Market segmentation is a marketing tool that is defined as the way in which a company selects which part of the market it is going to target. It sounds simple, but it is one of the most difficult issues when defining a project. Let’s see why in this article!
Imagine you have a big chocolate cake. As much as you think you could eat it whole, you realize that in order to enjoy that dessert you need, yes or yes, to cut a portion.
Let’s transfer that idea to the market and your business. If the market is the whole cake, in order for you to “work” it, you will need to decide which portion of it you are going to select. That is, where will your focus be: your .
Keep reading to learn first-hand about the importance of segmenting the market and how to apply this strategy in your business. Let us begin!
What is market segmentation?
So what is market segmentation? It is a marketing strategy that consists of classifying the target audience of a brand, company or business, into smaller groups that share or identify with certain characteristics.
By segmenting an audience you will be able to direct your branding, loyalty and follow-up efforts and strategies in a personalized way.
A market segmentation can be broad and have as its central axis, for example, students, teachers and employees of a school. Or, it can be reduced and focused only on teachers between the ages of 35 and 45 who work full time. All this will depend on the needs of your business.
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Types of market segmentation
The first step to identify and divide your target group is to follow and implement the following steps:
- Observation and .
- Market division.
- Market development through marketing instruments.
These segments will help you to better understand that target group, that is, to know what their priorities, needs and interests are in common, as well as to have their psychographic and behavioral data as consumers.
Next, we are going to explain what the types of market segmentation are and how these models influence the study and analysis of individuals, so that they can be grouped within each segment:
demographic segmentation
This group is classified according to characteristics such as family group, age, gender, nationality, educational level, income, occupation or profession plus other demographic data.
Geographical segmentation
This type of market segmentation focuses on a group of customers who share the same geographic boundaries. In other words, potential customers may have different interests and preferences based on their location.
For effects, studying the climate and knowing the characteristics of the regions will allow you to create reliable sales strategies, build and expand your business.
behavioral segmentation
This segment is governed by the behavior of individuals using the frequency of purchase and their consumption patterns as criteria. To this is also added the use of products or the .
An example of behavioral segmentation would be to identify that the young public (between 18 and 25 years old) prefers to buy liquid soap. Meanwhile, the adult public (between 30 and 45 years old) chooses to buy bar soap.
With this information in hand, you will be able to develop a strategy, as well as a product strategy that fits your audience.
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psychographic segmentation
Psychographic segmentation starts from the psychological aspects of the . The market or audience can be divided based on lifestyle, values, opinions, personality, and buying interests.
An example of this segment would be a fitness brand, as it classifies its customers into categories of people who care about exercising and maintaining a healthy life.
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Criteria for market segmentation
Each of the actions you plan for your company or business will be subject to a series of market segmentation criteria. Take note!
make it measurable
The criteria for segmenting the market must be measurable and identifiable. This variable facilitates the process of recognizing the most relevant characteristics, such as the size of the market or the purchasing power of its members.
However, in psychographic segmentation, for example, this criterion is not fully met. Since personality traits or opinions are sometimes not easy to measure.
make it profitable
In order for the profitability criterion in market segmentation to be met, it is important that the target group is large and have the ability to buy your product or contract your service.
Once this analysis has been carried out, it will allow you to have a broad vision of your business and implement strategic actions in the medium and long term aimed at your business.
make it stable
During the period that the market research is carried out, it is essential that the measurement criteria do not change in the short term and that they remain stable.
make it accessible
To recognize each group of customers according to their characteristics, it is necessary to handle a series of data during the market study.
Having this information should not be a significant expense for your company; on the contrary, you can use existing resources to access them, such as subscribing to groups, chats, specialized magazines, catalogs or online publications.
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Objectives of market segmentation
Let’s continue with the metaphor of the cake that we mentioned at the beginning of this post. What would happen if you tried to eat it all? Beyond the stomachache, it would be clear that it is more than you can cover, right? The same goes for business.
Except for certain exceptions of mass products (such as, for example, the Coca Cola brand), in order to make good business decisions it is necessary to focus, segment and divide the market you are going to attack.
For this reason, we are going to detail what the objectives of market segmentation are that you should not forget:
- Product: to create a product that meets the needs of your customers, it is important to conduct market research. This data collection tool will help you add the right features to what you offer. In addition, a good strategy will also allow you to reduce costs.
- Price: An elementary aspect of market segmentation is price. Learn to identify who is the public that is willing to pay for your product or service.
- Place: it consists of selecting the way in which you are going to present your product or service to your audience.
- Promotion: One way to retain the members of each segment is creating promotion or discount strategies which, in turn, help you.
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How to make a market segmentation?
To know how to do a market segmentation you have to follow the following steps:
1. Define the market
In this segmentation phase, focus on discovering if your brand or business fits in the market. In addition, it is crucial to determine if your product or service has the ability to solve the pain points of your audience.
2. Segment the market
At this point in the investigation you are going to choose which of the types of market segmentation is the most appropriate for your business.
3. Understand the market
In this part of the research, take the time to get to know your target audience. For effects, you can use online surveys or forms to find out what your needs are and how you are impacting your business. This way you will be able to create effective marketing strategies.
4. Build the audience
Once you get the responses from your audience, the next step will be to analyze that data. In this way, you will be able to create a unique market segment for your company.
5. Apply the strategies
After the surveys, it was time to make decisions and apply market segmentation strategies in order to make the necessary changes and adjustments in your business.
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Strategies for market segmentation
Now that you know how to do market segmentation, we continue to move forward on the topic and now it’s time to talk about market segmentation strategies:
Custom segmentation strategy
It consists of adapting the products or services —as well as the marketing actions— to the tastes and preferences of each segment.
Differentiated segmentation strategy
This action is based on segmenting the audience and then choosing two groups or more to make them your target audience. The last step will be to implement the strategies to promote your physical presence through the different channels.
Undifferentiated segmentation strategy
This type of segmentation is the cheapest and fastest to apply. The reason is that there is no prior analysis of the audience, but rather it is about reaching a high percentage of consumers. Therefore, it is not an optimal strategy.
Concentrated segmentation strategy
After defining your customer groups, you are going to focus your marketing efforts on just one. Try to make this segment the most profitable, since the possibilities of generating profits with little investment are high.
In fact, it is an ideal strategy for those online stores that have a limited budget.
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Advantages of market segmentation: how does it influence your brand strategy?
Think of it like this: the better you know your audience, the better you will know what things are going to generate an impact on them and what is going to mobilize them to take .
This will help you in the commercial definitions that you have to make about your business. Let’s see some specific aspects of how this works:
1. About your production processes
Knowing your market segment, understanding their needs, tastes and purchasing behaviors, can help you better define what type of products…
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