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Down to Basics: Understanding Market Segmentation

Down to Basics: Understanding Market Segmentation

If you are not using market segmentation yet to grow your marketing strategies, it may just be time to consider segmenting your target market.

This term is a fairly broad concept that is used across various areas of marketing. It is particularly useful for email marketing and automation, as it allows you to create extremely targeted email campaigns that have a far greater open and click through rate.

With the number of emails that every person receives each day, it is more important than ever that messages are targeted. An email that is not relevant will be far more likely to go straight to spam.

An email that is made to appeal to its recipient however is another thing entirely.

In fact, according to MailChimp, segmented email campaigns have a 14.31% higher open rate than non-segmented campaigns. Segmented emails also have a 100.95% higher click through rate than non-segmented campaigns, with a 4.65% lower bounce rate and a 9.37% lower unsubscribe rate.

What this tells us is that audiences generally prefer getting emails that are targeted according to their unique demographics.

Aside from the potential to grow your mailing lists, what other benefits does marketing segmentation offer? Let's take a look.

Market Segmentation 101

Market segmentation can be an incredibly powerful tool for marketing automation. Knowing your market can hold the key to reaching both existing audiences and new, untapped audiences. While the segmentation we know today is relatively new, the idea behind segmenting various markets has been around for a long, long time.

From as early as the 1920s, segmentation had begun to follow on from mass marketing. Hyper-segmentation truly began to pick up from the 1980s, with markets narrowing even further to include interests, locations, religions, gender, age, race, nationality and personal preferences.

To understand how segmentation can help, it always helps to start with the basics. In this introduction, we will take a closer look at segmentation to find out what it is, what it does and why you need it.

What is market segmentation?

Simply put, this term is used to refer to the grouping and targeting of prospective customers into various segments that share similar needs, who also respond in a similar way to marketing actions. This approach allows businesses to target customers on a far deeper level. Because customers who fall into various segments have similar views, needs and preferences, it becomes easier to tailor marketing strategies to each segment rather than trying to either reach individual customers or try and cater for the entire market as a whole.

The aim of segmentation is to allow businesses to create targeted messages for each segment, according to various criteria. Segments could be arranged geographically, by area; demographically by gender, age, race, life stage, income or even family size; behaviourally, by usage, response and benefit or even psychographically, by lifestyle, personality, interests, hobbies or social class. Segmentation needs to meet the following criteria in order to be effective:

  1. Measurable. Segments need to be easily measured, to determine the various variables that are required to segment markets. This is particularly important in the case of demographic and geographic segmenting. Market research plays a vital role in ensuring accuracy of segmented groups.
  2. Relevant. Segments also need to be extremely relevant. Segment size and profitability need to be big enough to make it worthwhile to market according to any given segment, or otherwise it may end up being a waste of time and resources.
  3. Accessible. Segments need to be easily accessible to businesses. This is key to being able to reach segments easily. Again, market research is vital to determining the best segment media or channel that is actively used by the target audience.
  4. Distinct. Segments need to be diverse enough to be unique, in order to plan tailored marketing strategies that are designed to reach each segment.
  5. Viable. Segments also need to be viable, in that it there is a good chance of marketing success when tailoring messages according to the segment.

Why should you consider segmentation?

You would consider market segmentation if you are aiming to create personalised, targeted marketing campaigns that will directly appeal to specific groups. This approach works for a number of different businesses, but is especially effective for businesses that have a large, diverse customer base. Marketing blogger Stephen Zoeller shares an excellent example on how luxury auto brand Mercedes uses segmentation to reach a younger generation of car shoppers.

By tailoring messages that specifically target millennials, including their highly popular “Generation Benz” campaign, this auto brand expanded their audience in time to launch their new Mercedes-Benz CLA product.Segmentation follows on from market research, helping to identify targeted groups for the main purpose of tailoring your products and offering in a way that will appeal to the segment.

Because messaging is so tailored, this approach reduces risk by defining the products and services that are more likely to be well-received. It makes sense that you would not waste time or effort marketing a line of nappies to childless singles, senior citizens or recent matriculants. A tailored campaign targeting new parents, families and customers who show interest in related products would obviously be more successful. Trying to appeal to all customers is often not practical, unless your business is already attracting a niche market.

Is segmentation the same as target marketing?

These are both very similar, but have a few differences. Target marketing is the broader term for tailoring your marketing efforts towards specific groups of your audience. You could think of target marketing as selecting your niche. For instance, if you sell furniture, your broader target market would be homeowners, renters, men, women, various ages, various income levels and a general location. Segmentation takes that one step further, by breaking down that broader market even further. You may segment your target market into specific groups: men, women, 20-30 year olds, 40-50 year olds, middle income, higher income, specific locations and even specific interests, such as people who prefer a minimal style, or people who are interested in modern furnishings.

How do you get started?

Market segmentation is not always a quick fix. It is always a good idea to understand exactly which segments offer the best returns for your efforts. Market research is the first step, as this will help you identify your segments. Once you have selected the most relevant and/or lucrative segments, you can begin to tailor your marketing strategies accordingly. Working with an experience marketing automation expert can save you a great deal of hassle. This will take a lot of the stress out of the equation, while also ensuring that your marketing messages are expertly tailored.

Ready to get serious about your digital marketing efforts? Grapevine offers the tools you need to create highly effective, carefully targeted campaigns that are designed to get your message across to the right people, at the right time.

Our marketing automation offering helps to simplify the process, so that you can focus on the things that matter, while we do the rest. Contact us today to learn more about how marketing segmentation can amplify your message.

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