Understanding the Importance of Segmentation in Marketing

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Singing in the Rain: The Importance of Segmentation in Marketing

Segmentation might be one of the oldest tenets of marketing, even if the vendors peddling their wares in the 1800s didn’t realize it. Even in the most primitive selling environments, you wouldn’t find an umbrella vendor trying to coax buyers when it was sunny. Instead, he’d wait until it started to rain to correctly identify the segment of the population most in need of an umbrella at that moment.

Segmentation breaks down the vast population into sectors that are easily identifiable based on any number of factors. From geographical location to age, job, spending habits, and lifestyle, segmentation simply makes marketing more effective. Instead of wasting precious budget dollars on people who won’t buy an umbrella when it’s sunny, understand the benefits of segmenting potential customers to promote double the sales in the rain.

Types of Segmentation

Segmentation is almost infinite in its possibilities: There are any number of ways to subcategorize potential customers. But in general, segmentation efforts fall into one of four basic types.

  1. Segmentation which categorizes customers based on the area in which they live (and the key characteristics of living in that area, such as cost of living).
  2. Behavioral segmentation revolves around the most common behavioral traits of a subcategory. New parents, for example, are more likely to purchase items for babyproofing their homes than retirees.
  3. Like selling an umbrella when it’s raining, segmenting the population by benefits means identifying which features, when presented at the right time, will result in a sale.
  4. Holidays and special occasions constitute new buying opportunities for different segments of the population and may require specialized marketing research and strategies.

Why Segment?

Segmentation is all about reaching the right customer at the right time, whether it’s during a busy downpour or a lifestyle change that necessitates purchasing new goods or services. Doing so offers distinct benefits to any organization willing to gain better insight into customers, their lifestyles, and their habits.

  • Marketing Budgets. One of the most obvious benefits of segmentation is reserving the marketing budget for those who are most likely to become customers. Without segmentation, a tire company might waste money sending direct mail ads to a family who takes the bus. Instead, defining the ideal customer profile and then marketing to those who fit means saving money while increasing the chances of a sale.
  • Pricing and Product Development. The average stuck-in-the-rain commuter wants a cheap, disposable umbrella. Proper segmentation highlights not only what customers want, but what they’re willing to pay for those desired features. This type of segmentation-driven product development allows for safe expansion with the confidence that the target consumer represents the high propensity for profits.
  • Customer Retention. Customers want to feel like more than just a number to organizations, and segmentation allows for a modicum of personalization in marketing. While you probably can’t afford to send every prospective customer a personalized greeting, you can target ads so that they’re relevant to that customer’s lifestyle, family, habits, and location. This creates a feeling a brand loyalty for customers who feel like they’re being catered to and heard.

Segmentation represents a marketing tactic that is as beneficial to business as it is to customers. By categorizing potential customers, you can go where they are at the exact moment they’re most likely to buy. Take a tip from the humble street umbrella vendor: Segmentation matters.

 

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