Reading Time: 11 minutes Market segmentation is a great technique to help you to sell your products and services. You need a really good picture of the customers you want to target. Many owners of online businesses come up with great ideas for their marketing strategies to ensure their website is being found in Google. They are keen to use all sorts of marketing tools, from emails and e-books to Facebook groups. But is your target audience actually on Facebook? Are your potential customers reading e-books and emails? Or would they rather watch an informative YouTube video?
Market segmentation
If you consider the whole world as your target group, you will reach less and get more negative reviews, because your product does not meet expectations. After all, you don’t know what the expectations are to satisfy everyone. Moreover, you are wasting a lot of time and money on marketing activities that give you little in return. If you want to reach your ideal customer who will be satisfied with your product, then you first need to know what the expectations are. To do this, creating a marketing strategy is the solution and market segmentation is a good start.
The first step towards your ideal customer is market segmentation
With market segmentation, you can get a good picture of your customers and know what factors play a role in the decision to buy a product or service from you. Each market segment consists of a group of people who have the same preferences when it comes to behavior, values, knowledge and assets.
For example, you don’t have to try to sell the latest model of a smartphone to someone who is very environmentally conscious and chooses to use items until they are broken and beyond repair.
By dividing the market into segments, you know to which people your products are appealing. You also learn what ‘language’ they speak, so you can adapt texts on your website and in your product descriptions accordingly. This enables you to reach your target group, because they feel addressed and are more likely to buy from you.
Benefits of an effective market segmentation
Good preparation is half the battle and this is certainly true for marketing strategies that should include market segmentation. Some of the benefits:
Better understanding of the customer : it lays the foundation for insight into the needs and expectations of the customer and understanding their buying behavior. This allows you to create a Buyer Persona to provide better and personalized services and to sell your products to the right customers.Superior insights : market segmentation ensures efficient and accurate forecasting combined with insights into customer behavior, sales channels, geographic and demographic data, etc.Better pricing and optimization strategies : markets segmentation strategies take into account expenses per revenue stream therefore leading to effective plans.Effective use of budgets : segmentation provides guidelines for better utilization of marketing budgets. Targeting the right audiences at the right time guarantees better conversion of promotional activities.Increased profitability : market segmentation offers a way to not only increase revenues, but also the profitability of the entire company.Proper SEO copy on your website : if you know your target market, you can write better content that is relevant to your ideal customer.
How to segment the market
You can split the market into segments based on certain criteria to understand people’s buying behavior:
Environment-based segmentation
Environment-based segmentation doesn’t tell you much about buying behavior. Highly educated women who originate from Turkey, live in Utrecht, between 40 and 50 years of age and are married, have 1 to 3 adult children and are a manager of an international organization, do not have to have the same needs and will therefore not show the same buying behavior. However, you can reach these people by providing products or services that may be useful to them – if it turns out that they prioritize the usefulness of a product.
Environment-based segmentation can be subdivided into:
Cultural: nationality, origin
Geographic: country, region/province, city, neighborhood, climate
Demographic: age, gender, family composition (single, living together, children), stage of life
Socio-economic: income, profession, education, religion
Person-based segmentation provides a picture of the mental processes involved in buying a product. You can subdivide this into:
Psychographic: personality, norms, values, lifestyle
Buying motives: focused on the benefits of a product or its practical properties
Buying behavior: degree of use, brand loyalty, stage of buying process
Sensitivity to marketing tools: price, quality, advertising, service
Cultural market segmentation
A cultural market segmentation allows you to visualize cultural differences. Cultures differ from each other in their opinions, values, norms, behavior, clothing, symbols and language use. Each culture has its own customs and preferences and it makes mutual contact and cooperation easier. Some cultures prefer to distinguish themselves clearly from others to strengthen the sense of belonging to a group.
The culture a person grows up and lives in can determine greatly the meaning people attribute to something. Culture also has a major influence on people’s buying behavior: what products, brands, use of social media and how important it is to own certain products.
In many European countries, a motley mix of products from other countries have become available for everyone to enjoy. Think for example of halal meat: in the 90s only a few butchers were selling it, now it is available in every supermarket.
At the same time, typical Dutch cultural elements remain important to many Dutch people, such as celebrating Sinterklaas. Marketers know that children are allowed to set their shoe up to receive a small present and that on the evening of Sinterklaas they usually get a larger present.
Subcultures and market segmentation
Subcultures are created by people who break away from a culture or integrate other cultural habits into their own. For example, you have subcultures that are characterized by their commitment to fighting climate change, subcultures that embrace health and sports as important lifestyles, subcultures that oppose certain mainstream norms, and many more. Most people are part of different subcultures, which means they also fall into different market segments.
Knowledge of culture is important for marketers
For marketing, knowledge of cultures and subcultures is important because it allows you to address your target audience. It gives you insight into the interest of a certain (sub)culture and it prevents you from committing flatters if you approach your target group.
Geographic segmentation
With geographical segmentation you determine where you sell, distribute and what area you advertise for. If you go international: to which countries do you want to deliver and which ones not? When you decide to go for a national company, do you want to deliver to your home country or are you also targeting people that speak your language and live in other countries? Does your company only target the local population in your area? You can also make a segmentation of climatic conditions: you can sell your heating installations better in cold areas than in areas with predominantly high temperatures.
Demographic segmentation
Age, gender, living situation and family size can show people’s needs. A family with a newborn baby has more interest in diapers and baby food, than in a small sports car or a trip through Nevada.
Socio-economic segmentation
A segmentation based on income and social class is done with socio-economic segmentation. If you have a travel agency that offers luxury tours, it is useful to know in advance that your marketing activities are aimed at people who can pay for such tours.
A segmentation by income does not tell you everything. A high-income family may well have four school-aged children, people may choose to live environmentally consciously and find healthy living more important than spending their money on expensive vacations, clothing, furniture and expensive cars. Often people from the lower income groups are precisely the ones who are interested in expensive items and the latest fashion.
If you segment the market by social class, you’re not just looking at income, but also at occupation and education. A highly educated IT professional will usually have a very different spending pattern than a nurse when it comes to clothes, books, hobbies and household furnishings.
If you sell high-tech smart gadgets through your online store, then you have a better chance of attracting the interest of the IT professional than that of nurses. You adjust your marketing activities accordingly so that they fit your target group.
Professional groups often have their own subculture as well. For example, years ago I worked in an organization where we got a new CEO who liked to play golf. In no time, most of the managers ended up on the golf course as well. Having the ‘right’ cell phone and laptop, wearing certain fashion brands, reading certain newspapers and driving a certain brand of car were also distinct cultural trends in this organization. You can also find this among dentists, lawyers, IT professionals, artists and many other professions.
Psychographic market segmentation
With psychographic segmentation you classify based on personality variables. Here you are looking at possible links between a certain personality profile and buying behavior. Personality, however, is difficult to measure and is usually not the key factor to determine interest in certain products.
With lifestyle segmentation you get a picture of how people spend their money and time. You can then consider people with a certain, similar lifestyle as a segment. For example, there are people aged between 25 and 30 who have bought a house together, do not yet have children, are both working 32 hours a week, earn an above average income, and are environmentally conscious. There is a good chance that you won’t generate any interest among these people for a “cheap” refrigerator with an energy class B. Instead, you stand a better chance with durable appliances that are energy efficient, long-lasting and made from reusable materials.
Buying motives
Segmentation by buying motives considers the product features that may be of interest to consumer groups. Using the example mentioned above, about durable appliances that last a long time and are made of reusable materials, you can look for people who desire these features of products. In doing so, you also involve demographic and socioeconomic data, so you know where to find these target groups and in what income groups they reside.
For some products, buying behavior can be well predicted. You can subdivide buying behavior into the quantity of usage and loyalty to a brand.
The quantity of consumption
For any product, you can estimate how often it will be used by different consumers. A laptop is more likely to be bought by someone who uses it extensively on a daily basis, than by people who only want to keep up with their social media and send the occasional email. There are also people who never use a laptop.
The people who intensively use a laptop are an interesting target group, because you know that at some point they will be looking for a new – and maybe a better – laptop. The group of people who never use a laptop can also be an interesting target, because then you take on the challenge of turning these people into your new customers.
Loyalty to a brand
A brand that has a positive reputation attracts loyal customers. If you sell a product of a new brand, it is difficult to attract loyal customers. It is better to focus on the people who often switch brands, because with a little promotion you can attract these people.
Getting loyal customers is more difficult, because people who are brand loyal are usually satisfied with the product and see no reason to switch to another brand. Unless you can convince them to try your brand, because it is much better/healthier/environmentally friendly, etc. You can be successful with this if your products have (new) features that they care about.
Consumer behavior
For website and webshop owners, knowledge of consumer behavior is important. Besides the fact that people go through a ‘buying process’ that can lead to the purchase of a product or the use of a service, the following characteristics are important.
Product ownership
Someone who buys a house will often spend a lot of money on furnishing the kitchen, bedroom, living room, etc. Just as buying a car involves also maintenance, insurance, gasoline and more.
Starting a new hobby can also lead to more product ownership. For example, I was involved in geocaching for many years. It started with the purchase of a GPS and good hiking boots. Slowly this expanded to backpacks, good outdoor clothing, special software, geocoins, flashlights, gear to climb trees and bridges, to trips to other countries to find caches and go to events. Count the profits for the stores selling gear to geocachers and the savvy marketers!
For marketers, having knowledge of product ownership – such as a GPS – is interesting because they can:
Identify the target market more easily : if people have a GPS, they are most likely to be interested in hiking boots and backpacks. Geocaching is a worldwide hobby, so international sales are within the realm of possibilities.Promotion : products can be promoted through the geocaching communities on social media and with a booth at an event.Product development : interesting products include software development for GPS navigation and compact products that are lightweight, very useful and provide greater safety for geocachers.Pricing : most geocachers consider quality, usability and the safety a product provides to be important and are often less critical of its price tag.
Advertisements capitalize on people’s self-perception
For some people, the way they see themselves or the way they believe others see them determines their buying behavior. They may also buy things to project the ideal image of themselves (how someone would like to be).
Or for the fathers and mothers who want their children to grow up smart and strong with a daily sandwich with Calvé Peanut Butter (a strong advertisement that will come to mind when you are preparing breakfast for the children!).
Unpredictable consumer behavior
Consumer behavior is much more fluid than the above market segments describe. People do not want to be pigeonholed. Consumers have become much more empowered, are often well informed and make choices based on many different motives.
In addition, they have become more skeptical and are not so quick to be talked into anything. The big advantage of this is that there is more honesty between sellers and consumers. It is better to be clear about your product or service, what you deliver and what quality people can expect. This will give you satisfied customers who may return and are great word-of-mouth advertisers.
As a marketer, website owner, e-commerce vendor, and blog writer, you have to start from something to reach your target market. Market segmentation is a good starting point. If you also remain open to the wishes of the individual, flexible human being, then you are already well on your way.
Read also “Buyer Personas that are discriminating “
Help defining your target group
Do you think it is difficult to do market segmentation? Then please contact me. I would love to help you effectively find your ideal customers who are interested in your products or services.
