Market segmentation (MS) is a term from the marketing field. Market Segmentation refers to aggregating future customers into teams or groups with similar requirements to perform more efficient marketing. Market segmentation is a highly effective way to better understand a company’s target audience.
In addition, a market segmentation strategy is essentially the creation of smaller sub-groups from your total audience based on criteria such as their age, gender, income, or a variety of other identifying qualities. These qualities may impact their preferences, interests, and purchasing behavior. These groups are called segments and can be broken down into micro-segments.
The Advantages of Employing Market Segmentation
Businesses that accurately segment their target audience are more likely to see positive ROI on their marketing budgets.
Deep and intelligent segmentation can allow you to understand your audience better and respond to their needs more accurately. In a competitive market, that is what distinguishes between success and failure.
When you look at your audience as a single, large group, it might be overwhelming, depending on the size and scope of your target base. A firm can more successfully target and serve the interests of its customers if they divide the total audience into more manageable groups—whether they are divided by age, region, or state of need, for example.
How to Perform Market Segmentation
Before you can begin to segment your market, you must first understand your target customer.
After all, the whole point of market segmentation is to divide the potential customers into groups that will make marketing more efficient. If you don’t know enough on your own, the grouping process will be based on false knowledge, leading to marketing efforts that do not meet the audience’s actual needs and fail to attract their attention.
Although defining a target market appears straightforward, it requires considerable consideration.
Knowing exactly who you are marketing to is critical, as only a few businesses can simultaneously provide something to suit everyone on the planet. Furthermore, attempting to sell to the broadest potential audience can be challenging, expensive, and often unsuccessful.
You can start the grouping process after you understand and know your audience.
For example, a vegetable company can have a market segment for vegans and carnivores. Even though both groups buy the same vegetables from the same company, they are two very different groups that act entirely differently within the market. Targeting a vegan with an image of a steak, for example, can have disastrous consequences for the brand. With proper market segmentation, you can avoid such mishaps.
It’s also worth noting that you will not be able to please everyone when defining your target market. Instead, you should seek to bring on board those who will add the most value to your venture. What specific people will benefit the most from your product or service? You can determine this through the use of market segmentation.
To accurately and efficiently market your products and services, you need to know your potential customers intimately. To achieve this you will usually need to employ a CRM capable of aggregating data from multiple sources to produce detailed profiles of consumer personas. With more data, you will be able to discover new niches and micro-segments you can market to with specific messaging and the channels they pay attention to.