Tips for Segmentation 101

Recently updated on October 17th, 2017 at 10:06 pm

As the saying goes, you can’t please all of the people, all of the time. And this is certainly true in marketing. When you try and satisfy all of your customers’ needs with blanket marketing messages your success rate will certainly suffer. Enter segmentation.  According to Wikipedia, market segmentation is about dividing “the market into distinct groups who have distinct needs, wants, behavior or who might want different products and services.”  The idea, of course, is that improving your customer segmentation will improve the effectiveness of your marketing because you have the ability to better satisfy the various customer needs. Proper market segmentation can help with your ability to:

• create separate offers
• upsell
• improve customer retention
• put your resources into your most profitable areas

So, how do you properly segment your customers into meaningful groups so you can craft the most effective messages and optimize customer loyalty? On a really basic level you can create segments based on the following:²

• Geographic (location)
• Demographic (age, gender, etc)
• Psychographic (activities, interests, opinions)
• Behavior (actual behavior toward products, first time & repeat customer, etc.)

But before you start segmenting your customers into lists, or working on improving the segments you already have, keep in mind that the point is for your groups (segments) to be useful to you.  How do you do this? For starters, try running your segments through the following 5 questions:²

1. Is the segment identifiable?
   The attributes of every segment should be measurable so that they can be identified.
2. Is the segment accessible?
   Segments must be reachable through communication and distribution channels.
3. Is the segment large enough?
   There is no point in creating segments that are too small to justify the use of required resources.
4. Is the segment unique?
   To justify separate offerings your segments must respond differently to the different marketing mixes.
5. Is the segment going to last?
   It’s preferable to have segments that are stable so you don’t have to keep changing things up (of course if they are lucrative enough so it doesn’t matter then ignore this one).

Of course, in addition to the above, today’s marketing world requires that you also consider the communication channels of your various  customer groups and messages to determine which ones are most effective for each segment.

Happy segmenting!

Resources

1. Wikipedia: Market Segmentation
2. Marketing Segmentation