In modern advertising, market segmentation can be a powerful tool.
Market segmentation can be used to help create a new identity for your brand, build brand equity, and position your company as an authority in your given market. Market segmentation also helps you understand customer segments more clearly and helps you plan your advertising and other communications more effectively. However, effective market segmentation requires a lot of planning, data analysis, and good management. If you’re not careful, your market segmentation efforts may backfire.
The most common market segmentation approach
This is done by looking at characteristics of a target market that are shared by all competitors.
For example, there might be several types of families that typically buy a particular brand of household cleaner. However, there might also be differences among different age groups, economic status, geographic location, and other characteristics that are important in defining a target market. Therefore, there is a clear overlap among households that share similar characteristics among all of your competitors, but there may not be strong ties among any of them to you. This kind of market segmentation requires lots of research and analysis and should only be undertaken with careful thought and attention to details.
Other common techniques for market segmentation
These include looking at attributes of a product or service relative to several other products and services that might be similar, and/or that customers have already purchased.
For example, if your cleaning products include a barber foam brush, you might want to segment the market based on barber shop visits or salon visits. You can also segment based on geographical regions. Your cleaning products might be very popular in the North East, but less so in the South East. You might then group these markets according to geographical location, since they will likely have overlapping characteristics.
Behavioral characteristics approach
Includes things such as age, gender, educational attainment, marital status, and other attributes.
When you look at the characteristics of the buying public, you can make educated guesses about their lifestyle. There are two major ways to accomplish this. The first is to use quantitative methods, such as marketing research, in which you randomly select individuals and surveys from the population; the second is to analyze cross-tabulations of data from various survey panels.
Performing an economic analysis of market segmentation – demographic profiling.
Using the same surveying methods that we used in the previous example of barbers, you would create a short list of potential demographic characteristics for each market segment. For instance, your list might start with a list of zip codes, based upon where most barbers live, and then add additional attributes based on geographic location. This list of zip codes could be used in a mailer or other marketing campaign to target residents of a certain zip code area. You could then create direct mail campaigns to reach residents in that area who are likely to be interested in your service.
Mass marketing technique.
Mass marketing refers to the practice of sending a marketing message to a large number of people in a short period of time. Many companies use this method when developing direct mail or online marketing campaigns, and it is effective for identifying targeted communities. In e-commerce, this form of marketing is typically used for promoting new products and services. An example would be if you were launching a new website selling dog supplies, you could send a mailer to all the people in your neighborhood that have dogs.
To make sure you are targeting the right audience and in the right market segmentation, there are many software programs available. Some of the free tools are very basic, while others are very sophisticated. Most of these programs will allow you to create targeted marketing lists and customize the messages to be sent to the targeted audiences.
Analyzing the relationship between characteristics of households and zip codes.
By understanding which areas of a city are more affluent, or which ones are more remote, you can target your advertising accordingly. For instance, areas near the airport or railroad stations tend to be more affluent, as do metropolitan areas with larger populations. By analyzing the relationship between the characteristics of neighborhoods and household sizes, you can target your advertising to these areas more effectively. The techniques that we have described here are just a few of the many available techniques to help you find profitable markets.