Segmentation 101: A Strategist’s Complete Guide to Marketing Segmentation
It’s no secret that consumers want personalized content. In fact, 74% of customers feel frustrated when website content is not personalized, and a further 59% say that personalization influences their shopping decision.
This means that you could be losing out on site traffic, engagement and purchases if you’re not personalizing your communication attempts.
Luckily, there’s one strategy you can use to deliver personalized marketing: segmentation. Marketing segmentation is a technique that works by using a variety of sources to make informal targeting decisions to improve customer satisfaction.
In this guide, we’ll show you how to do this.
What Is Marketing Segmentation?
Marketing segmentation is the act of grouping a type of people who share certain traits or needs together and supplying them with personalized content. Amazon and Netflix are ahead of the game when it comes to personalized content:
You’ve likely noticed this with Facebook. Their platform has 2.32 billion monthly active users to date (a figure that’s growing by the second), yet when you sign into your account, you’ll receive a personalized news feed. Your feed is packed with photos and game activity from friends and family, alongside blog content and videos from savvy businesses.
This happens automatically through a complex algorithm that delivers this flow of information. Engineers at Facebook have spent great sums building an experience that is equally tailored for each user, regardless of the absolute size of the user base.
You can – and should – apply this type of segmentation to your entire marketing strategy, particularly personalized emails.
For example, a personalized email could be:
- An email with the recipient’s name in the subject line
- An online catalog that offers suggestions based on prior purchasing history
- An email containing a special birthday offer or discount code
Each of these is an example of the kind of marketing personalization taking place on the Internet today — and it’s all made possible with new tracking and data collection technologies.
But here’s where things get interesting: Not only are businesses capable of delivering customized campaigns to their customers, but customers themselves have come to expect this kind of marketing from brands. Which means that failure to include the name of the recipient in the subject line of an email results in a 20% reduction in click-through rate:
That’s a huge chunk of people you are missing out on by neglecting segmentation.
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Do I Always Need to Segment My Audience?
That’s a valid question, and the answer varies.
Not every campaign can be fully individualized to customer needs. However, segmenting your audience allows you to group them by behavior and deliver specific content that truly speaks to them — as opposed to blanket offers that don’t help each individual to connect.
Market segmentation also allows your business to be able to deploy resources more efficiently and develop messaging that resonates with particular segments. These methods have come to fully eclipse the old methods of hyper-generalized, “scatter shot” marketing, which is particularly important for businesses with huge customer bases.
Having said that, market segmentation isn’t suitable for every business. While it can offer value to sales and marketing teams, you’ll need to fit some basic criteria:
- Market size: Your market must be large enough to justify segmenting. If you only have 50 customers, it might not be worth the time (or cash) investment. If you have 100,000 customers, however, you’ve got enough data with which to send personalized campaigns.
- Audience differences: There must be a measurable difference between the segments. For example, do half of your customers live in the UK, and the other half live in Indonesia?
- Finance: There must be a projected net profit after additional marketing costs. Calculate the cost of incorporating segmentation into your strategy and the revenue you expect to generate from it.
- Accessible: The segments you determine must be logistically reachable. While you can target people by demographic, it’s creepy (or impossible) to segment them by eye color.
At first glance, market segmentation appears to be a tool for medium- to large-sized businesses with the resources for research. But don’t knock segmentation off your to-do list if you’re a small business or start-up.
Businesses of all sizes could benefit from market segmentation — particularly from the ability to determine which segments to pursue when resources are scarce.
3 Simple Ways to Segment Your Audience
So, where are your segments found? What criteria does someone need to meet in order to join a segment? How do businesses determine which customers fall into which category? The answers to your market segmentation questions lie within the customer data you’ve already got.
But it’s no longer enough to group people together based on their gender or location. You’ll also need to create segments that are more tailored to the psychological and emotional characteristics of your audience.
The key is to understand what makes your buyers tick and what their needs are on a level that they themselves may not be able to articulate.
Here are three simple ways you can segment your audience in preparation for new marketing campaigns:
I know what you’re thinking: “You just told me that there’s more to segmentation than the location of our audience.” Hear me out.
Some characteristics are more complex, but geographical data is also vital to an accurate segment. Why? Because this type of data gives you access to a multitude of insights, including best times for posting on social media and what languages to utilize when writing copy.
For example: Is the majority of your audience based in the UK? If so, you’ll want to tweak your social media schedule to post content while they’re awake. I’s no use publishing tweets at 5pm if you’re in PST time because your UK audience will be asleep.
Geographic data tells you other characteristics, too. Hobbies and lifestyle, for example, may be dictated by the climate and topography of the area. It’s unlikely that your audience will have an interest in mountaineering if they’re based in Los Angeles, but it could be a different story if they’ve got the Swiss Alps on their doorstep.
The location in which your audience is based also helps to identify annual holidays that your campaigns could celebrate:
A difference in state religion, for example, may articulate the approach of an ad campaign. The presence of state or religious holidays may also indicate opportunity for targeted marketing. This is, to a large degree, why geographic segmentation remains viable.
Differences in culture and lifestyle exist based on geography, and the more information available to better understand the lives of your customer base, the more effective your segmentation will be.
Demographics specifically refer to distinguishing factors, such as:
- Social class
Many of these factors can help you to identify the purchasing behaviors of your audience, too. This is because consumer purchases often involve an element of image — and marketing to the wrong segment can significantly reduce your chances of converting them.
Demographics such as age, income and social class also suggest a level of purchasing power that must be taken into consideration. For obvious reasons, marketing cars to teenagers isn’t likely to pay off, but marketing cars to the parents of teenagers is.
Other factors, such as gender and religion, affect the decision to buy, too. For instance, if religious beliefs prohibit the use of particular items (like medication or meat), regardless of the buyer’s purchasing power, the product will go unsold.
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The final, broad category used to understand the divisions of distinct market segments is psychographic information. This relates to the subtle information about your audience, including their:
- Ethics and values
- Reactions to marketing activity
Let’s say we have an individual who resides in a large city. Their love of niche coffee and haute culture would suggest that their tastes are cultivated. So, with this buyer in mind, an advertising strategy created to target them might include depictions of a bohemian urban setting, punctuated by catchy indie music.
Ultimately, the psychographic information is a look into the personality, goals, aspirations and ideals of your ideal buyer. Used correctly, it can help build a strategy that’s both psychologically and emotionally resonant. And that’s important — considering that buying decisions are 20% logical and 80% emotional.
A Guide to Developing Your Own Marketing Segments
It’s easy to list the types of segments you can create for your marketing campaigns. But while sweeping statements can be applied across all markets (like “target people based on their location”), the most effective way to utilize market segmentation is to create your own customized segments.
Here’s how to do it.
1) Research Your Entire Market
Using available public resources, data collected from owned properties, and a bit of judicious research, your marketing department can evaluate its consumer ecosystem — and make strategic plans to target similar groups of people.
You’re able to research your entire market by digging into:
A) Public Resources
The first place to start is public resources, since a great deal of information, particularly demographic information, can be found through them.
Here’s where you can find public data:
- The Bureau of Labor and Statistics (US)
- Chambers of Commerce
- National and international press coverage
- Industry and trade research
- Figures from trade fairs and exhibitions
- Annual reports
The best part about public research? It’s often free to access, meaning that you can cut the investment you’re making into market segmentation.
B) Owned Marketing Channels
The next place to look is owned marketing properties. These properties include advertising accounts, social media accounts, websites and other outlets where data is collected. Some of these may include:
- Your company website
- YouTube accounts
- Twitter and Facebook profiles
- Accounts with advertising vendors
- Google Ads accounts
- Mobile applications
- Customer forums and comments
Each of these properties will explain how your audience interacts with your current marketing strategy. For example, are the majority of people clicking your Facebook ad between 21 and 25 years of age, or do they belong to an older generation?
C) Original Research
The last (and perhaps most expensive) place to look is original research. But even if your budget is limited, don’t write off this option completely.
Original research includes:
- Focus groups
- User testing
- Case studies
- Telephone interviews
- Online surveys
These sources can help you gain extra insight into the thinking and interests/priorities of your customer base, helping you to craft campaigns that speak to them.
More importantly, because original research is more specific and in-depth, it provides you with information about your specific market, helping to determine your competitive advantage and brand positioning.
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2) Connect the Dots
The three sources we’ve discussed can provide demographic, geographic and/or psychographic information. But the true value of this data lies in the analysis and understanding of the information as a whole.
In short: You’ll need to dig through the data you’ve collected and connect the dots.
But before we get started, note that this process requires two things:
- A methodical approach
- And a willingness to step into the buyer’s shoes
Begin by collecting the data by distinguishing demographic characteristics. Jot down the patterns in their age, location, income and occupation to draw broad segments.
Next, look at behavioral data and trends, along with data on beliefs and culture. Notice connections between this data and your demographics. For example, middle to upper class income earners may purchase trendier products or visit your website within typical 9-to-5 working hours.
Finally, look at the data related to your competitors and work to understand their strategy. Can you spot your competitors’ difference in advertising tone and positioning when promoting their product? Drawing inspiration from this could help your business to compete in the media environment of potential and current customers.
If you’re feeling overwhelmed at this stage, don’t panic. While the process of creating your market segments may be challenging, having defined audience groups (and data to support each) a gold mine for any marketing department. Just focus on the end result!
How to Use Your New Segments for Personalized Marketing
Granted, taking a broad look at your entire audience can be useful for marketing campaigns.
But the niche segments you’ve just created and defined can help various departments in your company — such as design teams, copywriters, and salespeople — to push for more sales.
1) Develop Buyer Personas
A buyer persona contains every common trait that your customers share.
But one thing to remember when creating your buyer personas is that they shouldn’t be based on guesswork. Assuming that your target customers share a certain trait can be dangerous — like if you think that they’re 50 years old but they’re actually 70. Your marketing strategy would totally change, right?
The segments you’ve already build can help flesh out your buyer personas. Whether it’s geographic, demographic or psychographic traits, you’ll understand the key decision maker or daily users’:
- Purchasing power
Then, with this knowledge, content can be developed to educate end users, while sales pitches can be built around the buying journey of upper management.
Much like segmentation itself, development of buyer personas is a process. They’re never concrete; you’ll always need to monitor your segments and check that they’re not adjusting (which they probably are doing as online purchasing habits evolve).
2) Position Your Product Properly
The tone, imagery and placement of advertisements and content marketing in the media ecosystem says a lot about the intended purchaser of your product.
Not convinced? Take Rolex, for example. Their advertising is a common sight in Wine Spectator, but they rarely grace the pages of magazines like Wired — where IBM and Apple occupy available ad space. Rolex has nailed their product positioning, and specifically go all-in on targeting the segment of people likely to purchase their product.
You’re able to do the same thing by using your segments.
First, take a look at the different buyer personas you have. Create a graph that shows where each of your products fits with your audience.
Let’s say you’re a fashion company with many clothing lines, styles, functions and genders. High-dollar, bejeweled jeans would then land in the form/female quadrant, with tailored, rugged, dark-wash jeans lying in the function/male quadrant.
Marketing content like emails, print ads and promotional videos can be distributed based on the regular channels of respective audiences when you’re segmenting by product (or service) fit.
The best part? You’ll be more efficient and able to offer your customers a pleasant shopping experience by driving them towards products they’re most likely to be interested in.
3) Craft Personalized Messaging
We all know that content marketing is important.
But if you’ve been trying to prove your ROI — or nudge people towards a sale through your content — without avail, you’ll understand that messaging, copy and visual tone are difficult concepts to nail down.
Add segment information into the mix and you’ll find a simpler way to craft content that actually speaks to your target audience. Why? Because understanding your segments before blasting them with emails allows you to really get their beliefs and emotional behavior. This can be beneficial for anyone communicating with your target customers:
- An understanding of the emotional reactions of particular marketing tactics and tone can help writers craft more resonant messages.
- Graphic designers benefit from guidance in the development of visual resources that connect with viewers.
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4) Push Towards a Sale
That’s what we’re all here for, right? To make a sale.
There’s a science to convincing someone to purchase and, unfortunately, the best method varies dramatically from brand to brand, and industry to industry. However, there’s one common ground: It’s easier to push someone towards a sale when you’re dishing out relevant content that speaks to them.
One report found that 78% of U.S. Internet users said personally relevant content from brands increases their purchase intent.
You could cater to this by:
- Using a segment’s pain points to craft a compelling email subject line. So if they’re struggling to manage their receipts, use “Cut the time you spend filing receipts by 50 hours per year”.
- Use your research on a segment’s purchasing habits to send timely social ads. If you know that your B2B customers purchase at year-end when they have the budget to spare, ramp-up your Facebook advertising throughout this time.
- Send relevant blog posts to your segments, based on their age. For example, don’t send a “how to get ready for school” blog post to your older audience. Segment your audience and send it to 11-18 year olds, instead.
You’ve done the hard work of segmenting your audience. If you’re neglecting them and still relying on mass market campaigns that don’t personalize shopping experiences, you’re missing out on tons of sales.
It’s 2019. Regardless of the size of your company, your customers expect a personal touch.
The good news? With the techniques we’ve shared here, there’s no reason why the segments you’ve created can’t blow your current revenue figures out of the water. The most important thing to remember is that people want personalized experiences — and businesses catering to those preferences can see overall consumer spending increase by up to 500%.
Why wouldn’t you want to start using segments to make that possible for your company?