Understanding Market Segmentation
What is Market Segmentation
Market segmentation is a method used to define and understand your customers and target market. This method allows marketers to connect with the right audience, with the right content, at the right time. Market segmentation is essential because every segment has different preferences when it comes to how, when, and what they are being communicated about. Market segmentation is a valuable tactic that will assist in the achievement of business goals by allowing marketers to focus their efforts on reaching the clients who are more likely to engage and purchase their products or services.
For example, in the real estate industry, it is important to segment your market and audience. This is because a client who is seeking to sell their property won’t be interested in receiving marketing emails, postcards, or notifications about other properties you recently listed for sale. Likewise, a client interested in purchasing a property won’t be receptive to marketing emails, notifications, or materials communicating the many reasons an agent is the best option for listing and selling their home. Market segmentation allows Realtor’s and other marketers to not only target their audience at the right time on the right platform, but it also allows them to target their content to the right market segment and audience. When a market is segmented, marketers are able to target those who are most likely to be satisfied with the product or service you are offering and save money on marketing materials by not sending mailers to the incorrect or uninterested segments.
Types of Market Segmentation
Market segmentation is the dividing and grouping of audiences into smaller collections based on similar characteristics. Markets can be segmented by demographics, psychological consumer factors, sociological, and usage or purchase patterns.
There are several ways for demographic markets to be segmented, including age, income, sex, occupation, family size, or other demographic characteristics. Additionally, characteristic segments can be based on psychological consumer factors, sociological dimensions, and usage or purchase patterns. It is important for a segment’s needs and wants to align with one or more of the several characteristics segments. These characteristic segments include demographics, psychographics, personality traits, and attitudes.
Demographic and Geographic Segmentation Vs. Behavior and Psychographic Segmentation
When compared to demographic or geographic characteristics, it is more challenging to measure segmentation when it is based on behavior or psychographics. This is because purchasing habits, spending habits, user status, and brand interactions, as well as personality traits, values, attitudes, interests, and lifestyles, are harder to identify because they are subjective and require extensive research to fully understand.
For example, a real estate agent with a luxurious estate for sale focusing on psychographic segments would consider tailoring their marketing efforts towards clients who pursue luxury lifestyles and quality by emphasizing upgraded features, luxury appliances, and specific layouts. Whereas a real estate agent with a small starter home listed for sale and a focus on demographic segmentation may tailor their marketing efforts towards a target market comprised of young married couples with children and a lower income.
Requirements for Successful Market Segmentation
For segmentation to be considered successful, it must be measurable, sizable, and reachable. If a market segment lacks definition and a means of measurement, we are unable to estimate the market’s potential for sales. Clearly defining the difference between market segments will make all the difference in ensuring that products and their marketing efforts do not overlap.
When considering an independent marketing effort, it is essential to ensure the market is sizeable enough to support the product, campaign or promotion because often times smaller markets are more difficult to validate spending production and marketing dollars on. This is because smaller segments can be challenging to gain a large number of potential customers when the segment itself is limited. Further, it is not always logical to develop or market a product with a smaller segment as the target market because the return on investment (ROI) is not as favorable as it would be if a product were developed to meet the needs of a larger market segment. It is crucial to seek out profitable consumer needs and focus your efforts in that direction.
Finally, a market segment should be able to be reached with marketing communications and efforts. Whether it be face to face sales practices, print marketing, email marketing, or media, it is essential to have an effective method of communication with your audience.
In conclusion, time, money, and resources are saved by marketers when they utilize the method of market segmentation, which leads to business goals being achieved. The risk of ineffective marketing can be reduced when marketers group their audiences by similarities in their characteristics because it allows them to tailor their marketing campaigns and content to the market segment’s preferences. When a marketer cultivates a marketing campaign based on the content preferences of a measurable, sizable, and reachable market segment, there are very few things that can stop their campaign from being successful!