What is Marketing Segmentation?
In other words, marketing segmentation is about dividing your consumers in to sub-groups to cluster them into more similar groups, such as for common needs, similar lifestyles or similar demographic profiles. Market segmentation is about dividing the population into customer segments, enables the company to be more selective and personalized for their customers in a cost effective manner.
A company’s segmentation strategy can be affected by different factors such as;
- company resources
- product variability
- product life cycle
- market characteristics
- competitive activity
Strategic Approaches to Marketing Segmentation
- Undifferentiated Strategy: Mass marketing, no segmentation
- Focus Strategy: Niche marketing, focus efforts on a small, tightly defined target market
- Differentiated Strategy: Multiple niches, focus efforts on 2 or more, tightly defined target markets
- Hyper-segmentation: One-to-one Marketing, customize the offer for each individual customer
Types of Marketing Segmentation [2]
- Demographic: Age, gender, SES level, Education, etc.
- Geographic: Country, Street, Region, Rural, City, etc.
- Geo-demographic: Combination of geographic and demographic variables
- Psychographics: lifestyle, social and personality characteristics
- Behavioral: Purchase frequency, needs-based, customer loyalty etc.
The answer is simple! Because everyone has different needs. For example in a work environment, a male professional might need a tie, and a female professional might need heels, and a kid might need coloring books for school. Market segmentation aids eCommerce marketers to group individuals with similar needs, like kids age 6 to 10 might be a segment for a toy producer. By doing so, they can come up with better marketing plans, and suit the needs of their target audience.
Steps of Marketing Segmentation
We may talk about few simple steps in marketing segmentation; [3]
- Identifying the target market
- Identify expectations/needs of Target group
- Create subgroups
- Fine-tune needs of the target audience
- Name market segments
- Form Marketing Strategies for each segment
- Test strategies
- Regularly keep collecting data about your target market
Criticisms and New Criterion for Steps of Marketing Segmentation
Like every subject, Marketing Segmentation has its limits and criticisms that it faces. People generally argue that geographic/demographic segmentation can be overly descriptive and provides insufficient insights to convey communication strategies. Another aspect that we can think of is, difficulties with market dynamics, and instability of segments over time.
Furthermore, according to Daniel Yankelovich (2006), traditional demographic traits such as age, sex, education, and SES levels are no longer enough to considered as basis for marketing strategies. Next, nondemographic traits(values, preferences and tastes) seem to have more influence over consumers’ purchases rather than demographic traits, and lastly, sound marketing strategy depended on identifying segments the were potentially receptive to a particular brand and product category.
Uses of Marketing Segmentation in eCommerce
Thanks to today’s technology, we can surpass the criticisms provided by Yankelovich (2006) with AI powered personalization and data-driven insights about customers. It is a game changing technology that helps to satisfy each and every customer’s needs just by making sense of their actions online. AI powered personalization eliminates manually created segments and take the game up to a whole new level.
With the help of an eCommerce personalization software, tracking an online shopper’s behaviour in real time and making the best of this data is possible. Rather than solely depending on the static demographic data, the dynamically changing purchase intentions of an online visitor can be sorted out and used to predict the next purchase. This in turn is translated into higher sales, higher conversions and customer loyalty.
