Importance of Market Segmentation1

Why is Market Segmentation Important? - 6 Benefits

Market Segmentation Guide

Understand customers’ needs & deliver a best-in-class experience.

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To grow your business it should resonate with your target audience’s needs. This means it is important that your message target the right audience. Creating imprecise marketing campaigns will reach lots of people who aren’t a good fit for your offerings. 

Tailoring your marketing efforts is important to target the right audience, boost brand perception, and also grow ROI. 

This is where market segmentation fits into the puzzle. Before you start creating marketing campaigns you need to determine who will be in your target audience. Segmentation can help you define precisely to who you should appeal with your messages and campaigns. 

In this blog, we will focus on why market segmentation is important and the benefits of each type of segmentation. 

What is market segmentation?

Market segmentation refers to the categorization of the target population into groups or segments based on shared characteristics. It helps you to determine exactly what messaging will drive customers to make purchases. 

It also allows businesses to manage their time and money, among other resources, in a better way. When you segment the consumers, you can identify which consumers are most likely to make a purchase. 

To answer the subject of this blog, why is market segmentation important? 

  1. It helps understand what influences customers’ purchase decisions – economy, culture, personal, or social factors. 
  2. It gives you deeper insight into what they want and need. 
  3. It helps you understand who is likely to buy certain products. 
  4. Ultimately, it helps you market your brand in a way that resonates with specific individuals or groups rather than the general audience. 

Not every customer’s preference and demand are the same. You can’t use a one-size-fits-all approach for all your customers. This is what makes market segmentation important. It allows you to focus marketing efforts on the most valuable customers, reducing the number of resources spent on marketing.

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What are the 6 benefits of market segmentation?

The data collected using segmentation helps marketers personalize the campaigns. This also helps you to utilize the time & resources efficiently. You can avoid offering products and services that would never interest the audience. Thus saving brands from running unsuccessful campaigns and wasting their resource. 

It offers a suite of advantages and we have listed six important ones: 

  1. Creating appealing marketing campaigns.
  2. Serving customers with personalized offerings. 
  3. Efficient use of time & resources. 
  4. Designing products that deliver value. 
  5. Better conversions. 
  6. Higher satisfaction and customer retention.

Let’s explore these six factors that make market segmentation important. 

1. Create appealing marketing campaigns: 

Segmenting your target market can help you discover opportunities to create personalized campaigns. 

The data enables you to understand the needs, preferences, and reasons for customer behavior. This way you can build strategies that market towards the need of different segments instead of a one-size-fits-all. 

2. Serving customers with personalized offerings. 

With a better understanding of your customers, you can focus on tailoring efforts that satisfy a particular segment of customers. You deliver the right product/ service/ content to the right audience making their journey with you smooth thus facilitating satisfaction. 

3. Efficient use of time & resources: 

Running 1 or 2 targeted campaigns is better than aiming at a broad population with a one-size-fits-all campaign. Market segmentation helps you create effective strategies that target the right segment and resonates with their needs. Thus saving time and resources from offering products and services your customers don’t want. 

4. Designing products that deliver value: 

Having knowledge of each segment can help design better products. Your brand can design a product that matches the demand and needs of each segment. Products with high market potential can be personalized and targeted to cater to the specific target market. 

[Related read: How to Segment the Market for a New Product in 5 Steps]

5. Better conversion: 

Among all the other reasons better conversion is the top reason why market segmentation is important among marketers. 

With customers in specific segments, you can address their needs and deliver to their expectations with a tailored approach. This is more likely to help improve the conversion rate. 

6. Higher satisfaction and customer retention:

Again segmentation is a good way to create a tailored experience and meet the individual needs of the customers. This will help you build trust with your existing customer and you will increase the loyalty base

When you have a clear idea of what each customer segment needs can help you devise a more informed action plan.  

This sums up why is market segmentation important. Now let’s take a look at the four types of segmentation. 

Start creating targeted segments with our market segmentation survey template.

What are the 4 types of market segmentation?

Importance of Market Segmentation2

There are four distinctive types of segmentation used by marketers. You can use the existing customer data, monitor their journey, or conduct customer segmentation surveys to gather the data you need to put customers into specific segments. 

While there are four segmentations, it is important to remember that you can’t restrict customers to these specific groups. To design better and more personalized marketing messages and experiences, it is ideal to mix two or three segmentation data. 

Now let’s take a look at the four types of segmentation. 

#1. Geographic Market Segmentation

Geographic segmentation involves segmenting consumers based on geographic location such as by county or by city. 

Divisions can be made in terms of:

  1. City
  2. Country
  3. State
  4. College
  5. Region 
  6. Area, etc.

With this data, you can localize the content of your marketing message to appeal to the target audience. Local language, appropriate cultural references, etc. can help you establish a closer bond with the customers. 

#2. Demographic Segmentation

Demographic segmentation involves segmenting consumers based on demographic information as mentioned below:

  1. Age
  2. Gender
  3. Education
  4. Income
  5. Religion
  6. Race

It is the most common and simple form of segmentation. This type could help you with the initial segmentation of the customers before you dive deeper. 

#3. Behavioral Market Segmentation

Behavioral segmentation involves segmenting consumers based on behavioral traits such as loyalty and spending habits. 

This method of segmentation groups consumers in the following ways:

  1. Occasion-Oriented 
  2. Benefit-Oriented 
  3. Usage-Oriented 
  4. Loyalty-Oriented 

It gives you better insight into the customer experience. When you know what benefits or why your customers are buying your product, you can market the product by highlighting its value. 

#4. Psychographic Segmentation

Psychographic segmentation involves segmenting consumers based on psychological traits. It helps in gaining a better understanding of customers’ purchase intent. 

  1. Social Status
  2. Activities, Interests, and Opinions
  3. Lifestyle
  4. Hobbies
  5. Personality
  6. Attitudes
  7. Values

It can give you insight into the motives that influenced a customer’s purchase decision. Learning about their motivation, preference, and beliefs can help you approach the customers differently. 

Now that concludes the four types of segmentation. Let’s also look at the benefits of each of these types. 

[Related Read: Ultimate Guide to Market Segmentation]

Market Research toolkit to start your market research surveys and studies.

What is the importance of market segmentation?

The purpose of this blog is to learn why is market segmentation important. We have addressed the benefits of conducting segmentation. However, it is also best to see how the four types contribute to the importance. 

Benefits of Geographic Segmentation

  1. It facilitates appealing to a market based on language and culture, among other geographic characteristics, which allows you to tailor marketing strategies that effectively target local consumers.
  2. Geographic segmentation gives your brand a competitive edge in new localized markets and helps provide better customer service in these markets as well. 
  3. You can create niche-specific campaigns to appeal to the local taste and purchase behavior and grow your market by getting in touch with the local market tendencies.

Benefits of Demographic Segmentation

  1. As government censuses are available in most countries, this method of segmentation is relatively easy to employ.
  2. It helps effectively identify a target market as demographic market segmentation focuses on who is most likely to buy a product.
  3. Knowing the demographic category of customers can help you avoid offering them products or services they don’t like or will never like. 

Benefits of Behavioral Segmentation

  1. Helps to understand consumer needs on a granular level by focusing on the behavior displayed by consumers.
  2. Uncover the reason behind customers’ purchase tendencies. 
  3. You can create personalized promotions, discounts, price structures, and products that drive customers’ purchase behavior. 
  4. Can build brand loyalty with like-minded consumers.

Benefits of Psychographic Segmentation

  1. Is more effective than geographic or demographic segmentation as it provides details about factors such as interests, activities, and values.
  2. Is a useful method of segmentation especially when the customization of products is involved.
  3. You can tailor to their needs and show that your brand truly cares for them, thus creating brand awareness and brand loyalty

Summing Up;

This concludes who is market segmentation important. 

  1. It makes planning marketing efforts easier. 
  2. It helps you to concentrate on a particular group instead of targeting a wide market. 
  3. It uncovers the key factors about who your target audience is and how to sell to the right audience. 

Segmentation helps you make data-driven decisions to perfect your efforts, identify marketing opportunities and efficiently use resources. If you want to learn more about how you can create targeted segments and cater to their needs, contact us. 

FAQs

Psychographic segmentation tries to understand consumers’ lifestyle and their key values. Behavioral segmentation, on the other hand, focuses on customer behavior, such as their purchasing habits. 

The goal of market segmentation is to help businesses understand distinct groups of consumers that make up their market. By grouping people with similar characteristics and attributes, marketers can effectively target the segments that are most valuable to their business.

Buyer persona, also known as customer persona, is a fictional character created to represent key traits and characteristics of a sizable segment of an organization’s target audience.

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Hindol Basu 
GM, Voxco Intelligence

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