As a business owner, no one knows the importance of keeping up with marketing trends better than you. The best resour
ce you have at your fingertips is your own website. It is an Alladin’s Cave of valuable data and insights that wouldn’t have been available otherwise.
In the early days of commerce, markets were treated as a homogeneous monolith and campaigns were general ones that were indiscriminately blitzed at customers. Regardless of their location, age, gender or preferences, they all got the same message.
With advances in social psychology, anthropology, marketing studies and business studies, the facts slowly began to emerge. Customers were unique, their habits, attitudes, preferences, behaviors and purchasing motivations were diverse and identifiable.
Suddenly, the market doesn’t look like a massive, undefined amorphous body any more. You can discern distinct parts and segments, each with its own characteristics and attributes.
This is what market segmentation is all about.
Table of Contents
Market Segmentation Benefits
There are different types of market segmentation:
- Benefit based
- Needs/Transaction based
Different academicians may use these and other criteria to divide up the market. In general, the perfect market segment is measurable, clearly different from other segments, significantly large to be a source of profit earnings, stable and sturdy, accessible through marketing strategy and responds homogeneously and similarly to marketing messages. A segment should also be large enough to make investing time and resources worth it.
It’s also important to ensure that you can communicate properly with every segment, no matter which part of the globe they’re located in. You may also need to ensure that they live in areas where the marketing campaigns will reach them (Internet capability, access to delivery of products/services, etc.). Each segment should have unique needs and it should be possible to study them.
By segmenting a large market, businesses can ensure that marketing appeals to the selective aspects (comparison, preferences) of purchasing rather than the primary motives (needs, wants).
The benefits of this approach are:
Value for money
The ROI that a business can achieve through segmentation is much higher. Segmentation creates more targeted, efficient and cost-effective campaigns instead of a broad-based approach.
When there’s more data available about your real customer, your conversion rates would automatically zoom upwards. This means that click to revenue transformations are quicker and more regular.
Market segmentation ensures that you serve your loyal customers in the way they want. This ensures that they stay loyal to your products/services and respond favorably to your ad messages.
Exploring new markets is possible with finer segmentation. You can reoptimize your business, reposition your brand and expand your customer base when you have a solid foundation in the segments who patronize your business.
What Is Behavioral Segmentation?
Behavioral segmentation divides the market into segments based on observed behaviors. The customer’s actions on your website are documented and analyzed. You can observe the number of clicks, frequency of visits, time spent on the site, pages visited, purchases made, conversion rates etc.
It can be understood in 4 different ways:
Gives you more information based on the journey stage of the customer on your website. It also informs you about their role in the process, whether they’re the primary decision makers or not, the obstacles in their path, the benefits/incentives they seek, etc.
The timing of purchases can be recorded and a pattern created from these. These may be personal occasions such as birthdays, anniversaries etc. or they may be national occasions such as Labor Day, Black Friday, etc.
What the customers gain from using the product/service provides important data.
Loyalty based behavior
You can measure how much loyalty your customer displays to your brand by repeat orders, frequent visits to your site, feedback, reviews and opinions expressed on social media. This allows you to strategize how you can maximize the value you receive from these customers.
How is It Important for Marketers?
This has emerged as one of the vital trends in marketing studies today. In the early days, when funnel reports were all the rage, salespersons assumed that simply adding more traffic to the funnel would give a certain proportion of sales.
However, today’s customer wants personalization more than anything else. According to research conducted by McKinsey, the world has become more customer-centric. Organizations that are able to use insights and data gleaned from customer behavior tend to outperform their competitors by a whopping 85% in sales growth and 25% in revenues. Today it’s important to be expert on behavioral segmentation.
Customers take an average of 0.05 seconds to judge whether they like a website or not. They quickly move on if the page takes too long to upload, if they can’t find the information they want immediately, if the content is not engaging enough, if they don’t feel welcome as a visitor on the website.
Boosts the customer’s reaction to your website and consequently to your products/services. It enhances their lives and increases their memory and loyalty to your brand, reduces acquisition costs by 50%, boosts revenues by 5-15% and streamlines your marketing expenditure by 10-30%.
When we group people according to their observed behaviors, it is vastly different from mere projections or speculations. Every action the customer takes digitally is counted as a behavior. You can compile this from data via clicks, cookies, site visits, stage of journey through the site, etc.
Another huge benefit is that your marketing team can segregate groups so that the high-value customers are quickly identified and separated from the occasional user, low-value user, the non-user, big spenders, impulse buyers, repeat users, etc. This allows you to create different campaigns that address each of these behaviors separately.
You can also gain valuable insights into why users may not be converting, why shopping carts are abandoned at the last moment, etc. This allows you to create appropriate strategies to address these issues.
4. Fine Tuning
Your marketing campaign becomes more textured, nuanced and fine-tuned with behavioral segmentation. You can measure the results of your campaigns accurately when the segment is smaller and more homogeneous.
This also helps you to implement better solutions and services, stay relevant and competitive and retain the customers who matter, while attracting those who are yet to engage.
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