Customer or client segmentation is the division of a customer base into groups of individuals that have specific similarities relevant to marketing. These demographics fall under

  • Age
  • Gender
  • Marital status
  • Location (urban, suburban, rural)
  • Life stage (single, married, empty nester, retired.)
  • Race
  • Religion
  • Income
  • Education level

A company employing segmentation operates under the premise that every individual is different and their marketing efforts would be more effective if they targeted specific smaller groups with messages that those consumers would find relevant leading them to buy something.

Consumer segmentation also helps companies gain a deeper understanding of their customers preferences and needs in hope of discovering what each segment values. This goes a long way in helping retailers accurately tailor their marketing material toward that market segment.

What is needed to segment a market

  • Deciding on what data to collect and how it will be gathered. Such data can be gathered through the following methods;
  • Face to face interviews
  • telephone interviews
  • Surveys
  • Research
  • Focus groups
  • Collection and integration of data from different sources
  • Developing data analysis method for segmentation
  • Ensuring effective communication is established between business units like marketing and operations about the segmentation
  • Implementing applications to effectively deal with data, and the information it brings out.

In dividing customers into groups that can be targeted, consumer segmentation relies on identifying key differentiators between those groups.

Other than demographics and geography, psychographics like social class, lifestyle and personality characteristics as well as behavioral spending, consumption, usage and desired benefits are all useful tendencies taken into consideration when determining consumer practices.

What are the benefits of market segmentation

1. Ability to target a specific group of people

This is the most obvious and immediate benefit because the company is also able to allocate marketing resources effectively.

2. Maximizing cross selling and up-selling opportunities

As a result of segmented groups, the company can send personalized messages as part of a marketing mix that’s designed around their needs. This encourages that specific group to buy more.

2. Improved customer service

Due to the personalized nature of the marketing material sent out, such material tends to be well received by customers because they take into account customers purchase history and brand relationship as opposed to impersonal brand messaging.

3. Two steps ahead

With customer segmentation, you are able to stay ahead of the competition in specific sections of the market by identifying new products that specific groups might be interested in.

Conclusion

Customer segmentation can be practiced by all businesses irrespective of industry, size or whether they are online or physical stores. It all starts with gathering the data and acting on the information in a way that is effective to your business.

By | 2017-07-20T03:34:56+00:00 July 19th, 2017|Articles|