Uses of Market Segmentation

customer segmentation

Picture this: You walk into a greetings card shop to pick the perfect card for your significant other. You browse the shelf, but all the cards are the same – Happy birthday with a picture of a child holding a balloon and some toys at their feet. This makes no sense – your partner is 30 and as far as you know they don’t even like balloons. Ok – a bit dramatic perhaps but marketing without segmentation of any sort is exactly like selling that one card. You’ll get it right every so often – maybe the card might work for your seven-year-old niece but most of the time you’re just hoping it will work. In 2022, marketing is one to one – even if you are marketing to millions of people and that’s where segmentation comes in.

Excellent marketing starts with the consumer. But how exactly do you go about putting the consumer first? No really. If your insight pertains to too broad a selection of consumers, you may end up reaching too many people who aren’t interested in your brand or your product. Too narrow and you’ll miss out on valuable potential consumers. Market segmentation research helps you understand your consumers’ needs.

Market segmentation has many uses and involves dividing your market by a variety of factors, into groups who have similar characteristics. This can be anything from where they live to what they like to do on the weekends, the possibilities are endless. The key is knowing what you want to look for, and that’s where we come in. You may be marketing to a niche – that’s fine but you need to know how to spot those consumers when you see them. Or perhaps you are mainstream or masstige – all of these positionings still require you, as a marketing leader, to understand the intricacies of what makes consumers different from each other and ironically to do that we first of all need to understand what makes some consumers similar.

At Spark, we know every brand has its own needs. We have developed our own tool – Spark Clan – and use it to conduct attitudinal and behavioural segmentation across languages, sectors and demographics. We believe that segmentation, particularly in a post Covid world where a lot has changed, makes a world of difference, positively impacting brand growth and helping you further connect with your audience.

The Different Types of Consumer Segmentation

Let’s look at the different types of market segmentation. There are quite a few and as always at Spark, if you engage us to look at a segmentation piece for you, we will recommend the most relevant one based on your brand objectives.

  1. Demographic

This is often the first type people think of when they think of consumer segmentation. One of simplest ways to define consumer groups, it can also be used as a very powerful tool. This type of segmentation is defined by identifiable non-character traits, which can be anything from age and gender to ethnicity and religion. While we do demographic segmentation as part of any segmentation it’s a bit basic. You may find that a lot of “big data” segmentation is based off demographic data. As you read this would you say you are a typical person of your age and social class? Are all people of that age and social class the same? Probably not – that’s the weakness. People are just more complex than that.

  1. Psychographic

This focuses on your consumer’s interests and personalities. We can define them by their hobbies, life goals, personality traits or lifestyles to name a few. These traits can be harder to identify, but when executed well can be a fantastic tool to market to consumers on a much more personal level. A psychographic segmentation really works with lifestyle brands. In truth, every segmentation piece that we undertake at Spark includes some psychographic exploration – people are emotional creatures so it’s essential in our opinion.

  1. Geographic

A simple way to identify areas of your consumer base, this groups them by their physical location. This can be their city, town, region or postcode. It’s an excellent tool for those looking to market to specific local audiences, such as those who run live events. Quite often another segmentation such as Behavioural, with Geographic over that could be very insightful. Micro-geographic segmentation is an interesting take on this; so deep diving into a city to see where the differences are.

  1. Behavioural

Using behavioural segmentation, you can group consumers depending on their spending habits, interactions with brands, and any previous product feedback. This data can be gathered through e-com interaction as well as via Spark Clan. We are what we do (rather than what we say) so we find this type of segmentation the most beneficial.

The benefits of Market Segmentation

Market segmentation is a powerful tool when utilised correctly. It can guide every part of the marketing mix from New Product Development (NPD) to advertising and communications, packaging development, pricing and distribution. Most importantly for marketing people reading this segmentation saves your budget. As it stands, unless you have a valid segmentation you are “wasting” a % of every £1/€1 you spend on marketing. It just isn’t landing; either at all or with the specific cohort it should be landing with. With a well-run segmentation programme, you can target specific segments with laser like focus meaning no waste and more impact.

Develop consumer insights

One of the most important things for a successful business is to understand your target audience, so you can work out how best to market to them. Using market segmentation, you can find out so much about your consumers, from the area where they live to their hobbies and interests. We like to apply the “cop on” test to our segmentations – “Do you know these people that we have created as segments?” If not, then there is likely a flaw in the algorithm.

Improve brand loyalty

Millennials will soon be the most dominant demographic, and they are loyal to brands they shop with. Collecting behavioural data and creating specific segments that represent them from social media platforms and other sources can help you address their needs more effectively. Better engagement and communication with your consumers impacts brand loyalty in a positive way. Think of Paddy Power – their marketing may not be to everyone’s taste but for their consumers it works and they come back for more.

Identify new opportunities

Another excellent way to use market segmentation is to uncover potential new opportunities for innovation. By further understanding what consumers want from your industry or brand, you can identify new products and services that meet their needs. You can use your research to see where others fall, and how your products or services can be improved to put you ahead of the competition. If you know your segments better than anyone you effectively have a head start on your competitions as you will see them move into new trends before your competition does.

More efficient use of resources

Effective segmentation allows you to understand where you should put your focus. This allows you to work out where best to use your resources, whether that’s budget, human resources, marketing campaigns or anything in between.

Find out how we can help you with consumer segmentation with Spark Clan.

How to get started with Market Segmentation?

Call us – we will talk you through your options and help you decide if you need a segmentation and if sop what type you need. There is a big difference between profiling and segmentation. It’s not difficult to create pen portraits of consumers using techniques such as qualitative groups or in-depths. However, a robust segmentation piece requires qualitative in-depths, a lot of statistical analysis (cluster and factor analysis) as well as robust, representative quantitative research. You need to know what you are doing. The output looks the same – nice pen portraits BUT with a lot more detail and a nice little algorithm that brings it all together.

When you might need to use a market segmentation strategy?

When times are a-changing: Changes in the market, world events and any number of factors can cause you to rethink your market segmentation strategy. For example, the Coronavirus pandemic changed the landscape of business forever: for example, businesses with physical stores setting up online offerings. Essentially, if your consumers are changing then you will need to as well. If you have a previous segmentation this can be “topped up” – there is no need to start from scratch.

Review every year: Segments can change year on year depending on all sorts of circumstances, so it’s worth reviewing annually just as a matter of course. For example, if your target segment moves away from the area, you have been targeting, you might want to consider refocusing your efforts elsewhere. Again, once you have done the initial piece this acts as a top up rather than a re-segmentation.

What to consider when updating your strategy?

There are several areas to consider when you’re either updating or implementing a marketing segmentation strategy.

Start planning ASAP

Successful businesses adapt to long-term trends, so you can tackle these changes head on by refreshing your marketing segmentation strategy. We suggest that once you have your defined market segments, assess each of them for any possible risk factors and work to forward plan should any of these issues occur.

Find out what has changed

By doing successful consumer segmentation analysis, you can work out what has changed from one time to another. You can use this to understand what the driving forces were behind it. Using your understanding of why the market is now different, you can make key decisions on where to go next.

How Spark Market Research can help

Spark Clan can give you the tools to understand your consumers. We can help you fully get to grips with your audience, looking at what they need, who influences them and the kind of messages that resonate with them. We use a number of research techniques to pinpoint consumer personas:

Qualitative research

As a general rule, we conduct one to one sessions for segmentation research so that we can really get to know each individual on a personal level. This can be done either face to face or virtually, whatever works best. These conversations capture deep and in-depth data about how people behave and think. The interviewer will use open ended questions to allow the participant to fully express their thoughts.

Quantitative research

We use quantitative research methods to get the thoughts and preferences of large groups of people over a short period of time. Surveys and questionnaires are ideal ways to find potential consumers and gauge opinions on certain topics.

Factor and cluster analysis

This will take place after the quantitative research phase. Every segmentation is unique, and lots of factors will determine how we agree on our final segment mix. We use this data to create a typology tool which can be integrated into further research. This allows you to truly build your brand with your consumers at front and centre.

We work collaboratively with you to understand your needs, so we can craft the most effective and efficient market research methods just for you. The experts at Spark have vast experience in all sorts of sectors from FMCG to finance to retail and entertainment, so we can help you tap into the minds of your consumers and take your brand to the next level.

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