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Understanding Market Segmentation

These days, it’s not sufficient to target all shoppers with the same marketing techniques. Not only do customers have varying needs, but they also demonstrate different online shopping behaviors based on factors like education, career, marital status and location. Additionally, different strategies and language choices are essential for targeting clients at various stages of the buying cycle.

Market segmentation is a strategy by which companies target multiple groups of consumers based on their shared characteristics and needs. By communicating with each subset of customers in a particular way, businesses can increase their chances of seeing return on investment, or ROI, for their marketing dollars.

How Does Market Segmentation Work?

In today’s increasingly competitive marketplace, sellers are venturing away from mass marketing in favor of targeting particular segments. Market segmentation involves dividing consumers into groups based on demographics, psychographics and geographics to determine the most effective means of targeting each segment. Demographics include factors like age, sex, occupation, education, marital status and income, while psychographics refer to customers’ values, interests, beliefs and opinions. Geographics are used to target people based on a location and its specific characteristics, such as weather conditions. By assessing a segment’s demographics, psychographics and geographics, businesses can determine the most effective means of targeting potential customers with their products.

Why Should Businesses Consider Segmentation?

Market segmentation is one of the best ways to match the unique needs of your varying customer bases. For example, a married female lawyer will have a different amount of disposable income than a single female teacher and, as a result, will likely be interested in different products. Additionally, factors like location can help determine what products will appeal to a particular client segment, depending on the demographics and common values of that location. By creating different offers and price points for these market bases, companies can ensure that their messaging meets their customers’ needs while increasing the odds of making a sale.

Not only does segmentation help companies target potential clients based on their needs and interests, but it also helps generate repeat business. For example, clients can target previous buyers and entice them to try different and higher-valued products that complement their previous purchase.

How Do You Segment Your Market?

When segmenting markets, companies should consider a variety of factors. According to a University of Delaware article, businesses must first assess whether a group of consumers offer enough potential profit to justify the creation of a market segment. Additionally, the group of potential customers must have similar needs in regard to your company’s product or service. Finally, it’s crucial that your company is able to reach the segment through promotional and distribution channels in a manner that’s cost-efficient.

Leveraging Segmentation with Email Marketing

Email marketing can be an incredibly effective, affordable means of leveraging your segmentation. One useful tool for leaning more about the different segments of your market is to survey your mailing list. Not only can you gain invaluable information about your customers’ genders, locations and areas of interest for use in future targeting, but you can also get feedback on their experiences with your business. When surveying your mailing list, it’s important that you keep your questions short and simple. You might also want to offer an incentive to shoppers who take part in the survey, like a free appetizer at your restaurant.

Additionally, new email marketing software allows you to customize your communication to meet your specific clients’ needs. Rather than reach out to everyone on your list with the same message, you can offer particular promotions to clients based on factors like gender, location and purchasing history. This helps improve your chances of making a sale, as customers only receive emails likely to match their interests. It also reduces your odds of annoying customers with irrelevant communication and improves your reputation as a vendor. You can even send subscribers special offers on their birthdays (this also provides incentives for users to provide their birthdays, which helps you assess their age).

Targeting your email marketing to different segments also allows you to create specialized copy for customers in different stages of the buying cycle.

The Proof Is in the Numbers

Studies show that segmentation is an effective way of improving your current email marketing strategy. According to a survey conducted by HubSpot, segmented emails produce an 8-percent average click-through rate compared to the 3-percent rate generated by non-segmented sends.

Customizing your email lists to your different market segments takes time and energy. However, getting to know your client bases is essential to maximizing your ROI. In the end, market segmentation is crucial to ensuring your company’s success in today’s highly competitive e-commerce arena.

Leveraging Segmentation with Advertising

Segmentation can be used for more traditional advertising as well. Once a business establishes its market segments, it can begin to identify potential new customer bases whose needs are not yet being met by the marketplace. Companies can then tailor their advertising efforts accordingly. For example, a restaurant might opt to target families with small children as opposed to the entire population of a town. By differentiating yourself from the pack, perhaps with an expansive children’s menu, you increase your odds of standing out to your target market.

Online advertising services such as Google AdWords allow you to target an audience locally through Google Places. If you’re looking to target a particular segment (for example, the audience in Southern California) this can be extremely useful.

Additionally, market segmentation can help businesses determine the best media for their advertising efforts. The restaurant that caters to families might do well to advertise in parenting magazines or to air commercials during child-centric TV shows.

Market segmentation helps businesses ensure that they are fulfilling their marketing objectives while saving on overall costs. By getting to know your customers, you can send messages of higher value across more targeted media channels. The end result is a more loyal customer base and greater return on investment for every marketing dollar you spend.