What is market segmentation? In simple terms, market segmentation refers to breaking down your target market into sub-groups of individuals exhibiting similar characteristics including factors such as age, gender, location, past purchases, etc. But this was the old way – wonder how market segmentation has evolved? In today’s data-driven era, digitization has conquered every industry possible. With the advent of technology, companies can now collect large volumes of customer data, which can be used for targeting personalized marketing campaigns based on the segmented customer groups. Many popular retail brands such as Target, Starbucks, Nike, etc. are constantly using customer data to tailor their marketing and advertising campaigns to give a more personal feeling to their customers.
How To ‘Segment’ Your Market
Marketing segmentation is done by companies broadly based on the following aspects:
- Motivation, psychographics, and social value groups
How Is Market Segmentation Beneficial?
Market segmentation can prove to be beneficial for both your business as well as for the customers. To the customers, it provides a greater choice and feeling of personalization as the companies keep improvising the products based on changing customers needs. Let us discuss in detail some of the benefits that market segmentation brings for your business:
- Cost Reduction – The traditional technique of mass marketing may not prove to be effective for businesses. However, with the help of market segmentation, businesses can target specific customer segments and direct marketing initiatives accordingly
- Product Development – Understanding the customers gives the business the opportunity to develop new products by incorporating customer needs. It also helps businesses to identify under-served product categories and venture into the same depending on customer demand.
- Business Focus – Through segmentation, businesses can narrowly define their markets and establish the offerings to meet the needs of the customers. This will prevent the business from being the ‘jack of all traits’ and rather help in mastering specific offerings
- Better Distribution – Market segmentation helps businesses to alter their distribution channels and cycles according to the demand of various segments. This will prevent them from under-stocking and over-stocking of products and assist in maintaining optimum product levels.