Author: Boglárka Sas
Publication date: 13.09.2024
In today’s competitive markets, companies can not allow themselves a one-size-fits-all approach. Market segmentation, targeting and positioning (stp) are crucial for driving business success. As customers have diverse needs and preferences they need to be segmented to ensure that they are reached by marketing efforts. With that in mind let’s delve into the topic of market segmentation.
How to effectively differentiate market segments
Demographic segmentation: This is the type of segmentation most people think of first. Therefore making the mistake of reducing customers to variables of age, gender or religion for instance.
Geographic segmentation: Then again, most companies also differentiate based on location. However, these two approaches do not consider the thoughts and behaviour of customers and thus are insufficient.
Psychographic segmentation: Marketers need to take into account the personalities, lifesyles and values of buyers.
Behavioural segmentation: As well as their purchasing behaviour, brand loyalty and usage patterns.
These four factors together form criteria for creating ideal customer segments. Using the metaphor of a hamburger, psychographic and behavioural segmentation is the meat and cheese while the other two are only the buns.
How to implement market segmentation
Now that we have the criteria we have to put it into practice.
1st step
Conducting market research: Assessing the market with the use of surveys, focus groups or data analysis.
2nd step
Defining segments: Once you have an understanding of the market you can create segments based on the above-mentioned factors.
3rd step
Targeting and positioning: Then when one or more personas are formed comes the creative part of marketing. Marketers need to find ways to appeal to those customer groups and platforms to reach them.
4th step
Monitoring: Finally, as consumer needs and preferences are always changing it is extremely important to monitor and adapt your marketing strategy continuously.
What you can expect as a result
By having a more targeted and tailored offering you can expect higher engagement, customer conversion and retention.
At the same time, you can be sure your resources are allocated in a way that benefits your company the most.
Customers will also be more satisfied with your product or service as they feel it speaks to them.
Finally, by segmenting and targeting market niches you can gain a competitive advantage and differentiate your business from competitors.
What are some examples of successful segmentation
To showcase this very efficient marketing tool, a very interesting example is Liquid Death, a company selling aluminium canned water. Although this company represents an extreme approach it proves how psychographic and behavioural factors make a lot of difference. Liquid Death targets millennials and Gen Z, that are environmentally conscious, unreceptive to traditional advertising and value individuality. Both their products and marketing communications are unconventional and still align perfectly with the target audience.
While in the service sector, we could talk about McDonald’s for example. It is also worthwhile to look at this company to see how more than one segment can be targeted successfully at the same time. McDonald’s is a popular choice for families, high school and university students and busy professionals as well. By focusing on the habits and lifestyles of potential customers McDonald’s was able to cast a wider net.
Conclusion
As markets are constantly evolving and changing players have to adapt and stand out to withstand. Segmenting, targeting and positioning are both crucial as a first step for businesses and as a way of ensuring long-lasting success.
The business landscape is dynamically altering and the appearance of novelties such as big data and AI are having a great impact. Such tools make the segmentation process easier given that the company can take advantage of them. Conclusively, in the future, effective market segmentation is going to become even more of a necessity for business success.
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