What Is Market Segmentation

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Introduction

Think about the different people in your life, your friends, family members, colleagues you work with, people you meet in the street and others. It’s more than likely you interact with these people in different ways, and you probably expect them to interact with you
differently as well. For example, the way you talk to your friends is likely quite different to the way you would talk to your boss in the office.


Your customers are the same. Many different types of consumers buy your products and services. Whilst they all see varying degrees of value in what you offer, the reason they buy from you (including their specific needs, attitudes, problems, and expectations of your
business) can differ wildly.


In order to successfully engage with different types of customers, you need to understand what is driving them and use this information to develop targeted communications plans that resonate with each type of customer you serve. Communicating with specific groups
of customers in a way that is meaningful to them, will help them notice your brand and build a stronger relationship with you by feeling served.

Enter Market Segmentation

To split out these different types of customers into useable groups to target, we need to conduct what’s known as a market segmentation. Market segmentation is the process of grouping people in your market based on their distinguishing characteristics (for
example their attitudes, interests, and hobbies) and demographics (like their age and household income).

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Once a segmentation has been carried out, you will have a better understanding of what is important to different groups of people and can create a strategy to more effectively market to each group. You will also likely find that different segments hold different levels
of value to your business and therefore you may choose to focus your marketing efforts on specific market segments that will deliver the best return on investment to your business.

Benefits of a customer segmentation include:

Step 1 - How Will You Use Your Market Segmentation?

Before you can create a market segmentation, you need to consider how you plan to use it. Many different factors can be incorporated into a segmentation and what you choose to include will differ depending on the industry you operate, competitors, size of
business and the end result you want to achieve.

For example, if your primary objective was identifying a profitable niche of customers to target with your advertising, you would want to include to purchase information (e.g. purchase frequency, order value) as well as demographic and media consumption data
for targeting. Using this information you might find a demographically distinct segment that purchase your product twice as often as the average customer.

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Step 2 - Sourcing The Data You Need For Market Segmentation

Once you have established goals for your segmentation, it is time to source the data you need to build it. One of the most effective ways to collect data from consumers that buy yours and your competitors ’ products is by conducting market research. You can discuss your information needs with a market research agency who can then advise on the most effective way to collect that information from consumers. A market research agency will usually have a data scientist on hand to advise on survey design.

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Step 3 - Building Your Market Segmentation

Once you have all of the data you need, it is time to engage a specialist (data scientist / statistician) to analyse your data and build your segmentation. It is usually best to engage a specialist at the beginning of the process, so they can help advise on what information you should be collecting which will ensure the segmentation they create is robust. The specialist will put their skills to work analysing data and separating it into distinct segments.


You can fine tune segments with the data scientist to ensure they meet your needs. You can also name your segments and create personas around them, which generally aids in identification, communication and overall usage throughout your organisation.

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Successful Marketing Begins With Market Segmentation

Market segmentation should be the foundation of every marketing strategy and can help guide your organisation and deliver significant growth. Without segmentation it is impossible, as a marketer, to definitively know if you are positioning your brand and targeting to the right type of consumer.

At Brand Health we are experts in brand research and can advise you on creating segmentation for your organisation. To find out more, get in touch today and chat to our friendly staff.

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