Market segmentation involves the company dividing a large market of potential customers into segments, which will allow the company to target only the individuals who are most likely to become loyal customers of the company or subscribers of their content. Targeting the right market is essential in the success and development of a business. These target segments are generally made up of individuals who share commonalities such as interests, demands, wants, and needs. These commonalities help the company target its audience in the right way through their content rather than a generic message to catch a few. Targeting content to align with the target group’s characteristics will result in the content being better received. This will be visible through the engagement and, ultimately, the return on investment or profits.
A company would need significant resources to target a mass market that most don’t; therefore, they must target the market that their product would most appeal to. A company can have various market segments:
- Demographic – The most commonly used segment refers to the statistical data of the audience, such as gender, age, income, ethnicity, and location.
- Psychographic – This is based on factors related to the audience’s personalities and characteristics, such as values, interests, lifestyles, priorities, and psychological influences.
- Geographic – This categorizes the audience based on geography such as country, zip code, climate, and urban or rural.
- Behavioral – This focuses on how the audience acts, such as their purchasing habits, brand loyalty, price sensitivity, and spending habits.
There are several benefits to a business segmenting its market, such as:
- Greater company focus
Instead of just casting a net on a broad audience and hoping to catch a few, segmenting allows the company to focus on those that would be most inclined to purchase their product, resulting in fewer resources being wasted and a higher potential for ROI. Focus also allows the brand to establish its brand identity and creating more of an impact.
- Informing other business decisions
Market segmentation can influence decisions regarding the way products are sold or promoted to customers. Based on the segment’s characteristics, business decisions such as pricing and promotions can be influenced based on the knowledge of the buyer’s sensitivity to prices. It can also assist with the company’s decision of where to open a new store using geographic data. Market competitiveness
- Targeted communication
Segmentation allows you to target your communications with your audience. For example, Elemis, the skincare brand, targets older men and women around the age of 60-80 due to them being a luxury anti-aging skincare brand. Due to the age range of the targets, Elemis spends very little time and resources on social media ads and instead focuses their attention on mail flyers and brochures on cruise ships where their target audience would frequently contact. Messaging is different for different segments, so knowing the segment a business should target will allow them to tailor their communications to reach and appeal to that segment.
Market segmentation makes planning campaigns easier, business decisions easier, and building a brand identity easier as it focuses the business on a specific group of customers instead of a mass-market target. This saves the company valuable time and resources and allows the company to learn about and understand their customers.