How can you use segmentation to attract more customers?

1 Benefits of segmentation

Segmentation can offer several benefits for your business, such as improving customer satisfaction and loyalty, enhancing your brand positioning, optimizing your marketing budget, discovering new opportunities and niches, and reducing risk and uncertainty. By segmenting customers, you can provide them with more relevant and personalized solutions. Additionally, you can highlight your unique value proposition for each segment and focus on the most profitable and responsive segments. Segmentation can also help you uncover unmet or underserved needs in the market, as well as test and validate your assumptions about your segments.

2 Types of segmentation

When it comes to market segmentation, there are four main types you can use: demographic, geographic, psychographic, and behavioral. Each one has its own advantages and disadvantages depending on your objectives, data availability, and market conditions. To give you a better understanding of each type, here's a brief overview: Demographic segmentation uses variables like age, gender, income, education, occupation, family size etc. to group customers. It's easy to measure and access but may not capture deeper motivations and attitudes. Geographic segmentation uses variables like location, climate, population density, region etc. to group customers. It's useful for adapting products and services to different environmental and cultural factors but may overlook similarities and differences within and across regions. Psychographic segmentation uses variables like personality, lifestyle, values, interests, opinions etc. to group customers. It's more insightful and effective for creating emotional connections and loyalty but is harder to obtain and analyze. Finally, behavioral segmentation uses variables like usage frequency, purchase patterns, loyalty status etc. to group customers. It's more actionable and relevant for designing marketing mix and strategies but may change over time and require constant monitoring.

3 Steps of segmentation

To use segmentation to attract more customers, you need to follow a systematic process that involves four steps: define, segment, evaluate, and target. In the define step, you need to clearly define your market and objectives for segmentation. This includes identifying potential and existing customers, their needs and problems, and how you can help them. You also need to specify criteria and methods for segmenting the market and the expected outcomes. The segment step involves applying chosen criteria and methods to divide the market into distinct segments. Data from surveys, interviews, observations, transactions, etc. should be collected and analyzed to create segment profiles with characteristics, needs, preferences, and behaviors of each segment. The evaluate step requires assessing the attractiveness and feasibility of each segment by considering factors such as size, growth, profitability, competition, accessibility, and compatibility. Segments should be compared and ranked based on potential value and fit for your business. Finally, in the target step you need to select the segments to pursue and serve. This includes defining your target market and positioning strategy for each segment as well as developing a marketing mix and action plan to communicate value proposition to target segments.

5 Examples of segmentation

Illustrating how segmentation can help you attract more customers, consider the following examples of different businesses using segmentation to create value and competitive advantage for their segments. Netflix applies behavioral segmentation to offer personalized recommendations, content, and pricing to its subscribers based on their viewing habits, preferences, and profiles. Starbucks utilizes geographic and psychographic segmentation to adapt its menu, store design, and service to different markets and cultures while upholding its core brand identity and values. Nike applies demographic and psychographic segmentation to target different customer groups based on their age, gender, lifestyle, and fitness goals, creating customized products, campaigns, and communities for them.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?