People cannot digest massive amounts of information at one time. It is inconvenient, this means it is a marketers job to provide a message that meets the customers requirements directly. However, to do this we need to know our customer groups, which is process of segmentation.
Segmentation Definition – Segmentation is the process of dividing the broad market into smaller and more manageable groups of people so that you can target customer more effectively with your positioning strategy.
In this article, we are going to take a look segmenting that market once it has been established.
1. What Is Segmentation In Marketing?
Put simply, segmentation is arranging people into groups whereby they have something in common. Academics says market segmentation is the process of grouping people, into similar homogeneous attributes.
Segmenting people into similar groups is stereotyping people with informed building blocks. In society, we all know stereotyping is a bad thing as we assume things about people at first glance. Whereby, we are often wrong.
However, in marketing we group people from the data we have collected from intense market research. The groups we place these people in are the most part are accurate.
2. Why Is Segmentation Important
The importance of market segmentation is so businesses can position there products more accurately reach the target customer group. As well as, more efficiently utilising the corporate resources.
2.1 Segmenting to Reach Customers
Knowing your customer segments can benefit you massively because your know exactly how to speak to this person. You understand their tone of voice, their likes and dislikes. This means you can evaluate how to please this person, in both your corporate messaging and brand. As well as, evaluating whether you have what it takes to please this person and deliver to their requests.
Sometimes it is beneficial to avoid some customer groups if you cannot deliver to these people, because this can cause problem for your business model in the long term.
2.2 Segmenting to Utilise Corporate Resources
The mass marketing effect tells us that when businesses try to please everyone they end up pleasing know what and so it is less effective.
In addition, if you did satisfy everyone in the market, would use a lot of resources to do so, and you would have to create many variations of the same product.
…Okay, so some corporations like Volkswagen Acquire other businesses to do just that. But, these subsidiaries businesses each have their own set of capabilities to deliver to that segment. By which they use a process called lean management to deliver to their segments requirements, utilising their resources more efficiently.
3. Volkswagen Segmentation Example
They cleverly, leveraged a subsidiary brands to each of the segments in the market.
They do this by positioning the brand towards a specific group of person. For example, they position Audi towards more high-class people and Seat towards cheaper run-about drivers.
Volkswagen is able to leverage each brand and devise a message, which is specific to that target segment.
This means the sub brands become more relevant for that group of person.
Furthermore, they are able to gain a high percentage of the overall marketplace, making them more competitive.
Harvard business review states if specifically to the automobile industry by stating: “the marketing director of an automobile company needs to break down his potential market into segments representing key differences in susceptibility.”
As their promotion, programs could mistakenly aim their products at the wrong people, and by doing so the message would not resonate with the audience thus sales would fall.
4. Pillars Of Segmentation
Customers are grouped by common attributes, by using segment pillars.
4.1 Four Pillars Of Market Segmentation
- Psycho-graphic segment: Grouping your customers into cultural clusters, social status, lifestyle and personality type.
- Demographic: Grouping customers by age, income level, gender, family size, religion, race, nationality, language, etc.
- Behavioural: Grouping customers by product usage. For example; light, medium or heavy users. This stage also factors in brand loyalty and the type of user.
- Geographic: Grouping customers by a specific area, such regions of the country or state and urban or rural.
5. Rules For Segmentation
- Rule 1: Do not define your segments too broad. This will give competitors an advantage if they are targeting the same segment narrower.
- Rule 2: Organise your business by market segments. Many businesses have focused teams that work towards the needs of that specific customer group. By doing this they always know who they are talking to and can respond appropriately.
- Rule 3: Have market driven analysis and research. You need to know who you are talking to from market driven research. Otherwise, your ideas of the person’s wants and needs will be wrong.
6. The Process Of Information Collection
Market segmentation doesn’t have to be as difficult as most business professionals make it. Moreover, the process just takes time and research. It is important to prepare and do your research upfront to truly determine your segments.
- One: Have the market information at hand (the was in the previous article). Talking to your customers
- Two: Create market segments.
- Three: Evaluate the proposed market segments for viability.
- Four: Construct segment profiles.
- Five: Evaluate the attractiveness of each segment.
- Six: Expanding the segment.
By the process of segmentation provides the company with potential options. Even though the market is vague at first, by being more specific in your targeting will bring you better reward for your business.
In addition, good market segmentation research should provide your company with a clear direction to move forward with and an idea of which markets will be best to target.
Either that or you will take the mass marketing approach that has proven to wield less rewards for businesses. Not only that but market your research shows to target should represent a high share of potential profitability to the company.
Overall, more closely targeting niches have form closer relationships with your audience.