Customer segmentation - slice being cut out of whole cake

Customer segmentation - the basics

The explanation for segmenting your audience can be summarised perfectly in the saying “you can’t please everyone.” 

 

Simply put, segmentation is the process of organising the whole market into smaller groups based on similar needs, characteristics, and aspirations. Logically, it would make sense that to generate the most awareness and profit, you should be targeting the broadest range of people possible. However, the contrary is true in the world of marketing. 

 

Marketers segment audiences because it can identify potential new audiences to target and it can produce benefits for the organisation. For instance, in terms of email marketing, organisations with segmented campaigns had a 14% higher open rate and a 100% increase in clicks compared to their non-segmented counterparts*. Through generating loyal consumers customer retention rates increase and your long-term profitability is sustained.

Whilst the thought of segmenting the whole market can seem overwhelming, we have outlined three key stages which should help to simplify the process:

 

  1. Focus on your industry and develop an understanding of the main consumers within it.
  2. Categorise these consumers by shared characteristics e.g. do they share similar interests? Are they of a similar age? Do they share similar lifestyles?
  3. Assess these segments by size, accessibility, profitability, and then identify which segment you would like to target based on the one which is most appealing or offers the highest likelihood of success.

 

Once you have segmented the market and identified potentially viable markets to target, it is a good idea to create multiple consumer personas which represent the ‘typical’ users you want to target. By creating an image of your ideal consumer, you can develop a more customer-centric strategy because you will have a better insight into what they like, dislike and want to see.

 

Albeit it is unlikely that you will address every frustration or every aspect of your consumers, however, through outlining the information of a few of your ‘core’ consumers, you will be able to speak to them as ‘one’ enabling you to deliver the ‘right’ message. Considering 71%** of consumers want marketing that effectively meets their needs, creating a persona (or multiple) is something that’s worthwhile. 

 

You can create a persona based on practically any variable, however, a good place to start is to address the who, what, why, and how of your ideal consumers.

 

Who: what is their age, location, and income? What is their background and what do they do for a living? What do they do in their spare time and what do they believe and value? 

 

What: what do they hope to achieve or overcome by using your products or services? What would make them choose you over your competitors? What frustrations and challenges do they face? 

 

Why: why would they be interested in your products or services and when would they use them? Why wouldn’t they choose your products?

 

How: how can you help them? How can you use this information to market your solution to them?

 

Typically, this process will be supported by data about your existing consumers – whether that is through analytics or your social media following. However, if it is a new consumer base you want to target, or if you have no data to go on, then databases, news articles, and even the targeting of competitors can give you an insight into consumer trends that you can pursue. You could also take it one step further and conduct interviews and questionnaires to gain a greater insight into your consumers and what they like or dislike. 

 

Ultimately the process of segmenting your audience and creating consumer personas will enable you to deliver more effective marketing communications. It should be one of the first things you do when it comes to developing your marketing plan as it acts as a guide for the content which is subsequently produced. 

 

*Taken from Mailchimp at https://mailchimp.com/resources/effects-of-list-segmentation-on-email-marketing-stats/ 

**Taken from Benes (2019) at https://www.emarketer.com/content/do-people-actually-want-personalized-ads 

Danielle Slater - On The Dot Marketing