There are three important reasons for market segmentation.
Customer retention : Customers targeted after segmentation right at the beginning of a purchasing journey can provide them with an excellent brand experience, which increases the chances that they will stay loyal to the brand.
Business growth : Market segmentation helps one reach and cater to your existing customers and helps one find new pools of customers that one has not reached previously. Therefore, for example, if a business-like Wow-Momos is trying to diversify and open up Wow-Chinese, they have already researched about the possible fan base before.
Reduced spending rate : If a brand knows how to speak and convey the right message to its customers correctly, it means it is more efficient in terms of efforts, which ultimately means less money being spent.
Common mistakes in Market Segmentation
Here are the prime common mistakes made by marketers when segmenting the target market for the first time.
If the segments are too small, they will lose the buying power of the group, and the segment metrics will be non-quantifiable too
If the strategies are not up to date and refreshed, will conduct the surveys based on an older strategy, and the results will not be fruitful
If the segment is targeted instead of money, the survey wonâ€™t have a positive return on investment
For example, mistakes may seem inevitable in the beginning stages of market segmentation, but being aware and mindful can prevent more damages later and save costs of redoing it.
Geographic segmentation This segmentation targets customers based on a geographic border that is predefined. As one move through different cities and locations, their interests, preferences, and values differ dramatically. Therefore, marketers need to recognize differences and advertise themselves accordingly. For example, in McDonaldâ€™s fast-food chain, one can notice a difference in the menu across countries.
Demographic segmentation This segmentation divides the market into different factors like gender, family size, income, ethnicity, age, occupation, education level, and more. This segmentation is used to specify products according to individual needs based on at least one demographic factor. For example, Lululemon targets athletic clothing to men and women of all ages above 18, but they also design their clothing to cater to girls from 6-15.
Psychographic segmentation This segmentation focuses on the intrinsic traits that the target audience possesses. These traits can range from attitudes, interests, lifestyles, opinions, values, subconscious motivators, etc. To understand the target audience, interviews, surveys, focus groups, case studies, and audience testing can be done. For example, Starbucks sells chocolate milk, and cheese sticks cake pops for kids that accompany their parents; for sophisticated coffee drinkers, Starbucks sells an exotic variety of beans sourced from over the world. Not only this, but Puppuccinos for pets too!
Behavioral segmentation This categorization is based on consumer responses and how they go through the decision-making and purchasing procedures. Many businesses have loyalty and incentive programs in place to encourage customers to continue their typical purchase habits. For example, Sephora, the beauty and cosmetics retailer, offers a fantastic loyalty program. The more time spent at Sephora stores, the more points are earned, which can be exchanged for free samples. They also have priority access to promotions, free services, and other benefits.