The Ultimate Guide to Marketing Segmentation

The Ultimate Guide to Marketing Segmentation.jpg

Most people are under the assumption that entrepreneurs have everything taken care of. That they understand the ins and outs of marketing, and that developing a strategy, or even a funnel, is easy. You could do it in your sleep.

But according to the Harvard Business School, more than 80% of all new consumer products fail annually.

As it turns out, companies become hyper focused on the design process, and push off marketing until it’s too late. And those who do spend more time on their marketing?

You guessed it, they failed to properly segment their market.

That means if you want to avoid becoming a part of a depressing statistic, you should keep reading. In this guide, we’re going over what marketing segmentation really means, why it matters, and how you can use it to your advantage.

Let’s get started.

 

What Is Marketing Segmentation

We know what a marketing campaign is. It’s a process that alters people’s views and behavior. You decide on a series of steps, in a specific order, market something, and as a result, many people begin to think they need something in their lives, or that they can become something more than they are. After all, you’re solving a problem, that’s what a business is supposed to do.

Now, this is under the assumption that you know who your audience is. If you use an audience persona, then you have a better idea of who they are, sure…

But mass marketing techniques often assume that all customers are the same. It leads to some clone-worthy landing pages that massively appeal to “all.” But in reality, even those who are part of a collective social group are all varied in striking ways.

For instance, maybe your audience is composed of book lovers. You sell monthly subscription boxes with books, book-related collectibles, and author notes. Well, your audience persona says that your customers all read YA books, and enjoy romantic fiction…

But in reality, only a third of your customers do. The other two thirds are into science fiction and horror, respectively.

Clearly, the better business decision is to sell three versions of the subscription box, so everyone gets something they like, rather than keep losing subscriptions month after month, and worrying about your conversion rates.

No amount of advertising is going to save a product that people don’t want, even if, generally speaking, they are a part of your audience.

This is where marketing segmentation comes in handy. It’s the act of segmenting, or better organizing, your audience by category. It divides your market, allowing you to effectively market to each with relevant information, products, and services.

And as a result, it gives way to better digital marketing thanks to a better understanding of your audience. Your content will reflect that, and your marketing will feel less pitchy, and more connected.

 

Why It’s Important

Obviously, there’s a lot to gain from marketing segmentation. Not only does it give you a competitive advantage over the many businesses that operate with mass marketing tactics, it also helps you better understand your audience.

Mass marketing does yield results, it’s the whole reason it’s such a popular approach, but it’s not the most efficient.

The more effort you put into understanding your customers, the better your messaging strategy can be. You waste less time and effort on things that won’t work for the vast majority of your customer base, and you learn to create multi-faceted campaigns that resonate on a more personal level.

 

Common Segment Descriptions

marketing segmentation

There are many ways to segment an audience, all of which revolve around descriptions. It’s these descriptions that serve as categories to place people under.

For example, using that book illustration again, suppose your audience is a collection of bookworms. Some of them may be of a certain age. The YA readers are likely teenagers, as the name would imply. Others might be older, and opt for the horror or science fiction subscription boxes instead.

Let’s consider some of the most common segment descriptions:

  • Demographic - covers age, income, gender, family size, race, language, religion, etc.

  • Geographic - specific areas, like regions within the country, whether they’re rural or urban, and even global.

  • Distribution - where they purchase your products (some might buy online only, others might prefer the store).

  • Behavioral - how different customers use your products (light users vs heavy users). This factors in brand loyalty (your products over any others on the market), and even the type of user.

  • Psychographic - cultural clusters, lifestyles, personality types, social status, etc.

  • Decision Makers - who decides to purchase your product within the company structure (B2B exclusive).

And of course, the segment descriptions you decide to use will largely depend on two factors: what type of business you’re running (B2B vs B2C) and level of experience.

For example, demographic is used amongst B2C businesses, and is relatively simple. But psychographic can be used in both B2B and B2C settings, and is considered more advanced.

 

How to Design A Campaign

Now that we’ve covered the basics, and better understand what marketing segmentation is, why it’s important, and the common variables that people use to categorize their audiences, it’s time to apply that knowledge to a marketing campaign.

Remember, we’re not approaching this from a mass marketing perspective. This is going to build on what you know, and have come to expect from marketing campaigns, essentially elevating what you do. Fine tweaking, so to speak.

 

Step #1 Target Audience

I’ve touched on buyer personas before in other guides, but it’s worth recapping again: buyer personas are the customer ideal that businesses develop to better market their products and services.

A great example of this is when an athletic wear company creates a fictional representation of their customer base. They name it Amy, and they deduce that she is a very healthy eater who loves to workout, and consistently looks for breathable, moisture-wicking workout wear that is both stylish and functional.

The company will then flesh out details, like demographics and behavioral (sound familiar?) information, until they manage to create the equivalent of a very fleshed out fictional character. Only, this is their buyer persona, their guide. If Amy likes a product or service, then odds are the rest of the target audience will too.

Now, that’s the mass marketing approach. To transition that into the marketing segmentation method, you’d have to create several buyer personas, one for every category you decide to use.

This is why research design is always a good idea. Designing a proper research method that allows you to see the vastness that is your audience. Surely, there’s more than just Amy types out there.

Many businesses dedicate an entire team of marketers to comb through social media, website clicks, and even event attendees, to get a better sense of the audience. Surveys also help with this, as does just being open and communicative within an online community.

The more data you have, the more you can gauge the variation amongst the buyers. And the more you can organize those audience members into groups or categories, the better sense of identity you have as a brand and a seller.

Now, it might seem difficult to do this. After all, what happens if you look at the audience and find 16 different groups?

You can’t possibly use 16 segments without losing some hair, right?

This is your chance to think outside of the box. Just because two people may look different, it doesn’t mean they don’t have a unifying factor. Try not to force people into categories, however. Stick to what makes the most sense, and only go as narrowly as your audience naturally allows.

In other words, don’t be too broad, but don’t force people into three segments if that’s just not enough to cover the extent of diversity within your audience either. Find a good balance.

 

Step #2 Segmentation

This is a tricky bit, because segmentation is a part of marketing, but it’s also so intricate that it has its own identity. It impacts everything, even how you structure a sales team.

That being said, consider the following a very generic, broad view of segmentation. It’s meant to give you an idea for your point of origin, but it is incomplete. You’re going to have to look at your business objectively and figure out what else makes sense for you. A

If you’re having trouble with this, remember to ask a digital marketing consultant. They know their stuff, and they’re very well connected, so they can point you in the right direction, offer advice, and set things up for you. For instance, they may know several top-notch copywriters who can help with your marketing once they’re done setting up a plan of action.

For now, here’s the general list:

  1. Be selective, but informed: this applies to your market directly. Rather than trying to appeal to everyone and anyone, be very realistic about who benefits the most from your products and services. Better yet, look through your customer base. Check social media, check your Instagram and see who follows you. What do they look like, and what are they into? The more you know about who’s actually buying your goods, the more you can narrow your focus to just those types of people.

  2. Consider vertical segmentation if your product helps several people across multiple industries. This is a great point for B2B. If you sell project management software, for instance, then you might think entrepreneurs get the most benefit from it, but what about the types of businesses they are, and how they differ from one another? One business who uses your software might be selling clothing, but another might sell home decor items. You could even take it a step further and say students are using your software to better schedule their classes, and homework assignments. Suddenly, you’re not B2B, you’re also B2C.

  3. Now that you’re looking at the pain points you’re solving for people, consider using that as a way to segment your audience. Customers all have variables that impact their purchase decisions, and that order will largely depend on the segment. To better illustrate this, let’s go back to that project management software. One segment might be B2B, while the other is B2C. The B2B care about things like being able to invite team members to their boards, being able to customize things like branding colors and deadlines, etc. But the B2C audience only really cares about ease of use, reminders, and labeling. You’re clearly solving different pain points here, with the B2B audience suffering from organization on a team-level and business scale, while the B2C audience cares about using your software as an individual digital planner/agenda book.

It also helps to bring up the common descriptions businesses use to segment their audience. We touched base on them earlier, but let’s highlight one of them as an example.

Geographic is widely used, very popular, and it covers regions within a country, or on a global scale. It even dives into urban vs. rural, so you cover all the bases of what a typical audience could consist of.

If you were to segment based on geographic descriptions, then it’s possible it might look something like this:

marketing segmentation

Notice, most of the customers reside in America, with a whopping 55%. The second largest is Japan with 30%, followed by Scotland at 7%, China at 5%, and finally England with 3%. That tells us, culturally speaking, your products (in this case clothing) has mass, global appeal, despite variations in psychographic factors (cultural clusters, lifestyles, personality types).

Now, if we dive deeper, the American customers prioritize style above all, and price isn’t an important factor as long as they have the style and fit they want. The same applies to Japan. But if you look at the other three regions, they care about price the most, then fit, then style.

That means it would be wise to alter messaging accordingly. All advertising needs to be reflective of what’s the most important to customers on a location basis. In America and Japan, branding and advertising that highlights fashion and style would make sense. Meanwhile, in the other three regions, it would be wise to lead with low prices, and all social media posting, all ads, and all email marketing should make low prices the main focus.

This will determine how to go about designing your ecommerce website from the ground up. It will dictate which influencers you work with, which marketing tactics you opt for, and what CTAs you use. This is especially true for companies that sell their products digitally only, such as game development studios, who need to understand their customer base to the best of their ability, largely because they don’t have multiple money making avenues to rely on ethically.

 

Step #3 Test, Test, Test

Of course, as with anything in business, you can’t possibly expect not to test out your findings and your plans. Gathering data on your target audience so you can better understand them, and create segments around them is only the first half of a big picture, kind of like the tip of an iceberg.

Once you’re done creating a general plan, you need to test things out. One of the best ways to do that is to ask questions on community forums, send out surveys, and use social media polls.

If you find that the information doesn’t go with your assumptions, and nothing adds up, then you can go back and find the mismatched points, tweaking as you go.

For example, if you believe that part of your audience is middle aged music lovers, and you organize them into segments based on genre, demographics, and geographical location, you might find that two of those segments overlap. Maybe the rock music lovers also tend to enjoy classical music, and vice versa, which means they could be organized into one segment.

In other cases, you may find that the segments you’re using aren’t the most helpful or useful. Perhaps music genre doesn’t ultimately matter, because the main factor you care about is that music gets sold, and that people from different parts of the world continue supporting your business. At that point, you’d be better off with a geographical segment, and one on demographics, particularly on income level, and frequency of repeat business.

To summarize, no two cases are the same, even those in the same niche, from competing businesses. Every situation is unique and requires some careful scrutiny. Just because you’ve set things up and organized, it doesn’t mean you’re done. You have to test that your findings match with the hypothesis you started. If they don’t, there’s a gap somewhere in the plan, and it’s up to you to find it.

 

Step #4 Reiterate As Needed

In a continuation of step 3, reiteration can take anywhere between a week, and several months. It will take longer if you keep adjusting several factors while testing, since you won’t know which of the changes had the negative impact, per se, without in-depth analysis.

So, to make it go faster, consider only adjusting what you know isn’t lining up correctly. Leave everything else untouched.

If you still find that your tests aren’t working, it might be time to hire a digital marketing consultant. They specialize in setting things up for success, regardless what your goals may be.

They’re also generally well-connected, often working with their own teams of professionals, so don’t assume you’re hiring one person’s expertise. Although possible, odds are you’re looking to get help from several different people who specialize in different aspects of marketing.

 

Step #5 Execute the Launch Plan

Once you have your audience organized into segments, it’s time to launch. The first step is to identify key stakeholders. These are the people who can either affect, or become affected by your business endeavors, objectives, and policies. They are often creditors, employees, directors, suppliers, unions, and owners (shareholders).

Then, it’s time to develop your communications plan. How will you deliver the goals, messaging, and overall insight you’ve obtained after X amount of time researching? Many entrepreneurs opt for board meetings, as well as sending out company reminders in email and newsletter formats.

Whatever you decide, make sure that everyone knows what’s going on. Everyone should be on the same page, and should know how and when to approach you with any questions, comments, or concerns. The door should be opened, much to your benefit, since many different people within your same company may see certain elements of the business that elude you on a daily basis.

Once you’ve informed everyone, and people have had a chance to come forward with their feedback, it’s time to execute and monitor.

Don’t hesitate to use the tools available, including but not limited to Google Analytics and A/B testing. Paired with the right keyword research, and SEO tactics, your marketing may prove that segmentation is the better, more accurate, way to approach advertising.

 

Rules to Follow

marketing segmentation

Now that you have a better sense of what segmentation entails, it’s time to highlight the rules you absolutely should go by. Consider these to be pretty much unbreakable.

 

#1 Don’t Be Too Broad

Defining your segments in a broad fashion is never a good idea. This only opens the door for competitors to swoop in and target more narrowly, essentially making you look like the generic “jack of all trades, master of none.”

For example, say one of your segments is psychographic, which covers cultural clusters, lifestyles, personality types, social status, etc. But instead of using your audience personas to really limit the people you’re marketing to, you begin to cover all sorts of people, with different personality types and statuses.

That won’t fair well, especially when you compare your business with those who did limit their market narrowly.

 

#2 Organize By Market Segments

Let your segments dictate how you run your teams. For example, you have three solid segments you’re using to market. You look at your team, determine who works well together, and who has related skills and experience, and take the time to create three teams. One team per segment means that everything will be narrowly focused, and marketed the best it possibly can be, because every team is only focusing on a singular goal, not all three at the same time.

 

#3 Handle Them Globally

If you’re not selling your items on a global scale, and you don’t see that changing at any point in time, then you might be tempted to avoid this step. But you see, sticking to regional organization can lead to being blindsided by a dynamic global economy. It’s just better to be cautious and prepared, rather than caught off guard.

 

#4 Always Do Your Homework

Never go into anything without first doing your research. That means analyzing your competition, really digging into your customer base to see who they are and what they’re all about, and scrutinizing your best potential segments. Use this information to develop a strategic market segment portfolio, if possible. It may seem like tedious labor, but it will save you time and money later on.

Just think of all the time you’ll spend enjoying the fruits of your labor rather than testing and reiterating over and over again. That’s less stress, less time and effort, and of course, less money, considering the help you’d have to outsource if you kept getting your variables wrong.

 

Mistakes To Avoid

Obviously, market segmentation isn’t too straightforward. In theory, it’s the practice of categorizing people into boxes that showcase the variations within your audience. And yes, it certainly helps. But that’s only assuming that the segments you’re choosing actually work with your audience.

There may come a time when you determine how to segment your market, only to find that they answer your follow-up questions much differently than you’d expected. Your statistical software shows too many variations within each segment, and you realize that all of your hard work has resulted in… inaccurate representations of your audience anyway.

This is why the #1 mistake to avoid is assuming you’ll get this right on the first try. It’s not straightforward enough, because people aren’t one size fits all. It’s important to evaluate your segments by asking questions throughout the process, from the moment you’re getting to know your audience, to the minute you’re done organizing them into segments.

Speaking of segments, there is such a thing as a weak segment. One business may benefit from it, but another might not, and it will largely depend on the market, niche, and products/services being offered.

To ensure your segments are up to par, always use this checklist:

  1. Measurable: ensure that your segmentation variables relate to your product purchase. If you can’t calculate how much one particular segment group will spend on your product, that’s a bad sign. That means the important bit, the most crucial piece of information you need for projections, is missing.

  2. Substantial: ensure that your segment can substantially keep up the purchasing goals that you have set for them. If you sell designer goods, but your segment can’t afford those prices, you’re wasting your time. That’s just a segmentation with interest, but you need a segment with both interest and money. However, if you’re looking to research and brainstorm, you could always use your findings on a segment that can’t afford your items, but has expressed clear interest. Perhaps a cheaper product line, or a mashup collaboration with a more affordable brand that is in the same niche as you.

  3. Accessible: your segment should be reachable, which sounds logical, but often isn’t. Depending on your segment, variations will render one form of communication useless, while another is infinitely valuable. One segment, perhaps an older generation, will be more accessible via email marketing or press coverage (see my guide on writing the perfect press release, if you need help with this), but another more youthful segment might be more accessible through Instagram or Facebook Ads.

  4. Actionable: in order to prove that you need X number of segments, you need to show that each group as a different reaction to your products/services. Otherwise, it defeats the purpose of segmentation. If one segment cares about the environment, and another cares about physical health and fitness, but both share the same shopping habits, you can combine them into one segment.

Here’s another major mistake to avoid: don’t approach market segmentation as the entirety of your marketing. It is a part of it, but not the totality of it. Important, but not the end all. Whatever you find in terms of segmentation, use it to better elevate your landing pages, your social media accounts, your video content (see my guide on YouTube marketing, by the way), email marketing, etc. You can even use it to better personalize seemingly “unimportant” elements, like chatbots, which actually prove to be beneficial for most business models.

Here are some more of the things your market segmentation will affect:

  1. How you link build, and who you guest write for to build up your blog.

  2. The collaborations you decide to participate in after spending X amount of time networking.

  3. The differences of tone, content, and objectives within your copywriting.

  4. How your growth strategy is designed.

Always focus on the areas where you know your target segments hang out, because that’s who you’re reaching out to. But always make sure that your brand as a whole connects its marketing with all of your segments in mind. Your business is a machine with many working parts. Don’t neglect everything in favor of the one part that although tricky and time consuming, isn’t a one-stop for all things marketing.

 

Conclusion

marketing segmentation

As you can see, there’s a lot that goes into marketing segmentation. Get it right, and it will change the way you structure your team, view your audience, conduct your messaging, etc. The right approach makes the difference between mediocre funnel systems and CRO, and exceptional lead generation and sales.

That’s why it’s always a wise idea to take your time on the segmentation process. Really look at your customer base. Who is buying your products, and where are they located? Where are they buying your goods, in store or online? How old are they, and what seems to be their social status?

The list could go on, but ultimately, the descriptions you choose to segment by are yours to decide on. Whatever you select, make sure that it makes sense. For instance, if you only work with local clients, geographic location won’t be a good thing to segment by.

And remember, if you’re having trouble with any of this, you can always hire some help. Digital marketing consultants are used to scrutinizing marketing plans, and tweaking them to fix underlying issues, and drive traffic through things like SEO and lead magnets. And they most certainly can help you figure out how to segment your audience.

So, what did you learn in this guide, and how will you use this lesson moving forward?

Let me know in the comments below, I love hearing from you all!