Segmentation And Targeting
Segmentation & Targeting surveys help you understand what different members of your target market have in common—and how they differ. Here are a few different types of segments used by marketers:
Some of the most critical data points on existing and potential customers are their basic demographics. These include income, gender, race, education level, and marital status. Demographic segmentation is often a useful way to divide up your target market.
Demographic Segmentation & Targeting Examples
- Family Situation
- Annual Income
Where people call home can drastically change how they respond to interactions with your company. Learn where your target customers live, and tailor your marketing efforts to account for their local values, whether they live in an urban or rural area, their climate-specific needs and behaviors, and other traits.
Geographic Segmentation & Targeting Examples
- ZIP code
- Radius around a certain location
- Urban or rural
Some of your most subtle but powerful marketing insights can result from informed psychographic segmentation. This research, for which surveys are especially useful, allows you to divide your customers into groups based on their lifestyle—their attitudes, values, habits, and opinions. Psychographic segmentation helps decode the emotional elements of buying that might otherwise seem mysterious.
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Psychographic Segmentation & Targeting Examples
- Personality traits
- Psychological influences
- Subconscious and conscious beliefs
Behavioral segmentation research reveals how customers interact with your particular product or service. For example, how often do they buy it, and where? Position your marketing differently for those who use your product as a daily necessity versus those who see it as a luxury and use it only occasionally.
Behavioral Segmentation & Targeting Examples
- Purchasing habits
- Spending habits
- User status
- Brand interactions
Segmentation strategies can vary drastically for different businesses. Say, for example, you sell raincoats. Demographic segments like men, women, and children probably have drastically different preferences. Similarly, types like geographical segmentation might reveal that people who live somewhere where it rains all the time might view raincoats differently from someone who lives in the desert.
When you understand these different segments (and segment types) you can begin to craft customer profiles and positioning and focus efforts from product development to advertising to make sure you’re hitting the mark.
How to create market segments
Segmentation typically occurs as part of a marketing, product, or customer support effort. Here are a few times when you might seek to create segments:
When you survey potential customers who are likely to consider your product or service, you’ll have an opportunity to segment. For example, if you send a survey questionnaire about a new product concept to a broad group of people, adding demographic questions will help you understand the differing appeal to men and women, who you might want to focus your marketing efforts on, and what shortcomings you need to address to increase your market size. Segmentation can be a useful strategy, whether you’re interested in concept testing, branding, or product development.
Whether you have customers, clients, or patients, it’s likely that different people have different experiences with your brand. Adding questions to your CSAT and NPS surveys that allow you to segment your customers makes it easier to pinpoint issues and improve customer service.
But segmentation isn’t limited to these scenarios. Event planners might segment sponsors from attendees. Educators might look at the differences between boys and girls, or teachers and support staff. HR departments might segment survey results by job level or department.
The key is to think about how you might want to segment before writing a survey. If you don’t ask the right questions, you might not be able to segment your market the way you want to when it comes time to analyze your results.
Eight Benefits of Segmentation & Targeting
The importance of Segmentation & Targeting is that it makes it easier to focus marketing efforts and resources on reaching the most valuable audiences and achieving business goals.
Segmentation & Targeting allows you to get to know your customers, identify what is needed in your market segment, and determine how you can best meet those needs with your product or service. This helps you design and execute better marketing strategies from top to bottom.
1. Create stronger marketing messages
When you know whom you’re talking to, you can develop stronger marketing messages. You can avoid generic, vague language that speaks to a broad audience. Instead, you can use direct messaging that speaks to the needs, wants, and unique characteristics of your target audience.
2. Identify the most effective marketing tactics
With dozens of marketing tactics available, it can be difficult to know what will attract your ideal audience. Using different types of Segmentation & Targeting guides you toward the marketing strategies that will work best. When you know the audience you are targeting, you can determine the best solutions and methods for reaching them.
3. Design hyper-targeted ads
On digital ad services, you can target audiences by age, location, purchasing habits, interests, and more. When you use Segmentation & Targeting to define your audience, you know these detailed characteristics and can use them to create more effective, targeted digital ad campaigns.
4. Attract (and convert) quality leads
When your marketing messages are clear, direct, and targeted they attract the right people. You draw in ideal prospects and are more likely to convert potential customers into buyers.
5. Differentiate your brand from competitors
Being more specific about your value propositions and messaging also allows you to stand out from competitors. Instead of blending in with other brands, you can differentiate your brand by focusing on specific customer needs and characteristics.
6. Build deeper customer affinity
When you know what your customers want and need, you can deliver and communicate offerings that uniquely serve and resonate with them. This distinct value and messaging leads to stronger bonds between brands and customers and creates lasting brand affinity.
7. Identify niche market opportunities
Niche marketing is the process of identifying segments of industries and verticals that have a large audience that can be served in new ways. When you segment your target market, you can find underserved niche markets where you can develop new products and services.
8. Stay focused
Targeting in marketing keeps your messaging and marketing objectives on track. It helps you identify new marketing opportunities and avoid distractions that will lead you away from your target market. There are four primary categories of segmentation, illustrated below.
|Definition||Classification based on individual attributes||Classification based on company or organization attributes||Classification based on attitudes, aspirations, values, and other criteria||Classification based on behaviors like product usage, technology laggards, etc.|
|Examples||Geography Gender Education Level Income Level||Industry Location Number of Employees Revenue||Lifestyle Personality Traits Values Opinions||Usage Rate Benefit Types Occasion Purchase Decision|
|Decision Criteria||You are a smaller business or you are running your first project||You are a smaller business or you are running your first project||You want to target customers based on values or lifestyle||You want to target customers based on purchase behaviors|
|Difficulty||Simpler||Simpler||More advanced||More advanced|
Target marketing involves the identification of the most profitable market segments. Therefore, businesses may decide to focus on just one or a few of these segments. They may develop products or services to satisfy each selected segment. Such a target marketing strategy differs from mass marketing (where a company may decide to produce and distribute one product to all consumers) or from product differentiation (where a company offers a variety of products to a large market). Marketers have been moving away from mass marketing endeavors, as they are increasingly targeting smaller segments with customized marketing programmes. In this light, this chapter sheds light on the process of Segmentation & Targeting. It clarifies how businesses could select the most profitable segments as they employ market coverage and positioning strategies to attract them. A market segment is a group of individuals, groups, or organizations who may share the same interests, traits, and characteristics. The consumer segments may have similar needs, wants, and expectations. Therefore, businesses should ask themselves which segments they should serve. To answer this question, businesses must determine the most appropriate ways to distinguish and differentiate their segments. Once the segments have been identified they must customize their offerings to satisfy each and every one of them. Segmentation & Targeting is the actual process of identifying segments of the market and the process of dividing a broad customer base into sub-groups of consumers consisting of existing and prospective customers. Segmentation & Targeting is a consumer-oriented process and can be applied to almost any type of market. In dividing or segmenting markets, researchers typically look for shared characteristics such as common needs, common interests, similar lifestyles, or even similar demographic profiles. So, Segmentation & Targeting assumes that different segments require different marketing programmes, as diverse customers are usually targeted through different offers, prices, promotions, distributions, or some combination of marketing variables. For example, Southwest Airlines’ single-minded focus on the short-haul, point-to-point, major-city routes, allowed them to prosper as their competitors floundered. The airline’s focus on specific segments allowed them to do a better job of deciding what their target segment really valued (for example, convenience, low price, on-time departures, and arrivals, among other things). Once the customer segments have been identified and profiled, the marketer must decide which segment to target. Diverse customers will have different expectations. For instance, there may be customers who will value a differentiated, high-quality service, whilst others may be more price-sensitive. Notwithstanding, not all firms have the resources to serve all customers in an adequate manner. Trying to serve the entire market could be a recipe for disaster. The overall aim of segmentation is to identify high-yield segments. These are likely to be the most profitable groups of customers or may hold potential for growth. Hence, the most lucrative segments will usually become target markets. In the tourism industry, the business traveler is usually considered an attractive segment. However, there are different types of business travelers:
- The Hard Money Travellers (or the independent business travelers), include the business individuals traveling at their own expense;
- The Soft Money Travellers (or corporate business travelers), include business individuals traveling on an expense account;
- The Medium Money Travellers (or the conference or incentive business travelers), include business individuals traveling within a group;
- The Interim Travellers, include business travelers who are combining personal travel with a business trip;
- The Frequent Short Travellers, include business travelers who consistently fly a short-haul route;
- The Periodic Travellers include sales persons who make a round of stops on a steady itinerary.
However, these six groups are said to be only part of some other travel groupings which have often been identified as principal sources of revenue for the tourism industry. Travel and tourism marketers must analyze these various segments. They must then select at least one segment and decide how to service them, in terms of fare prices, facilities, frequencies, and special features. By dividing the market into segments, marketing managers can acquire a better understanding of the needs and wants of customers. This enables them to customize or to ‘tailor’ the company’s marketing activities more accurately and responsibly to the individual customers’ liking. Segmentation marketing supports businesses in meeting and exceeding their customers’ requirements. It may also allow them to evaluate the competitors’ strengths and weaknesses. This way, they could discover business opportunities in markets that were not served well. Customer segmentation enables marketers to adopt a more systematic approach when planning ahead for the future. This leads to better exploitation of marketing resources, resulting in the development of a more finely-tuned marketing programme. For example, the businesses’ integrated marketing communications can be better organized, as targeted advertising (for example native advertising) and promotional activities can be directed at individual customers. For example, the emergence of data-driven, digital technologies such as sensor analytics, geo-location, and social data capture could track the users’ movements and other real-time phenomena. These disruptive technologies are increasingly being used by tourism businesses as they add value to customer-centric marketing endeavors.
The data was collected through the internet, research paper,s and online journals.
Create a Segmentation & Targeting Strategy
Now, you know what Segmentation & Targeting is, why it’s important, and the four types of Segmentation & Targeting. It’s time to put this information into practice.
Use the following Segmentation & Targeting process to learn about your audience and find new marketing and product opportunities.
1. Analyze your existing customers
If you have existing customers, start your Segmentation & Targeting process by performing an audience analysis. An audience analysis allows you to learn about your customers and begin to identify trends that exist within your current customer base. Use these market research questions to guide your research.
Interview your customers.
Go right to the source and conduct interviews with existing customers, past customers, ideal customers, and prospects and leads. Ask questions that help you fill in the details of all four types of Segmentation & Targeting.
Interview your sales team.
If you have a sales team that spends a lot of time working with customers, use them as a resource. Interview them to find commonalities or trends they often see while working with your customers.
Refer to your business data.
Your business likely has loads of data that can help you get to know your customers. Use your customer relationship management tools and point-of-sale systems to find trends related to behavioral segmentation. Pull data that shows how much customers spend, how often they visit your store, and the type of products and services they buy.
Use your website analytics.
Your website also has data that can help you learn about your audience. Use Google Analytics to find details related to all four types of Segmentation & Targeting. For example, you can learn about customer behavior by seeing what pages users visit, how long they stay on the site, and what referral sites led them to your site.
Research audience geography.
Get details for graphic segmentation and find out where your audience lives using Alexa’s Site Overview tool. Enter your site URL, and the report shows you where your website visitors are located across the world.
Research audience interests.
Knowing your audience’s interests can help you identify psychographic segments within your customer base. Use Alexa’s Audience Interest tool to find topics and categories that your audience cares about.
2. Create a buyer persona for your ideal customer
Once you complete an audience analysis, you’ll have a good idea about who your current customers are. In the next step, take your data and use it to create a buyer persona that describes the exact type of customer you’d like to attract.
A buyer persona is a semi-fictional description of your ideal customer. It allows you to clearly visualize the person that your brand is trying to attract. Knowing whom you want to work with will make it easier to find the right market segment opportunities.
3. Identify market segment opportunities.
Once you have a buyer persona that describes your ideal customer, start looking for market segment opportunities.
A market segment opportunity is a trend that can drive new marketing tactics or offerings. To find them, first, ask questions about your brand.
- What problems does your brand solve?
- What problems can you solve better than your competitors?
- What do you know a lot about or excel at?
- Who do you and your team like to serve?
Then, refer back to your audience analysis and buyer persona and ask questions that uncover opportunities.
- What large segments stick out?
- What customer characteristics or qualities are most common?
- What segments are currently not being served?
- What segments is your brand uniquely qualified to serve?
Identify a few potential market segment opportunities, and then research to confirm that they are viable.
4. Research your potential segment.
Before you launch a marketing campaign for a new segment of your market, verify that it is a good option. Research to see what competition exists and if audiences are interested in your new market.
Research the competition.
If there is interest in your market, research to see what competition is already in the space. Use Alexa’s Keyword Share of Voice tool to find brands already in the market. Enter a search phrase to create a report with brands that own the top share-of-voice for the phrase.
5. Test and iterate
Once you find a new market you want to explore, don’t go all in just yet. Create a few campaigns to test your idea.
Try new markets and track your results to see where you can find a sweet spot that resonates with audiences. Small market tweaks can lead to big results, so continue to go through this process, test, and iterate based on what you learn.
Ensuring Effective Segments
After you determine your segments, you want to ensure they’ll be useful. A good segmentation analysis should pass the following tests:
- Measurable: Measurable means that your segmentation variables are directly related to purchasing a product. You should be able to calculate or estimate how much you segment will spend on your product. For example, one of your segments may be a coupon maven, who is more likely to shop during a promotion or sale.
- Accessible: Understanding your customers and being able to reach them are two different things. Your segment’s characteristics and behavior should help you identify the best way to meet them. For example, you may find that a key segment is resistant to technology and rely on newspaper or radio ads to hear about store promotions, while another segment is best reached on your mobile app. One of your segments might be a male retiree who is less likely to use a mobile app or read an email but responds well to printed ads.
- Substantial: The market segment must have the ability to purchase. For example, if you are a high-end retailer, your store visitors may want to purchase your goods but really can’t afford them. Make sure, an identified segment is not just interested in you, but can be expected to purchase from you. In this instance, your market might include environmental enthusiasts who are willing to pay a premium for eco-friendly products, leisurely retirees who can afford your goods, and successful entrepreneurs who want to show off their wealth.
- Actionable: The market segment must produce a differential response when exposed to the market offering. This means that each of your segments must be different and unique from the other. Let’s say that your segmentation reveals people who love their pets and people who care about the environment have the same purchasing habits. Rather than have two separate segments, you should consider grouping both together in a single segment.
Segmentation & Targeting is not an exact science. As you go through the process, you may realize that segmenting based on behaviors doesn’t give you actionable segments, but the behavior does. You’ll want to iterate on your findings to ensure you’ve found the best fit for the needs of your marketing, sales, and product organizations.
Some types of behaviors to look at include:
- Online shopping habits: You might consider a user’s online shopping habits across all sites, as this may correlate with the likelihood that they will make an online purchase on your website.
- Actions taken on a website: You can track actions users take on your online properties to better understand how they interact with them. You might look at how long someone stays on your site, whether they read articles all the way to the end, the types of content they click on, and more.
- Benefits sought: This refers to the need a customer is trying to meet by purchasing a product.
- Usage rate:You can categorize users based on usage rate. Your messaging will be different depending on whether someone is a heavy user, medium user, light user or non-user of your product.
- Loyalty:After using a product for some time, customers often develop brand loyalty. You can categorize customers based on how loyal they are to your brand and tailor your messaging accordingly.
In a recent survey of marketing professionals in North America, 62 percent of respondents said improving audience segmentation to enable more precisely targeted messaging was a top priority. There’s a reason improving segmentation was the most frequently reported priority in the survey. Segmentation & Targeting offers many benefits to marketers, publishers and others, including the following advantages.
1. Improves Campaign Performance
Segmentation & Targeting can help you to improve the performance of your marketing campaigns by helping you to target the right people with the right messaging at the right time. Segmentation enables you to learn more about your audience so you can better tailor your messaging to their preferences and needs.
Targeting a specific segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience. If you advertise to an entire market, you will end up spending a massive amount of money on ads, but a relatively small percentage will convert. If you instead direct your marketing to a segment with the right characteristics, you can increase the conversion rate of your campaign considerably.
The more specific the audience of people interested in your brand, the more beneficial targeting can be. For example, there’s no reason to market dental tools to anybody but dentists. Marketing them to a broad audience would result in wasted ad dollars.
Even if you’re selling a product with broad appeal, customer segmentation can help you tailor your messaging to different groups to better engage with them. Say that you’re advertising furniture. You might split your audience up by age and push individuals ads that show people who are close to their age.
2. Informs Product Development
Segmentation & Targeting can also help companies to develop products that better meet the needs of their customers. You can create products to appeal to needs your main market segment may have and develop different products tailored to different parts of your customer base.
Say, for instance, you run an automotive company, and your primary market segment is middle-class families. You would likely design your car with lots of seating, leg room and space to accommodate a family with multiple kids. You would also create mid-range priced vehicles.
You could, however, also segment your audience further, and create vehicles that appeal to each of those segments. For example, one segment might be families who like to go on outdoorsy vacations. To appeal to this group, you could offer a vehicle with four-wheel drive and lots of cargo space. Another segment might prefer to take trips into the city. You might make this car smaller so that the drivers can easily navigate narrow city streets and fit into tight parking spots.
Designing your products with the needs of your customers in mind will help you to sell more and will make your customers happier. Your customers will also feel like you understand their needs, improving your company’s reputation.
3. Reveals Areas to Expand
Segmentation & Targeting can also help businesses to identify audience segments that they are not currently reaching with their marketing efforts and then expand into new markets.
When you look at your audience data, you might discover interests that you didn’t realize your customers had. For example, a company might make the majority of their sales in physical stores. When looking at behavioral data, they might see that many of their customers like to shop online. Based on this information, they could then either open an online store or stat advertising their online marketplace more.
As another example, a clothing company that primarily targets middle-aged women might decide to start selling kids clothing as well. They could introduce these items and market them to their current customers, encouraging them to buy them for their kids.
4. Improves Business Focus
Segmentation & Targeting can also help businesses to focus their efforts, which enables them to establish a brand identity and specialize in a particular type of products. A brand that tries to appeal to everyone in their marketing will come off as generic and unmemorable. It could also leave customers confused about what the brand stands for and what kind of company it represents. Similarly, a company that tries to sell everything likely won’t make a big impact in any one market, and its offerings may be of lower quality compared to companies that specialize. As your company grows, you can expand your offerings, but when first starting out, it can be challenging to differentiate your company if your product offerings are too broad.
5. Informs Other Business Decisions
Segmentation & Targeting can also help to inform other important business decisions regarding how you get your product to customers. These decisions may involve matters such as pricing and distribution.
Businesses can use segmentation to help them decide on pricing that maximizes sales while keeping customers happy. Companies may consider demographic information such as income levels. They may also take into account their customers’ price sensitivity — the degree to which their price affects their purchase decisions. Paying attention to seasonal demand changes can help businesses time special deals to boost sales.
Segmentation & Targeting can also help companies to determine the optimal strategies for the distribution of their products. Some groups of people, for instance, are more likely to shop online, while others are more likely to shop in a store. Companies can also decide which stores to pitch their products to based on where their market segment shops. Their customers may, for example, shop at luxury boutiques or bargain outlets. Looking at geographic data can also help a company decide where to set up a new store.
Conclusions and Recommendations
The final stage in target marketing is product positioning. Firms formalize “positioning statements” which specify the position they wish to occupy in their target customers’ minds, relative to other competitors’ products or services. Customers continuously compare products or services. Therefore, marketers must build their positioning strategies to improve the customers’ (and prospects’) perceptions of their products. Effective product positions have four important characteristics. Firstly, they are built around benefits for prospective customers. Secondly, they differentiate the specific firms’ products or service from those of key competitors. Thirdly, the respective firms need to possess relevant skills, resources, and the credibility to deliver on their implied statements and promises. Finally, an effective position is defensible, which means that an aggressive competitor cannot act quickly to neutralise or preempt another positioning strategy. For example, a full-service, national carrier could differentiate itself among other competitors as the only airline offering a superior service in its chosen markets. The tourism businesses should stand out from their rivals whether they decide to position themselves alongside competitors, or to position themselves in untapped niches. They may position themselves for their high standards of service, additional amenities and so on. Alternatively, low-cost carriers like Southwest Airlines could position themselves as a punctual airline, as a no-frills airline, as a low-cost airline, as a safety-conscious airline, as a friendly airline, and as the airline serving the western part of the U.S. Recently, they used TV advertising to counter an unpleasant customer perception about the airline’s ‘free-for-all’ seating policy. The rationale behind this spot was to build an image in their consumers’ minds. It is virtually impossible to satisfy all customers, so it is up to the company to select the specific parts of the market which they can best serve. Therefore, businesses could identify market segments, select a few profitable segments, and develop products and marketing mixes that are aimed at particular customers. Target marketing is made up of three stages: Segmentation & Targeting, marketing targeting and product positioning. Segmentation is the identification of customer groups who share similar characteristics. This process has a number of advantages, and enables a marketing manager to design an effective plan for each segment. Usually, tourism companies segment their market by using demographic, geographic, psychographic, behavioral and product-related variables. The chosen segments ought to be measurable, accessible, substantial and actionable. Three market coverage alternatives including; undifferentiated marketing; differentiated marketing and concentrated marketing were also put forward in this chapter. Businesses should consider the most appropriate market coverage strategy according to their resources, the type of service to be offered and the diversities within the market. However, they should also evaluate their competitors’ market coverage strategies. The final stage in target marketing is product positioning. Consumers have different perceptions of products or services. Therefore, business should underline their products’ unique attributes, features and value propositions to differentiate themselves from other competitors in the marketplace.
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