SEGMENTATION
SEGMENTATION
SEGMENTATION
There is nothing new about this kind of segmenting in the pregnancy test market,
however. And it’s actually a really useful (if not slightly unsettling) example of how
you might segment potential customers with very different needs and behaviors.
For example, you could segment the market for early pregnancy tests based on
demographics such as age and income, or you could segment the market based on
consumers’ price sensitivity. But in this situation, it is useful to ask why: Why would
a woman want to take a pregnancy test? And are these reasons the same for
everyone? A little bit of thought would suggest that there are two groups of
women: hopefuls, those who want to be pregnant, and fearfuls, those who are
afraid that they might be pregnant.
How would you identify these two segments and market to them differently? Often
companies offer multiple products that appeal to different market segments and let
customers self-select. That is, the firm does not identify customers in various market
segments; instead, the customers reveal their market segment identity by choosing
different products. Quidol, a company based in San Diego, California, created two
different products to appeal to two segments in the market for early pregnancy tests:
the hopefuls and the fearfuls. The actual test products were almost identical, but the
two products were given different names and package designs, were placed in
different aisles of a drugstore, and were priced differently.
Segmenting, at its most basic, is the separation of a group of customers with different
needs into subgroups of customers with similar needs and preferences. By doing this,
a company can better tailor and target its products and services to meet each
segment’s needs. This isn’t, as McKinsey’s John Forsyth says, simply for marketing
or retail firms. “We see many, many companies saying, ‘I want to get more
consumer-driven and customer-facing. But sometimes the organizations don’t know
how to start. I’d say you really start with a basic understanding of your consumers or
customers, right? And that’s segmentation.”
It sounds straightforward but often it isn’t. Here are a few pitfalls that many
companies fall into when they start thinking about segmentation. One, companies
rarely create a segment — more often they uncover one. Two, segmentation and
demographics are very different things. “You have two people, we know they’re the
same age, we know they’re British citizens, and we know they’re of royal blood,”
explains Forsyth. “One of them is Prince Charles. The other is Ozzy Osbourne, the
Prince of Darkness. They’re in the same demographic segment, but I can’t imagine
marketing to them the same way.”
And three: you have to ask yourself why you want to segment and what decisions
you’ll make based on the information. “Many companies say, well, I think I just need
a segmentation,” says Forsyth. “But before you even start the segmentation, you need
to really understand why you’re doing it and what some of the actions are that you’re
planning to take, based on what you think you might see. It helps you understand
what’s actionable in terms of driving a company’s business.”
Once you’ve answered these questions, you have to decide whether you want to start
segmenting by needs or behaviors. “If you’re doing something strategic and you’re
trying to figure out if you have the right brands, the right value proposition, the right
product line, then I would say you should start with needs or attitude segmentation,”
explains Forsyth. This is basically trying to identify what needs your product or
service is or could meet.
“But if you think you’ve got that pretty much under control,” he continues, “and you
need to understand how to go to market or target your digital and TV spending, then
I would start with behavior.” This involves trying to identify differences in customer
groups based on their buying and lifestyle patterns, for example.
3) Accessible. It sounds obvious, but your company should be able to reach its
segments via communication and distribution channels. When it comes to young
people, for example, your company should have access to Twitter and Tumblr and
know how to use them authentically — or, as Clearblue smartly did, reach out to
celebrities with active Twitter presences to do some of your marketing for you.
Now you can start breaking down segments by who buys, what they buy,
and why they buy (or use or view, etc.) it. The pregnancy test interactive above is a
great example of how this works.
There are also prominent failures that companies should heed. One of the most
infamous is when Bic decided to segment its young female consumers. The “Bic
Cristal for Her” writing utensils were thinner, designed with more pastel colors, and
priced higher than other pens. Women, in general, were offended, taking to Amazon
to write some very creative reviews. The pen market, in other words, was not as
heterogeneous along gender lines as Bic had thought.
When thinking about how you segment, John Forsyth has several suggestions. For
one, he notes, “focus groups are dead. If you’re still using focus groups, you’re using
30-year-old technology.” A much better way to understand customer needs and
behaviors is to spend time with people in their homes, stores, or health clubs. “You
watch them, you talk to them while they’re doing the kinds of things we want to be
observing.”
This type of qualitative research is all the more important because it showcases real
stories that are key to convincing stakeholders. “When we illustrate things with
qualitative research, we get CEOs going, ‘Wow, you’re really telling me my marketing
strategy is all wrong and I need to change it,'” says Forsyth. “It’s very powerful, and
it’s really exploded in the last 10 years.”
Big Data and technology have changed how companies approach segmenting. “The
old model, particularly in the market research world was, ‘I understand people’s
needs and attitudes, and behaviors will come from that,'” Forsyth explains. “Today,
in many situations, [marketers] have flipped it to say, ‘I’m going to do segmentation
based on their behaviors, and then I’m going to try to understand the needs that
drive behavioral differences.”
He warns, however, that this type of segmentation is “a lot harder to do than people
think, and I don’t think we’re anywhere near being good at it yet.”
Forsyth’s also seeing a lot of movement in the area of segmenting emerging markets
worldwide, which poses a number of challenges. For one, scales marketers use to
measure needs or behaviors in one country may be way off in another due to
different cultural norms.
He also notes that affordability is still a huge factor in developing countries, too,
whereas it may not be elsewhere — as the $20 pack of digital pregnancy tests
demonstrates nicely.
CUSTOMER SEGMENTATION
In this customer segmentation guide, Forbes Advisor will show you what
customer segmentation is, why you need it and the different types and
strategies you can adopt to effectively reach various customers and increase
revenue.
There are several types of customer segmentation you can use for your
business. Each one has variables you’ll need to consider when segmenting.
Let’s look at the most popular ones below.
Demographic Segmentation
Demographic segmentation groups customers according to shared
characteristics, such as gender, age, marital status, educational level,
occupation, household income and location.
Interests: These are the things, such as sports, games, pets and
activities, that customers enjoy. You can, thus, direct your ads
towards their areas of interest or collaborate with relevant
institutions. For example, you can run a cross-promotional campaign
with a seniors’ home if a customer loves spending time with seniors.
Values: You can determine customer values from surveys or one-to-
one interviews. Then, pay attention to fine-tuning your product or
service to meet their specific needs.
Personality traits: You can also segment customers based on their
personality traits. Doing this will help you market to them in a way
they can better relate to and respond.
Behavioral Segmentation
Behavioral segmentation considers customer purchase history, response to
marketing campaigns and product or feature usage patterns when
grouping.
Device type: You can divide customers based on the specific type of
device they use to interact with your website, which can be a phone,
tablet or computer. Knowing this will direct your focus. For example,
if most of your customers visit from their phones, you need to
consider introducing a mobile app and ensuring that your site is
mobile-responsive.
Browser type: Customers use various browser types, including
Google Chrome, Mozilla Firefox and Safari. Find out the ones your
customers use to better drive your site layout. You might need to test
your content to ensure that they display properly on these browsers.
Original source: Customers can find you via social media, search
engines or even referrals from other customers or websites. You need
to know how they discover you so you can optimize the conversion
path.
How To Segment Customers
For the best outcome, you need to create specific plans for each segment.
You can use the segment information to determine the type of content and
products or features that will bring them the most value. Then create new
targeted content they can engage with, and craft a strategy to get it to them.
Also, find out the best time to send out content.
You can then personalize their emails and create more meaningful landing
pages. These will help your customers feel that you understand them, value
them and are willing to solve their issues faster.
Qualtrics
Qualtrics is a customer segmentation software with machine learning and
artificial intelligence (AI) capabilities to help you group customers into
segments. Qualtrics also organizes studies on segments, determines
optimal communication approaches for each segment and runs customer
segmentation analyses. It also provides segmentation features for your
products so you can fine-tune your product offerings to specific customer
segments.
HubSpot
HubSpot offers customer segmentation tools for creating segments from
static and active contact lists. HubSpot uses contact scoring to segment
your customers. This software also offers its users event-based
segmentation, which can help you locate customers within a specific area
and market to them. Also, after events, this customer segmentation tool will
use collated details from attendees to create customer segments for future
business events.
Segment
Segment is a suitable tool for aggregating data points from mobile and
website applications. It integrates with more than 300 software tools so you
can have your data in one place. Segment tracks customer interaction and
offers daily reporting. It will help your marketing team create specific
marketing campaigns and deliver personalized customer experiences.
Userpilot
Userpilot has advanced segmentation features for managing customer
relationships. With Userpilot, you can track customer engagement, from
where they visit to how often they click on specific elements on your
website and their journey as customers. Userpilot will segment your
customers based on their value to your business or however you want them
segmented. It is easy to use and it enables smooth integration with other
tools.
Bottom Line
Customer segmentation is relevant for all businesses, as it groups
customers based on shared characteristics to provide customers with the
exact experience they need. However, to enjoy business growth and sales,
which is the aim of customer segmentation, it is important to identify and
follow the fundamental strategies for customer segmentation. So, start
working on these strategies and use customer segmentation tools for faster
process
Gender
Age
Family status
Sexual orientation
Occupation
Income
Education
Religion
Ethnicity
Nationality
It's essential to segment your target market by demographics because these criteria affect
their individual needs. For example, a man in his early 30s has different preferences than a
woman in her late 60s. If your business sells shoes, you cannot appeal to both demographic
segments in the same way. The young man may be interested in athletic name-brand shoes,
while the older woman may want comfortable sandals with arch support. The marketing
you use to reach both demographic segments needs to take their requirements into account.
In some cases, people from different demographics may have the same needs, which is why
it's critical to understand your consumer on a granular level. For example, the customers of
a bakery may differ in religion, nationality, education and occupation, but they may all
desire the same baked goods and react the same way to the marketing.
Geographic Segmentation
Another way to segment the consumer market is geographically. Sometimes, this is seen as
a subcategory of demographic segmentation. Many businesses and marketers treat this
category as major because customers’ geographic criteria can significantly affect their
needs as consumers. Geographic segmentation elements include:
Consumers from different geographic areas have varying needs. An online retailer who
sells swimwear to customers across the United States and Canada may need to vary the
marketing to those consumers who live in colder climates. Many parts of Canada and the
northern United States have a beach season that only lasts for a few months. As a result, the
retailer needs to focus promotional efforts during this time in those areas, while in the
southern United States, they can run year-round promotions.
Similarly, a corner store that operates in a rural area with a sparse population uses different
marketing and sales tactics than a corner store on a busy metropolitan street with a high
population density. In these market segments examples, businesses need to understand how
geographic segmentation criteria affect the needs of their consumers.
Psychographic Segmentation
Values, such as what they believe to be important to them, including family, community,
money or success
Attitudes and opinions, such as how they feel about a political party or toward a key social
issue
Interests, such as what kinds of movies they watch or what their hobbies are
Activities, such as whether they play a sport or instrument or enjoy a cooking a particular
kind of cuisine
A consumer’s psychographic qualities affect which products and services they buy. For
example, consumers who strongly value environmental sustainability may look for products
that are manufactured using recycled materials. They may choose to buy only from
businesses with a formal program for reducing their carbon footprint. Some consumers only
support companies that are in line with their political or social beliefs.
For other consumers, their interests and activities determine the types of products and
services they buy. For example, an avid basketball player may want to buy basketball shoes
and jerseys, while a musician may be interested in specific instruments. By understanding a
segment's values, attitudes, interests and activities, businesses can market the right products
to them in the right way.
Behavioral Segmentation
While demographic, geographic and psychographic traits include specific qualities about
your customers and their needs, behavioral segmentation is about how your customers feel
about your products. According to NetMBA, this is a good starting point for market
segmentation because it is directly related to your business.
The way you market to a loyal customer is different from how you market to someone who
knows nothing about your business. Use behavioral segmentation to understand what your
consumers need and what they think of your business. If you approach loyal customers with
basic information about your products, they may feel insulted you think they don’t know it
already. Similarly, if you don't begin by talking about the benefits of your product to a new
prospect, they will not know what makes your solution better than a competitor's.
There are endless ways to segment your consumer markets, so how do you know which
segments to use? Segmenting your target market ineffectively may mean your marketing
message does not resonate with your audience. Qualtrics suggests doing a market segment
analysis to see if you have the right criteria. Consider these five elements when segmenting
your market:
Is your segment measurable: You need to be able to determine how much your consumer
market segment will spend on your products and when they will buy. If this is something you
cannot estimate, it won't be easy to develop sales and marketing plans.
Is your segment accessible: Segments of the consumer market you're targeting should be
easy for your business to reach. For example, if you have a potential market segment that
does not use technology but all of your company's marketing is currently done online, this
may not be the best segment for you to target.
Is your segment substantial: Your market segment needs to be a sufficient size to be worth it
for your business to cater to them. If it is too small, you won't see the kind of return you
need.
Does your segment have unique needs: If your market segment has the same requirements
as another market segment, you don't need to separate them. They need to be diverse
enough to require tailored marketing.
Is your segment durable: If your consumer market segment is volatile and changes
frequently, you may not be able to keep up with their needs.
When you've developed segments of the consumer market you want to target, you must put
your plans into action. Single Grain recommends creating buyer personas and ensuring your
marketing and sales teams are familiar with them. Develop personalized messaging for each
persona that takes into account their pain points and challenges and includes their needs.
Where possible, use personalization to show your consumers you understand them and can
help with their problems.