marketing segmentation for beginners, marketing segmentation definition and principles
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marketing segmentation for beginners, marketing segmentation definition and principles


knowing where your customer lives can
save your business time and money this knowledge can also give you a
significant competitive advantage geographic segmentation is a method of
dividing your customers or people who are not yet your customers into groups
based upon where they live there’s one thing that every person in America has
in common we all have a zip code that corresponds to the location where we
brush our teeth each morning if you’re like me you get mail at an address in
that zip code and much of that mail was not something you requested you call it
junk mail but the people that sent it to you call it marketing material or direct
mail the reason marketers use Geographic
segmentation is because people tend to live near other people that are like
them we congregate in locations where we have a high likelihood of being around
other people that have similar cultural values as we do similar levels of
education similar tastes in housing and similar income levels one of the keys to
success and marketing is being able to efficiently spend your marketing dollars
by hitting those customers who are most likely to respond to your message
geographic segmentation can help you target the right customers in the right
locations and it isn’t just for consumer marketing you can use Geographic
segmentation for business-to-business marketing as well a common mistake some
businesses make is to assume that geographic segmentation is only useful
for retail businesses it does make sense if you have a retail shop you would want
to target those people that live near your location for your promotional
messages but there are many business leaders with a web presence that want to
target a specific socio-economic or even racial group you can use Geographic
segmentation to help you do this if you think of Geographic segmentation as a
funnel the method of segmenting your customers or future customers by
geography flows from a broad geography down to a very narrow or specific locale
for example you could look at your targets as everyone the United States or
narrow it to a region such as the west coast or down to a state such as
California or further to Southern California
yeah or specifically to the Greater Los Angeles area
on down to Beverly Hills and on to a zip code such as nine oh two one oh and
further to a specific neighborhood or Street being able to do this would
certainly be helpful to you if you owned a restaurant near Mulholland Drive and
wanted to use direct mail to create awareness for your location this would
also be helpful if you sold luxury automobiles in the LA area and wanted to
place billboards in that area or if you use telemarketing services to make
people aware of your upcoming yacht sale being able to focus your dollars on
certain neighborhoods may make sense do you occasionally get an envelope from
Valpak in your mailbox or do you subscribe to a magazine the advertiser
is using these media are employing geographic segmentation as part of their
marketing program Valpak has the ability to target specific zip codes and their
mailings many newspapers and magazines have the ability to print regional
editions for those advertisers who want to target a specific area even Facebook
has the ability to target users at the zip code level so now that we’ve covered
why you might use Geographic segmentation let’s talk about how you
can see a map of every ZIP code in every state in the u.s. at zip map net or
United States zip codes org the US Postal Service has programs allow you to
deliver Direct Mail material to the zip code level if you do an online search
for advertising by zip code you’ll find a number of companies that specialize in
this area the next time you collect your mail pay attention to who is sending you
coupons and advertising material they’re using the geographic segmentation tools
we just covered and give them your business they’ll appreciate it segmenting by demographics is the
practice of dividing a market by factors such as age sex households eyes income
education level race nationality you get the picture by looking at these
variables you can get a more detailed image of the market because people that
belong to groups tend to behave in manners similar to others in the same
group it makes sense to look at the things that group members have in common
and attempt to draw some insights from those commonalities let’s dive into some
of these groupings a little more deeply age is very commonly used as a
segmentation variable because it is typically easy to gather information on
the average age of consumers in a market and it’s a meaningful indicator of how
consumers are going to behave makes sense right teenage girls are shopping
for different things than 65 year old women in terms of products and services
income is an important segmentation variable because it can be an indicator
of not only what kinds of products and services a person or family will want
but also where and how they may purchase consumers and higher income brackets
tend to shop for different products and they have historically done more online
shopping than those with lower incomes a closely related segmentation approach is
to place people into life-stage categories as people grow older they
tend to move through phases of their lives that lead to changes in the amount
of disposable income available the types of purchase decisions they’re making as
well as the products and services they need this commonly used model shows how
consumers move from the bachelorhood stage to newly married couples as
children arrive they move through a series of nest stages and then into
empty nest stages and finally back to a solitary stage you can appreciate how
the amount of money a couple with young children differs from the financial
means of a couple celebrating their entrance into the empty nest stage for
each demographic segmentation variable there are differences in the needs wants
habits shopping styles and purchasing processes for the people within the
group the attune to these differences may help you
gain more and deeper insights imagine for a moment that you’ve invented a new
watercraft you’ve specifically designed to go as
fast as today’s jet skis but it’ll run more quietly and you’ve figured out how
to keep the riders from getting wet while jet skis are popular not every
person or even every household in the u.s. owns one some research on the
personal watercraft market indicates that the average owner is 41 years old
and has an income of 94 thousand dollars 85% of them are male
40 percent are college graduates and 71% of them are married so let’s compare
these to some national averages the median age for males in the US during
the 2010 census was about 36 the median income was about 53,000 dollars 49
percent of the u.s. population is male 30% are college graduates and
approximately 52% of American adults are married knowing these details will be
helpful as you design your product develop your pricing plans and
promotional strategies the key is to figure out which demographic variables
are important to your business this contains a list of demographic variables
where you can begin to track the data that’ll matter most to you I’ve used
data from the US market in this example but the principles apply around the
world you can find demographic data on most countries at CIA gov or World Bank
org the national averages for some of the key components are already loaded
for you by doing some web searching you’ll usually find some data points to
load into the next column labeled for the next market as you dig deeper or do
more research on your own you may find different sub segments for example if
your company makes more than just personal watercraft but also other types
of recreational vehicles you could create a column for your personal
watercraft segment and another for the all-terrain vehicle segment of the
market most states have the data for each zip
code available on a website take a look and then think about how your
neighborhood is similar and different from the US population as a whole cultural segmentation involves a
subdivision of groups by aspects such as languages spoken religion sexual
orientation dietary preferences and lifestyle preferences just to name a few
it may sound as though some of these are similar to demographic segmentation
variables and in reality they are very closely linked cultural segmentation
came about as marketers look for better descriptors to some of the broad
demographic components this may be useful to you if you need to understand
the reasons why your customer or target group behaves or acts in a certain way
it may also be useful if you have a product or service that appeals directly
to specific cultural groups for example if you’re involved in the development
activities of a charity linked to the Catholic Church and want to promote a
large upcoming community event is it enough to know that 40% of the people
that live in a certain zip code consider themselves to be Catholic or would you
also like to know that only 15% of the people in a zip code went to church in
the last year and 8% of the residents responding to a recent survey said they
attended regularly you might want to know this especially if your research
also uncovered that a zip code just across town about the same size also has
40% of its population calling themselves Catholic but 25% went to church in the
last year and 18 said they attended regularly your direct mail dollars may
be better put to use in the second zip code this is an example of how cultural
segmentation allows you to dive a bit deeper into a population in reality
there are two important components of segmenting a market by culture the first
involves digging into the customer groups to understand if there are
cultural sub segments that are of meaningful size or interest to your
business the second component involves the
adjustment or revision of your marketing plan to increase the appeal of your
offering to a specific cultural segment describing or defining the cultural
segments that are important to you begins with analysis you’ve likely heard
of the 80/20 rule of thumb and business this concept says that 80% of your
revenue comes from 20 your customers or something similar
often the numbers don’t line up perfectly with this ratio but it isn’t
uncommon for businesses to begin their segmentation work and learn that a large
portion of their sales come from a concentrated group of core customers
that provide a lot of repeat orders when you look at your business through this
lens its then helpful to look at the two groups of customers the first bucket is
of your best customers those that come back time and time again to give you
more business or if you’re in a volunteer organization who are the
people that show up every time the ones you can count on to participate
are there any cultural similarities in this group
do they have societal factors in common the second bucket consists of perhaps
the 80% of your customer base that are occasional or light purchasers you
should consider them through the same lens are there similarities related to
culture that you can uncover why do this you might ask well there may be
something about your business or organization that’s more appealing to a
certain cultural group and therefore you may have an opportunity to grow by
focusing on one or more of these sub segments you can’t do this solely by
looking at the numbers though going through your customer records and sales
numbers may help you develop some theories but ultimately you’re going to
need to talk to your customers and listen intently to look for patterns and
opinions that may help you figure out which groups are most important cultural
analysis from a marketing perspective is done by looking at the behaviors symbols
values and languages used by a cultural segment if you do the work to determine
that a cultural group is more important to your business than other groups you
can then look at the common behaviors within the group the symbols that are
important or easily recognizable by the group the things they value the language
they use etc I encourage you to look into your business and see if you can
identify any cultural subgroups that make a difference for you let’s say you’ve just invented a new
selfie stick you’ve watched all these people taking selfies and you’ve noticed
some you sticks and others don’t your new product is even better than what’s
on the market today now you’re trying to figure out how to promote your new idea
but before you get to how you first need to look at who marketing is expensive
and you need to be careful not to waste your money your time so you’ll want to
target the right market with your promotional dollars but who is the right
target doesn’t everyone who own a smartphone need a selfie stick to do
this right you’ll need to segment smartphone owners by behavior behavioral
segmentation involves breaking customers into targets groups based upon how they
use a product when or where they use it how they purchase just to name a few
while geographic demographic or cultural segmentation may be useful to you in
this situation you may get more value by segmenting the market based upon how
they behave with their smartphones in essence it might matter more to you to
understand how the consumer is going to behave with your product rather than
where they live or how many children they have here’s why the Pew Research
Center and other similar research organizations have compiled useful
information on cell phone owners if you look at the demographics of cell phone
owners you might not pick up anything particularly valuable for your selfie
stick project but when you dig a little deeper into how people use or behave
with their cell phones you might pick up some deeper insights beyond how
consumers use your product there may be value in understanding behaviors around
how people buy for example Nicole ponder researched the way people buy furniture
her work showed that 22 percent of people have purchased furniture online
as of 2013 up from only 11% in 2008 more interestingly about 35% of people said
they would likely shop online in the years ahead
if you’re in the furniture business being able to identify the segment of
people that are likely to purchase online
will be important as you’re building your marketing plan so that you can show
them some methods to reach and make the purchase process easy this is just one
example of how behavioral segmentation can be used even if you’re not in the
marketing part of your organization behavioral segmentation can still be
used some accounts receivable teams within companies segment their customers
as fast paying or slow paying you may offer different incentives and deals to
your fast paying customers while offering different deal terms to those
who take a long time to cut you a check the reason it’s important to pay
attention these types of behavioral activities is because you may find there
are different products or services that will help you expand your business by
tapping into and solving some of the behaviors that your target market
exhibits let’s look at the flaw stick as an example researchers spoke to and
observe people who regularly flossed at home as well as some who are not
considered regular flossers one of the things they learned is that some people
don’t like to stick their fingers in their mouths to floss another key
insight was that as people eat more meals in their cars or at their desks
the need to be able to get that pesky seed out from between the teeth was
growing now it appears that more people are flossing in the overall market has
grown a behavioral segment of car flossers that didn’t exist before has
now become quite large I think you can have a lot of fun segmenting your
customers and targets by behaviors as you start to develop your marketing plan
for the selfie stick a little further think about other ways people use their
smartphones that may make your stick more useful for
more than just taking pictures when was the last time you were on an
airplane did you notice there’s a group of people who were able to board the
plane before you and they had all the good window and aisle seats too or maybe
you’re a traveler who gets the benefits of being recognized as a frequent flyer
frequent flyer programs are one of the best examples of segmenting customers by
usage there’s a segment of extremely heavy travelers who fly the equivalent
of going around the world five times or more each year there are others who fly
often but not quite as much as those super road warriors and then there are
those who do not fly much at all maybe just a couple times per year what else
can you infer about heavy users of airline travel it’s very unlikely that
they’re doing all this travel on their own time rather you’d be correct and
assuming these people are traveling for business purposes if you’ve ever had to
buy an airline ticket on short notice you’ve noticed that they’re not
inexpensive business travelers don’t routinely have a month or even two weeks
to plan out their calendars in advance if a customer needs immediate attention
and they’re on the other side of the country someone likely will need to get
on a plane and pay the price to get there quickly the airlines have learned
the business traveler who hits the road a couple times per month that’s their
most profitable customer when you think about it in this context it makes a lot
of sense why the travel industry has developed reward programs for frequent
travelers this is similar to segmenting by behavior but there are some subtle
differences while behavioral segmentation often takes a little bit
more research and insight segmentation by usage can often be done by performing
data analysis this method has become so valuable that you’ll encounter it in
just about every aspect of your life your cell phone provider knows how many
texts you send Twitter tracks your tweets the department store knows how
often you return things after you’ve purchased them when you look around
you’ll see more examples than I could possibly name since just about every
transaction you make today has an electronic component there are data
being tracked to inform companies about usage as a business being able to
identify your heavy moderate and light users will enable you to create products
services and programs to help you grow being able to identify the users in each
of these groups can help you identify and then develop strategies unique to
your business you can create a grid to discuss with your team and talk about
the different options you have to provide better programs and services to
your highest usage customers so they stay with you the idea is to look for
ways to keep these customers loyal to your business or brand for the moderate
users you can look for ideas to build stronger brand loyalty with them or get
them to use more of your products or services for light users you can
investigate promotions and idea is to encourage them to try using your product
in more situations or in combinations with other products you can also better
target potential customers by working backward from your usage analysis
segmenting your customers and targets by usage can be one of the easiest
approaches to take it can also yield some big results for you what will you
learn when you look at your customers through this lens do you know someone who consistently
buys the latest electronic gadgets I have a friend who gets the newest
smartphone as soon as it’s released the same goes with his headphones I have no
idea how much he spends on his habit each year but it’s important to him that
he has the most recent model available and the more visible as purchases the
better he likes for others to know that he has the new thing psychographic
segmentation is the concept of segmenting consumers based upon their
values opinions attitudes and lifestyles marketers have found that psychographic
segmentation can be very powerful there’s a bit of psychology at work here
which makes sense we are using the same root word after all all human beings are
susceptible to some core concepts that help protect our egos one of these is
related to something called selective exposure what this means is our brains
tend to pay more attention to messages or stimuli that are aligned with the way
we see the world if you’re a big fan a major league baseball and don’t follow
professional football at all you’ll be more inclined to notice news stories
about baseball and ignore those about the NFL Draft a similar concept is
called selective comprehension what this means is that we interpret information
in such a way that we make the message is consistent with our beliefs or
attitudes going back to our baseball analogy if you’re of the opinion that
pitchers should bat for themselves you may think the story of an American
League Pitcher getting injured while batting in a national league ballpark
supports your beliefs that more practice may have saved him from being hurt
meanwhile someone who believes the designated hitter rule is important
would see the injury as a prime example of why both leagues should implement the
rule on top of all this we add the concept of selective retention which
means we have a higher likelihood to recall or remember messages that are
consistent with our existing beliefs and we often forget hearing things that
don’t align with our view of the world so if you think that the designate
hitter rule as a travesty you’ll pay more attention to and have better recall
of stories that support your beliefs and tend to ignore those that are
inconsistent with your attitudes here’s how all of this impacts the marketing
world because we want to avoid something called cognitive dissonance otherwise
known as regret we’ll look for and pay closer attention to messages that
support our decisions or beliefs so you’re more likely to see and remember
advertising messages link to the new shows or magazines with editorial
content aligned with our viewpoints knowing this marketers and advertisers
will pay close attention to the beliefs of their customer base or targets if
they have insight into how you view certain topics they can do a better job
of targeting messages to the media outlets you choose learning more about
what your customers like and dislike and their opinions can help you determine
where to advertise and how to tie in with other brands or events that are
more likely to be of interest to your customers
another important thing marketers need to do is reinforce the good decision you
made to purchase their product since as consumers we want to avoid regret
receiving messages that tell us you made a good decision shortly after we made a
purchase helps build brand loyalty and brand satisfaction if you aren’t sending
your customers an email text or piece of direct mail thanking them for their
business and reminding them of the great features of your product you’re missing
a great opportunity to put psychology to work for your brand my friend who likes
to buy the latest gadgets he particularly likes it when his friends
noticed that he has something new and hears such comments says that was a good
purchase or that’s cool it’s only natural we all like to get positive
reinforcement you

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