Marketing Segmentation: A Beginners Guide
Marketing segmentation sounds like one of those buzzwords marketing “gurus” toss around. But, you would be surprised that many marketers don’t fully understand marketing segmentation. They think it simply means creating separate marketing campaigns for different genders and age groups. However, while that is a great example, marketing segmentation entails much more.
If you’re just now hearing of marketing segmentation or want to learn more about it, not to worry. In this guide, we will demystify the concept by explaining the basics of marketing segmentation and how to use it to boost your sales. Here’s what you will learn.
- What is Marketing Segmentation
- Types of Marketing Segmentation
- Marketing Segmentation Example
- Why is Marketing Segmentation Important?
- The Benefits of Using Marketing Segmentation
- How Artificial Intelligence and Machine Learning Can Help With Market Segmentation
- Reasons You Should Upgrade Your Marketing Segmentation
What is Marketing Segmentation?
Marketing Segmentation (also referred to as market segmentation) is the creation of separate marketing strategies and campaigns for different segments of the same business or product. Still doesn’t make sense? Okay, let’s explain it better.
Marketing segmentation is a process in which you divide your prospects or customers, according to shared characteristics, into different groups known as segments. Then, you create specific marketing strategies and messages that speak to their unique needs. Here’s a market segmentation example.
Say you want to run a Father’s Day marketing campaign for a gift items store, and your target market is women. You can make more sales by creating separate campaigns for different age group segments. The Father’s Day gift a college-age person would buy would be different from someone in her late thirties. This is the most basic type of marketing segmentation, and it’s known as demographic segmentation. Now, let’s explore the different types of market segmentation.
Types of Market Segmentation
Marketing segmentation depends on shared characteristics that prospects in your target market have in common. Traditionally, there are four types of market segmentation.
1. Demographic segmentation
This is the most popular type of marketing segmentation. You’ve probably used it at some point, unknowingly, such as for Facebook Ads setup. Demographic segmentation involves grouping your prospects by identifiable or observable characteristics. These include things like sex, age, educational level, occupation, religion, and so on.
2. Behavioral segmentation
Behavioral segmentation is based on your prospects’ habits, actions, and how they interact with your business and other brands. It may include segments such as their shopping habits, the type of content they read or websites they visit, how often they use a tool, and so on. This type of segmentation is the most useful as it enables you to identify the stage of awareness of prospects, and create targeted campaigns that will prompt them to take action. You can get data for behavioral segmentation by analyzing your website data and using cookies to track your customers’ behavior.
3. Geographical segmentation
Just as the name implies, this marketing segmentation is based on location. You can create marketing campaigns according to where your prospects live, as well as the characteristics of their location. Is their location an urban or rural area? Is the climate warm or cold?
4. Psychographic segmentation
Psychographic segmentation is a marketing segmentation that involves grouping your prospects based on characteristics, such as personality traits, lifestyle, values, mentality, interest, and so on. This type of market segmentation is more complex than the others as the characteristics are subjective.
Marketing Segmentation Example
Say you want to market a productivity software, here is how you can use the four types of marketing segmentation to improve your campaign.
- Demographic Segmentation – Segment by age and occupational status. The productivity needs of a young adult still in college will be different from that of an employed middle-aged man.
- Behavioral Segmentation – Segment by websites visited. Prospects who have visited competitors like ClickUp are likely in the product-aware stage, so your campaign would focus on selling your software as the better product.
- Geographical Segmentation – Segment by country or state in a particular country. People in the U.S. may more likely purchase your software than those in the Bahamas.
- Psychographic Segmentation – Segment by interest. People who follow authors of books on productivity may more likely pay for a productivity app.
Why is Marketing Segmentation Important?
You may ask, “is marketing segmentation really important?” Well, the short answer is that marketing segmentation is a must if you want to make more sales. Without segmentation, you may be missing out on the chance to increase your revenue by 760%, according to a Campaign Monitor report.
Marketing segmentation is important as it helps you identify the most profitable segments of your target market. And, with this information, you would know where to focus your marketing efforts and resources to get higher conversion rates and make more sales. Now, let’s explore the benefits of marketing segmentation.
The Benefits of Using Marketing Segmentation
Marketing segmentation offers several benefits, including increasing your click rate and improving your conversation rate. Outlined below are the top 3 benefits of using marketing segmentation in your business.
- Enhances Campaign Performance
As we mentioned previously, segmentation would enable you to run more specific campaigns that speak directly to prospects and increase your conversion rate. Different prospect segments have different pain points, and segmenting your marketing campaign will help you address how your solution solves their specific problem.
- Informs Better Product Decisions
The data you acquire from your marketing segmentation can indicate which products or services are bestsellers, and who is paying for them. With this information, you can introduce other related products or services you can cross-sell or tweak existing products to market to your most profitable segment.
- Provides Insights for Other Business Decisions
Marketing segmentation provides insights on your target market. Knowing your customers and how they are likely to behave around your product through market segmentation can inform other important business decisions such as your pricing, branding, and sales distribution.
How Artificial Intelligence and Machine Learning Can Help With Market Segmentation
In today’s world, to get an edge over your competitors, you have to leverage technology, and artificial intelligence (AI) and machine learning are the latest techs. Traditionally, marketing segmentation is done manually, and it can be strenuous and time-consuming to collect all necessary data. Additionally, it often results in large segments that are not highly targeted and are difficult to adjust during a campaign.
Enter AI & machine learning for marketing segmentation. Artificial intelligence can help to create ultra-targeted segments by quickly accessing and combining data from different sources, and the entire process is automated. On the other hand, machine learning can help adjust the marketing campaign in real-time to suit a segment, as the market changes. Thus, you should consider upgrading your marketing segmentation with AI and machine learning.
Reasons You Should Upgrade Your Marketing Segmentation
Whether you’re just getting started with marketing segmentation, or you already have a traditional process in place, you should upgrade your marketing segmentation; and here’s why. First, the upgrade will free up your time to concentrate on other things, as the segmentation process is automated. No need for close monitoring, updating, nor maintenance. Just get it set up, sit back and let the technology do the work.
Secondly, the segmentation is not limited by human fatigue and bias. This means that an unlimited number of segmentation characteristics can be analyzed and used to target prospects. Even better, AI and machine learning can connect obscure patterns in segmentation data to show your campaign to qualified look-alike prospects you would otherwise not include in a traditional segmentation. Lastly, they can adjust your variables such as headlines, copy, images, and CTAs during a campaign to suit a prospect’s segment.
Ultimately, upgrading to AI and Machine learning marketing segmentation takes away human limitations and biases, producing only fact and data-based segments that yield increased conversion rate and boost your sales.
What’s Next?
Before you start another marketing campaign, ask yourself, “What segment of my target market is this campaign for, and what are their characteristics?” We can answer that question for you. Yes, that’s what we do. Talk to our team today to get smart AI-powered marketing segmentation that will boost your sales.
