Reach your target market using market segmentation

You may have the best air conditioner in the world, but even so, you’re likely to have trouble selling it in Antarctica. The same rule applies to any product or service: no matter how good it is, the other half of the equation is finding the right target market for it.

This is where market segmentation comes into play. This marketing strategy lets you identify the different types of customers that you have and that you want, and it helps you reach them with the right product and the right message.

Let’s review the definition of market segmentation, how it relates to finding your target market and what types of market segmentation surveys you can use to gain an in-depth knowledge of your customers.

Market segmentation is the process of dividing a broad population or target market into subgroups of consumers according to certain shared factors. These can be based on demographics (age, gender, etc.), geographic location, attitudes and behaviour.

How does market segmentation relate to your target market?

A single person could be part of various different groups. They might share common interests or needs with one group, be residents of the same area as another or be the same age as another. Each of those subgroups could be a market segment for the brand or company doing the analysis.

How can segmentation strategies vary drastically for different businesses?

Let’s suppose you sell raincoats. Demographic segments such as men, women and children would probably have drastically different preferences from one another. Similarly, geographical segmentation might reveal that people who live somewhere where it rains often, e.g. Cardiff or Mumbai, view raincoats differently from people who live in Athens or Adelaide.

When you understand these different segments (and segment types) you can begin to craft customer profiles that allow you to better improve initiatives from product development to advertising in order to make sure you’re hitting the mark.

Let’s focus on some of the advantages of market segmentation.

Once you’ve spent some time segmenting your target market, you’ll be in a great position to enjoy its benefits.

Let’s suppose you have come up with a tasty new chocolate bar. How can you convince your target market to try it? The most effective approach would be to find out what your target audience likes about chocolate bars, or what motivates them to try something new. However, those likes and motivations are likely to differ based on certain characteristics of your prospective customers. For example, people who like cooking might be looking for chocolate that melts well, while workers who take chocolate snacks to the office might be looking for something that fits in their lunchbox. 

Including messages about both the meltability and snackability of your chocolate in the same marketing communications can be confusing and might lead to message overload. When you segment your market according to characteristics such as their demographics, habits and preferences, you’ll be able to tailor your marketing messages to each group to meet their individual and specific needs, and this will put you in a strong position to convert viewers or targeted accounts to customers. 

Linked to stronger marketing messages is targeted advertising. For instance, if you want to make sure messages about the meltability of your new chocolate reach bakers, you might want to invest in ads in cooking magazines or on baking websites. When you segment your market, as well as learn more about different segments’ needs, you also find out how best to reach them.

Customer acquisition costs are one of the most significant costs for businesses. These costs include all of the resources and strategies you use to reach and contact prospective customers and then convert them into buying customers, such as your marketing budget, your salespeople's salaries, advertising costs, inventory maintenance and more. If your salespeople, operations staff and marketers understand the different needs and preferences of different customer segments, they will be able to tailor their messaging, sales pitches and resource budgets so that there will be less waste of resources and costs can be significantly reduced.  

Not all customer segments are created equal! For example, some customers have a tendency to be more loyal than others; once they’ve found the right brand, they’re willing to stay with them and may spend more. Others prefer to switch between different brands and products and can be enticed away with deals. These differences mean that some segments of customers bring in more revenue than others, and these are the ones you should be targeting. But to do that, you’ll first need to slice your customers by segment.

Market segmentation can actually be a crucial tool in building profits. That’s because when you segment your market, you’ll have a much better understanding of the needs of your customers, which means that you can avoid wasteful marketing activities and invest in messaging and initiatives that better appeal to your most valuable customers. For instance, Spotify’s recent profit growth has been attributed to the way it segments and understands its 158 million subscribers, using its recommendation engine to locate and suggest songs that it knows each individual customer will love. 

Now you know the advantages of customer segmentation, how should you go about segmenting? In order to bolster your chances that market segmentation will help lower costs, improve marketing efforts and drive profits, you’ll need to identify effective market segments: segments that are measurable, accessible, substantial and actionable. Let’s take a look at each of these factors in turn.  

In order for your customer segments to be of value, they should be measurable. In other words, you should be able to gather quantifiable information about each segments’ size, preferences and needs, and purchasing power. Without this data, you won't be able to create targeted, effective and impactful marketing campaigns. So, first find out whether a market exists for your product or service, and then measure how many possible customers exist in the overall market, before moving on to perform market segmentation. That way, you can measure the size of each segment relative to the overall market.

The characteristics and behaviours of each of your segments should help you identify the best way to reach them at an affordable cost. For instance, if you find that a significant segment you’re targeting is housewives, you might be able to access them by, for example, placing advertisements on the kinds of websites that they like to visit. 

An effective customer segment is one that has the ability to purchase your product or service. It just doesn’t make business sense to spend time, money and effort trying to reach a tiny segment. Even if you do manage to convert most of them to customers, their low spending power represents a waste of resources.  You should try to define the profile, purchasing power and potential contribution to your bottom line of each segment and then focus your efforts on the most substantial segments.

Each segment should be differentiated from one another and should be able to respond to your marketing strategies in a way that yields value. To ensure that your segments are actionable, you’ll need to try to find out which marketing strategies are most effective for certain segments through market testing. We have a range of handy expert tools to help you: tools such as our Ad Creative Analysis for testing the impact of creative campaigns, or our Messaging and Claims Analysis, which you can use to make sure your messages resonate with your target segments. 

Now let’s look at the most common types of market segmentation.

Market segmentation surveys help you quickly understand what the various members of your target market have in common, and also how they differ. Here are a few different types of market segments you can apply to find your target market:

Some of the most critical data points on existing and potential customers are their basic demographics, such as how old they are, what their level of income is and how highly educated they are, etc. Demographic segmentation is often a useful way to divide up your target market and is generally a good first step in any marketing initiative. (You can research this topic in-depth on our demographic survey page.). The types of characteristics that you can use to build demographic segmentation include:

Where people call home can drastically change how they respond to interactions with your company. For example, if you’re selling cars, you’ll find that the needs and preferences of people who live in rural areas are very different from those who reside in the inner city. Learn where your target customers live and tailor your marketing efforts to account for their local values. Examples of data points you might consider using for geographic segmentation include:

Psychographic segmentation is a way of dividing the target market based on socio-economic class or lifestyle preferences. Psychographic segmentation helps decode the emotional elements of buying that may otherwise seem mysterious. That’s because there’s a relationship between lifestyle preferences/socio-economic status and things like attitudes, values, habits and opinions. Psychographic segmentation, therefore, helps you get to the bottom of why people act the way they do, make certain purchases or adopt certain behaviours and habits, which is a crucial insight you can use to drive sales.

This type of 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.

The various types of market segmentation can be useful in different kinds of business projects, including marketing campaigns, product development, and customer experience and support initiatives. Here are a couple of examples showing when this strategy may come in handy for your company:

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, what age group you might want to focus your marketing efforts on, and which shortcomings you need to address to increase your market size. Segmentation can be a useful strategy 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 segmentation questions to your CSAT surveys makes it easier to pinpoint issues and improve customer service.

Segmentation isn’t limited to those 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, time with the company, or department.

The key is to think about how you will 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 the time comes to analyse your results. Most of the time, demographic data is the first type you want to collect about your customers. It’s worth taking a deeper look into it.

A few well-directed demographic survey questions can help you obtain key data for your market segmentation analysis. Knowing your target market’s age, gender, income and education levels (among other factors) can give you a much better sense of who they are.

Try these demographic survey templates to add the right expert-designed questions to your market segmentation questionnaire.

If your target market is based in the US, we’ve prepared a template you can use to gather key demographic data, such as their age, location, income and education levels. Our template has been specifically designed to capture data relevant to American consumers. Use this as your starting point for in-depth analysis.

Preview the US demographics template

The typical customer demographics template is useful if you’re a B2B firm: if you market to other businesses, you can ask them about their own customers to better understand their needs. Once you know who their typical customers are, you’ll gain critical insight into what they’re looking for from you.

Preview the typical customer demographics template 

A target market demographics survey is useful in that it combines knowledge about the demographics of your market with insight into the way they view the landscape for your product or service. For example, you can ask them about their awareness of competing brands or the kinds of products that they buy and use. 

Preview the target market demographics template

Ready to begin reaching your target audience via market segmentation? We recommend the following five steps:

Ready to reach your target market using market segmentation? Get in touch with our market research experts today. We can help you tailor an audience for conducting market segmentation surveys, and we even help you construct the survey.