Everyone in marketing seems to be talking about market segmentation lately, and as a market researcher, I’m all for it! Dividing your audience into meaningful chunks helps marketers develop stronger messaging, relevant positioning and more targeted strategies. This means you get more bang for your buck in everything you do.
But what is market segmentation? That’s what I wanted to talk about today. Market segmentation is a hot topic, sure, and a lot of marketers have a great sense of how the concept works. But when they actually put it into play, it’s easy to get lost in the nuances of the process.
So, with that said, let’s take a look into the ins and outs of segmentation in marketing.
4 Steps to Market Segmentation
I figured a few folks might appreciate a quick simple answer to the ‘what is market segmentation’ question. So, as an overview and to get us started, here you go.
Step 1
Gather data and other research information about your total audience, and start to examine frequencies of certain insights and characteristics.
Step 2
Filter and divide the audience by those key characteristics from your research (ie. gender, age group, or income). You’re exploring different customer segmentation variants here, so be sure to look at several different options.
Step 3
Determine the audience segments that matter most to your marketing (top 2 to 6 segments). This could be based on their total size, total buying power or even the greatest opportunities for growth. Note that there might be some overlap in the audiences – that’s ok.
Step 3.5 (Optional, but bruh, seriously)
Develop good buyer personas about each of the audience segments you identified. Consider this individual’s values, pain points, and even their journey map (aka path to purchase).
Step 4
Reexamine your marketing strategy, and be sure it reaches each of your audience segments appropriately. Consider revising your resources, budget and marketing mix to account for each group appropriately. Also, take the time to determine that all messaging and creative executions are tailored for each audience segment across each relevant medium.
But that’s just a super-quick overview. Now, I figured we’d dive a little deeper into the secret sauce behind segmentation in marketing.
Marketing truth: your audience is not one person.
Market research teaches us that we can learn a lot about a whole audience, and apply that knowledge across the whole customer base. This has proven useful to marketers in understanding buying power and affinity, and even for developing overall messaging and marketing strategy.
But, at the same time, we need to remember that each individual customer within our total audience is a little more unique than our assessment-of-averages might suggest. Some customers prefer black ink to blue, or white bread to wheat, for example. However minute, if we’re in the business of choosing ink colors to use on sandwich ads, we want to be aware of these nuances.
Market segmentation forces us to explore these differences to better understand the people behind them.
What is segmentation?
Segmentation in marketing is the process of dividing your total audience into smaller, meaningful chunks. Each chunk is defined by some specific characteristics – like demographics, psychographics or even behavior – and the result is a few targeted audience segments that matter to your marketing.
Let’s look at a market segmentation example. Imagine we dive into our black or blue ink scenario above, but then we use market research to explore the commonalities of the black-ink-aficionados. Maybe they’re similar in age, or gender, or income and career, or maybe even a combination of these. Perhaps they all have similar cultural upbringings, or maybe they just spend the same amount of time on Facebook every day.
Once we find the commonality, and measure to see if that similarity represents a meaningful audience to warrant hyper-targeted marketing, you’ve identified an audience segment.
When I say ‘meaningful’, I’m referring to whether or not the audience will have a noticeable impact on your marketing goals. Sometimes the segmentation is based on a demographic segmentation, a psychographic segmentation or even a behavioral segmentation. However cut, meaningful is going to be defined as whether a group can really move the needle on what you’re trying to achieve overall.
With that in mind, if you’ve identified a strong segment with a meaningful impact on your marketing, then a portion of your marketing efforts should be focused with this specific audience in mind.
Segmentation in marketing is vital.
Imagine you have two friends – one an extreme introvert, and the other an extreme extrovert – and you want to invite them both over for dinner. Now, ask yourself, would you send each of these people the same text?
If you’re like most people who I discuss this hypothetical with, you realize the best solution is to send two texts. You have two very distinct personalities, and you inherently know that you need to send them each a customized message to have the best results (in this case, both individuals come to dinner).
If you had decided to send one single text, you could have used extrovert language (and hope it doesn’t turn off the introvert), used introvert language (and hope it doesn’t turn off the extrovert), or try to find a middle ground for the text language (and hope it resonates with both). There’s a lot of hoping in that text messaging strategy.
This example applies to all marketing strategies.
When you put a message out there, you’re hoping that it resonates with the whole audience. But if your audience is made up from any major personality differences, there’s a good chance a portion of your marketing is going to fall flat on the audience members.
Market segmentation is the process of realizing your audience is different people. It forces you to think more about who you’re really speaking to, and tailor your messages, your strategy, and everything in between to better reach those important audience chunks you’ve identified.
Where to draw the line.
So, you’ve tapped into the power of audience segmentation, and see now how understanding how your audience is divided can be beneficial to your strategy. Now, you just need to identify every customer segment under the sun, right?
Wrong.
While it might seem temping to identify a customer persona for every type of customer segment out there, you must always be aware if the juice is worth the squeeze.
Imagine you have an audience of 100k people, and you start to chop them up. You realize immediately that some are Knights (60%), some are Princesses (30%), and some are Jesters (10%). Great, you have three audience segments to target, right?
Looking further, you see that the Knights, your largest segment, are moderately engaged with your brand. You also learn that the Princesses, which is only half the size of the Knights, actually represent about half of all sales – they’re totally into your brand. Finally, you learn that the Jesters, who are the smallest segment overall, also represent the lowest likelihood to purchase from you.
With that research in hand, you can see that targeting the Jesters might not be worth the squeeze. Marketing takes time and effort, and creating specific targeting that reaches the smallest segment with the lowest interest in buying might not be a great direction to spend your marketing dollars.
This leaves you just with your Knights and Princesses to target. Your audience is now reduced to 90k, and you have a much clearer plan for the messaging and tactics you’ll need to reach your two primary audience segments.
What is a Buyer Persona?
I wouldn’t be doing the topic of audience segmentation justice if I didn’t discuss buyer personas for just a bit. Using our Knights and Princesses example, if the Knights are an audience segment, then calling them Galahad is a buyer persona.
Buyer personas are backstories and character sheets that define who your audience really is. And not necessarily in numbers and data, but in story-based format of who they are and how they came to your product or service.
A customer persona like this, which details in a short-but-memorable format the individual’s values, beliefs, and pain points, as well as their journey from interest to purchase, helps humanize who you’re marketing to. You don’t just consider how the Knights will react to an ad, but how Galahad will engage with it.
Buyer personas are like creative briefs for audiences. They spark creativity for marketers by journey mapping the customer’s lifestyle, sprinkled with insights and actionable nuggets to help keep the ideas flowing.
Yokel Local wrote a great article on Buyer Personas for digital marketing - it’s a great read!
Could your marketing team use some help wrapping their heads around segmentation? Let’s talk!
Note – I’m totally serious about Galahad here. Naming your audience segment with a real-world name helps humanize the persona even further. When you create an ad or develop a PR pitch, you can really ask yourself “how would Galahad respond to this ad?” Likewise, when you’re mapping out a strategy or full campaign, you don’t just have to ask whether or not you reached the Knights and Princesses equally, but instead you’ll consider if Galahad and Guinevere each received the same text message.
Improve your marketing strategy with market segmentation.
Market segmentation is a product of great market research, and it’s an incredibly powerful tool that should be kept in in every marketer’s arsenal. Consider this important topic in mind as you develop your next big strategy or campaign!