Audience Segmentation: Maximizing Marketing Efforts

If your company had infinite resources, then you would not have to concern yourself much with audience segmentation. If you’re like most organizations, then you probably have limited resources. Audience segmentation helps you make better use of those resources through targeted and personalized ads. Learn why your brand needs audience segmentation to maximize its marketing efforts.

What is Audience Segmentation? 

Audience segmentation is the process of organizing your market into groups and sub-groups on the basis of shared characteristics. The people in the group tend to have common interests or needs and behave similarly. Different groups have different expectations, different reasons and reactions, and different actions. Understanding the different audiences allows you to tailor your messaging and direct your marketing efforts appropriately. Audience segmentation helps you to better communicate and connect with your customers, enabling you to get the right message about the right product to the right people at the right time.

Conventional Types of Audience Segmentation

Traditional market segmentation divides consumers using one or more of the following sets of traits:

Demographic

Demographics are statistical characteristics of a population. Demographic segmentation is the most common type of segmentation used by marketers, perhaps because it is one of the simplest to perform and data is more readily available. Demographic characteristics typically include:

• Age
• Gender
• Household size
• Income
• Education level
• Ethnicity
• Marital status
• Occupation

Geographic

Geographic segmentation sorts people according to where they live. You can divide your market in several ways:

• Geographical areas such as city, county, or state
• Region, such as the West Coast
• Country or international region, like Asia
• Rural, suburban, and urban market segments
• Climate
• Total population

Psychographic

Psychographic segmentation divides your audience according to personality traits, hobbies, habits, lifestyles, and values. These characteristics relate to who your customer is and what motivates them to buy. Segmenting by psychographic qualities helps you tap into the more emotional components of the buyer’s journey, which enables you to reach and better captivate your target audience.

Examples of psychographic traits that might be useful, depending on your product or service, include the following:

• Level of conformity and degree to which they are influenced by friends and others
• Environmental awareness and attitudes
• Health consciousness

Behavioral

Behavioral segmentation focuses on consumers’ behavior patterns related to their interactions with your company. This category segments things such as consumers’ use of or response to a product, service, promotion, or brand. Examples include:

• Purchasing behavior: Have they bought your product before? How do people decide to buy a certain product (price, quality, reliability, brand name)?
• Benefits sought: What are they looking to get out of buying the product?
• Buyer journey stage
• Usage: How will they use your product?
• Timing or occasion

Additional Types of Audience Segmentation

For e-commerce and digital content sites, additional forms of segmentation are often useful in predicting future engagement and purchasing. These also are helpful in deciding where you should promote, letting you focus on channels where your target audiences are most likely to be found.

User Type

This segment groups web or app visitors according to their relationship to your content. Are they new users? Converted users? Active users and dormant users should be approached differently.

Source

The source of traffic could include paid campaigns, social media, referral, direct, and organic. Traffic source helps you learn more about your audience’s journey. Knowing source also can guide your targeted marketing efforts, so you can spend more of your budget on the channels most likely to drive traffic to your site.

Device

You can filter your audience by the technology used to access your website. This includes the browser used, screen resolution, screen resolution, and the type of device (laptop, desktop, tablet, smartphone). You can further narrow mobile devices by their operating system, brand, and model.

Why You Need Audience Segmentation 

Audience segmentation enhances your ability to effectively market. Market segmenting improves your ability to figure out marketing’s four P’s, since the different segments of your target population:

• Need and want different products or services (even if they want the same product, they might want to use the product in different ways or they might be interested in different features of that product).
• Are able and willing to pay different prices (in terms of money, effort, or time).
• Are reachable in different places through different media channels.
• Are more responsive to different types of promotion tactics and messages.

Market segmentation allows you to personalize content delivered on your site, email messages, ads and ad campaigns, and other stops along your customer’s journey. Modern customers expect to receive personalized messages, and rarely will a general message speak to all customers. Personalization increases customer engagement and loyalty by delivering messages that are in line with what customers really want. With increased customer engagement and loyalty comes an increase in your company’s bottom line. Personalization can improve revenues by five to 15 percent. Properly executed personalization also can lower customer acquisition costs by as much as 50 percent and raise your marketing spend’s efficiency by 10 to 30 percent.

Best Practices for Segmenting Your Audience

Segmentation is about categorizing your market in groupings that help you better understand and better engage your target customer, so you need to group according to characteristics that make sense for your business. Don’t feel limited to only those segments identified above. However, whichever characteristics and groupings that you decide on, choose criteria for your groups that has some relationship to how they will respond to your message.

To create the most effective segments for your business, keep in mind the following attributes. Each segment should be:

• Homogeneous (internally): Members of each group need to have at least one important factor in common with each other.
• Heterogeneous (externally): That common factor must set them apart from other groups.
• Measurable: Data to measure the segment’s market size, purchasing power, sales volume, etc. is available. Use this information to decide whether a segment is worth pursuing.
• Accessible: Can you reach the segment with your message?
• Substantial: The segment should be large enough to likely yield enough of a return on investment. Note that “large enough” does not necessarily mean number of people.
• Actionable: Are you able to effectively differentiate your segment and customize your messaging to reach this segment? Can you quantify the results of any targeted campaign?
• Responsive: Are the segment’s characteristics distinct enough to target a campaign specifically to this segment? If the same or similar message would work with multiple segments, consider combining those segments.

Tips for Audience Segmentation

1. Follow the money, not the people. When deciding which segments to focus on, identify the segments most likely to have higher returns on investment. Which segments will spend the most? Which segments will generate referrals and repeat business? Don’t go after the segments with the most customers, unless those customers also represent the most profit.
2. Don’t be too specific. Segments must be large enough that it is worth your effort to target them. Avoid making your criteria so specific that the resulting segment narrows its effectiveness. Generally, follow the three-adjective rule: your segment is too complicated if you cannot describe it in three adjectives.
3. Don’t create too many segments. As a general rule of thumb, four or five segments tend to be most manageable.
4. Test and optimize. Market research is essential to refine your marketing strategy and to understand what works (and doesn’t work) with key groups of customers.
5. Revisit your segments periodically. Your users will evolve over time. People age, switch jobs, add interests. People also change how or service. Periodically revisit your segmentation strategy. Review shifts in segment size, behavior, and engagement. Figure out whether your current messaging needs to be refreshed, or whether segments need to be defined differently.

To Learn more about marketing analytics, check out our article “What is Marketing Analytics?” Looking for getting your audience data? Contact ironFocus to access your customer insights.