The Advantages of Customer Segmentation

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Customers - Target and Arrows Hit the Word

What is Customer Segmentation?

Customer segmentation is a strategy that market research companies use to target specific groups of people, where individuals are highly comparable in each segment. It is advantageous to follow this methodology because segmenting people by defined criteria supports understanding of people’s specific wants and needs. Instead of focusing on the needs of the entire market, companies use customer segmentation to break down the needs of everyone, specifically focusing on target niches. This makes it easier to manage and deploy the right strategy which will create the most positive response. The segmentation method better understands consumers, because it refrains from treating them as all the same. Therefore, it makes sense why marketing strategy should identify those differences. By targeting specific traits and characteristics, the more likely the consumer will pay attention to the message, relate to it, and subsequently buy into that product or idea.

Planning a Customer Segmentation Strategy

Firstly, researchers need to recognize three initial identifiers when planning a customer segmentation strategy. Market researchers will work by subdividing the homogeneous market into subsets of consumers. They do this based on a common need, in which individuals will respond to in the same way as the rest of the segmented group. Secondly, they will classify distinctions which are the characteristics that make them unique from other groups of consumers. Finally is identifying the reaction, which is the best idea of how to reach the target group, using different media outlets.

Customer Segmentation Categories

Customer segmentation is based on many different identifying characteristics. They can be broken down into the following categories of Geographic, Demographic, Attitudinal, Behavioural, and Priori segmentation.  The first is based on Geographic location and segments the market into different regions, countries, states or provinces, for example. Demographic segmentation identifies things like gender, education, ethnicity, and religion.

Attitudinal segmentation can only be achieved by primary research using survey tools. It provides researchers with levels of agreement to specific attitudinal statements. Typically this is done using a traditional Likert scale, or more novel approaches such as Maxdiff, or a cluster analysis. This way, researchers can easily identify which segments hold similar views, and how they vary from group to group. These commonalities can be things such as interests and values for example.

Behavioural segmentation describes questions marketers ask about their feelings towards brands. Customers are divided into different segments and are measured by using primary or secondary research. Methods of segmentation include a Parteo Split, deciles, or terciles. Other questions related to this type of customer segmentation could include their eagerness to buy something, potential benefits of a product, use rate, or their inclination to buy one brand over another.

Needs segmentation is what consumers are looking for in a product. This method is implemented using likert scale ratings, maxdiff exercise or a conjoint exercise. Cluster analysis statistical techniques also are used to segment respondents.

Finally, Priori segmentation is used in already-deduced segmentation, and is probably the most common method.  Much the same as behavioural segmentation, Priori segmentation can also be achieved by using primary or secondary data.

What are the Advantages?

Conclusively, using market segmentation gives marketers the advantage of identifying niche populations to effectively sell a product, idea or message. It is a better strategy in marketing to break up diverse groups of people, rather than treat them as all the same. If you are interested in finding what groups make up your target market, SmartPoint Research can help by designing and conducting a customer segmentation study – contact us today.