What Is Segmentation in Marketing? Expert Insights & Tips

Understanding your audience is key to success in any business. After all, identifying common traits among different groups is how businesses are able to create more personalised and effective strategies.

These traits can be outward, such as where people live or how old they are, or they might include deeper aspects like personal interests, values, and lifestyle preferences. This approach helps ensure your efforts are reaching the right people in the right way, leading to stronger connections and, most importantly, better outcomes.

In this article, we’ll tell you everything you need to know about segmentation marketing, including why it matters and how you can apply this technique to your own marketing efforts.

What Is Segmentation in Marketing?

Segmentation in marketing simply means dividing a broad audience or market into smaller, more specific groups that share common characteristics.

These characteristics can include factors such as:

• Demographics (age, gender and income).
• Geographic location and behaviour (buying habits and brand loyalty).
• Psychographics (lifestyle, values, and shared interests).

The key purpose of segmentation is to understand better and cater to the unique needs of each group instead of treating the whole market as one.

By doing this, businesses can create tailored marketing strategies, design products that appeal to these specific target groups, and communicate more effectively to them. This helps them connect with the right customers, increase engagement, and improve conversion rates – because the messages or products are more relevant and appealing to each group.

Why Do We Use Segmentation in Marketing?

Businesses use market segmentation to advertise their products to customers who are more likely to purchase. This reduces the amount of time and budget spent on advertising while also increasing the chances of a successful sale.

This example will help you to understand the basic principle of market segmentation.

Example of Market Segmentation

Imagine you are launching a new marketing campaign to promote the latest Rolex watch. Let’s say there’s a budget of £100,000. You must decide where and how to advertise this high-end product effectively.

The first step is to ask – what do we know about the product?

• The watch is expensive, indicating a luxury product.
• The specific model being sold is a men’s watch.

With this information, we can begin segmenting the market by identifying groups most likely to be interested in and able to purchase this product. So, for example:

• Income level: The watch is a luxury item, so it’s reasonable to target higher-income individuals who can afford such a purchase. This allows us to exclude lower-income segments that are less likely to buy a Rolex.
• Gender: As the product is a men’s watch, our marketing efforts can focus on male consumers. However, we may also consider targeting women who may be interested in purchasing the watch as a gift.

As we go through this process, we continue refining our target audience by considering other attributes like age, lifestyle, and geographic location. So, we might focus on professionals aged 30-50 who have an interest in luxury items and live in urban areas where such products are more commonly sought after.

By eliminating segments that do not align with these characteristics – we essentially drill down to our ideal target audience. This ensures that our marketing budget is spent efficiently, maximising the likelihood of reaching customers who are both interested in the product and financially capable of purchasing it.

Understanding Who to Target

Now that we understand the benefits of segmenting target customers, the next step is to decide which segment to focus on.

Although this might seem straightforward initially, market segmentation is not always as clear-cut for many businesses.

For example, what if you run a business selling everyday items like lightbulbs or offering services such as window cleaning? In these situations, it’s not as straightforward to make assumptions based just on the type of product or service.

To make an informed decision, we need to rely on what the data is telling us. We gather data from as many relevant sources as possible, including:

• Sales data: Understanding past sales patterns can help identify customer segments.
• Website data: Analytics tools can show who is visiting your website and how they interact with it.
• Government and public data: Demographic and economic reports provide insights into potential customer groups.
• Market research: Reports and studies from industry sources can offer detailed information on market trends and consumer behaviour.
• Social media data: Platforms like Facebook and Instagram offer insights into user demographics, interests, and engagement.
• Qualitative data: Insights from focus groups and customer interviews provide a deeper understanding of motivations and preferences.

By compiling data from all these sources, we can form a clear picture of who is interested in or already buying our products. The more comprehensive our data, the better we can define and target the right market segments for our business.

Are There Any Drawbacks to Using Segmentation in Marketing?

Market segmentation, when done correctly, can massively reduce waste in your advertising budget and increase the likelihood of reaching consumers with a higher chance of purchasing. But, like any marketing technique or strategy – it’s not without its challenges.

Market segmentation takes time, which, of course, incurs costs. If your data is inaccurate or if the person interpreting the data makes a wrong decision- the consequences could be worse than simply targeting a broad audience.

A good example of this would be when Dr Pepper brought out a new drink called Dr Pepper Ten in the early 2010s. It was a diet pop aimed specifically at men with the slogan, “It’s Not for Women.”

The idea behind this was that diet drinks were seen as more “feminine,” so they wanted to make a version that would attract men. But this approach didn’t go down well. Many women felt put off by the campaign, and it didn’t really get men excited about the drink either.

So, instead of appealing to a broader audience, the marketing ended up actually creating a divide. The brand faced a fair amount of backlash, and sales didn’t meet expectations.

This showed how relying on stereotypes in marketing can actually push customers away rather than bring them in. In Dr Pepper’s case, they narrowed their audience rather than expanding it, and the product’s appeal suffered as a result.

So, what we’re trying to say is – ensure that your data is accurate and that the decisions you make are based on a deep understanding of your audience. Missteps in segmentation can result in missed opportunities and even backlash, so careful planning and analysis is important.

Expert Tips and Insights for Beginners

If you’re new to market segmentation, here are some simple yet effective tips to get you can apply to your marketing to get started.

Start with the Basics

Begin with demographic information. Think age, gender, income level, and location, which are all easy pieces of data to gather.

It’ll provide you with a solid foundation for dividing your audience into groups. You don’t need to learn how to use tools or complex marketing software right away – even a basic understanding of who your customers are can make a big difference.

Use Your Existing Data

Don’t overlook the data you already have. Sales figures, website analytics, and social media engagement can all provide valuable insights into your customer base.

Start by reviewing this information to see if any patterns emerge.

Avoid Over-Segmenting

It’s quite tempting to break your audience into as many groups as possible. But too much segmentation in marketing can actually just over-complicate what it is you’re trying to do.

So, start with a few key segments and expand from there as you gather more data.

Keep It Really Simple

Basic tools, such as Google Analytics or built-in analytics on social media (e.g., Instagram), can provide valuable data to begin segmenting your audience.

Take Practical Steps

Have a straightforward process to follow. This can look like:

• Identifying key segments: As we mentioned above, use available data to segment your audience based on factors like demographics, geography, or behaviour.
• Tailor your messaging: Create unique messages for each segment that speak to their specific needs, interests, and values.
• Choose the right channels: Not every group uses the same platforms. Some segments may prefer social media, whereas others respond better to email marketing campaigns.
• Track and adjust: Monitor the performance of your segmented campaigns. Refine your audience segments based on what works and what doesn’t.

Need Help With Your Marketing? Get in Touch Today!

If you’re ready to refine your marketing strategy or take your ad campaigns to the next level, our expert team is here to help. We specialise in identifying and reaching the right audience for your brand, using data-driven insights to maximise your impact.

Contact us today at 0151 652 4777 for expert advice on tailoring your marketing efforts to achieve better results.

Posted on Friday, September 6th, 2024 in Digital Marketing.