Market segmentation is a marketing term that refers to the aggregating of prospective buyers into groups, or segments that have common needs and 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.
Three criteria can generally be used to identify different market segments: homogeneity, or common needs within a segment; distinction, or being unique from other groups; and reaction, or a similar response to the market. For example, an athletic footwear company might have market segments for basketball players and long-distance runners. As distinct groups, basketball players and long-distance runners respond to very different advertisements.
Market segmentation is an extension of market research that seeks to identify targeted groups of consumers for the purpose of tailoring products and branding in a way that is attractive to the group. The objective of market segmentation is to minimize risk to the company by determining which products have the best chances of gaining a share of a given target market and determining the best way to deliver the products to the market. This allows the company to increase its overall efficiency by focusing its limited resources on efforts that produce the best return on investment.
Markets can be segmented in a number of ways: geographically by region or area; demographically by age, gender, family size, income or life cycle; psychographically of social class, lifestyle or personality; or behaviorally by benefit, uses or response. The objective is to enable the company to differentiate its products or message
The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
Few companies are big enough to supply the needs of an entire market; most must break down the total demand into segments and choose those that the company is best equipped to handle.
Four basic factors that affect market segmentation are
- clear identification of the segment,
- measurability of its effective size,
- its accessibility through promotional efforts, and
- it’s appropriateness to the policies and resources of the company.
The four basic market segmentation strategies are based on
- psychographic, and
- geographical differences.
Examples of Market Segmentation
Examples of market segmentation can be found in the products, marketing, and advertising that people use every day. Auto manufacturers thrive on their ability to correctly identify market segments and then create products and advertising campaigns that appeal to those segments. Cereal producers market actively to three or four market segments at a time, pushing their traditional brands which appeal to older consumers and their healthy brands to health-conscious consumers, while building brand loyalty among the youngest consumers by tying their products to popular movie themes.
A sports shoe manufacturer might define several market segments that include elite athletes, frequent gym-goers, fashion-conscious women and middle-aged men who want quality and comfort in their shoes. In all cases, the manufacturer’s marketing intelligence about each segment enables it to develop and advertise products with the high appeal more efficiently than trying to appeal to the broader masses.
Put Your Customers at the Center of Your Marketing Strategy
Lytics brings all of your customer engagement data (purchasing, email, sales, web, mobile, and more) into one centralized hub so that you can run more personalized and results-oriented marketing campaigns across various communication channels.
Increased Website Engagement
With personalized web content – for example, only displaying newsletter or sign up prompts to unknown visitors (and suppressing them for your known customers) – you can achieve a 3X increase in conversions and improve bounce rates by 10%.
More Efficient Advertising
Clothing retailer Wildfang saw a 60% improvement in their return on ad spending when they used Lytics’ behavioral data to target ads on Facebook.
Smarter, More Relevant Email
Media company Racing Post increased their email engagement rates by 20 percent when they adjusted their email frequency based on customers that Lytics’ identified as “likely to engage,” and “unlikely to engage.”
RealSegments. Are You Sure You’re Really Reaching and Engaging the Right People?
Reaching your target customers is the single most important job of any marketer, and it is a job that never ends. RealSegments shows whether you are effectively reaching your target customer segments or personas by continuously measuring and monitoring your marketing performance across all your digital touch points.
What Can Realsegments Do For You?
Resonate’s RealSegments enables you to continuously assess, in real time, how well your digital marketing plan is adhering to your segmentation strategies. By showing you where you can shift dollars to higher performing channels and partners, RealSegments provides transparency into your media effectiveness and holds partners accountable for results. Use this new platform feature to avoid wasted media spending, re-calibrate creative design and messaging, and understand which segments are driving the most conversions.
Take a Closer Look:
Drive more revenue through your marketing funnel
Ensure you’re actually reaching your target segments throughout every step of your digital marketing funnel. Discover who else is engaging with your brand that you weren’t aware of before.
Optimize media spending and reduce waste
Measure campaign performance across all channels including digital media, website, and email. Uncover which media partners are truly reaching the people that matter most to you. Validate the effectiveness of different creative design and messaging.
Know what’s working, what’s not and why
Reduce time in understanding how your segments are performing in terms of conversions, product line and more. Rejuvenate segments that have lost momentum.
Activate your defined segments at scale
With RealSegments, defining segments and personas no longer have to be an occasional, big ticket exercise. It is a continuous process that constantly improves marketing effectiveness. Unlike the personas or segments an agency would create, you can activate against your custom segments online with precision using their suite of Activation products.
Reach and Understand Your Customers at an Individual Level
Don’t settle for segment definitions that must be selected from a vendor’s pre-determined list – you deserve better. Instead, they can help you define and refine your unique customer segments in their platform by mapping them to their 7,000 consumer attributes. Rather than follow the industry standard of household level data, they model attributes at the individual level. Pinpoint your best customers using the largest, most accurate proprietary pool of consumer data on more than 200 million US adults.
RealSegments defines your target segments by combining traditional demographic attributes like age, gender, income, life stage, and online behavior with Resonate’s rich attitudinal, motivational and value attributes. Want to get even more specific? Resonate can work with you to create new custom attributes with their largest-in-the-nation consumer survey.
Bold Approaches for Inspired Outcomes
No matter where your business is right now, growth is somewhere just over the horizon. While your vision may be clear, defining the optimal segments and opportunities for growth – and the shortest path to them – requires strategy. A practical road map to greater success.
Read More: SMART Marketing Aims and Goals