Segmentation

 \Segmentation

Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.

Market segmentation seeks to identify targeted groups of consumers to tailor products and branding in a way that is attractive to the group.

Markets can be segmented in several ways such as geographically, demographically, or behaviorally.

Market segmentation helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market.

With risk minimized and clarity about the marketing and delivery of a product heightened, a company can then focus its resources on efforts likely to be the most profitable.

Market segmentation can also increase a company's demographic reach and may help the company discover products or services they hadn't previously considered.

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Demographic Segmentation

Demographic segmentation is one of the simple, common methods of market segmentation. It involves breaking the market into customer demographics as age, income, gender, race, education, or occupation. This market segmentation strategy assumes that individuals with similar demographics will have similar needs.

 

Example: The market segmentation strategy for a new video game console may reveal that most users are young males with disposable income.

 

Geographic Segmentation

Geographic segmentation is technically a subset of demographic segmentation. This approach groups customers by physical location, assuming that people within a given geographical area may have similar needs. This strategy is more useful for larger companies seeking to expand into different branches, offices, or locations.

 

Example: A clothing retailer may display more raingear in their Pacific Northwest locations compared to their Southwest locations.

 

Behavioural Segmentation

Behavioural segmentation relies heavily on market data, consumer actions, and decision-making patterns of customers. This approach groups consumers based on how they have previously interacted with markets and products. This approach assumes that consumers prior spending habits are an indicator of what they may buy in the future, though spending habits may change over time or in response to global events.

 

Example: Millennial consumers traditionally buy more craft beer, while older generations are traditionally more likely to buy national brands.

 

Psychographic Segmentation

Often the most difficult market segmentation approach, psychographic segmentation strives to classify consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to achieve, as these traits (1) may change easily and (2) may not have readily available objective data. However, this approach may yield strongest market segment results as it groups individuals based on intrinsic motivators as opposed to external data points.

 

Example: A fitness apparel company may target individuals based on their interest in playing or watching a variety of sports.

Importance of Audience Segmentation

Audience segmentation can bring many benefits for advertising targeting, such as:

·         Increased Relevance

By delivering ads that match the interests, preferences, pain points and motivations of each segment, marketers can increase the relevance and appeal of their ads and make them more likely to be noticed and clicked.

·         Increased Personalization

By tailoring ads to the specific needs and expectations of each segment, marketers can increase the personalization and value of their ads and make them more likely to resonate and convert.

·         Increased Efficiency

By focusing ads on the most profitable and responsive segments of the audience, marketers and brands can optimize their advertising budget and resources and reduce wasted impressions and clicks.

·         Increased Customer Acquisition

By creating more compelling and persuasive campaigns that appeal to each segment’s motivations and pain points, marketers can increase customer conversion and referrals.

·         Increased Customer Lifetime Value

By optimizing their marketing mix for each segment based on their profitability and potential growth, marketers can increase customer revenue and reduce customer churn.

 

·         Increased Competitive Advantage

By differentiating themselves from their competitors who may use a one-size-fits-all approach, marketers can create a unique brand identity and position themselves as experts in their niche.

 

 

 

 

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