Marketing / Digital Marketing

Why should you segment your target market?

John Rampton

Updated: Sep 20, 2022 · 7 min read

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Target marketing or target arrow concept: Bullseye is a target of business. Dart is an opportunity and Dartboard is the target and goal.

Once a brand has a general target market for their products or services, they can segment it.  The overall benefit of market segmentation is that there are now groups of buyers that have been defined by their similar needs and wants. In doing so, a company can improve its return on investment through a buyer-based marketing strategy.  Here's why and how you should segment your target market.

Additional benefits of market segmentation

Besides better addressing the needs and wants of various groups, there are other benefits from this strategy. A company that leverages its target customer segments can significantly reduce its risk of marketing failure. Instead, they can make more accurate decisions about the where, when, who, and how of marketing. Since companies often have limited resources to spend on marketing, the choices made for each group can result in better responses and increased revenues.

In recognizing the differences between the various segments, there can be more clearly defined messaging that appeals to each group. This focus on differentiation can also set a brand apart from the competition that delivers a generic message to all its target audience members.

At the same time, similar needs, wants, and values can also be defined across the segments to provide an overriding consistency to branding and messaging. In combining the similarities and differences, a brand should be able to address all the dimensions that go into how a consumer or business approaches its decision to purchase a product or service.

From this information, a company should be able to generate a detailed product positioning statement that frames the entire marketing strategy and messaging. This positioning is aligned with specific needs and wants that then make the product or service as desirable as possible to that particular target market segment.

Best approaches to audience segmentation

There are two primary ways to develop a segmentation strategy: concentration strategy and multi-segment strategy. Within these segmentation strategies, there are numerous factors to use, including geography, demographics, behaviors, and psychographics.

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First, a concentration strategy focuses marketing efforts on only one market segment with one marketing mix. The benefit to this approach to audience segmentation is that a company can focus its efforts on one segment. For example, a luxury fashion brand will only focus on a wealthy target audience.

However, if that segment declines in interest or demand for a company's offering, then that company will struggle. Plus, it will take considerable time to start concentrating and attracting a new segment.

Second, a multi-segment strategy for market segmentation looks at two more market segments and develops a marketing mix for each segment it identifies. The overall benefit is greater sales versus those from just concentrating on one segment. However, there are greater costs involved in this approach due to the time and money necessary to study each segment and implement multiple marketing programs.

Types of marketing segmentation

No matter what approach you take to get the greatest benefit out of segmenting your target market, you will have to decide what type of segmentation to undertake. Widely used segmentation methods include:

  • Geographic segmentation includes larger groups by country, region, or state. It also involves more focused groups divided by city, neighborhood, and even zip code. This type of segmentation is beneficial if you are selling a product range that addresses various climate needs. Alternatively, geographical areas may have specific economic or cultural needs that are important factors for marketing.

  • Demographic segmentation involves factors like age, occupation, education, religion, race or ethnicity, gender, income and family size. Many factors link to specific needs, wants, and purchasing power.

  • Behavioral segmentation considers the knowledge and attitude of different groups in response to a particular product or service. This information is collected from studying past purchases.

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Additional segmentation factors

Other segmentation factors include the following that certain types of brands find useful:

  • Psychographic segmentation builds on the geography and demographics by applying more factors that influence purchase decisions. These factors include values, lifestyle, social class, and individual personalities. It is the area of the world and generation that a particular audience member that can separate them from a group of potential customers in a different area or from a different generation.

  • Certain types of groceries or personal care products are regularly bought throughout the year. Therefore, this type of segmentation factor can be important to certain brands.

  • Benefits segmentation may also be considered. When a product has multiple benefits— some of which may be more important to one aspect of a target market than another—this type of segmentation can be useful. For example, one group may prefer online payments while another uses traditional payment methods.

Generational segmentation

Looking at various generations and how they approach purchase decisions has become one of the most important and widely used target market segmentation strategies in recent years. Certain generations, such as millennials and gen Z, are wielding significant influence. As a result, more companies are making this segmentation factor one of the most widely used.

Each generation has certain values and perceptions about certain products and services as well as expectations about price and service experience. If a brand wants to win over these groups, they will have to deliver on their perceptions and expectations.

Deciding which segments to focus on

If there are multiple segments within your target market, then decide how many to focus on. Base this decision on your current budget size. Consider measurability, accessibility, sustainability, and how able they are to act on their needs and desires.

Market research helps you determine these factors for each segment. From there, you can narrow down the segments. Over time, you may also adjust which segments you pursue after tracking results from each.

John Rampton Bio Photo Small.jpeg 

John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the payments company Due.

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