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5 steps to kickstart your market segmentation

Posted by Perceptive Team - 12 February, 2019

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Segmentation is the key to successfully discovering and defining your target audience. Here's how to get started:

 

Read more: Understanding your Audience, the complete guide to market research.

 


1) Understand your audience’s needs and problems

Segmentation can be thought of as separating out groups of people to get a better idea of their behaviour. By finding out Group A does something that Group B doesn't, you get a better idea of who Group A are.

Crucially, this includes understanding what kind of problems these groups will be facing; in fact, this is where we recommend you start.

 

Begin by noting the challenges and needs of your audience. Here are some industry examples:

  • Grocery retailer: "food is too expensive".
  • Shoe retailer: "not enough diversity of style".
  • Insurance provider: "no suitable policy for my profession".
  • Bank: "too many fees".
  • Telecommunications: "terrible customer service".

Check the commentary of your latest customer survey if you want to expand your search. Pay particular attention to your promoters i.e. those who scored you highly and recommend your services. These comments will often include the precise problem that your product helped them to solve. 

i.e. "I love the Widget Deluxe, now I never have to worry about my windscreen icing over."

 

Next, list how your product or service can resolve these issues.

  • Grocery retailer: A range of everyday basics for lower incomes.
  • Shoe retailer: A new set of European-style shoes available in three different trending colours.
  • Insurance provider: A policy specifically designed for a single profession.
  • Bank: Lower initial fees for new customers.
  • Telecommunications: Dedicated customer service agents available at all hours.

After this, you'll have a clear idea of the problems facing your potential customers and how to position your offering to resolve them. This clarity will enable you to further refine your audience segmentation, which we'll cover in the next step.

Tip: You can do this for your company in general, but it's ideal to perform this analysis for a single product or service at a time. This way, you can achieve greater granularity which often leads to the discovery of new insights.

 


2) Define your customer demographics and geographics

Now that you know what problems you are solving and how you are solving them, you can begin figuring out who would benefit from your efforts

Begin by grouping your target audience by demographics. Traits like:

  • Age
  • Gender
  • Education
  • Nationality

Geographical factors like country, region and city are also important.

For example, if you were the grocery retailer above who was developing an everyday range of food for lower income families, then you might segment out your audience by household income, or family size, or occupation; anything that might make them more likely to have the need or problem you are solving.

 

As you do this, you'll start seeing groups forming naturally.

The demographics might reveal single parents with large families and a low income are a significant part of the grocery retailers target audience, for example.

Students on a low income who live in a flatting situation might be another group they would target.

These will form the basis of your primary segments.

 

However, the key to success here is to nail down exactly what makes these groups different from one another, as well as what makes them similar.

The grocery retailer has identified the differences between the student and single parent segments (household makeup), but they may also find that there are similarities; such as both segments living in the same major city, for example.

If the retailer wanted to target both of these audiences, they would do well to ensure that their new everyday basic range is available in that city.

This exercise allows you to target specific traits, as well as more general ones, across the entirety of your audience—rather than treating your target audiences as completely separate and potentially missing out on a campaign or product development that would appeal to both.

 


3) Define your customer psychographics

The demographic and geographic analysis was just the beginning. You also need to consider psychographics, which looks at the values, personality traits, interests, attitudes and so on of your customers. 

Much like your demographics and geographics, this is designed to clarify the makeup of your segments. Begin by asking the following questions:

  • What do your segments enjoy doing at the weekend?
  • What do they do after work?
  • Do they have a particular political leaning? 

 

Once again, groups will begin to appear naturally. The insurance provider detailed before ("no suitable policy for my profession") could develop an insurance product for a group of tradespeople, for example, who require a more robust policy. 

In the demographics and geographics stage, the insurer found that their target audience tends to be older males in rural settings.

This covers the problem they are facing, how the offering intends to resolve it, as well as who is suffering from the problem and where they are.

Next, their psychographics research uncovers that these older males share a love of sports, and many of them are a member of their local  rugby team.

This gives the insurer more insight into the personality of the audience, and could inform them on how to appeal to their audience beyond just having the policy available. Perhaps getting an endorsement from a popular sports star to capitalise on the interests of their audience would be effective.

 

Once again, ensure that you are looking at both the similarities as well as the differences between various segments. The insurer above may find that there's a small but significant audience for their new product that's made up of younger females, who share the same interest in sports as the older male demographic. 

This might draw the insurance company to include a social media marketing campaign featuring the popular sports star—a channel where the older male segment might not be active, but the younger women are.

 

Tip: Psychographic information can be difficult to come by for the average business owner. Most companies turn to dedicated research agencies to perform their studies in the form of focus groups, interviews, and so on. Some information can be gleaned from surveys as well—but all research, in order to be valid and useful, must be performed correctly; and that's often best left to the professionals.

 


4) Fuel your marketing strategy

Once you have a clear idea of the segments that make up your audience, you can use this information to develop your marketing strategy.

Gather your team to brainstorm ways you can target your customers. Would they respond well to an emotional appeal? To practical benefits? To a particular channel or advertising method? Is there an opportunity to use multiple different marketing methods for different segments of your target audience?

Every piece of research you have done so far will help you appeal to your audience no matter where they arewho they are or what they believe.

 

Crucially, define what you can do to make their lives easier with your product or service and how you will communicate this message most effectively.

 

This is also an excellent opportunity to "close the loop" on your segmentation analysis. After a marketing campaign is finished, send out another survey to get an idea of how successful it was; what kind of impact it had on the people who saw it.

Did the people who you thought would see it do so? Did they react in the way you wanted them to? Did it result in more sales, more brand equity, greater understanding of your product? Your financial reporting will be able to tell you some of this, and the follow-up survey will fill in the blanks on how effective your segmentation was.

  


5) Continue collecting research and experimenting with segments

Segmentation analysis is not a one-and-done deal. As your audience changes or grows, you'll need to ensure that you stay on top of the segments you are targeting—and that can only be achieved with ongoing research and experimentation.

Your research should consider both qualitative and quantitative measures, and you should also be studying your buyers' journey and your competitors efforts as well. 

Understand what makes your products, services and company unique; your strengths, weaknesses, unique selling points and so on. This is best achieved simply by asking your customers—and regularly!

 


For more information on market segmentation, download our all-in-one guide to understanding your audience.

 

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Topics: Customer Insights, Segmentation


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