Market segmentation is a familiar term in the world of marketing. This is because market segmentation has a major influence on product sales and the implementation of a company’s marketing strategy. So, it’s not surprising that many companies are now starting to implement this market segmentation.
However, what exactly is market segmentation? Then, what are the goals, benefits, conditions, and types? So, for those of you who want to know more about market segmentation, check out this article!
What is Market Segmentation?
Market segmentation is a marketing strategy that refers to dividing the target market into smaller groups or segments. Segmentation can be divided based on demographics, needs, priorities, interests, behavior, and more. Through this market segmentation, you can try to better understand the target consumer group.
Market segmentation also helps companies answer customer needs, manage products, and minimize production errors. That way, customers will be more satisfied with the products and services you provide.
Not only for production needs, market segmentation is also closely related to the implementation of marketing and sales strategies. This market segmentation can help you determine the right marketing strategy in order to reach customers. Moreover, each segment has different needs and marketing methods.
Market Segmentation Objectives
Although the main purpose of market segmentation is to increase marketing efficiency by focusing on certain segments. However, there are still various other purposes that you need to know about. Here is a brief explanation.
1. Better Service
Market segmentation is carried out to provide better service to customers. This can help you understand customer needs. That way, you can come up with a suitable solution. In addition, good service is also proof if you are able to communicate products well to customers.
2. Designing More Suitable Products and Services
Market segmentation will help you understand what the market wants. This is what allows you to design products and services according to these needs and desires. It is not surprising that market segmentation is an element of the business model canvas that needs to be filled in when designing products.
3. Optimum Utilization of Resources
Doing market segmentation means providing details of the target market and their needs. This can assist the production team in producing products according to customer needs. So, there will be no wastage of resources.
4. Effective Planning
The next goal of market segmentation is to be able to make effective planning. This can happen because you have done market specialization and have detailed information about the needs of the target market. Hence, the marketing strategy planning process can run more effectively.
5. Easier to Make Changes in the Market
Market conditions are dynamic because human desires are constantly changing. It is not surprising that the process of updating products and marketing strategies must continue.
Well, this can be done more easily if the market is segmented. Because you have identified and analyzed customer needs. So, the changes you make will be more efficient and organized.
Benefits of Market Segmentation
The benefits of market segmentation that you need to know are as follows.
1. Stronger marketing messages.
This is because it can directly communicate with customers according to their characteristics and needs.
2. Implement the right marketing strategy.
Market segmentation helps you define and understand customer characteristics. So, you can direct your marketing efforts according to your target market.
3. Attract the right customers.
Because the marketing strategy used is correct, you can immediately attract customers who want to buy your product.
4. Improve business branding.
Branding is your strong business identity. Well, the division of groups in market segmentation makes customers feel better understood and served well. This is what makes them continue to use your brand.
5. Increase profits.
Segmented sales will make it easier for you to offer products to customers so you can increase profits.
6. Develop a better product.
You will better understand customer needs so that you can develop products to meet customer demands and wants.
Market Segmentation Terms
In conducting market segmentation, companies must also meet certain requirements. So, here are the market segmentation requirements needed by every company.
1. Scalable
The first segmentation requirement is measurable. That is, you must have measurable data about customer profiles. This requirement is important because it will determine the campaign or advertising process for the market.
Apart from that, you also have to estimate how many customers will buy the product. That way, you can calculate product stock so you can meet market needs.
For example, one of your segments is likely to buy a product during a promotion. Then you need to prepare more product stock during promotions so that customer demands are met.
2. Easily Accessible
Customers should be able to easily access information about products. This benchmark will help you determine an advertising strategy that reaches the right target market. That way, the ads you post will be more profitable.
For example, you may find that the main segment of your product relies heavily on advertisements in newspapers for product promotions. Meanwhile, other segments use mobile applications to obtain product information. So, you need to prepare two different advertising media in order to reach these two segments.
3. Distinguishable
When segmenting the market, you can differentiate each segment clearly and specifically. This is because each segment must have different characteristics. For example, segments differentiated by gender, age, or lifestyle.
4. Substantial
You need to ensure that your market segment is not only interested in your product, but also has the ability to buy it. Because the market segment must be able to provide benefits to your business.
So, you don’t need to be fixated on finding a large market segmentation. The most important thing is to make sure that this segmentation is willing to spend money on your product.
If indeed your market segmentation can reach a large number of customers, it is very likely that you will sell these products at low prices. So, make sure you choose the right market segmentation.
5. Executable
The last condition for market segmentation is that it can be implemented or followed up. That is, you have to make sure that each of these segments can get the best service. In addition, the market segment must also be adjusted to the scope of your business.
Types of Market Segmentation
There are at least five types of market segmentation used by various companies. The following is an explanation of the types of market segmentation.
1. Behavioral Segmentation
Behavioral segmentation tends to focus on exploring customer habits in buying products. This type of market segmentation consists of behavioral patterns, such as customer loyalty, consumption, lifestyle, and others.
Behavioral market segmentation allows you to develop a more targeted marketing approach. This is because you become more focused on what is known about the customer and what makes them interested in buying a product.
2. Psychographic Segmentation
Psychographic segmentation is a type of market segmentation that focuses on customer traits or personalities. This is what makes you need deeper analysis if you want to use psychographic segmentation.
The indicators included in the psychographic segmentation are habits, hobbies, interests, opinions, personality, lifestyle, and social status. By defining customer personas, you can adjust marketing strategies that can attract customer tastes.
3. Demographic Segmentation
Demographic segmentation is the breakdown of customer personas in the market. Generally, this type of segmentation is divided based on age, income, marital status, education, and gender. Market segmentation by demographics is the most basic type of segmentation.
Generally, demographic segmentation will be combined with other types to help narrow the scope of the market. This will make it easier for you to access and obtain target market information.
4. Geographic Segmentation
Geographic segmentation is grouping the target market based on customer location. In addition, geographic segmentation can also cover areas that are not technically defined, such as the environment. Customer location can help you understand customer needs.
Later consumers in the same area and have the same preferences will be grouped. The indicators of geographical segmentation include cities, countries, population density, population density, and regional climate.
Dividing the target market by location is important. Especially for small-scale local business owners. This is because you can adjust your advertising needs and marketing strategies more specifically.
5. Firmographic Segmentation
Firmographic segmentation is a type of market segmentation that helps a company in positioning its products and services. This is done by collecting data to identify the condition of a company. For example, business descriptions, financial performance, and industry insights.
From this data, a company can target clients and make products according to their ideal market. Generally, firmographic segmentation is used by B2B companies.
Market Segmentation Levels
The following are the levels of market segmentation that are part of the market segmentation strategy for many companies.
1. Mass Marketing
In market segmentation, mass marketing refers to a strategy of targeting all potential target markets through one marketing strategy. The marketing strategy used does not target specific customer needs. However, focus on all market segments that could become potential customers of a product.
The advantages of mass marketing are lower production and marketing costs with a higher profit margin percentage. This is because when a company carries out a marketing campaign, it automatically targets all target markets.
While the drawback is the low profit margin. This condition occurs because companies usually rely on low prices to attract as many customers as possible.
2. Segment Marketing
Segment marketing divides the target market into various segments based on several factors. For example, customer consumption patterns, purchasing power, social values, and others. Segment marketing is also often called differentiated marketing because segment marketing divides the target into many segments.
This way allows you to understand the needs of each segment and provide the best possible solution. By reaching each target market, the company will generate more sales. Apart from that, you can also satisfy each segment that has been targeted.
3. Niche Marketing
Niche-based marketing is a collection of several specific market segments. This market segmentation strategy focuses on narrower customer groups. So, companies can develop products that fit the needs of each niche. For example, the traveling niche is divided into luxury vacation, staycation, backpacker and other segments.
4. Micro Marketing
In general, micro-marketing follows a narrower market segmentation strategy by serving potential customers. In contrast to special marketing, in micro-marketing customers only serve individuals from certain locations or individuals with very specific lifestyles.
Well, one way to increase the effectiveness of micro-marketing is to take advantage of the internet. You can reach a mass market with individual offers for customers on a smaller scale than mass marketing. Apart from that, you can also take advantage of micro influencers.
5. Individual Marketing
Individual marketing is a market segmentation strategy that focuses on satisfying the needs and wants of individual customers. Usually individual marketing is known as 1-to-1 marketing because sellers only offer products tailored to consumers.
Simply put, you only sell products according to consumer needs and preferences. Requests can be communicated directly to manufacturers so that later they will provide products according to customer requests. With individual marketing, customers will know your brand better.
Already Understand Market Segmentation?
From the explanation above, it can be concluded that market segmentation or market segmentation is dividing the target market into certain segments according to predetermined characteristics. Segmentation needs to be done so that a product can be distributed properly while optimizing your marketing strategy.
Apart from that, market segmentation is also very suitable for companies to implement because you can create campaigns that match the segments that are created. So, you can do the campaign via Facebook Ads to target the target market.
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