Market Segmentation: Definition and Effective Strategies

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By Laia Cardona, on 16 August 2021

If you try to reach everyone with your marketing, chances are you won't really reach anyone. We live in a very competitive environment, and what delights one group of consumers may leave another completely indifferent. If you want to get your messages right and make sales, you have to segment.

Market segmentation is the key to getting the results that you want. If you know what kind of people you want to reach and target them exclusively, you will have a much easier time satisfying their needs. So read on to learn the keys to market segmentation!* Do you want to boost your website's positioning on Google? We're sharing 10  keys to improving SEO ranking in our FREE ebook! Download it here.

Market Segmentation Definition and Effective Strategies

What Is Market Segmentation?

In technical terms, market segmentation is a marketing process by which a company divides a large market into smaller groups composed of people with certain similar characteristics.

What you need to identify when segmenting is groups that have common needs. This will make it much easier for you to develop an effective marketing strategy that is tailored to the audience you want to reach.

What Are the Characteristics of a Market Segment?

Market segments must meet a series of characteristics in order to be useful to you when you're developing your marketing strategy. They must:

  • Be measurable. In order to know how many people you are targeting, you need to be able to measure the size of each segment. Segmentation tools on advertising platforms such as Facebook Ads make this job easier by providing an approximate size of the audiences according to different filters. You should also be able to analyze the main characteristics of the market segment, such as its purchasing power.

  • Be the right size. Market segments need to be large enough to be profitable. The minimum size will vary depending on how big your own company is. On the other hand, they should not be excessively large, as this would distort them.

  • Be accessible. You must be able to reach the market segment you have identified and communicate with them using available resources.

The Advantages of Market Segmentation

  • Market segmentation allows you to understand the needs of a specific portion of the public in order to offer them the products that best suit their situation, which results in a much better fit between your brand and the market.

  • It allows you to make more personalized marketing strategies based on the unique interests and characteristics of your segment. For example, if the group you want to connect with belongs to a certain generation, you can play on nostalgia by using references from their childhood or teenage years.

  • It reduces costs, since you won't waste resources on a target audience whose characteristics do not match your brand's.

  • It helps you identify new opportunities. If you clearly define the segment you are targeting, you will be able to identify patterns that will allow you to get ahead of other brands.

  • Increases loyalty and sales. If you tailor your product offering, price, and messaging to the specific needs of your audience, they will respond much better. This in turn will lead to more conversions, and it will be easier for you to retain your customers in the long term.

Types of Market Segmentation

Geographic Segmentation

The first thing you need to know about your market segment is where they live. Although ecommerce is breaking down distribution barriers, it is normal to target people who live in a specific country or region. This will also determine the language(s) of your messages.

But the country (or region) is not the only geographical aspect to consider. It's important to also take into account aspects such as whether your market segment lives in a coastal or inland area, in urban or rural areas, the climate, etc.

Demographic Segmentation

Demographic market segmentation takes into account characteristics such as age, gender, nationality, marital status, profession, purchasing power, and so on.

In terms of age, in marketing we usually divide users into different generations, each of which has a different consumption style. Thus, we speak of Baby Boomers, Gen X, Millennials and Gen Z.

Psychographic Segmentation

This is one of the most complex types of market segmentation, as it takes into account the personality, lifestyle, values, interests, and concerns of the people who make up the market segment.

One of the "classic" psychographic categorizations in marketing was the VLAS survey, which asked thousands of Americans about their values, attitudes, and lifestyles and classified them into 8 distinct types: innovators, thinkers, achievers, experimenters, believers, strivers, creators, and survivors.

Behavioral Segmentation

In digital marketing you have a large amount of data on users who have interacted with your brand. This allows you to carry out behavioral segmentation.

This is where all kinds of elements related to decision-making and purchasing come into play. It includes things like if a user has visited your website, if they have bought complementary products, if they usually visit pages related to certain topics, etc.To accurately segment by behavior, it is necessary to collect and analyze all these data points and identify the most relevant patterns and trends for your brand.

Company Segmentation

This type of market segmentation is very important for brands in the B2B sector. It takes into account the attributes of the company the users work for, such as the industry, size, location or the number of employees.

Keyword Segmentation

Finally, when you segment based on the digital positioning of a brand, you must take into account the keywords that your audience has searched for because these are the topics that interest them.

Market Segmentation Strategies

To put all this into practice, you must choose and implement a market segmentation strategy. Let's see what the main options are depending on the characteristics of your company and your products.

Undifferentiated Segmentation Strategy

The undifferentiated segmentation strategy is what is known as "mass marketing", since it seeks to target the majority of the market. In reality, this strategy is non-segmentation.

Targeting too broad an audience makes campaigns less effective and can lead to wasted time and resources, but it may be the right choice for large companies selling generic products. Even so, each product range within the company is likely to target a more specific market.

Differentiated Segmentation Strategy

Differentiated segmentation or segment marketing is halfway between mass marketing and personalized marketing. Here, a company seeks to identify broad segments of the market with certain common characteristics and adapt their marketing to each of them.

Niche Segmentation Strategy

Niche market segmentation goes one step further, as it seeks to identify "micro-segments" whose needs are not being met.

Typically, a niche is a smaller sub-segment within a market segment, which has a number of unique characteristics that make it worthwhile to target independently.

Between the sheer amount of user data and the marketing automation tools that are available, it's possible to fine-tune campaigns and target specific niches. In fact, certain marketing trends are moving in that direction, such as the shift from macro-influencers (where the important thing was to reach large audiences) to micro-influencers (who specialize in a specific niche and have high levels of interaction and loyalty).

Niche segmentation further accentuates the advantages of market segmentation but, in order to be profitable, you must ensure that the audience you are targeting is of sufficient size. It's important to balance specialization and critical mass.

Customized Segmentation Strategy

Finally, we reach the highest level of segmentation: considering each consumer individually to create personalized marketing campaigns.

This option is becoming increasingly popular thanks to the possibilities offered by technology. Many companies give customers the option to participate in the design of a product, meaning the result will be unique and perfectly tailored to their preferences. In addition, marketing automation tools make it possible to send highly personalized communications based on factors such as a user's registration date or interactions with a brand. This results in marketing that fits each individual like a glove and achieves the best results.

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Laia Cardona