Introduction to Branding: Segmentation

Brands, irrespective of their industry sector and size, need a structured way to maximize their influence. At the basic level, this can be done by grouping or dividing an audience into subgroups based on their commonalities and characteristics. This grouping or dividing of the audience is known as ‘Market Segmentation’ – a popular tool for modern marketers.

The term ‘Market Segmentation’ was first coined by marketer and academic Wendell R. Smith, and it has been around since 1956. Initially, it began as a small activity where the users were segmented based on simple demographic information. Over the years, segmentation has evolved to become more complex and specialized. The emergence of the digital network has further enhanced how segmentation is done. It is core to the STP (Segmentation, Targeting, and Positioning) model of modern marketing that is used to develop marketing strategies.

Studies have revealed the tremendous potential of segmented campaigns and pointed out that segmented campaigns have registered more than a 700% increase in revenues. It is widely believed that segmentation ability has helped marketers move from functioning in a market characterized by mass customization to mass personalization. A variety of studies have shown that 85% of new product launches fail due to poor market segmentation. The ability of hyper-personalization has opened more unique avenues of audience targeting.

Market segmentation offers many benefits and is usually the first step in marketing. It serves as the foundation of a strong marketing strategy and the ability of businesses to thrive in competitive market landscapes. Once the segments are identified well, the spending becomes efficient, and the return on investment is high. Targeting the right set of people brings high-quality leads and enhances business outcomes. It also helps to break down the complexities of the market, makes it manageable, and offers ways to drive customers to make a purchase decision.

At a deeper level, segmentation helps identify niche markets that were ignored mainly earlier, primarily because they were unidentified. When customer needs are placed at such micro levels, it becomes easier to improve customer retention and loyalty. Segmentation also facilitates the differentiation of your brand very clearly, and it becomes easy for the audience to see the actual value of your brand.

At the fundamental level, there are four common market segmentation types: demographic, psychographic, geographic, and behavioural.

• Demographic Segmentation reveals the non-character traits and includes such elements as Age, Gender, Income, Occupation, Family Size, Race, Religion, Education, Ethnicity, etc. These help us identify the essential traits of the target customers.
• Psychographic Segmentation is the second type of segmentation that looks at the customer profiles and interests, such as Values, Life Goals, Needs, Pain Points, Hobbies, Personality traits, Hobbies, Life Goals, Values, Beliefs, and Lifestyles.
• In Geographic Segmentation, the focus is on identifying customer groupings based on their physical location and includes Postal code, City, Country, Region, Population Density, Distance from a specific location, Climate, Time zone, Dominant language, etc.
• Finally, in Behavioural Segmentation, we look at customers regarding traits such as Purchasing habits, Spending Habits, Loyalty to Brand, Purchasing Habits, Brand Interactions, Actions taken on a website, Previous Product Ratings, etc.

We can repurpose the following image by changing the icons to go with the above paragraph (Please ask the graphic designer to map the sub-elements inside each category, as mentioned in the above paragraph):

Even as Demographic Psychographic, Geographic, and Behavioural is the basic type of Segmentation, there are some other types of Market Segmentation that offer considerable insight into customer segments. These include Technographic Segmentation, Generational and Life Style Segmentation, Transactional Segmentation, and Firmographic Segmentation.

In Technographic Segmentation, we try to segregate people based on how they adopt technologies. This includes distinguishing people based on early and late adopters of technology, differentiating people based on the device they use, and classifying users based on the software and apps they use the most. In Generational and Life Stage Segmentation, we use two distinct approaches. For Generational Segmentation, we segment users based on their age. For Life Stage Segmentation, we group customers based on marital status, home ownership, children, etc. In Transactional Segmentation, we draw behavioural insights by looking at the orders made by customers in the past, the time since the last order, the number of orders made of a certain value, orders cancelled, etc. Transactional Segmentation is mainly helpful in e-commerce, where brands can use the data to predict the intricate behaviour patterns of buyers.

Segmentation is an exacting science, and mastering it requires ingenuity. The same set of products in the same market will have very different results when two different marketers do the segmentation. What works at one point may not work the same at some other point in time, which is why organizations have come to employ technological tools. Today, big data, advanced analytics, and dynamic segmentation are helping speed up this transition.

Deployed wisely, segmentation can transform the marketing and advertising outcomes drastically and ensure that the money spent gets a higher return on investment. And when organizations realize this efficiency, it will make a big difference in the way customers and stakeholders look at products, services, and brands. Time we get snazzy with segmentation.

~ Dr Asim Chowdhury, Consultant for Global Enterprises  

Statistics reveal that presenting a brand consistently across all platforms can increase revenue by up to 23% (Forbes). Marketing has been evolving with time and marketers need to constantly upgrade their tactics to retain and grow their customer base. Don’t get left behind in this. Take a look at top-rated courses in sales and brand marketing , which have world-renowned faculty teaching the latest strategies.