The Importance of Market Segmentation

No matter how large or small your company, no matter what your specialism is, your entire marketing planning and implementation should always be based on your customers. After all, the very essence of marketing is to build relationships with these people, the people you define as ‘your customers’. So how do you form a relationship with someone?

You take the time to get to know them.

Knowing Me, Knowing You

Just as it is important for your customers to get to know your brand and what you stand for, it is equally important that when you are marketing to an audience, you understand what drives them to make their decisions, and what they want and need on a regular basis.

You must first begin to understand their lives. Not every customer will lead the same life, which is where market segmentation comes in. Your customers can be segmented into groups depending on the daily routines they have in common, their shared values, their emotions, etc.

The market segments that your customers can be separated into will help you to tailor your marketing approach to have the most effect on each segment.

Market Segmentation

Once you have your market segments, there is more than can be learnt about the customers within each group. Each group’s typical lifestyle, their daily routine, the choices they are faced with and the reasons they make the decisions they do, how their environment impacts these decisions, all this data can be used to a marketer’s advantage.

The more you find out about your customers, the more ways in which you can tailor your approach to demonstrate how your product or service can help them on a personal level, benefiting both yourself and them in the process.

The Value of Market Segmentation

The value of segmentation for both the company and the end user can be broken down as such;

For the customer:

Provides greater choice of products/services
Products/services should more closely match the needs of consumers.

For the company:

Better marketing planning as reactions to marketing activities can be predicted
It helps organizations to identify prospects who are most likely to buy
Marketers will get to know their customers better so that they can provide a better service
Budgets can be more closely allocated on the basis of the investment and return needed from different segments
Smaller segments may be easier to dominate
Marketing and sales activity will be closely focused, leading to more sales, lower costs and higher profitability.

Market Segmentation Method

For B2C market segmentation, the common method used is ‘consumer typology’. This is the process of segmenting consumers into 5 main categories based on the following;

Behaviour in the product field
Motivation, psychographics and social value groups.

For B2B market segmentation, markets are typically segmented into the 5 following variable groups;

Operating variables
Purchasing approaches
Situational factors
Personal characteristics.

The Next Step…

After the market segmentation process has been completed, the company must then develop profiles for each market segment. This will then allow them to determine which market segments they want to enter.


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