Market segmentation is a well-known strategy that offers numerous advantages for businesses. Did you know that crafting segmented email marketing campaigns can potentially boost your revenue by up to 760%? Determining the appropriate market segmentation methods for your business and implementing them effectively can be challenging. If these questions are at the forefront of your mind, you’ve come to the right place. We’ll explore the following key topics:
Understanding market segmentation
The seven primary types of market segmentation
The four main benefits of market segmentation
Choosing the optimal market segmentation strategy
Market segmentation is a strategy that categorizes customers or potential customers based on common characteristics. This approach aims to divide a broad target audience into smaller, more manageable segments to enable the creation of customized marketing campaigns for each group.
Here are the seven most common types of market segmentation:
Demographic segmentation
Psychographic segmentation
Geographic segmentation
Behavioral segmentation
Benefit segmentation
Life stage segmentation
Firmographic segmentation
Here’s a brief overview of these segmentation methods:
Type of market segmentation
Answers the question
Sorts your customers according to
Demographic
Who are your buyers?
Age
Gender
Marital status
Income
Education level
Profession
Psychographic
Why are they buying?
Values
Aspirations
Opinions
Preferences
Lifestyles
Social status
Interests
Geographic
Where are your buyers from?
Where they live, work, travel, or shop
Behavioral
How are they buying?
Buying habits
Browsing habits
Buying history
Interaction with your brand and website
Customer satisfaction
Benefit
What are the benefits that entice your buyers?
Perceived benefits they’ll get from your offering
Life stage
Which life stage are your buyers in when they purchase?
Life stage when they convert into a customer
Firmographic
What types of businesses are buying?
Industry
Location
Market size
Number of years in business
Customers and products
Number of employees
Average sales cycle
Let’s delve into each type in greater detail:
Demographic segmentation is a straightforward and effective method for categorizing your audience based on objective data such as age, gender, marital status, income, education level, and profession. This approach answers the question, “Who are your buyers?” and is often used in conjunction with other market segmentation methods to create buyer personas. When combined with other segmentation strategies, demographic segmentation allows you to gain valuable insights into your target market, identify the products or services they are likely to purchase, determine the best marketing channels for reaching them, and understand the marketing messages that resonate with them.
Psychographic segmentation seeks to answer the question, “Why are your customers buying?” By sorting prospects and customers based on their motives and preferences, this segmentation uncovers the reasons behind their purchase decisions — or lack thereof. Unlike demographic segmentation, psychographic segmentation is subjective, focusing on understanding your audience’s values, aspirations, opinions, preferences, lifestyles, social status, and interests. You can gather psychographic data using your martech stack, conduct surveys, interviews, and focus group discussions, or ask open-ended questions to gain insights.
Psychographic segmentation can enhance demographic segmentation by revealing differences in aspirations among individuals who share similar demographic characteristics. For instance, a car dealership may target two different psychographic segments within the same demographic group: those who value their image and appearance and those who prioritize family and safety. By understanding these differences, the dealership can tailor its marketing campaigns to each segment’s specific preferences.
Geographic segmentation involves categorizing customers and prospects based on their location, including where they live, work, travel, or shop. This approach is useful because it takes into account location-based factors such as climate, culture, language, urban or rural settings, and weather. Geographic segmentation is particularly beneficial for businesses with multiple brick-and-mortar locations or campaigns focused on a particular branch. It also allows for improved marketing messages and ad targeting when combined with other segmentation methods.
Behavioral segmentation focuses on understanding how customers buy from or interact with your business, website, or app. This approach groups customers based on their behaviors, such as buying habits, browsing habits, buying history, interaction with your brand and website, and customer satisfaction. You can gather behavioral data through website analytics or customer relationship management (CRM) software. By analyzing this data, you can identify patterns and tailor your marketing efforts accordingly.
Benefit segmentation aims to answer the question, “What are the benefits that entice my buyers?” By categorizing your audience based on the perceived value they will receive from your offerings, you can tailor your marketing campaigns to highlight the unique benefits of your products or services.
Life stage segmentation involves classifying buyers based on their life stage when they make a purchase. This approach allows you to improve campaign timing and marketing messages by understanding the significant milestones in your customers’ lives and tailoring your offerings to their needs.
Firmographic segmentation is suitable for B2B companies and answers the question, “What types of businesses are purchasing?” By segregating B2B customers based on shared characteristics, this segmentation provides insights into your audience’s strengths and needs, such as industry, location, market size, number of years in business, customers and products, number of employees, and average sales cycle.
Implementing market segmentation can offer several benefits to your business, including:
Better ad campaign performance
Personalized communications
New market identification
Increased revenue
There is no one-size-fits-all market segmentation strategy for all businesses. The best approach depends on your business and objectives. To help you choose the right market segmentation strategy, consider the following guide questions:
What are the characteristics of your target audience?
Based on your data about your target audience, what are the most important characteristics you should use to group your audience?
What are the benefits of your products?
Based on your products’ benefits, who will need them the most?
Pro tip: If you have multiple products or services, create buyer personas for each offering. Buyer personas are semi-fictional representations of your customers that will purchase your products or services.
Market segmentation allows you to divide your audience into smaller segments and create more effective campaigns for each group. If you need assistance gathering and analyzing customer data to start your market segmentation strategy, consider partnering with WebFX. We are a full-service digital marketing agency with over 25+ years of experience.
Our team of 500+ experts is eager to understand your business and target audience, develop the right market segmentation strategies for you, and leverage our proprietary growth platform, MarketingCloudFX (MCFX). MCFX houses all your customer and prospect data, enabling you to analyze their interactions with your business.
Contact us online or call us at 888-601-5359 to speak with a strategist about our digital marketing services!
