Chocolate. Let's assume that everybody loves it (I mean, they do, right?) But wait up, some people prefer dark chocolate, chocolate with orange, or chocolate with mint in it. Or maybe they hate all of them and prefer white chocolate. Not everybody loves all kinds of chocolate. And chocolate companies know that. They've researched and broken up the market into segments depending on what type of chocolate they try to sell to a particular group of people.
The same goes for a startup and their product/service - if they can divide the market into distinct groups, they can better target the people who are most willing to buy from them. In this article, you'll learn what market segmentation is, its benefits, the different types, and how to do it.
What is Market Segmentation?
Market segmentation is the marketing strategy of dividing a market into specific groups to address each group more efficiently. Market segmentation is a powerful tool to create brand loyalty and increase revenue. When effectively implemented, market segmentation can help pinpoint people who are more likely to buy a product and should be given a higher priority for marketing efforts.
To ensure your efforts are going in the right direction, you have to know your target audience. You need to understand their needs and what they want from you, which will lead you to divide them up into segments.
What Are The Benefits of Market Segmentation?
Marketing is not an easy task. It is a complex process that requires effort, preparation, and strategy. And you cannot reach your target audience without having a specific segment in mind. Here are some advantages of dividing the market into parts:
- It will help you to understand which customers to target and allow you to serve their needs better than other brands.
- With proper market segmentation, you can design your product/service precisely to your customer's requirements and continue to make minor tweaks in the right direction.
- It will help identify your product/market fit more efficiently and help you determine new marketing directions.
- It will increase your chances of success by targeting your customers through more personalized ads, thereby converting leads more efficiently.
Types of Market Segmentation
When you segment the market, there are four different types to consider. You can use more than one at a time if necessary.
Demographic segmentation divides a market into segments through demographic criteria such as gender, age, income, socioeconomic status, etc. It is one of the simplest ways to segment the market as the information gathered is relatively easy to acquire. Just about every startup has an online presence these days, so it's easy to collect data from web traffic to your app/website through software such as Google Analytics.
Psychographic segmentation divides a market into segments based on an analysis of an individual or group's attitudes, values, lifestyle, interests, and beliefs. To perform this type of segmentation, you can use various tools such as focus groups, interviews, polls, surveys, and questionnaires to dig deeper into your target's needs.
Behavioral segmentation divides a market into segments based on an individual's buying habits, interests, etc. You can use the same tools for psychographic segmentation, but you should adjust the questions to reflect the customer's behavioral insights instead.
Geographic segmentation divides a market into segments based on geography. It could be by city or region, country, etc. An American customer's needs will differ significantly from the needs of a Vietnamese customer. Your customer's geographic data can be found in the same way as demographic segmentation - analyzing data of visitors to your website/app.
What steps should I take to segment a market?
- Define the market for your startup. At this first stage of the segmentation, concentrate on finding out how big the market is, where your brand relates to a need, and whether your product can assist.
- Identify which segments you will use. Here, you will choose from demographic, psychographic, behavioral, or geographic segmentation. You can select more than one way to segment the market if necessary.
- Know your market. Once you've decided which segment/s to use, you need to ask the right questions. It's essential to examine your target customers and know them in detail. You can use various tools such as questionnaires, surveys, focus groups, interviews, polls, or historical data analysis.
- Analyze your market. After you've accumulated responses, you need to analyze your data to create customized segments for your product/service.
- Interpret the data and put your new strategy to the test. Get practical and test your new data on your target audience. If any issues arise, you can always make adjustments where necessary.
Market segmentation is a crucial step in the marketing journey to get to know your customers. In return, you will be rewarded with far-reaching benefits for you, your startup, and your customers alike. We wish you good luck in your segmentation endeavors!