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What is market segmentation?

Market segmentation, also known as audience segmentation, means splitting potential customers into meaningful groups based on their characteristics, wants, and behaviors.

Once you’ve got these segmentations, you can tailor your marketing messages to speak more directly to your varied customer base. 

It’s the 101 playbook on speaking to the right people in the right way. And, ultimately, these personalized tactics are more efficient and cost effective.

In fact, a quick look at some statistics on market segmentation tell all. According to a study by Hubspot, email campaigns that took advantage of market segmentation had “14.31% higher open rates and saw 101% more clicks than non-segmented campaigns.” On top of that, revenue was said to rise by 760%.

Let’s take a closer look.

Why is target market segmentation important?

Brand loyalty is the bread and butter of customer retention. But plenty of brands are still failing to tap into what drives this level of commitment – brand loyalty isn’t just about competitive pricing.

It all comes down to understanding what consumers want – and there’s no one-size-fits-all answer.

Tailored experiences are in demand, and they play a key role in keeping customers interested. In fact, we’re willing to give up some privacy in order to get that personalized journey. 

Research has shown “87% of Americans are willing to have various details of their activity tracked in exchange for more personalized rewards and brand experiences.

Focusing on your audiences as individuals and putting their interests at the core of your brand’s content means your products and messages will be hyper-targeted. And in turn, your customers will enjoy their time with you more, and keep on coming back. It really is as simple as that.

How to split your audiences into market segments

Market segmentation can be done in a handful of ways. 

Within each, you can split them into smaller segments for an even more granular understanding of a market.

Behavioral. Essentially, this means how consumers interact with products or brands. It can include how and where they engage, their social media usage, or their wider consumer journey.

Demographic. Criteria can include gender, age, income, education, social class, religion, and nationality.

Geographic. This uses information on where they live, work, or even spend their weekends. This can be subdivided by nation, state, town, county, and so on.

Psychographic. This can include personality variables like introvertedness and extrovertedness, lifestyles, attitudes, likes, and dislikes. 

A step-by-step guide to market segmentation

A target market analysis will help you pinpoint exactly which groups of people you should be speaking to.

1. Gather recent, reliable data.

Third-party data sources are hugely valuable in helping you build that real-life picture of your industry, market segment, competition, and potential customer base.

But knowing what data you need is the big challenge.

With consumer and industry trends evolving so fast, a key thing to consider is how recent and reliable the data you’re gathering is.

At GWI, we present our data quarterly, which means you’ll always know the data you’re looking at is up-to-date, fresh, and highly relevant.

2. Divide your market.

Although all your customers are unique, you’ll be able to spot certain patterns between groups of them. Identifying these shared characteristics will help you create your target market segments and refine your messaging for each.

Ask questions like:

  • What defines this particular group of people?
  • What do they have in common?
  • How do they go about researching products?
  • Which touchpoints matter most?

Creating customer profiles or personas that pull together these shared traits will help you hone in on what matters by identifying patterns, trends, and insights that will spark ideas and bring in high-value customers.

3. Know your competitors.

Understanding the competition in the market is key. It will tell you exactly what your product or service is up against, and what tactics you need to take on to compete.

Ask questions like:

  • How many businesses have a comparable offering to you?
  • What’s their pricing structure?
  • What reach do they have?
  • Who do they appeal to most?

You may find that one group of people is very well served by competitors while another group is yet to be tapped into.

This will help you identify the most profitable group to target in your marketing plans, and what types of marketing communications have or haven’t worked before.

4. Bring your analysis into your business strategy.

Once you’ve completed your market analysis and identified the audiences with the most potential, you have to incorporate these different target market segments into your wider business plan.

With this, you can make predictions about who will buy your new product, in what quantities – and how often – and spot any possible peaks or troughs in demand.

Pinpointing the variables that differentiate one group of people from another is key to knowing your market.

Building up the picture one question at a time

Let’s take a hypothetical example.

Say you work for a beauty brand which is looking to get greater engagement with your advertising among diverse audiences.

From your research, you’ve segmented your audience into two key markets: LGBTQIA+ consumers and people of color.

Now you want to create the kind of marketing messaging that will have true impact with these consumers. 

But in order to reach them effectively, you need to understand their behaviors and attitudes.  

Using third-party data, like a survey, you can get the answers to these questions and build a detailed picture of what these consumer groups want to see from brands in 2022.

We found that 43% of LGBTIQA+ respondents and 40% of people of color want to see more models in ads who look like regular people, while 52% and 42% respectively believe society focuses too much on people’s looks. 

These are key insights which will help frame your brand to focus on what really matters to your target market. 

Take Glossier, for example. Its ‘skin first, makeup second’ mantra is a testament to accentuating a well-cared-for base. Emily Weiss, CEO and founder of the beauty brand takes this one step further. She says, Glossier is “about fun and freedom and being OK with yourself today. It’s about being nice to people and knowing that a smile begets a smile.”

For a beauty brand, cheerleading that mentality is revolutionary, and it puts kindness and self-acceptance at the heart of looking good.

And when it comes to giving all of its customers a more personalized experience, the brand’s diverse models, who proudly bear freckles and stretch marks, help everyone to see realistic versions of themselves rocking the products.

Bringing audience segmentation into your marketing strategy

Target market segmentation should be all over your brand’s marketing strategy, helping you set objectives and form ideas in the most audience-centric way possible.

When you have a better understanding of your target audience and can split this knowledge into meaningful and distinct groups, you know what they want,  when they want it, and where they want it.

This way, your marketing campaigns are sharply tailored to your audience for maximum impact.

And the benefits are never ending. From more intelligent marketing spend to increased sales and greater loyalty, target market segmentation contributes to a healthier ROI and customer value – and who doesn’t want that?

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