The right segmentation model can have a significant impact on rates of customer conversion and retention, as well as on market share and / or profitability.
What is market segmentation
A B2C or B2B market segmentation breaks the customer base down in to different groups – or segments, using criteria such as demographics, location, attitudes and behaviours.
Why is market segmentation important
If you are thinking of developing a market segmentation, it is likely to be one of the most important marketing investments your organisation will ever make.
A correctly configured market segmentation can enable you to;
- Articulate your brand (e.g. proposition, positioning, values, promise) in the most compelling way for your audience
- Ensure the ongoing relevance and appeal of your products and services
- Identify and maintain the optimal price point(s)
- Identify the channel and customer experience strategies best able to deliver customer satisfaction
- Create communications campaigns that achieve cut-through
As a result of the above, market segmentation enables greater levels of acquisition, retention and profitability – as well as greater return on marketing investment.
Market segmentation examples
Broadly, there are 4 types of market segmentation;
- Demographic market segmentation – a segmentation model based on commonly identifiable data such as age, sex and socio-economic status.
- Geographical market segmentation – a form of market segmentation based on location; continent, country, city, town, or urban versus rural locations. Geographical market segmentation criteria are usually combined with demographic segmentation data.
- Behavioural market segmentation – a behavioural segmentation model based on how (often) the customer interacts with the brand by (for example) visiting the store or website, making a purchase or consuming the product.
- Attitudinal market segmentation – a model based on what consumers think about the category in question. An attitudinal segmentation model enables the organisation to target consumers based on what they think and feel, rather than simply on (for example) how old they are or where they live.
Whilst a demographic segmentation model is typically the simplest to create, today’s models (including B2B ones) are increasingly likely to include shades of all of the above.
Creating your segmentation model
Before we even propose a solution, we’ll make sure we understand exactly;
- What you know about your customers already
- What data you hold on them
- How you wish to use your segmentation model going forwards.
Based on that understanding we’ll then propose a highly cost-effective research programme that may include;
- (If required) an initial round of qualitative research, to really get under the skin of your must-succeed-with audiences and identify their defining characteristics, needs and expectations, drivers, barriers and behaviours.
- A survey to understand the relative importance of those individual insights, as well as identify the other demographic, geographical, behavioural and attitudinal insights we need to move forward.
Analysing the survey data
The survey data is then analysed in two ways.
Firstly, we conduct input analysis using factor analysis, cluster analysis, and discriminant analysis, to identify the key customer segments,
Then, and we conduct output analysis, to understand what the segments mean to your business and how they can be leveraged.
Bringing your segments to life
The way a segmentation model is delivered is as important as the way it is created.
If it isn’t delivered with real clarity and impact, it is far less likely to achieve the initial buy-in it needs to be adopted across the business.
That is why we provide;
- Customer segment personas – a highly visual set of customer profiles that bring each segment to life in an engaging and relatable way
- A Behaviours and Attitudes Report, that provides all the facts and figures in relation to each segment
- Data tables and raw data, along with training on how to use them, if necessary, so that you can continue to develop your understanding of your target audience long after the project has finished
- Golden questions – a set of questions derived from the quantitative data, that can be used with new customers, in order to determine which segment that belong to
In addition we offer workshops, to present the segmentation to managers and front line staff across different departments and sites so they can understand exactly what the market segmentation model means for them and their roles.
MAXIMISE YOUR BRANDS PERFORMANCE
Our research toolkit is comprehensive! It contains all the latest tools and techniques, as well as lots of old
favourites. Whatever your project, we have the research solutions to provide the answers you need.