Market segmentation is the foundation of a successful marketing campaign. There are likely many different types of consumers that could be interested in your products, and sending the right message to each type of customer is key to acquiring new users. Whether it be targeting customers based on their age, or understanding that different types of customers value different aspects of your product or service, you’ll want to deliver unique, personalized messages to different segments in order to foster enthusiastic brand loyalty.
Let’s run through the 5 different types of market segmentation in detail so that you can understand which is right for you.
This is usually the first type of segmentation we think of when starting to define our different customer personas. These are basic defining characteristics such as age, gender, race, income level and education level. Demographic targeting can be anything from advertising high end products to those with higher income levels, to a clothing company advertising gendered clothing to women and men separately.
This is mostly used in B2C marketing efforts, as these traits focus on the individual. The B2B counterpart is firmographic segmentation.
Firmographic segmentation is the most basic form of market segmentation for B2B marketing efforts. Firmographic traits of a company include size, location, industry, structure and financial performance. For example, you’ll want to use different messaging when marketing towards a small business than when reaching out to an organization with hundreds of employees.
A subset of demographic segmentation, geographic segmentation entails segmenting customers by their location. You can segment by city, country, zip code or even language region. The most straightforward example of this is trying to drive foot traffic to a brick and mortar store by targeting people who live within a certain number of miles from the store. But even for online businesses, it’s important to analyze which geographic areas your website traffic is coming from. Sometimes these answers may seem obvious, like a company selling cowboy boots targeting states in the south. But you may be surprised what other regions are interested in your product, beyond the most obvious opportunities. Often market research brings about data that cannot be acquired by intuition alone. Who knows, there could be a lot of cowboys in Vermont…
This is the most complex and arguably the most valuable type of segmentation. Behavioral segmentation is the ongoing process of tracking and targeting users’ behavioral trends. As you collect data about your target market over time, you’ll be able to segment your audience into groups based on things like purchasing habits, brand interactions, buying history, website visits and interactions with competing brands. This form of market research is very valuable because it brings to light users with intent to buy, allowing you to target your most interested audiences.
This form of segmentation attempts to understand the consumers’ motivations. It’s not the what, or where, but the why that psychographic segmentation strives to make sense of. Why do customers buy your product, or choose your competitor's product over yours? Is it their values? Their political beliefs? Their interests? This sort of segmentation is extremely valuable for media companies, for example. News stations will market towards those with aligned political beliefs. Gossip magazines will target those interested in celebrity content. This form of segmentation can be difficult to nail down, but is very powerful.
Now that we’ve got an understanding of the different types of segmentation, let’s discuss how to begin segmenting your market.
Start with testing
The first step is market research. You’ll want to cast your net wide with broad targeting, then see what content appeals to different segments of users. Once you’ve identified segments based on engagement with your different categories of content, you’ll understand what sorts of products or services they are interested in. Then you can hit those segmented audiences with more specific retargeting ads.
It’s important to set a measurable goal when testing. Let’s say you’re trying to understand if your products appeal more to women or men. Send ads to both groups equally, and measure performance with a metric such as click through rate or conversion rate. If women seem to drive a higher conversion rate for a particular product, break men and women out into separate audiences and allocate proportionately more ad spend to the female audience. This is one simple example; but there are countless ways to run this same sort of test based on the segmentation factors you believe could apply to your particular campaign.
Never stop analyzing
It’s important to continually analyze these different sorts of user trends, as things can change over time and new segments may emerge. Moving forward, allocate a small portion of your marketing budget to testing ongoing so that you can make sure you're capitalizing on emerging segments and keeping your audience fresh.
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