper analysis, just like psychographics. It focuses on patterns like customer reactions, customer loyalty and engagement levels, etc. While it requires a tidy process of analysis and some time invested, it is one of the most popular segmentation methods to be used in marketing as it helps brands reach a more specific list of customers and allows improvements in satisfaction and success. This type of segmentation is also used by marketers to determine future leads in the market and act accordingly.

 

  • Firmographic Segmentation

 

Firmographics are used to describe the traits of firms or businesses. Almost like the way demographics are used for people, firmographics are used for firms and investors. It is used by companies to determine if a smaller firm is qualified for investment.

 

What is the Difference Between Targeting and Segmentation?

 

While the process of segmentation focuses on dividing the market into several groups, targeting is the process of concentrating on a particular segment of the customers. Working as the second step of segmentation, targeting focuses on specific groups that can benefit the company’s business, helping them identify their most likely prospects and adjust their steps according to the demands of each group. Targeting requires a deeper focus but knowing which groups would be interested in the offered product and / or service results in saving both time and money for companies. Two different steps for marketing, but targeting is as important as segmentation when it comes to marketing strategies.

 

 

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