Ultimate Guide to Marketing Segmentation (2022 Edition)
Whether you are a business owner or digital marketer, marketing segmentation puts you in the driver’s seat when it comes to knowing your audience’s needs.
Just because you have a product to market that you believe is a winner doesn’t necessarily mean people will rush to buy it.
You will have to uncover who your audience is and what makes them tick to capture their attention.
What’s the best way to accomplish this? Marketing segmentation.
Let’s dive in!
What is Marketing Segmentation?
Marketing segmentation is the process of sorting potential customers into groups or sections based on commonalities such as demographics, interests, needs, location, or behaviors.
For example, what is the typical response of males in their 20’s to a limited inventory sale?
Does this promotion typically drive a sale, or does it fall flat? Likely the latter.
Knowing what a specific group of buyers values allows you to focus your marketing strategy, ultimately creating loyal customers.
Types of Marketing Segmentation: The Big Four
Marketing segmentation consists of the four following groups:
1. Demographic Segmentation
The most common form of segmentation is demographics.
Demographics represent the tangible attributes of a person or business. And these attributes, for the most part, are irrefutable and fact-based.
The following list represents popular demographics worth tracking for B2C relationships:
- Marital Status
- Family Size
- Education Level
And demographics for B2B relationships include:
- Company Size
- Job Function
An example of a B2C demographic segmentation could be a restaurant that sells trendy food on the go that is fast and healthy. They might target an audience made up of young people in their 20’s or 30’s with demanding jobs that don’t allow them the time to cook.
A B2B demographic segmentation could be a software company selling online course platforms to execute corporate training more efficiently. They might target HR departments of companies located in Brazil with greater than 100 employees involved in manufacturing jobs.
The simplest way to obtain demographics is to query your existing audience or target customer.
In addition, you can gather demographics from credit bureaus and marketing service providers like Facebook. Other resources are public records that hold information collected from the U.S. Census Bureau and the U.S. Postal Service.
2. Geographic Segmentation
Geographic segmentation groups people based on their location and is thought to be the most uncomplicated information to gather.
But, don’t be fooled by the simplicity of geographic segmentation because it is a powerful attribute when used in alignment with your prospects’ desires.
For example, someone living on the south side of Chicago will value things differently than someone living on the north side of Chicago. South side Chicago residents are die-hard White Sox fans and north side Chicagoans are unshakeable Cubs fans, no matter whether their team is winning or not.
Say you are a manufacturer of sports equipment and apparel looking to target south side Chicago residents. Would you endeavor to sell them Cubs jerseys or Sox jerseys? Smart money says that Sox merchandise will be your best choice.
Geographic Segmentation includes:
- Zip Code
- Radius around a specific location
- Urban or Rural
Underestimating your geographic segmentation will truly cost you in wasted ad spend. So keep this in mind when you are ready to execute digital marketing strategies that can benefit from this critical attribute.
3. Behavioral Segmentation
Behavioral segmentation represents how potential customers interact with your products, website, app, or brand.
Behavioral Segmentation research examples include:
- Purchasing habits: How often and when do they purchase?
- Online shopping habits: Tracking the buying behaviors of your target audience online.
- Actions taken on a website: What pages are they clicking? What content are they engaging with? How long do they stay on your website pages before they click on something else?
- Intended benefits: What is the need your potential customer is trying to remedy with your product or service?
- Interactions with your brand/Usage Rate: Segmenting customer behaviors by heavy, medium, or light usage of your products or services will shape how your messaging meets the needs of these groups.
- Customer loyalty to brand: How loyal are your customers? Do they have one of everything you sell? Do they shop around and buy from brands based solely on price versus quality?
- Previous product ratings: Do you show up favorably in your customer’s eyes, or do you fall flat? Are your customers open to you changing and improving upon what needs help?
To gather this information, you can query your existing customers tactfully. Marketing automation analytics can also help you out with this process.
4. Psychographic Segmentation
This type of customer segmentation focuses on the less tangible characteristics of demographics. You are specifically targeting the mental and emotional aspects of a person.
Psychographic segmentation includes:
- Personality traits: The big five personality traits are openness, conscientiousness, extroversion, agreeableness, and neuroticism. Some researchers suggest a 6th trait called honesty-humility.
- Interests: Are those activities or pursuits that light a person up. These include leisure, recreation, hobbies, professional interests, school subjects, and any topic you enjoy researching.
- Beliefs: A belief is a thought that you categorize as truth. These include core beliefs, limiting beliefs, and belief systems.
- Attitudes: Are predispositions or sets of expectations that have a person responding to stimulation in a certain way.
- Values: Represent a collection of beliefs that motivate people to action. These can be intrinsic, like love, truth, and freedom, or they show up as a means to an end, such as ambition, responsibility, or courage.
Honing in on the finer details of your audience via psychographic segmentation can fine-tune your messaging so that no one falls through the cracks.
Other Types of Marketing Segmentation
Besides the big four, you will find six other forms of segmentation that are equally as valuable.
1. Firmographic Segmentation
Firmographic segmentation looks at the characteristics of companies as potential prospects aimed at the B2B sector.
Firmographic segmentation typically includes:
- Number of employees
- Company Size
- Executive title
- Sales cycle stage
In this type of segmentation model, the business becomes the entity you want to explore.
A specialized approach to B2B, firmographic segmentation gives you the tangible attributes of a business.
2. Transactional Segmentation
Transactional segmentation, known as RFM modeling, involves the observation of spending patterns. Grouping your most valuable customers by purchasing behaviors is the purpose of this segmentation.
RFM segments customers in the following manner:
- Recency: How recently a customer has purchased from you?
- Frequency: How often they are buying from your business?
- Monetary: How much they have spent?
Let’s say you’re a clothing retailer and you want to bring people back into your online clothing store to re-boost your sales.
Using RFM behaviors, you can track customers who visit often but spend a small amount; customers who show up less frequently but spend a lot; and customers who don’t frequent often, hardly spending at all.
Knowing these behaviors allows you to deliver the right customer experience.
3. Generational Segmentation
According to Wikipedia, “a generation is defined as “a cohort of people born within a similar span of time (15 years at the upper end) who share a comparable age and life stage and who were shaped by particular events, trends, and developments.”
Generational segmentation allows you to group people by cohorts and birth date. The assumption purports that values, attitudes, and brand preferences will be similar for each person in that generation.
Generational Segmentation variables include the following:
- Baby Boomers: born 1946-1964
- Generation X: born 1965-1980
- Generation Y (Millennials): born 1981-1996
- Generation Z: born 1997-2012
4. Life Stage Segmentation
Next, let’s take a look at segmenting your target market by life stages.
And yes, your assumption is correct; life stages are the different phases you go through in a lifetime, from cradle to adult.
Each one of these positions in life requires different needs. What college students desire is vastly different from that of a new parent.
Life Stages include:
- New Parents
- College Students
- Newly Independent
Meeting your potential buyers with a marketing strategy that addresses where they are in their life stage is a powerful marketing tool to convert prospects into customers.
5. Technographic Segmentation
Knowing how your prospects use technology such as social media, podcasts, software, and videos can shape your marketing strategies and message.
Technographic profiles include:
- Inactives: User’s that don’t engage or create content.
- Spectators: Don’t create content but observe through channels like youtube, podcasts, and blogs.
- Joiners: Own and maintain sites but don’t post.
- Collectors: Are starting to engage with content.
- Critics: Individuals start posting comments and contributing.
- Conversationalists: Use statuses on social media to start a thread.
- Creators: Create their posts, blogs, and videos.
6. Seasonal Segmentation
This type of segmentation groups buyers by the seasonality of their purchasing behavior.
What a consumer buys in May can differ significantly from purchases made in December.
And as you take note of purchasing behaviors throughout the year, you must be aware of long-term and short-term seasonal segmentation.
A long-term segmentation strategy looks out into the future for patterns similar to past years, like Christmas buying habits.
And short-term segmentation strategy is more geared towards a burst sale. For instance, your business may want to boost sales more spur of the moment in a season where they can sell more of something they may not typically carry.
Benefits of Marketing Segmentation
Market segmentation provides focus. As a result, your resources are not spread too thin into areas that don’t match demand.
Other benefits of marketing segmentation strategy include:
1. Powerful Marketing
Your marketing becomes more powerful because you are now able to speak your target market’s language.
The aligned messaging that comes from knowing your potential customer’s needs, desires, and wants create a win-win.
Customers come away with what they need, and businesses improve their bottom line.
2. Laser-Focused Digital Advertising
Online audiences are becoming epic in numbers. To play in this market, you have to employ a market segmentation strategy to keep relevant.
Even if you are a small business owner looking for prospects online, you will find that market segmentation widens your scope of ideal buyers.
3. Pin-Point the Most Effective Marketing Strategies
The specificity you gain by market segmentation allows you to create marketing strategies that work.
Taking the time to execute a proper market segmentation strategy uniquely positions you to create ad campaigns that offer the right message at the right time.
4. Attract High-Quality Leads (and Conversions)
Market segmentation stops you from throwing a dart in the dark.
Screening potential prospects allow you to market only to those most interested in your products and services, thus creating a powerful lead magnet.
When you hone in on consumers that are qualified leads, sales become the next logical step.
5. Discover Niche Markets
What if I told you that untapped markets would make ideal customers for your products and services?
Beyond segmenting and attracting quality prospects, you can now uncover previously unknown markets, ultimately broadening your audience and horizon.
6. Fuel Brand Loyalty
Understanding your audience and what makes them tick allows you to intimately craft relationships that cultivate trust and respect.
Segmentation gives you the building blocks to create nurturing marketing that leaves a customer feeling well taken care of and coming back for more.
Supporting your buyers well creates brand loyalty.
7. Outshine the Competition
Intimacy is the name of the game when it comes to outshining your competition. Meaning, the better you know your audience, the better you can serve them.
Investing energy into market segmentation puts you in this unique position and creates potential audiences that may not experience that from your competition.
8. Keep Marketing Goals On Track
You can lose sight of your main objectives and goals without a road map.
Segmentation offers you that clear path and keeps your marketing strategies and messaging aligned with your short and long-term goals.
Having a compass that tells you when you’ve come off course is invaluable.
9. Increase ROI
Segmenting gives you the right message at the right time and affords you the ability to set prices for your products and services appropriately.
You can breathe a sigh of relief because you will no longer have to offer a blue-light special or invent a scheme to get customers to buy.
10. Turn Customers Into Fans
Market segmentation creates raving fans. Why? Because you are in sync with your customer’s desires, making you a trusted resource.
When customers become fans, you naturally increase customer retention, which equates to longer-term profits.
11. Make More $$$
Wasting resources is what happens when you don’t segment your target market.
Sure, it may take more effort to run a market segmentation; however, it will pay you continuously if done right.
12. Inspire Product Development
When you know what your customers and potential audience want, you can create and offer products and services they need.
The position segmenting puts you in is the vehicle that drives product development.
Implementing Marketing Segmentation
Use the five following steps as your guide to segment:
1. Scrutinize Your Existing Audience
Your existing audience is a gold mine of information. Discovering more about who already does business with you via a market segmentation analysis can shape your future outreach and growth.
You can query the following resources to collect data for your analysis:
- Interview your customers
- Query your sales team
- Refer to your business data
- Utilize website analytics
- Research audience logistics
- Investigate audience interests
- See what customers search for
2. Invent a Buyer Persona
Use the data you have gathered about your existing customers and create a buyer persona with it. A buyer persona is your ideal customer profile including, their needs, wants, desires, and personal characteristics.
In essence, it’s a fictional representation of your ideal customer.
3. Analyze Marketing Segment Options
Market segment opportunities are trends that can drive new marketing opportunities.
To uncover these, you will ask your brand questions that further identify and clarify how your product best serves your intended audience.
And as you find answers, you will use this data to refer back to your audience analysis and buyer persona to see if a new audience becomes evident.
4. Research Segment Interest
Next, you will want to flesh out whether or not this new opportunity is legit.
Market research into your audience’s search intent clues you into knowing the relevancy of a proposed product or service.
5. Test Your Marketing Strategy
Before investing whole-heartedly into a set market segment, start slow with a few ad campaigns and track their conversions. Sure it may take a few attempts to dial in your marketing; however, it beats falling flat on your face right out of the gate.
Can You Imagine Life Without Marketing Segmentation?
Marketing segmentation is your navigation system. To move forward without it is like asking someone to drive a car without a steering wheel.
Marketing segmentation allows you to know your audience in ways that successfully catalyze a focused marketing campaign that equates to sales.
So, if you haven’t already, start a marketing segmentation strategy now that will change the course of your business!