Segmentation: Ultimate Guide For Digital Marketers (Stunning Tips)

According to research done at Mailchimp, marketing campaigns utilizing segmentation received 100.95% more clicks than their non-segmented counterparts.

What is Segmentation, and Why is it Important?

Segmentation is the marketing practice of differentiating consumers into distinct categories that have strong marketing implications.

Marketing professors define segmentation as: the process of identifying relatively homogeneous groups of consumers for practical marketing use.

Marketers need to segment their target audience to deliver the right marketing efforts to the right people.

Proper segmentation can reduce marketing risks, focus marketing efforts, and lead to a more effective marketing strategy.

Why Do Marketers/Companies Segment?

Brands, businesses, and marketers perform segmentation because it gives them a basis for differentiation in the market.

Being heard in marketing is becoming increasingly difficult.

In response to the noise of the marketplace, marketers must target their efforts toward specific consumers that are the best fits for their products.

There are 3 primary reasons for marketing segmentation:

1. Reduce Risks in Marketing

Every marketing effort costs money and has risks involved (loss of profits, damaging brand image, the decreasing company perceived value, reducing sales).

In order to minimize these risks, marketers need to make sure they are talking to the right audience.

2. Focus Marketing Efforts

In addition to reducing risks, marketers must also focus on areas with the highest leverage.

It’s always best practice to separate the most special consumers (most likely to purchase your product/service) from the rest of your audience.

3. Design More Effective Marketing Strategies

Having solid segmentation information can lead to more impactful marketing strategies for a business as a whole.

This can allow a company to satisfy a specific need with more potency and build top-of-mind awareness.

Related: Marketing Orientations and Concepts: The Ultimate Guide

What Are the Bases for Segmentation?

There are various different ways to segment and factors that may impact a marketer’s segmentation choice.

The primary basis of segmentation include:

Geographic-location-based information.

Demographic-related to distinct statistical population factors (age, race, gender, etc.)

Psychographic-linked to lifestyle or other psychologically observable factors.

Behavioral-based on previous buying behavior or measurable data.

Descriptive Vs. Behavioral Segments

The two different categories of segments relating to the marketing strategy and approach that a business will have with its target audience.

Descriptive Segments

These are the demographic, geographic, and psychographic factors.

Variables like these are easy to observe and distinguish at face value.

Marketers use these segmentation factors to turn externally noticeable traits into internal buying conclusions.

There is a strong emphasis on the accessibility of information, meaning that marketers will choose the descriptive segments that are easily available.

Descriptive segments include:

• Geographics-location, city, zip code.
• Demographics-age, sex, race, education level.
• Socio-economic characteristics-income, wealth, career.
• Psychological-lifestyle, personality type.
• Media viewing platform data-consumer choice of media (Social Media, TV, Radio).

While descriptive segments may seem effective on the surface, they typically do not lead to significant segments that are optimized for marketing purposes.

As a result descriptive segmentation will lead to a very large segment or an incredibly niche segment, both of which are inefficient for marketing.

Behavioral Segments

The better approach to market segmentation is behavior-based segmentation.

In the behavioral segmentation style groups are created based on their behavior or response to certain variables that distinguish their consumer behavior with respect to a company’s product or service.

As the inverse of descriptive variables, behavioral variables allow marketing strategists to view the internal approach of consumer behavior in order to make external decisions.

Some behavioral variables include:

• Benefits sought
• Attitudes towards a product
• Likelihood of purchase
• Price sensitivity
• Purchase volume
• Loyalty in retention rate
• Customer lifetime value
• Media response

While behavioral data is much more conclusive than descriptive data, it is usually much more expensive to collect.

As a result, marketers that utilize behavioral approaches to segmentation are careful to choose relevant behaviors and response variables to form segments and build customer personas from them.

Related: Is Hubspot’s Content Marketing Certification Worth It? 11 Key Skills

What is a Target Market?

A target market is a group of consumers that a business wants to concentrate its marketing efforts on for maximum profit and impact.

Target Markets are essentially the same as a market segment. In fact, target markets are the chosen market segment that a business will channel its marketing efforts toward.

In other words, target marketing is the process of evaluating each market segment for desirable traits and choosing which segment to focus on.

Which Segments Should You Target?

To discover which segments work the best for your business, it is essential to understand the full range of your customers, competitors, and company capabilities.

The four main levels of marketing segmentation that you should understand are full market coverage (undifferentiated mass market), multiple segments (differentiated markets), single segments, and individuals as segments.

Undifferentiated Mass Market: The complete marketplace. Including the total of all geographics, demographics, psychographics, etc. Commodity based.

Differentiated Markets: Multiple target segments and a marketing strategy that is designed to provide separate offers for each segment.

Single Segments: Focus on one particular group or niche with a distinct set of needs. Users are usually willing to pay a premium for the business’s specialty in the industry.

Individuals as Segments: Custom segments for very specific groups of people or individual persons. Products and services are customizable and individually tailored for consumers.

Depending on your business’s size and focus, you will want to deliberately choose which market segmentation strategy you should use.

Hardly any businesses still use undifferentiated mass market segmentation due to its expensive and impractical marketing budget.

Larger firms use differentiated markets and provide various products and services for each of their target segments.

Most small to medium-sized businesses focus on a single segment and serve it very well. Other smaller brands will deliver a unique, customizable experience for a premium.

Which size and offering does your business fall into? Comment below.

Related: Top 10 Productivity Killers For Digital Marketers

What Characterizes a Good Segment?

Good segments should work to set apart your target customer from the masses.

Every great segment should be relevant for consumer needs.

The 3 most important aspects of a practical segment are:

1. Identifiable

Every consumer should be identified within a segment. Marketers should not have trouble distinguishing between different segments.

2. Accessible

A brand’s chosen marketing communication mix should be able to reach the entire segment. If segment marketing communication is not affordable it may not be a practical segment.

3. Predictive of Future Outcomes

All chosen segments should have strong predictors for future Return on Investment (ROI). Without this trait marketing toward this segment would be inefficient and expensive.

Additionally, good marketing segments should be:

• Measurable
• Substantial
• Differentiable
• Actionable

What are Segmentation Mistakes?

As with any marketing activity, segmentation can sometimes go wrong. This often leads to costly and embarrassing mistakes.

In modern marketing mixes, it is profitless to market to people purely based on their demographics.

For example, a new business that segments the marketplace purely based on hair, eye color, language, or skin color will find itself marketing to millions with no conversions.

One big takeaway from recent segmentation mistakes is to take caution when segmenting based on gender.

For example, BIC for her was a marketing campaign designed to give ladies stylish pens that they would purchase on a regular basis.

While the idea was praiseworthy in concept, women felt patronized for being sold a pen specifically made for women.

Furthermore, they found the pen insulting and overtly sexist.

This is certainly a mistake that modern marketers can learn from.

When segmenting the market and choosing a target audience for your product it is crucial to conduct proper research and understand how your marketing will impact the end consumer.

Related: Copywork: 8 Surprising Benefits for Bloggers

How Can You Apply Segmentation?

Segmentation is more than just theory, it’s part of modern marketing best practice principles.

Here are a few ways that you can apply segmentation to your career or business today:

Digital Marketers

Use the basic segmentation principles to find your target market and understand the best channels that you can use to contact them.

The advantage that digital marketers have lies in data collection and segmentation options.

If you use Facebook Ads, Google Adwords, or any other online marketing framework you’ll understand just how limitless your segmentation options are.

Master the fundamentals and put them into practice for optimal results.

In-house Marketers

Take your current knowledge of segments and work with your team to refine and optimize your target market.

What is currently working? What needs tweaking? Which segment should you market your next new product to?

A stable segmentation knowledge will give you the day-to-day direction you need for marketing decisions.

Entrepreneurs and Business Owners

Executives and business owners may be tempted to leave target market and segmentation discussion to the marketing team.

However, as a business owner, your choice of target segment is crucial. You should have a vivid idea and customer avatar for your desired customer.

This will not only lead your marketing efforts but also your overall business agenda.

Conclusion

Want to learn more marketing fundamentals? Click here to see more articles like this one.

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How will you apply segmentation? Comment below.

Thanks for reading!

Class Dismissed,

Chris Chan