Marketing Segmentation

Why is Marketing Segmentation Important

Posted on in Small Business Tips

This month we look at marketing segmentation, an oft forgotten but highly powerful subject!

One of the keys to a successful marketing strategy is segmentation – the ability to target an offer to defined and ‘real’ segments and making that offer unique to your customers.  Segmentation is a powerful concept and has been shown to improve the profit of those businesses that adopt it.

Effective communication often depends on the use of one simple and relevant message – therefore if customers can be grouped around common needs then, by customising your offer in line with those needs, you can gain competitive advantage and save on your marketing spend by addressing a proportion of the market rather than the whole.

The old ‘shotgun’ approach, especially via email communication, can be self-defeating with ever-increasing bounce, unsubscribe and spam complaints; direct marketing can be expensive with the cost of postage and much wastage due to old, uncleansed or incomplete data.  Indeed, gathering data for the sake of it makes no financial sense either and may annoy your customers.  Whenever money is to be spent on data collection and database updates it needs to be justified.

Data in isolation is not particularly useful but with analysis it can offer real customer insight – it’s a massive subject and specialism in its own right, but basic qualitative and quantitative testing to check the appropriateness of each segment would be of benefit, including:

  • Homogeneity – to what extent will members of a given segment act in the same way?
  • Measurability – how big and valuable is the segment?
  • Accessibility – is it possible to reach the segment, either by marketing or sales programmes?
  • Profitability – is the segment substantial enough for you to profit from?
  • Relevance – is the segment something that your customers will identify with?

Mosaic or other profiling will help with this immeasurably.

Furthermore, regular customer satisfaction surveys can help identify what you’re doing right, what could be improved and help you to better understand your customers’ needs.  As I’m sure you’ll know, needs themselves can be quite complex, ie, stated, real, unstated and emotional.

The size and profit potential of a market segment has to be large enough to economically justify a separate marketing mix and/or marketing campaign with a tailored proposition for each one.  This is especially important if you enter a market with established competitive companies – such as insurance, for example.

Ideally you should be able to take your existing database (and/or any that you might purchase in future) and divide it up using your agreed segments with the ability to manipulate and shape the data for future purposeful targeted marketing.

If you would like to know more or are interested in segmenting your data, please get in touch via email to hello@alisonpagemarketing.co.uk.