The 6 types of user segmentation and what they mean for your product or service
Our direct marketing experience (30-years) allows Response Generators to apply segmentation practices to online marketing.
Marketing segmentation is marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, wants, demand, or characteristics.
You can learn the basics of it in the book that become the bible for startups 25 years ago and it’s still valid: Crossing The Chasm, by Geoffrey Moore.
There are many other books that have become part of the reference library for direct marketers and they include: Segmentation Marketing by John Berrigan & Carl Finklbeiner; and Market Segentation by Art Weinstein.
Let’s explore the different types of segmentation.
Market Segmentation Practices
Behavioural segmentation considers a few things such as:
• The knowledge of your product, • User’s attitude towards your product, • How often they use your product, • How they respond to your product, • Their loyalty to the product.
You can also think about creating a segment based on what your customers will benefit from the product.
Behavioral segmentation is a great place to start when you think about segmenting your market.
Let’s take an energy bar for example. What’s important for you?
• Do you look at the price? • Do you look at the calories? • Do you look at the sugar content? • Do you look at the fat content? • Do you want something that has less calories or more calories? • Do you look at the protein? • Or maybe you don’t care, and you’re just hungry?
Our messaging for each of these segments is going to be different for each of it.
Also it’s going to be affected by the different benefits that these customers seek.
We also need to think about the places, online or offline, where our customers may be.
Let’s say is offline. We may consider to put a poster up in a gym to market our energy bar.
Using online, we might want to post an ad to a web page that sells workout clothes.
This segmentation is achieved by studying activities, interests, and the opinions of your customers.
You’re thinking about the lifestyle of your customer:
• How do they spend their downtime? • What are they influenced by? • What image are they trying to project? • What are the needs and wants of people in this common lifestyle group?
For example, usually people who buy a luxury car can not only afford it, thus defining their economic status. It also shows a preference to spend money on more luxury lifestyle products.
We can extrapolate that they may travel to high class destinations, wear specific brands, or visit certain establishments.
Let’s say we’re trying to sell a luxury car, if we want to market to people who can afford it, we’re going to consider doing that in other high-end places such as a luxury magazine found in the first class section of an airline, or sponsoring the valet outside of an expensive restaurant. Online, the digital version of high end magazines like Architectural Digest and the Robb Report will attract wealthy searchers for luxury brands of automobiles.
The demographic segmentation is, you guessed it, based on your customers demographics characteristics. Things like age, gender, occupation, education level, income level and much more.
If you’re coming from a B2B point of view this could be the size of the company, the number of employees, industry codes or even the location of the company.
This segmentation is based on geographic areas such as a country, regions, different cities, or postal codes/area codes.
Now, you can do a geo-cluster approach which combines Demographics and Geographic segmentations.
You’ll look at demographic information within a certain area to create a more specific profile.
The occasional segmentation focuses on certain occasions that are completely independent of the customer.
You don’t care at all about demographics and you just care about occasions such as going out for ice cream, taking a vacation, or as Coke famously did it, being thirsty.
Coke’s campaign doesn’t care if you are a man, woman, living in Uruguay or Romania or if you have high socio-economic status or low.
All they care about is are you thirsty; it’s very simple.
With this you’ll classify the markets according to the cultural origin.
This can be incredibly powerful given that understanding a culture can give you so much insight to certain groups of customers and their behaviors.
When you use cultural segmentation, you’ll be able to communicate well with a given culture in the most effective way.
Cultures can be large, they can be nationwide or they can be small and reflect a particular region such as the Golden Horseshoe Area or even the startup culture.
Things to Remember When Segmenting
When defining your market segments, you want to make sure you don’t define segments that are too narrow.
Ask yourself, is my offering really different from one segment to another? Could it be different by price or by features?
And if you realize that you offer the same to two different segments, maybe you should define them as one bigger segment. For startups it’s crucial to measure not only the quantity of the potential segment but its quality.
A quality segment will help engage users quickly. Learn from early adopters and test to see of quality needs apply to broader market segments for your products.
Make sure you choose a segment that is accessible for you.
If relevant, choose a segment with the shortest sales cycle, so you don’t wait too long between the times your customer is exposed to the product until you can show value.
You can do that by choosing the segment that will consume a more simple product, or the segment that will be willing to pay maybe less but buy your product more quickly.
If you have a niche product, you better start with the smaller companies as your customers and reach out directly to the decision maker rather than going through a lengthy process of searching for the right buyer at a big company.
Try to find a segment that is less crowded (blue ocean vs. red ocean), so you have no or fewer competitors.
For example, the messaging company Slack found great opportunity in the enterprise segment with very little competition.
They realized their value was to focus specifically on tech teams, small companies and startups that work quickly and needed to be able to communicate quickly using tech features integrated in their product.
Had they wanted to focus on consumers rather than enterprise, they would have been faced with a great deal of good competition like Whatsapp and WeChat.
Market Segmentation and Personas
Marketing segmentation is probably at the very, very center of a go to market strategy that’s successful.
A market segment is a group of people that have two things in common.
1. They have a use case
They have a common set of needs that they would be fulfilling through a product like yours or someone else.
2. They talk to each other
A segment is actually a unit of conversation and the reason why that’s so important is if you can get your marketing message circulating inside a segment, the segment will circulate it for you.
No entrepreneur can afford to go out and pay to address every prospect that they want to sell to.
You have to have your community selling for you.
That means you have to be able to model the boundaries of that community and be able to aim your marketing communication activities in a way that embraces the community, and resonates inside that community.
When you are talking about your product, you’re saying things that will not resonate inside a community.
When you talk about the specific needs of that community in the language the community talks to itself about — this is how you resonate with that segment.
How do you start this?
As a startup, I think it’s best to start with persona and I think the persona is targeting the customer with a compelling reason to buy.
As you start to engage them with that persona, you will increase your understanding of what differentiates each market segment, allowing you to scale up your business.
When you scale up, you’ll need to develop a more analytical approach to targeting and segmentation (quantitative), where as in the beginning, it’s more qualitative.
Happily, online marketing comes with robust data sets to help you “dice and slice” segments in real time.
Good luck, have fun, and happy segmentation!
Response Generators 2019